Richard Herring
Heriot REIT
CEO
Heriot REIT Limited has reported a strong set of full-year results to 30 June 2025 that highlight the resilience of its retail-and-industrial-led strategy and the early benefits of the Thibault acquisition. The diversified REIT increased distributable income by 26.1% to R389.2 million and grew distribution per share (DPS) by 14.3% to 121.91 cents, maintaining a 100% payout ratio. Net asset value (NAV) per share rose by 17.5% to R20.59, while portfolio vacancies were halved to 1.6%.
The year’s performance—achieved against a still-fragile macroeconomic backdrop—was supported by improving domestic electricity availability, policy stability under the Government of National Unity, and the start of a South African rate-cutting cycle. Heriot’s weighted average cost of debt (WACD) fell 54 bps to 9.73% as management refinanced facilities on better terms and benefited from 100 bps in repo reductions. Loan-to-value (LTV) improved to 38.95% from 42.06% as property values increased and cash generation strengthened.
Larger income engine, higher quality earnings
Group rental income rose 20.2% to R1.183 billion (8.9% like-for-like), with net property operating income (NOI) increasing 14.8% to R976.3 million (13.0% like-for-like). Investment property values grew 10.2% to R12.799 billion (12.3% like-for-like), driven by higher property income, lower discount and exit cap rates, and selective capital investment. NAV momentum was further supported by disciplined recycling of non-core assets and the consolidation of Thibault.
Distributable earnings were influenced by several tangible drivers.
Thibault consolidation: The acquisition on 28 June 2024 contributed R61.9 million to distributable earnings, with Thibault’s 10% Safari stake adding a further R19.1 million. Thibault’s WACD decreased by 61 bps to 9.74%, LTV improved to 43.8%, ICR rose to 1.83x, and vacancies slightly declined to 1.1%.
Texton distributions: Thibault received 120.1cps in distributions from Texton during the year, including a special dividend. Of the cash received, 20.13cps (R13.0m) was dividend income and 79.87cps (R51.5m) was a return of capital—prudently used to reduce revolver borrowings.
Portfolio operations: Higher letting velocity and positive reversions in industrial, steady essential-retail performance, and a sharply improved aparthotel/residential contribution lifted like-for-like NOI by 13.0%.
Funding tailwinds: A 100 basis points repo cut and margin reductions on refinancings lowered WACD despite the lag from three-month JIBAR resets (90% of facilities are JIBAR-linked).
Management maintained the payout at 100% of distributable earnings and declared a final dividend of 65.07 cents (up 14.5% compared to the previous comparable period), supported by stronger cash flows. Total cash resources amounted to R502.0 million (R121.4 million in cash and R380.5 million in unutilised facilities).
Segment performance: industrial outpaces, retail remains resilient, offices stabilise, aparthotel accelerates.
Retail (excluding Safari and Thibault): Emerging-market grocery-anchored centres continued to show resilience. Heriot’s retail rent increased by 5.1% to an average of R186/m² (2024: R177/m²). Retail net operating income (NOI) rose by 3.9% to R278.9 million, affected by higher operating costs (an R5 million electricity provision reversal in the previous year created a tougher baseline) and underperformance from certain solar plants impacted by municipal load-reduction regimes. Vacancies remain low at 1.8% (2024: 0.9%). At Thibault, almost full occupancy (approximately 100%) and the Helderberg Mall Phase 2 extension (2,300m² with Fresh X) supported retail NOI of R101.0 million at an average rent of R149/m², with vacancy rates at a minimal 0.1%.
Industrial: Limited, well-situated logistics space—especially in the Western Cape—generated strong re-lettings and renewals. Industrial net operating income increased by 10.7% to R171.6 million; the average rental rose to R56/m² (2024: R52/m²). Vacancies decreased to 1.2% (from 4.6%), with notable activity including a five-year renewal at Epping (28,894m²) at R56/m² (+10.7%) and Kuilsrivier (23,867m²) at R44/m² (+15.9%). Heriot also re-let the 8,966m² Cleveland distribution centre at R27/m², significantly improving the group vacancy rate.
Office: Still the most challenged segment, but stabilising. Office NOI decreased by 3.4% to R16.8 million after the Supergroup head-office lease reverted to market rentals from October 2023 (R115/m² vs R315/m²). Positively, vacancies improved to 4.4% (from 8.4%), with the long-vacant 899m² at Melrose Arch re-let at R210/m² for 18 months.
Residential/aparthotel: A notable turning point. Segment NOI increased by 48.5% to R27.4 million as Habitat (launched Dec-23) ramped up and The Heriot reopened in November 2024 as HAVN following refurbishment. Portfolio occupancy averaged 73% at R356/m² (2024: 55% occupancy and R273/m²), with Cape Town CBD aparthotels benefiting from peak-season demand. Thibault’s hotel component averaged 63% occupancy, with the highest revenue per unit recorded in the aparthotel set.
Specialised: Paper plantations maintained their consistent, escalator-driven growth, with 5–6% lease escalations.
Safari: period-specific nuances conceal underlying strength; portfolio repositioned
Heriot’s 59.2% stake in Safari again provided an accretive, defensive exposure to township and peri-urban convenience retail. A change in Safari’s year-end in 2024 means the base period included 15 months compared to 12 months in 2025, skewing year-on-year comparability. On that basis, Safari’s reported DPS was 73.6cps (down 5.7% from the 15-month figure of 78.0cps). However, like-for-like (12 months to 31 March 2024 versus 12 months to 30 June 2025), DPS increased by 20% to 73.6cps, supported by 5% rental growth, tighter vacancies (2.06%), internalised utilities management (NOI +11.3%), a 61 bps reduction in WACD to 9.74%, and a lower LTV of 31.5%. Hedged debt decreased to 0% from 4%.
