Township retailer Exemplar lifts distribution 21% despite cost pressures
Key topics:
20.9% hike in distribution per share
Revenue up 16.5% from new mall openings
Operating costs surged 17.3%, pressuring margins
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BizNews Reporter
Exemplar REITail Limited (JSE: EXP), which focuses exclusively on developing, owning, and managing township and rural retail properties, has reported strong interim results for the six months ended 31 August 2025. The results highlight successful asset expansion and debt management, leading to significant shareholder return growth, despite substantial pressure from escalating operational expenses.
The Good: Record distribution and strategic growth
Exemplar reported a declared distribution per share of 84.92758 cents, marking a robust 20.9% increase compared to the 70.24654 cents reported in the prior corresponding period. This growth was primarily fuelled by an increase in net property income before fair value adjustments, coupled with reduced interest rates on debt.
Headline earnings per share (HEPS) also saw a healthy rise to 73.46 cents, up from 62.47 cents. Distributable income for the period was R284.874 million.
Operational expansion and income drivers: The Group’s growth strategy was successfully executed, leading to expansion across key metrics:
Revenue growth: Rental and recovery income grew by 16.5% to R736.977 million. This sharp increase resulted from the opening of new centres, including Eerste Rivier Mall (November 2024) and Mbhashe LG Mall (March 2025), and the expansion of Theku Mall (October 2024).
Like-for-like resilience: Even excluding new centers, growth in rental and recovery income was a solid 7.25% on a like-for-like basis. Trading density for national tenants rose by 5.68%, aligning broadly with prevailing inflation.
Low vacancy: Vacancies remained stable at 3.0% as of 31 August 2025, further improving to 2.6% at the date of the announcement.
Asset value: The Net Asset Value (NAV) per share increased to R17.07 (from R16.69 at February 2025), driven by R193.4 million in fair value adjustments on investment properties, representing a 2.05% uplift on carrying values.
Financial strength: Exemplar maintained a conservative financial structure, reporting a Loan-to-Value (LTV) ratio of 38.5%, which is well within the board’s comfort level. The weighted average cost of debt declined by 142.7 basis points from the comparative period, a direct benefit of reduced interest rates. The Group strategically increased hedging to fix the interest rate on 76.1% of its total facilities as at August 2025. Subsequent refinancing in September 2025 further reduced the weighted average cost of debt to 8.528%, with 71.1% of facilities hedged.
Exemplar continues to pursue expansion, with new developments and acquisitions including the 50% acquisition of Tonk Meter Crossing (to be renamed iTonka Square) and the 100% acquisition of Vosloorus Crossing, subject to approval.
The Bad: Inflationary headwinds and rising bebt costs
The positive growth was partially offset by significant inflationary pressures impacting operations and increasing overall debt servicing costs:
Soaring operating costs: Total operating costs surged by 17.3%. Specifically, property operating costs increased by 18.2% (or 5.9% on a like-for-like basis). Management noted that this jump was due to new malls coming online and above-inflation increases across most property expenses, including security, cleaning, electricity, and rates.
Higher finance payments: Despite the weighted average rate of debt declining, total interest paid on interest-bearing debt still increased from R165.0 million to R178.6 million. This was necessary to fund income-producing capital expenditure, as interest-bearing borrowings increased by R555 million between August 2024 and August 2025.
Derivative losses: Fair value adjustments on derivative financial instruments resulted in a loss of R35.036 million, a significant increase from the R9.253 million loss reported previously.
Technical liquidity issue: While the Group prepared its statements on a going concern basis, current liabilities exceeded current assets by R330 million, primarily due to the current portion of financial liabilities. Management confirmed these liabilities were successfully refinanced after the half-year end.
Conclusion
Exemplar successfully translated its growth strategy into superior shareholder returns, evidenced by the 20.9% distribution increase. However, the substantial 18.2% growth in property operating costs highlights the difficult cost environment facing the retail REIT sector. Exemplar’s ability to maintain double-digit distribution growth hinges on successfully integrating new assets while mitigating these pervasive inflationary pressures.