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<p>SOUTH AFRICAN consumers may well have tightened their purse strings but that hasn't stopped listed property funds to continue pouring money into new shopping centres. Resilient is a particular case in point, with its latest annual report showing a pipeline of retail developments currently under construction worth R516,4m. </p>
<p>Shareholders will no doubt be pleased to see its management is retaining its focus on investing in malls in smaller cities and Platteland areas that cater mainly to lower income earners. Resilient's strategy is to focus on non-metropolitan areas - including the likes of Tzaneen, Polokwane, Kimberley, Rustenburg, Mafikeng and Nelspruit - has to date paid off handsomely for shareholders. Resilient was one of the R112bn listed property sector's top performers in terms of income growth for 2009, with distributions up a healthy 14,21% compared to a sector average of around 8%. </p>
<p>Furthermore, Resilient's retail portfolio appears to have bucked the general trend of rising tenant closures: vacancies remained static at 3,2% last year. MD Des de Beer says there are further opportunities for retail development in the Platteland, which isn't yet as over-shopped as South Africa's major cities. </p>
<p>De Beer notes in the directors' report that Resilient will continue to invest in dominant retail centres in non-metropolitan areas tenanted predominantly by national retailers. De Beer says: "These centres have outperformed similar centres in metropolitan areas due to consumers having lower levels of personal debt and the underpin provided by increases in social spending." </p>
<p>Management is also taking advantage of the downturn in the construction cycle to negotiate competitive building rates on new malls with reputable construction companies. Bulking up the portfolio with stakes in new developments will help Resilient to increase its conservative gearing level from its current 26,4% to between 35% and 40%, which management believes will be prudent in a recovering economy. </p>
<p>Some of the malls currently under construction in which Resilient has sizeable stakes include the 75 000sq m Mall of the North (Polokwane) and the 33 000sq m Brits Mall. The I'langa Mall (Nelspruit), in which Resilient has a 25% interest, opened its doors last month. Construction of the Burgersfort Mall (Mpumalanga) should start later this year. </p>
<p>Management expects retail trading conditions to gradually improve during this year, which should be positive for rental growth. "The retail trading environment remains buoyant and trading densities - particularly in Limpopo province - are currently growing significantly faster than rental escalations. This provides further opportunities for increased rentals on lease expiries." </p>
<p>However, De Beer says the board remains concerned about the substantial increase in the cost of services, particularly electricity, which has a direct impact on tenants' occupancy costs. Distribution growth is forecast to slow somewhat this year but should remain in the double digits. Resilient's flagship properties include Highveld Mall (Witbank; 60% interest), Tzaneng Mall (Tzaneen), Diamond Pavilion (Kimberley), Jabulani Mall (Soweto; 55% interest) and the Limpopo Mall and Taxi Centre (Polokwane). </p>
<p><img src='http://www.fin24.com/downloads/Media/article_images/fweng_img/2007/sep/ee_sho060510.gif'> </p>
<p>Shareholders will no doubt be pleased to see its management is retaining its focus on investing in malls in smaller cities and Platteland areas that cater mainly to lower income earners. Resilient's strategy is to focus on non-metropolitan areas - including the likes of Tzaneen, Polokwane, Kimberley, Rustenburg, Mafikeng and Nelspruit - has to date paid off handsomely for shareholders. Resilient was one of the R112bn listed property sector's top performers in terms of income growth for 2009, with distributions up a healthy 14,21% compared to a sector average of around 8%. </p>
<p>Furthermore, Resilient's retail portfolio appears to have bucked the general trend of rising tenant closures: vacancies remained static at 3,2% last year. MD Des de Beer says there are further opportunities for retail development in the Platteland, which isn't yet as over-shopped as South Africa's major cities. </p>
<p>De Beer notes in the directors' report that Resilient will continue to invest in dominant retail centres in non-metropolitan areas tenanted predominantly by national retailers. De Beer says: "These centres have outperformed similar centres in metropolitan areas due to consumers having lower levels of personal debt and the underpin provided by increases in social spending." </p>
<p>Management is also taking advantage of the downturn in the construction cycle to negotiate competitive building rates on new malls with reputable construction companies. Bulking up the portfolio with stakes in new developments will help Resilient to increase its conservative gearing level from its current 26,4% to between 35% and 40%, which management believes will be prudent in a recovering economy. </p>
<p>Some of the malls currently under construction in which Resilient has sizeable stakes include the 75 000sq m Mall of the North (Polokwane) and the 33 000sq m Brits Mall. The I'langa Mall (Nelspruit), in which Resilient has a 25% interest, opened its doors last month. Construction of the Burgersfort Mall (Mpumalanga) should start later this year. </p>
<p>Management expects retail trading conditions to gradually improve during this year, which should be positive for rental growth. "The retail trading environment remains buoyant and trading densities - particularly in Limpopo province - are currently growing significantly faster than rental escalations. This provides further opportunities for increased rentals on lease expiries." </p>
<p>However, De Beer says the board remains concerned about the substantial increase in the cost of services, particularly electricity, which has a direct impact on tenants' occupancy costs. Distribution growth is forecast to slow somewhat this year but should remain in the double digits. Resilient's flagship properties include Highveld Mall (Witbank; 60% interest), Tzaneng Mall (Tzaneen), Diamond Pavilion (Kimberley), Jabulani Mall (Soweto; 55% interest) and the Limpopo Mall and Taxi Centre (Polokwane). </p>
<p><img src='http://www.fin24.com/downloads/Media/article_images/fweng_img/2007/sep/ee_sho060510.gif'> </p>