Aligned with capital-allocation priorities, Safari sold its Namibian subsidiary to Oryx for N$290 million, with a further N$10 million contingent consideration, and designated Mnandi Mall and Soweto Day Hospital as held for sale. Platz am Meer was transferred on 30 June 2025 for R300 million, reducing the group’s retail GLA and enhancing focus on core assets with higher through-cycle yields.
Thibault: strategic alignment, operational excellence, financing synergies
The Thibault transaction—structured as a common-control business combination—added scale, prime Western Cape retail, and the iconic One Thibault mixed-use asset to the group, alongside a 10% Safari stake and a 21.7% (ex-treasury) interest in Texton. Synergies realised include corporate cost savings (R1.7 million), approximately R3.0 million in annual cash savings from converting amortising debt to interest-only (Heriot guarantee), improved debt pricing through cross-collateralisation with the Heriot security pool, and increased influence via the higher Safari shareholding.
Operationally, Thibault’s retail space traded at near-full occupancy, One Thibault’s offices achieved a 94.6% occupancy with an NOI of R24.8 million, and the aparthotel contributed an NOI of R20.7 million despite cyclical off-peak softness. The Helderberg Mall extension included a R9.5 million, 1MW solar installation and R50.9 million in tenant fit-outs for Fresh X, targeting a 15% ROI.
Capital investment, development pipeline and sustainability
Group capex remained disciplined and value-enhancing. Heriot: R19.5m to refurbish The Heriot (re-opened as HAVN), R9.2m for water and fire upgrades at Denver DC, R3.9m for solar at Shoprite Emmarentia and Fish Hoek, R3.4m on Mpact Pinetown roof works, and R2.6m on HAVN HVAC.
Safari: R88.4m allocated for centre upgrades and refurbishments.
Thibault: R110.9 million at Helderberg Mall Phase 2, including solar.
Two Cape Town residential projects provide optionality and growth:
The Fibonacci (Mowbray): Redesigned to feature 574 primarily one-bedroom student units with ground-floor retail. The development budget is R530m, with R530m in development funding at prime minus 180 basis points, which converts to a R330m three-year term loan at 3-month JIBAR plus 147.5 basis points following sales of R200m. As of mid-September 2025, 174 units had been pre-sold; foundations will commence in October 2025 for completion ahead of the 2028 academic year.
Horizon (Finsbury Court, Sea Point): Redevelopment from 19 to 36 units (50 bedrooms), with a budget of R82m and an initial yield of approximately 12%. It will be operated by Total Stay as an aparthotel from December 2025. As at year-end, R36.1m of capital expenditure had been incurred, including R9.0m of capitalised interest.
On sustainability, Heriot operates 13.71MWp of installed solar across major retail centres, with a further 1.7MWp planned by end-2026, and manages 14 groundwater harvesting plants with additional sites under exploration — strategic measures in a grid-constrained, water-stressed environment that also reduce controllable costs structurally.
Funding: lower-cost debt, extended tenor, abundant liquidity
The group reported total debt of R5.302 billion (+4.9%) with WACD at 9.73% (-54 bps). The weighted average remaining debt expiry was 2.16 years at year-end, extending to approximately 2.3 years after year-end following renewals at Nedbank, Standard Bank, and Sanlam. Notable initiatives include:
Heriot: Early refinancing of R215.6m Sanlam facilities for three years at 3-month JIBAR +158 bps (margin reduced by 22 bps), and an increased Nedbank revolver to R280m.
Safari: New R200m Standard Bank capital expenditure line at JIBAR +153 bps (maturity September 2027).
Thibault: Margin reductions of 17–45 basis points through cross-collateralisation; a R250m Nedbank three-year refinance at JIBAR +151 basis points signed in July 2025.
ICR closed at 2.04x (2024: 2.05x), comfortably above the 2.0x covenant, with further relief expected as rate cuts and repriced facilities fully flow through the JIBAR reset cycle. LTV at 38.95% leaves headroom below the 50% covenant and provides optionality for selective growth.
Governance, audit and going concern
The condensed consolidated results were reviewed by BDO South Africa, which issued an unqualified review conclusion. The board confirmed the going-concern status based on strong cash generation, covenant compliance, a R380.5m liquidity buffer in unutilised facilities, and proven access to refinancing on favourable terms.
Outlook and guidance: DPS growth aimed at 10–15% in FY26
Management continues to focus on extracting value from the existing portfolio—particularly logistics and convenience-retail assets—while progressing the Cape Town residential/aparthotel strategy, where demand fundamentals remain strong. With macroeconomic tailwinds increasing (lower interest rates, improved power supply), the board forecasts 10–15% DPS growth for the year ending 30 June 2026. Key assumptions include stable prime (10.50%) and JIBAR (7.02%), contractual escalations, market-related renewals, cautious vacancy and reversal allowances, and no significant tenant defaults. The guidance has not been reviewed by the auditor.
Bottom line: Heriot’s FY25 reflects a REIT focusing on what works—essential retail, infill logistics, and Cape Town hospitality—while utilising its balance sheet and partnerships to recycle capital, cut financing costs, and extend tenure. With vacancies at multi-year lows, a cleaner portfolio after disposals, and a funded development pipeline, the platform seems poised for another year of dividend growth.