Safari Investments RSA Limited (JSE:SAR) News - Pre-Close Operational Update

SAFARI INVESTMENTS RSA LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2000/015002/06
Share code: SAR
ISIN: ZAE000188280
(Approved as a REIT by the JSE)
(“Safari” or “the Company”)


PRE-CLOSE OPERATIONAL UPDATE


Safari hereby provides its pre-close operational update relating to business activities prior to the
close of its financial year ending 31 March 2022 and ahead of the start of its closed period
commencing 1 April 2022.

Safari is a South African Real Estate Investment Trust (“REIT”) with a portfolio of premium retail
assets in semi-urban areas in South Africa focused on creating long-term shareholder value. The
portfolio, externally valued at R3,46 billion in 2021, comprises 7 retail shopping centres and a day
hospital in South Africa. One mixed use development is held in Namibia. The Company’s defensive
income stream is underpinned by careful tenant selection, efficiencies in property management
and strategically located assets.

While the operating environment remained challenging, the operational performance of the
portfolio for the period up to 28 February 2022 was in line with expectations and guidance
communicated to shareholders. The Company’s strategic focus on food-anchored convenience
shopping centres in mainly semi-urban areas has proven again to be a key factor in the defensive
nature and financial stability of its portfolio.

OPERATIONAL HEADLINES
Improvements were evident in all key trading metrics of the portfolio. In particular increased tenant
turnover and trading densities are encouraging and bear testament to the resilience and
dominance of Safari’s centres. Tenant turnover and trading density metrics for February 2022 were
in line with (or above) pre-Covid levels of February 2020, notwithstanding the negative impact of
an anchor tenant, SuperSpar, not trading at Thabong centre since the July 2021 riots.


 KEY TRADING METRICS                          February          February         February
 (retail portfolio only)                        2020              2021             2022
 
 Trading Density (ZAR per square metre)         32 700           33 700            33 900

 Trading Density (growth %)                                            3%               1%
 
 Arrears (ZAR)                                 7 150 000        9 859 000       11 690 000

 Arrears as % Outstanding                           2,43%             3,07%            3,01%

 Vacancy Factor                                     3,33%             3,12%            3,03%



As at the end of March 2022 the weighted average lease expiry of Safari’s retail portfolio stands at
3,3 years. Considering the 11 months to February 2022 the retail portfolio shows a collection rate
of 98% of contractual billings. Should deferrals to collection be disregarded the rate improves to
99%.
With a number of new leases still under negotiation, current estimates indicate that a positive
reversion rate in the region of 0,5% will be achieved for the period ending 31 March 2022. This is
a significant improvement compared to the negative reversion of -2,5% for the corresponding
period ended 31 March 2021. This is indicative of the portfolio reaching a rental base from which
sustainable growth may again be achieved. It may however be affected by other shocks to the
economy, including rising levels of inflation.

The strategic layout and positioning of each property in its target market are continuous focus
points. Safari’s centres must maintain their dominance and remain relevant while changes in tenant
and consumer needs are recognised. In line with our vision for each site, refurbishments of certain
assets and introduction of new tenants were implemented across the portfolio.

Redevelopment of the Victorian Village shopping centre is near completion. Despite the centre’s
relatively small size it has been re-established as the most prominent convenience retail
destination in Heidelberg, Gauteng.

Denlyn shopping centre in Mamelodi, Pretoria became a triple-anchored centre with the recent
addition of Boxer Superstore alongside the existing anchors Shoprite and SuperSpar.

Nkomo Village shopping centre continues to trade exceptionally well. Construction of an entire new
phase for the centre is due to commence in April 2022, adding approximately 5 000 square metre
of GLA. The expansion will accommodate Shoprite and other nationals including Mr Price, Sheet
Street, Ackermans Connect, Pep Home and Burger King to cover a broader customer-base in
future.

After the damage caused by the civil unrest in July 2021 the restoration of Thabong shopping
centre provided an opportunity to optimize its tenant mix. A repositioning and right sizing of the
Standard Bank branch was completed successfully and Nedbank is in the process of doing the
same. Ackermans was increased in size, SportScene relocated to a larger unit and a Sneaker
Factory was added. Ackermans Connect opened for trade in February 2022 and it is anticipated
that Shoprite, a fourth anchor, will open by the end of 2022.

