Safari will ‘certainly pursue any good opportunities’

Safari Investments CEO and founder François Marais discusses the good reaction his company received from investors when it listed on the JSE‚ in this interview conducted on April 7.

BUSINESS DAY TV: There’s been a lot of activity in the property sector‚ mergers aplenty as well as new listings and‚ among those‚ retail group Safari made its debut today and a pretty strong one too at that‚ with its shares trading well above R8.40 from the prelisting price of R7.63. Joining me now on News Leader is François Marais‚ the CEO and founder of Safari Investments.

François‚ I have to say I’m not surprised to see the shares trading well today. They reached R8.49 at one point‚ because the prelisting placements were very well over subscribed. In fact‚ you had applications for just under 61-million shares and you only issued about 49-million shares. Were you not tempted to maybe issue more‚ given the appetite that you received?

FRANCOIS MARAIS: We worked out a certain return yield on the share price and obviously that disciplines one to how many shares you can issue. We did go to ... call it just short of 50-million shares as you rightly put it. It was our intention initially to just issue 43-million shares but because of the very good reaction we got from the private placement‚ it was a pleasure to go above that. We actually managed to get together R375m‚ which places us in a very comfortable cash situation‚ which was our intention. We were prepared to still carry some debt so to speak‚ but now we literally have no debt and the bond that is there we can apply for further developments currently on the go and which are on the table.... In fact‚ it is under construction so in that way it is very pleasing. The essence behind all of this is that 12 years ago we made a promise to our shareholders that this year we will start taking our profits to them and that’s why we registered in the Reit (real estate investment trust) section ... it (fits) like a glove which is very nice and in July we will be paying out the first small return to the shareholders.

BDTV: You talk about these patient shareholders‚ are they the institutions that are named in the prospectus ... Stanlib‚ Grindrod‚ for example ... have they been with you from the beginning or did they only come in latterly?

FM: All the institutional investors who are now our shareholders came in with the private listing. Previously‚ it was entirely our old investors that have been with us‚ some of them for 12 years. So we got the new institutional investors now on board with the new listing of the private placement and we’re very grateful for that. It is also a show of confidence in the company and we want to tell the investors that we won’t disappoint them ... and‚ by the way‚ thank you for the opportunity for the interview.

BDTV: It’s a pleasure and clearly people are interested in you and you must be quite gratified by the interest shown in Safari because it has been a rather tricky patch ... or certainly earlier in the year and last year was a bit of a worry for property stocks and a lot of people feel that it’s been the wrong time to be investing in property with bond yields set to rise. So are you quite surprised that there was such strong interest in Safari Investments?

FM: We were certainly surprised ... it started slow ... if you look about six weeks to two months ago we had half a point interest rate rise which of course slowed things down. But then it became known in the market that the interest rates (hikes) expected for the whole year is maybe just one point or two half points and that put people at ease again. And then suddenly the interest started flooding in.... We were very surprised and we have some very nice investors that we are very excited about.

BDTV: Just tell us for those who haven’t been following Safari Investments‚ what the company is about ... you’re purely a retail property group ... tell us about the four existing properties that you have within the company and the portfolio of investments that you plan to invest in.

FM: We are entirely‚ at the moment‚ in retail and we want to stick to retail and try and keep it retail only for as long as possible and hopefully for the foreseeable future of the next four or five years.... We can’t see that we will necessarily have other options ... not that we will not look at new acquisitions or other possibilities. We will certainly pursue any good opportunities. The four centres we have are performing extremely well. If you look at the trading densities of these centres‚ they’re from 35% to 50% above national averages so that‚ in itself‚ tells you the story that they’re successful and they’re in very interesting areas. We have three of them in previously disadvantaged areas like Mamelodi‚ Atteridgeville and Sebokeng and these centres are surprising everybody. It’s not just us‚ other people are now also investing in the same areas and it’s a good investment for everybody. One of our investors is the investment arm of Fortress which is Resilient. They had very positive comments to make about our portfolio.

BDTV: And you’ve got a development portfolio too‚ which is worth about R1bn.... Is it similar kind of retail developments? I know you’ve got something in Swakopmund in Namibia‚ so is it a similar kind of development in township areas that you’re looking at?

FM: Two of the current extensions that we’re doing ... the one is in Atteridgeville which is close to the centre that we have ... we will enlarge the node by 2‚500m² and the other one is an extension to Sebokeng. The one in Swakopmund is a waterfront development‚ which is certainly very exciting and for us also its ... quite a unique development. We’re currently busy with the civil works which is learning how to contain the western coast of Namibia‚ which in itself is a challenge but it will essentially .... be retail. What we are doing there in the form of residential we will be selling off so we will retain the retail portion of it. But we’re also looking at other areas.

BDTV: I have to ask this‚ because of the big property companies I’ve interviewed in the last year or so — they’re very keen to get their hands on any kind of retail assets‚ it seems‚ although they’d probably say they’re looking more towards the A-grades such as Sandton City kind of properties. Have you had any expressions of interest from the bigger firms?

FM: Certainly‚ we’ve had two approaches ... one fairly aggressive one I don’t think I should enlarge on‚ but we’re very careful as to how we look at these things. The one thing we do not want to compromise on is the quality that we currently have. We have‚ I believe‚ a small but very good quality portfolio and we want to maintain that at all costs and what we’re busy with currently as further extensions will enhance this. We do believe that we’ll be able to grow within the next two years to around R2bn-R2.5bn and in the next three or four years to above R3bn. So we will aggressively expand our own portfolio.

BDTV: But you’d like to remain independent?

FM: We would very much like the independence we’ve got....

BDTV: Hopefully we can chat to you about all this consolidation at some later point....

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