Property investment and development entity, RDC Properties, attributed its growth in pre-tax profit to improved net operating income.
For the half-year financial results ended 30 June 2024, RDC recorded a 36 percent increase in profit before tax, reaching P41 million compared to the corresponding period.
RDC Chairman Andrew Bradely noted that the previous period’s performance had been negatively affected by a P13.2 million downward fair value adjustment on investment properties held for sale, an issue that did not recur this period. Additionally, the sale of RDC’s subsidiary, 108 Albert Road (Pty) Ltd, contributed a P6 million gain to the current year’s profit, further boosting results.
Despite the impact of higher finance costs due to rising interest rates, Bradely affirmed that RDC’s overall financial position remains robust and continues to deliver value to its investors. He emphasised that the company’s well-diversified portfolio, both in terms of sector and location, has once again enabled it to achieve strong results in a challenging macroeconomic environment.
RDC’s portfolio spans several countries, with properties in South Africa (48 percent), Botswana (25 percent), Croatia (23 percent), Madagascar and Mozambique (2 percent), the USA (1 percent), and Zambia (1 percent). As of the reporting period, the total value of RDC’s portfolio stood at P6 billion, marking an increase of P18 million from the previous corresponding period. Despite selling some non-strategic assets, RDC’s total assets rose by 2 percent to P6.2 billion.
Bradely said that management is focused on further reducing gearing over the medium term, while the group’s financial results demonstrate improved operational performance. “The property improvement program continues to yield results, as reflected in increased revenue and earnings,” he stated. Additionally, he noted that the value of RDC’s investment portfolio has grown despite the sale of non-core properties.
Bradely highlighted that this aligns with RDC’s dual strategy of increasing shareholder distributions and Net Asset Value per share in the short to medium term. He pointed out that a key metric in property management is vacancy analysis, and RDC has continued to see a downward trend in overall vacancies.
In December 2023, RDC reported a vacancy rate of 10.7 percent of the total Gross Lettable Area (GLA). Over the past six months, this rate has dropped to 8.4 percent, thanks to efforts by the in-house letting teams.
“A more meaningful measure of current vacancies is expressing it as a ratio of Total Rental Income,” Bradely said.
Using this metric, RDC’s vacancy rate fell from 7.9 percent in December 2023 to 4.8 percent in the first half of 2024.
“New lettings have aligned with our forecast rental rate projections, and we have managed to renew 25,200m² in the review period with a nil reversion rate,” he added.
From a regional perspective, Bradely noted that Botswana remains stable, with hospitality assets benefiting from buoyant leisure and improved business travel markets. “Letting activity has been proactive, with some 8,000m² in new and renewed leases concluded during the period,” he said. Botswana’s current vacancy rate by revenue stands at 6.2 percent.
In South Africa, the Gauteng portfolio has a vacancy rate of 14.6 percent by revenue, with 14,200m² in new and renewed leases signed in the last six months. The region is beginning to show signs of growth after a sustained downturn. In KwaZulu-Natal (KZN), the vacancy rate is 8.8 percent by revenue, with 3,100m² in new and renewed leases secured during the review period. However, KZN accounts for only 5 percent of RDC’s total rental income.
Bradely explained that improvements in the Tower portfolio’s performance are due to a structural change in the outsourced property management contract, which has shifted to an “admin only” support model. The asset manager now directly employs the portfolio managers, improving communication, control, and accountability.
The Western Cape portfolio, meanwhile, is reportedly outperforming the market with a vacancy rate of just 2.2 percent by revenue. RDC also announced the opening of the redeveloped Westlake Shopping Centre in Cape Town, with Checkers and Clicks as anchor tenants, expected to contribute sustainably to rental revenues.
In Europe, Croatia remains a key part of RDC’s currency hedging strategy and continues a robust growth path. “A significant leasing deal in an annex to our 12,300m² Dubrovnik Shopping Centre is set to add an estimated €2 million to the property’s value in the next valuation cycle,” Bradely revealed.
Global inflation has cooled, and the Euribor (Euro interbank rate) is declining, which is good news for RDC’s financing costs. “This positive trend is evident across all our regions,” Bradely concluded.
