SA Corporate Real Estate – one of the country’s oldest JSE-listed property companies is eyeing further expansion in the multifamily residential market.

This comes as its R1 billion acquisition of Indluplace Properties in 2023 is already delivering dividends for shareholders, according to the group’s full-year results ended 31 December published on Wednesday.

Listen: SA Corporate goes ahead with Indluplace takeover

SA Corporate has slashed vacancies within the Indluplace residential portfolio by almost half, bringing down vacancy levels in the subsidiary from 8.5% in September to 4.5% by the end of December 2023.

The Indluplace deal was finalised in the second half of last year, and saw the residential real estate investment trust (Reit) being delisted from the JSE.

SA Corporate – which was a takeover target itself back in 2019 from the likes of Emira Property Fund and Dipula Income Fund in the wake of board and executive leadership tussles – now owns one of the country’s largest residential property portfolios of more than 19 000 units, valued at around R7.9 billion.

It owns the Afhco portfolio of more than 10 000 residential units (including student accommodation) and almost doubled its residential portfolio with the Indluplace deal (over 9 000 units).

Read:
SA Corporate Real Estate Fund snubs takeover offers
Takeover battle brewing for SA Corporate Real Estate
Consolidation on the cards for listed property players
Emira wants full control of Transcend for R525m

The residential commercial market is now being referred to as the multifamily residential or build-to-rent market in SA, in line with global trends and to secure investment into this ‘new’ specialist asset class in the property sector.

On Wednesday, SA Corporate reported in its results booklet that total property revenue for its 2023 financial year came in at just over R2.48 billion (up from R2.04 billion in 2022).

It noted that “the like-for-like portfolio, excluding disposals, developments and acquisitions during 2022 and 2023, amounted to R1 825 million [2022: R1 726.4 million]”. The group’s net property income (NPI) increased by 10.7% (R125.9 million) from the previous year, while its like-for-like portfolio NPI increased by 4.6%.

“The increase in NPI was largely driven by the acquisition of Indluplace and the increase in the like-for-like portfolio,” said SA Corporate.

“These were partially offset by a decrease in NPI attributable to properties sold and held for sale,” the diversified Reit added.

The group noted in the outlook section of its results booklet that “a pipeline of quality suburban residential estates is being explored” to increase exposure to this asset type.

SA Corporate has a R19 billion property portfolio of assets under management and is invested in the retail, industrial and multifamily residential sectors of the market. It also has a small storage property business.

Office exit

The Reit has largely divested out of the commercial office property market over the years, barring some property assets that have mixed-use components linked to it, such as Musgrave Shopping Centre in Durban, which has an office tower.

Nationally, the office market is struggling as the worst-performing sector of the property industry. Durban’s CBD is one of the worst affected.

While Musgrave Centre is not located in the Durban CBD, SA Corporate said in its results booklet that ‘the group’s small commercial [office] portfolio is largely impacted by vacancies in the office space above the retail centres”.

“In the commercial space above retail at Musgrave Centre, we have contracted a development partner for the conversion of office to residential apartments on a phased approach,” it added.

This office-to-residential conversion is similar to moves by other players in the market, such as unlisted group Africrest Properties, and JSE-listed Reit Octodec.

Africrest is reputed to be the biggest office-to-residential redeveloper in the market and is also a residential landlord in the multifamily or build-to-rent space.

Read/listen:
Weak office market a boon for Africrest’s expansion plans
Exit from office sector for SA Corporate Real Estate
Multifamily residential hits SA property investor market
Octodec still banking on the Pretoria and Joburg CBDs

Meanwhile, SA Corporate reported a 5.5% increase in distributable income for the second half of its 2023 financial year on Wednesday. However, for the full year, the group’s distributable income fell 4% (to R647.8 million or 25.76 cents per share) compared to the 12 months to 31 December 2022 (R674.8 million or 26.83 cents per share).

The Reit declared a distribution or dividend totalling 23.18 cents per share at 90% payout ratio (2022: 24.15 cents per share, also at 90% payout ratio).

SA Corporate share price