Maurice Shapiro on Attacq’s results

An investment vote of confidence in JSE-listed capital property company Attacq – which has delivered 25% growth in Net Asset Value Per Share (NAVPS) – is effectively a vote of confidence in the giant Waterfall Estate development in Midrand. That’s the key message from Maurice Shapiro, head of asset manager Alternative Real Estate, in this Alec Hogg interview. Attacq comes from the stable of Atterbury, which has a build-out pipeline in Waterfall Estate of R20-billion to R30-billion over the next 10 years. (Attacq holds a 25% interest in Atterbury). Waterfall Estate is unique in that it provides a central head office/corporate consolidation option midway between Sandton and Pretoria for companies currently housed in both locations. Waterfall has a substantial infrastructure to accommodate people not only working there, but also living there – a whole work/live/play scenario, but in a big-scale environment, says Maurice. Companies that have taken this plunge include PwC (25-storey office tower; 3 500 people) and Cell C (15-year lease). And, yes, Alternative Real Estate is a buyer at R20 says Maurice – still seeing upside in a company with a high quality portfolio that’s delivering on its distribution/growth promises. GK

ALEC HOGG: Welcome back to Power Lunch. Just of a year of being listed on the JSE, capital property company Attacq released its results this morning. In fact, downstairs, Morné Wilken and his team are currently entertaining their guests. Maurice Shapiro from Alternative Real Estate came upstairs from the floor (tore himself away from all the eats). Were you at the presentation, Maurice?

MAURICE SHAPIRO: Yes.

ALEC HOGG: Was it a happy presentation? I would assume so, given that this share price has performed extremely well since the listing.

MAURICE SHAPIRO: Yes, the team is well managed. It’s been around for a long time, pre-listing, coming out of the Atterbury stable, and they delivered a 24 percent NAV growth.

ALEC HOGG: And that’s for this company. That’s the key number. Why?

MAURICE SHAPIRO: In a lot of the listed property sector, you look at distribution growth and distribution because you’re looking at the yield. Atterbury doesn’t pay a dividend. It doesn’t pay its income out. It’s actually reinvesting its income into capital projects. It has a major development in the Waterfall Estate. It has a pipeline there of 1,700.000sq metres of vacant land to build out, which is R20bn to R30bn to build out over the next ten years.

ALEC HOGG: Those are big numbers but Maurice, a development like that will only really fly if the economy is in good shape. Every day, we hear that the economy is struggling. Are there sufficient pockets of excellence in this economy to fund the development of an estate like that?

MAURICE SHAPIRO: Alec, there are two parts. 1. The company’s quite aware of the South African dynamic, so they do have investments in Africa, as well as internationally, and through their holdings in MASS in Western Europe. They do have a more diversified investment, but the bulk (74 percent) of their assets do sit in South Africa.

ALEC HOGG: And the bulk of those – in Waterfall…

MAURICE SHAPIRO: Well, the bulk of their pipeline is in Waterfall, but many of their current assets…

ALEC HOGG: That’s the game. Waterfall’s the game for this. If you think Waterfall’s going to be a success, then you can buy Attacq.

MAURICE SHAPIRO: I think you definitely have to be backing the Waterfall Estate. What’s quite unique about this estate is that it’s centred right between Sandton and Pretoria so what they’re finding is that many of the head offices/big corporates have decided rather than having an office in Pretoria and having an office in Johannesburg or Sandton; now we can consolidate and have an office in Waterfall.

ALEC HOGG: Have these guys ever driven on the roads here in Gauteng? That’s not an advantage to be away from Sandton.

MAURICE SHAPIRO: I think the key is that the infrastructure build-out in Waterfall comes off the Allandale off-ramp, so there’s substantial infrastructure to accommodate people not only working there, but also living there. It’s the whole work/live/play type of scenario, but in a big-scale environment and they are seeing this move. PwC recently signed a lease with them, so they’re going to be moving their head office to Waterfall. They’re going to be building a 25-storey office tower in Waterfall City, so there’s a substantial move. Cell C have done it as well. They signed a 15-year lease.

ALEC HOGG: Is PwC signing a 25-year lease?

MAURICE SHAPIRO: No. Attacq is building them a 25-storey office tower.

ALEC HOGG: Are there that many accountants?

MAURICE SHAPIRO: Well, they are consolidating their Pretoria office and their Johannesburg office. It will house 3,500 people.

ALEC HOGG: Is it a stock you would be buying at these levels?

MAURICE SHAPIRO: I think the key is the right price. What we’re seeing here is a high quality portfolio that’s delivering on its distribution/growth promises and the total return story is there. We do believe in the stakes, we do believe in the prospects of the company as a whole, and we still see value there. It has been a good, big uplift in the share price. Some of the analysts are saying it’s priced in. We still think there’s upside.

ALEC HOGG: So at R20.00 per share, you’re a buyer.

MAURICE SHAPIRO: At R20.00 per share, we’re a buyer.

ALEC HOGG: Well, it’s one to remember. Maurice Shapiro is with Alternative Real Estate Fund and Attacq is a property stock where you really are buying for the capital growth and for their ability to bring developments on-stream. As Maurice was telling us, they don’t pay dividends, so don’t get confused with that one.

Well, that’s all from us here at the JSE outshoot of CNBC Africa.

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