The Pivotal Fund Limited ('Pivotal'), a development focused investment fund, today reported strong growth for the financial year ended 29 February 2016 with a 23.91% increase in net asset value per share to R22.80, excluding deferred tax. Pivotal's strategy of developing and managing high quality retail, office and industrial assets in key nodes continued to underpin its consistent results in a politically and economically uncertain environment.
As at 29 February 2016, Pivotal's combined property portfolio was valued at R11.3 billion and R1.2 billion for directly and indirectly held assets respectively. During the year under review, Pivotal acquired properties and strategic land for development to the value of R494 million. Pivotal also concluded the purchase of its first asset in the rest of Africa being a 37.1% share in the Oando Wings Office development currently under construction in Nigeria.
Pivotal's Chief Executive, Jackie van Niekerk commented: "Our focus remains on creating sustainable value for our investors by focusing on consistent growth through our extensive development pipeline, international investments and pro-active management of our portfolio. Pivotal has a secure long-term development pipeline that was further bolstered with the acquisition of additional development land to the value of R494 million.
"The conversion of our secured pipeline to current development commenced at Loftus Park mixed used development phase 1, Kyalami Corner shopping centre phase 1, Hill on Empire building A as well as the redevelopment at Wonderboom Junction.
At 29 February 2016, Pivotal's net asset value per share, excluding deferred tax, was R22.80, an increase of 23.91% in comparison to the net asset value per share for the year ending 28 February 2015 of R18.40.
"The growth in our net asset value per share was attributable to the revaluation of the income producing properties, fair value adjustments on current developments and financial instruments, an increase in net working capital and gains on foreign currency translation. Our strategic objective remains generating consistent returns from our portfolio of investments over time achieved through capital growth from our completed portfolio, unlocking development margin on key developments and growth from our offshore investments," commented Aaron Suckerman, Pivotal's Financial Director.
Pivotal currently has borrowings of R5.8 billion which represents 45.8% of the current property portfolio value which includes indirect property investments. At 29 February 2016, the average cost of funding increased marginally to 9.56% from 9.36% at 28 February 2015 and interest rates have been fixed in respect of 84% of borrowings for an average period of four years.
Aaron Suckerman says: "Our interest rate hedge policy remains conservative and forms part of our risk mitigation strategy. We believe we are well positioned to weather the current economic and political uncertainty by de-risking our current development pipeline through pre-letting activity, development contracts which are fixed so we are not exposed to currency fluctuations and cashflows that are underpinned by quality income producing assets which account for 74% of our property portfolio."
The Fund will build on its growth and diversification strategy by pursuing opportunities to expand and diversify its investment portfolio through selective investment in emerging and mature markets.
Pivotal has entered into an agreement with Mara Delta Property Holdings Limited ("Mara Delta") (previously Delta Africa) to incorporate its rest of Africa investments into Mara Delta and to invest up to R370 million in the company. During the year Pivotal completed its first investment into Mara Delta by way of a subscription of approximately two million shares in Mara Delta at a cost of USD3.41 million.
Jackie van Niekerk said: "The transaction gives Pivotal he benefits of diversification of risk by way of a spread of quality income producing investments and quality development opportunities."
Post year end Pivotal entered into a share sale agreement and a co-investors agreement with Redefine Properties Limited which will result in Pivotal acquiring approximately 6.06% of Echo Prime Properties B.V. ("Echo") for a consideration of €31.07 million.
Jackie van Niekerk commented: "We are very excited about the Echo transaction as part of our diversification strategy. Echo has in-country knowledge and the portfolio comprises high quality and modern assets with solid property fundamentals to the value of €1.2 billion." Echo owns a €1.18 billion portfolio of prime shopping centres and offices across Poland. The effective date of the transaction will be 31 May 2016.
Pivotal made a number of changes to the board post year end. Tom Wixley has stepped down as chairman of the board but will remain on the board as an independent non-executive director with Sakumzi Macozoma (Saki) being appointed as an independent non-executive director and chairman of the board. Dave Savage stepped down as executive director and will remain on the board as a non-executive director. "We would like to welcome Saki to the board as chairman and thank Tom for his valuable input and guidance as chairman.
"We anticipate that sluggish economic growth both in South Africa and internationally, coupled with high volatility in financial markets, will continue. Our risk mitigation by way of conservative borrowing and interest rate hedging policies, quality income-producing assets and development pipeline as well as an increasing international investment exposure places Pivotal in a strong position to weather the storm in these uncertain times.
"Pivotal will continue to re-invest in its portfolio of properties to ensure delivery of sustainable growth with focused attention being placed on the key fundamentals," concluded Van Niekerk.