The bubble bursts at PrimeTime
• But the directors are not too worried
At 31 August, current liabilities of PrimeTime Properties exceeded the group’s current assets by P295 944 266 (2019: P50 899 358). According to the company’s financial results for the year, current liabilities exceeded current assets due to the group’s loan facilities which expire in the 2021 financial year.
The group says it had a breach on an interest cover covenant with a lender and the loans, amounting to P111 million, have been classified under current liabilities. Given the net current liability position, current market conditions and significant uncertainties resulting from Covid-19, the directors say they continue to assess the impact of the pandemic on the business, in particular focusing on the appropriateness of adopting the going concern basis in preparing the summarised consolidated financial statements for the year ended 31 August 2020.
“The group’s going concern assessment covers the period of at least 12 months from the date of authorisation of the consolidated financial statements (the ‘going concern period’),” it says.
Given the current uncertainties created by Covid-19, the group says it will monitor the interest and debt cover position closely, taking mitigating actions within its control, and if required, seek cover covenant waivers. “The directors believe that the group’s lenders will continue to view the group as a secure customer throughout the going concern period,” PrimeTime says.
To address the company’s net current liability position and funding requirements, the directors have outlined a number of measures they have taken. The group says it has prepared detailed cash flow forecasts, taking into account the potential impact of Covid-19 on net rentals.
In preparing the cash flows, the group has made the following significant judgements; the group vacancy levels in its properties will remain below 5 percent for the next 12 months, there will be no significant downward rental adjustments beyond the concessions already made for the anchor tenants of the various properties, the group will obtain new lines of credit to extinguish maturing debt, and there will be no significant lockdowns in the countries the group operates in.
The company says it has been able to take mitigating measures to obtain waivers on the interest rate coverage ratio on a facility for which one of the covenant conditions has been breached at year end. It revealed that it has offers under consideration from some of its lenders to obtain new funding and roll-over some of the debt that is due within the next 12 months. “These are currently under consideration to determine which terms are most suitable for the group,” the property company says, adding that the group is currently exploring various debt and equity funding options as part of its capital management process.
At the request of the lenders, the group disclosed that it agreed to roll over two facilities with a combined balance of P12.7 million which were due for repayment in November 2020. The facilities were rolled over to November 2021. The group says it already secured a facility of P70 million for one of its developments in progress and draw-down is expected to commence in January 2021. Subsequent to year-end, the group has issued a bond of P33million in line with its Domestic Medium Note Programme.
PrimeTime says it has met all of its interest and capital repayments due since 31 August 2020 to the date of authorisation of these financial statements. This includes part early settlement of P30 million on the First Capital Bank facility due by 31 December 2020. “The group continues to use a blend of short- and long-term debt in order to efficiently manage its cash flow and the developments currently in progress,” the group states, adding that once the developments are completed, they then become viable for longer-term funding.
Although it remains uncertain as to when the pandemic will be brought under control, based on their analysis, the directors say they are satisfied that there is a reasonable expectation that the company will be able to meet its ongoing and future commitments for at least 12 months from the date of approval of the consolidated financial statements for the year ended 31 August 2020 and that no material uncertainty on the going concern assumption exists. “The directors have therefore resolved that it is appropriate for the group financial statements to be prepared on a going concern basis,” says PrimeTime.
The company says creation of attractive built environments is core to its business model and its portfolio is stacked with future opportunity. The group has a mix of near-term and medium-term development prospects which offer an exceptional platform to create sustainable spaces of tomorrow and enable both PrimeTime’s tenants and the markets in which they operate to thrive. According To the company, these already secured opportunities will enhance returns for investors for many years to come and can be delivered in phases to match occupier demand.
“In addition to those, our land bank will produce several new additions in the future, including the development of up to 15,000 sqm of prime grade offices in Gaborone’s New CBD, the first phase of which will deliver 3,000 sqm at an estimated development cost of P55m,” the company says, adding that having achieved its first investments in South Africa during this financial year, these mark the start of a planned portfolio of properties in the country. “While our progress might have been slowed by the current investment climate, it is our intention to increase our assets there in the next 6 to 12 months.”
In Botswana, the group says it is busy completing tenanting of Pinnacle Park Phase I and is fitting out for other new tenants taking up space elsewhere. The Lobatse Junction Retail Mall is progressing, albeit some delays have been experienced during lockdowns. The completed centre is already over 85 percent let with scheduled completion in Q4 of 2021. “We also want to proceed with the planned extension at Boiteko Junction in Serowe at an estimated cost of P35m, which will satisfy the strong tenant demand in the area, and the exterior refurbishment of our South Ring Mall property is due to start shortly,” the company says.
In Zambia the property company says it is filling the remaining vacancies at Chirundu and Munali malls, a process which has stalled over the last six months. The proposed solar installation at Kabulonga Mall is now at the planning stage. G4S – a tenant at two of its properties in Zambia – has a requirement for a cash centre to be developed for them on one of the existing sites and the company is in discussions with funders for a tentative build start date in Q1 of 2021. Current cost estimates for this addition are USD520 000 which will be rentalised.