Where feasible, solar installations are expanded to maximum capacity across the portfolio to
ensure uninterrupted trading while mitigating the energy supply risk and minimising our carbon
footprint.

INSURANCE COVER FOR IMPACT OF COVID-19 AND THE JULY 2021 RIOTS

Rent relief granted to tenants in the 2022 financial year totalled approximately R1,5 million due to
the Covid-19 pandemic. Together with the R27 million relief granted in the 2021 financial year this
brings the total relief granted by Safari due to the pandemic to R28,5 million. The Company’s legal
claim against its insurers is still in process and the Board is hopeful that a settlement will be
achieved in the 2023 financial year to recover the loss.

The unfortunate period of civil unrest in South Africa in July 2021 resulted in material damage to
certain assets, most notably at Thabong shopping centre in Sebokeng. To date the Company
incurred R25 million in expenses for material repairs. Interim compensation payments received
from Sasria amount to R22 million. The claim for the recovery of the remainder of the expenses is
still in process.

This event naturally caused severe business interruption, again mainly at Thabong shopping
centre. Rent relief granted to tenants for the period of closure and repairs total approximately R11
million to date with interim payments of R7 million received from the insurer. The precise shortfall
still to be recovered will be determined in due course.

SECURITY SERVICES INTERNALISED

In a joint venture with Heriot REIT Limited, Safari internalised its security function. This entity, HS
Secure, has taken over the security services on the majority of the Safari and Heriot retail sites
with the aim to improve services and allowing management a more hands-on and controlled
approach to securing and safeguarding Safari’s shopping centres and shoppers.

DISPOSAL STRATEGY ON TRACK

In line with the Company’s strategic focus on dominant retail assets in semi-urban and township
areas, Safari has earmarked two non-core assets for disposal. There is engagement with potential
buyers for Soweto Day Hospital and the Mnandi shopping centre. The sale of these assets is in
line with the Board’s objective to optimise capital allocation and focus on higher yielding retail
opportunities.

The majority of the 36 residential apartments forming part of the Platz am Meer mixed-used
development is now sold. Safari is confident that the remaining balance of 9 units in stock will be
sold during the 2023 financial year. The medium to longer term view is for Safari to exit Namibia
and focus on the South African retail landscape.

IMPROVED REPORTING ON ESG

To integrate ESG principles into business has become increasingly important in the REIT
environment. A priority in the 2022 integrated annual report will be an improved focus and reporting
on Safari’s various initiatives and partnerships that support sustainability. This will assist investors
in gauging the societal impact of the business with a better understanding of the Company’s
various non-financial and socially responsible practices.

OVERVIEW OF FINANCIAL STABILITY

Safari continues to prudently manage its balance sheet and liquidity. The loan-to-value percentage
of approximately 38% based on 31 March 2021 valuations and the interest cover ratio are well
within the required debt parameters, and it is expected that these covenants will continue to be
comfortably met. Currently, approximately 47% of debt is hedged.

During the financial period under review R800 million of the Company’s total facilities of R1,4 billion
matured and were successfully refinanced. Liquidity remains sound with unutilised credit facilities
of approximately R100 million in place on date of this announcement.

DISTRIBUTION GUIDANCE

The Company intends to continue to apply a consistent dividend pay-out ratio as a result of strong
underlying cash flows and comfortable levels of gearing. Shareholders are referred to the full year
distributable income per share guidance published as part of Safari’s interim results for the 6
months ended 30 September 2021 and are advised that the guidance remains unchanged at this
stage.

DISCLAIMER

Safari enters a closed period from 1 April 2022 until the publication of its annual results for the year
ending 31 March 2022. Safari will announce its 2022 annual financial results towards the end of
June 2022. For further details contact info@safari-investments.co.za

The information contained in this document has not been reviewed or reported on by the auditors
of Safari. Estimates, assumptions, and forward-looking statements may therefore differ from the
annual results to be published in June 2022.

Pretoria
31 March 2022

Sponsor
PSG Capital

Date: 31-03-2022 09:13:00
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