Turnstar beats economic slowdown
By Aubrey Lute
Turnstar Managing Director, Gulaam Husain Abdoola has reported that the property market has remained relatively strong despite the recent economic slowdown. But a drop in the demand of residential houses is a major concern in the industry.
Abdoola has said the Botswana property market experienced varied challenges with some sectors performing better than the others. Reporting on the performance of Turnstar during the year 2016, the Managign Director said during the past year, the industrial sector continued to be stronger than the other market segments.
He indicated that the commercial office space has been the most challenged with a high number of commercial properties being introduced to the market, especially in the Central Business District (CBD) during the past years. “The drop in demand for residential housing is a major concern,” he emphasised.
Abdoola says many new retail malls are in the pipeline and it will be a challenge for existing malls and the new entrants to share the same “pie”. However, he points out that Turstar’s property portfolio shows attractive future prospects supported by strong underlying contractual cash flows, escalations and a healthy lease expiry profile.
“Turnstar’s portfolio has limited exposure to the Botswana office sector, which is currently in a state of oversupply. The group has exposure of 75% by value, and 72% by GLA, to the retail sector which is mainly comprised of large listed or large national companies,”he writes in his report. He says the portfolio has a healthy lease expiry profile. Approx. 53% of leases expire in 2019 and beyond (by GLA). The leases expiring in 2017 and 2018 are routine renewals and the vast majority of them will be renewed at current market terms.
Abdoola reflects on 2016 and points out “This has been both, a sad and prosperous year for Turnstar. On the 27th November 2015, our Chairman, Mr Cuthbert Moshe Lekaukau passed away. Mr Lekaukau was the Chairman of Turnstar from its inception. His dedication and wise counsel was invaluable and his passing has left a void. He is missed by the entire Turnstar team. The Board is currently evaluating various options to fill the Chairman’s position.”
The Turnstar Managing Director is however pleased that the Company performed extremely well as is evidenced by the results. He points out that the Tanzanian subsidiary, Mlimani Holdings is becoming more significant each year, in terms of contribution to the Group. The BWP/USD exchange rate is also a favourable factor. “At Mlimani, the bulk land has appreciated significantly, and this is reflected in fair value gains.”
Turning to one of their star malls in Gaborone, Abdoola says the construction work at Game City is nearing completion. He observes that it has been extremely difficult to construct and carry out renovations to an operating mall. “We have and continue to do everything possible to minimise the disturbance and inconvenience and are thankful for the cooperation of tenants and customers. However, we assure you that the improvements will be well worth the wait and inconvenience. Mlimani City construction is also well underway and is scheduled to be completed by the end of this year,” he says.
Turnstar is currently in the process of carrying out a feasibility exercise on the hotel project at Mlimani and will reach a decision on its viability, shortly. Turnstar intends issuing a USD 30 million, 7 year convertible bond in the market. These funds will be raised to fund the construction of the Mlimani City developments. This form of funding should boost the profitability and cash flow of Turnstar.
Abdoola says Africa still remains to be further explored for opportunity, and they are very keen to look at countries they believe they can do business in. “Several Organisations and Governments are in discussions with us to consider various developments. Mlimani Holdings has a proven track record and has turned out to be a successful story in terms of profitable partnerships. However, we maintain a conservative approach and will undertake projects which are within the capacity of Turstar.”
The Group continued to post pleasing results for the year, despite challenging market conditions. “The share price has performed beyond expectations and we are very pleased that the value in Turnstar is now being recognised.” According to Abdoola, Turnstar remained the most diversified property Company on the BSE with property assets valued at over P2 bn. The Group’s Tanzanian subsidiary, Mlimani Holdings Limited, generates US Dollar revenue. Turnstar is a fully integrated internally managed property company, employing 125 staff.
Group revenue increased by 5% from the prior year, to P247.6M. The rental income from the Company’s Botswana portfolio decreased by 4.2% due to the sale of Fairgrounds office park property, whilst the rental income from the Tanzanian portfolio increased by 16.7%. Approx. 49% of the Group’s total rental income, is in US Dollars.
Tanzania continues to be one of the fastest growing economies in sub Saharan Africa. The economic growth is spearheaded in the Gas, petroleum, mining, tourism, agriculture and manufacturing sectors. The retail and industrial property sectors in particular are flourishing. The Government is focussed on growing the economy and welcomes foreign investment.
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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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