Exemplar REITail, a specialist in rural and township retail, has published its financial results for the year ended February 2024. Despite a challenging economic environment, the company has declared a final distribution and reported significant performance highlights.
Final Distribution
Exemplar declared a final distribution of 74.66425 cents per share for the six months ended 29 February 2024. This final distribution includes a dividend of 57.03275 cents and a return of contributed tax capital of 17.63150 cents, marking a 3.1% increase from the same period last year.
Combined with the interim distribution of 64.27220 cents per share for the six months ended 31 August 2023, the total distribution for FY2024 stands at 138.93645 cents per share, a 1.5% decrease from the prior year.
Portfolio
Exemplar, a listed Real Estate Investment Trust (REIT), owns and manages 26 retail assets with a combined Gross Lettable Area (GLA) of 414,530 square meters across five provinces in South Africa.
The company's core focus is providing and managing retail services in previously underserved regions.
Key Financial Metrics:
Loan-to-Value Ratio: 36.5%
Rental and Recovery Income: Increased by 16.4% to R1.22 billion
Net Property Income: Improved by 13.2% to R784.148 million
Diluted Headline Earnings per Share: Declined by 20.7% to 110.25 cents per share
Net Asset Value per Share: Increased by 7.4% to R14.75
Profit for the Period: R754.026 million, down from R1.028.719 billion previously
Tenant Performance and Lease Renewals
The trading densities of anchor tenants improved by 2.6% to R4,847 per square meter, reflecting a below-inflation increase consistent with the recent results of food retailers indicating volume decreases in sales.
Despite the major food anchors opening new stores, which results in some cannibalisation, the depressed economy and high-interest rate environment continue to negatively affect consumer spending.
On renewal of expiring leases, a weighted average increase in base rental of 4.1% was achieved. During FY2024, a GLA of 90,889 square meters expired, of which 77,680 square meters were renewed.
Tenants occupying 5,018 square metres chose not to renew, and 3,106 square metres of this space have been re-let.
Negotiations are ongoing for the remaining expired leases.
Vacancies and Operating Costs
The vacancy rate slightly increased to 3.51% from 3.35% the previous year. Property operating costs rose by 22.7%, outpacing the 17.6% increase in rental and recovery income.
This rise in costs was mainly due to a significant bad debt expense of R16.8 million compared to R2.4 million in FY2023. Excluding this bad debt expense, the increase in operating costs would have been 18.5%.
The bad debt expense is largely attributed to a few tenants, with the Post Office being the most significant, accounting for R6.2 million.
The Post Office was a tenant in 11 of Exemplar's centres, and most of these leases have been cancelled.
Replacements have been found for five locations, two are pending board approval, and negotiations are ongoing for the remaining spaces.
Development Projects
Exemplar is progressing with several key developments. The Mbhashe LG Mall is currently under construction and scheduled to open on 27 March 2025.
The expansion of Theku Plaza, to be renamed Theku Mall, is also underway, with a scheduled opening on 31 October 2024.
Income Growth Drivers
Rental and recovery income increased by 17.6% to R1.21 billion. This growth is partly due to the acquisition of Mamelodi Square in February 2023, the opening of KwaBhaca Mall and Bizana Walk in October 2022 and December 2022 respectively, and the completion of the Edendale Mall rebuild in April 2023.
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