SA Corporate is focused on achieving long-term sustainable distribution growth by ensuring its portfolio comprises defensive assets that generate robust NPI.
To achieve this, the Group embraces active asset management and uses acquisitions, developments, disposals, and the recycling of capital to achieve its objectives. SA Corporate has and will continue to, consider both development and investment partnerships where it is able to achieve a balance between risk and reward within the framework of its determined risk appetite and tolerance levels.
Sustainable distribution growth
To achieve our vision of sustainable distribution growth and long-term capital appreciation, the Board and management at SA Corporate is constantly required to review the use and allocation of the available resources to ensure maximum effectiveness. Below are a few of the primary trade-offs that we have made amongst capitals this year:
- Maintaining a quality portfolio - we constantly have to assess the quality of our property assets, recycling from those that do not meet our investment criteria to those that will better contribute to sustainable distribution growth.
- Preserving cash flow by deferring and reducing the pay-out ratio of distributions paid to investors – the challenges of the pandemic required the Board to balance short-term negative investor sentiment versus preserving liquidity for the long-term sustainability of the Group.
- Tenant sustainability versus cash flow – the pandemic and related lockdowns prevented many tenants from trading, creating financial hardship and a reduced ability to service leases. SAC had to consider its role as both a landlord and a corporate participant in the broader economy. We have elected to assist tenants and prevent tenant failure where possible.
- Continued occupancy versus positive rental reversions – it remains cheaper and often less risky to retain a performing tenant, rather than to maximise income. With multiple tenant failures and oversupply, managing vacancies and retaining tenants have been a priority, often at the expense of negative rental reversions.
- Financial sustainability versus environmental sustainability - implementing water- and electricity saving strategies may impact on the company’s short-term liquidity position but provide long-term benefits in terms of reduced environmental impact and lower occupancy costs for tenants.
The Group is allowed to make use of debt and corporate guarantees up to a maximum of 45% loan to value (“LTV”) as per the lenders’ covenant requirements. The long-term strategy of the Board is to maintain the borrowing limit at a maximum level of 40% of the underlying assets of the Group.