How prioritising through a tough year has kept Attacq healthy
Attacq CFO Raj Nana says the real estate market is keeping the company on its toes.
Raj Nana says Attacq is navigating a real estate market that is changing fast on the heels of Covid-19 induced changes. Raj joined Attacq, a real estate investment trust (REIT) in 2014, just a few months after the company listed on the JSE. He did so in the role of an investment officer with his responsibilities focusing on the group’s funding, deal structuring and assessing property development opportunities.
Prior to joining Attacq, Raj’s career was largely in investment banking, and he spent some time at Rand Merchant Bank followed by Absa Capital where he worked in leveraged finance as a transactor before leaving for Attacq.
In 2018, he took up the role as Attacq’s CFO and executive director when the incumbent CFO, Melt Hamman, was appointed CEO.
Latest financial results
Looking back on the financial year, Raj says Attacq reported robust financial performance for the six months ended 31 December 2019. The group was on track to achieve its distribution guidance of 10 percent year-on-year growth, and in March 2020, its interim distribution was 11.1 percent higher than the prior comparative period.
The final quarter of the financial year, which ended 30 June, was affected by Covid-19. “We took the decision to focus on preserving capital and liquidity, given the uncertainty related to Covid-19, and therefore resolved not to pay the final dividend. There were a number of requirements that we needed to meet as a REIT from a JSE and a tax perspective, and we met all of those.”
Raj says one of the group’s key drivers is its investment in MAS, which is also listed on the JSE. The retail real estate sector was impacted in the Central and Eastern European countries that MAS operates in and as a result, it also decided not to declare a final dividend.
“Another driver that we have is the rest of Africa real estate investment. This remains an exit strategy for us, and we've been working on selling one of our key assets located in Nigeria. We've recently entered into a sale agreement and are looking forward to closing the transaction shortly,” he explains.
He notes that overall asset values were negatively affected with the investment property portfolio being valued downward on the back of higher cap rates, but also other valuation assumptions. “Similarly lower share prices across the board, especially in the listed real estate sector, impacted the valuation of our investment in MAS, and this resulted in a decline in the net asset value of the group and also contributed to higher gearing levels.”
Impact of the lockdown
The group’s top priority through the pandemic has been the health and safety of all its staff and other stakeholders, including tenants (clients) and shoppers across the country. Stakeholders were anxious with the uncertainty brought on by the virus and the lockdown, and as an executive team, they proactively updated them regularly on what operating realities were on the ground.
“Early on during the hard lockdown, we had to come to an understanding of the new regulations and their implications for our operations. We had to ensure that we were compliant but also create a safe environment for our tenants and shoppers,” Raj says. “We spent a lot of time with our clients to understand the impact of the lockdown on their businesses and worked with them to find solutions. The rental relief we provided as support impacted our results, but we took a long term view on the sustainability of our tenants.”
Leading through the pressure
Raj reflects that as a team, what came out quite strongly was that the pressure of working remotely and balancing domestic and work responsibilities, was difficult. These were compounded by needing to run additional scenario analysis and sensitivities and finalise year-end reporting as a finance team, in addition to meeting all other requirements.
“What was important for me as a leader was to maintain close contact with my team, check in frequently, and not always talk about work but listen to how the team were coping with their own personal challenges. This was deliberate during a time where the line between private and work time began to ‘blur’,” says Raj.
As a company, Attacq was proactive in providing additional leave. The decision considered that many employees had to adjust their day-to-day lives and the break allowed them the space to pause, reflect and come back rested into the virtual workplace.
“On a case by case basis, we made counsellors available. Some people were faced with the struggle of juggling work with personal life, others were grappling with financial hardship as spouses were out of work or had businesses that were not able to trade, so we supported where needed,” he explains.
New market trends
Raj observes that trends such as click and collect and online retail have been accelerating through Covid-19, acting as a catalyst for retailers to offer online channels and to service their shoppers differently.
“From an office workplace perspective, we saw some trends emerging prior to Covid-19 with flexible and co-working spaces gaining traction. I personally believe that a hybrid model, as opposed to a pure work-from-home model, is a better solution for businesses. We forget how important it is for most businesses that colleagues collaborate with each other. Virtual meetings can only take you so far, but creativity stems from positive energy, and that comes from physical interactions, which can be done responsibly by taking the right precautions. Currently a number of large employers have different views on the future working arrangements; we continue to stay close to our clients and monitor global trends as well,” notes Raj.
He explains that Attacq is strategically focusing on capital structure and liquidity through the levers that the company has control over, such as delivering on some of the property disposals it has earmarked. “The company is also ensuring that it is allocating capital in the right places as it becomes much scarcer and refinancing the group’s debt to a more balanced maturity profile,” says Raj.
Now that we’re a few months into the pandemic, he says there is still a lack of visibility on what the real impact of Covid-19 will be on the economy in the longer term. Raj says Attacq’s South African portfolio is well diversified across sectors and this has served them well during the pandemic, with their portfolio including iconic assets such as the PwC Tower, the newly completed Deloitte head office building, and the Mall of Africa.
The Waterfall development is where their focus is. “Waterfall is unique in that we are developing a smart city located between Sandton and Pretoria. It's anchored by Mall of Africa and over recent years it has become the home to a number of domestic and global firms. We are particularly excited by our Ellipse residential development with Phase 1 well under way and due for completion next year. The Waterfall logistics precinct has attracted many businesses looking to develop their logistics and distribution centres in the centre of Gauteng with easy access off the N1 and flexible development and leasing options.” he concludes.