Our opinion on the current state of EXP

Exemplar (EXP) is a real estate investment trust (REIT) which specialises in developing rural shopping centres through its relationship with McCormick Property Development. It listed on the JSE on 12th June 2018. It owns 26 shopping malls in rural and urban areas close to concentrations of the population such as Alexander township and at the Chris Hani Crossing. It has a gross lettable area (GLA) of 382322 square meters. Its total assets are worth just over R5bn and it has a further R10bn worth of properties in development. The CEO is James McCormick who has been involved in developing property for 35 years in South Africa. In our view, this is an exciting property company with a niche approach which is potentially highly profitable in South Africa. The company's tenants are mainly involved in essential services and so have not been greatly impacted by COVID-19. On 15th July 2021 the company said of the unrest and looting, "...five retail assets in which the company has either a total or partial shareholding, have been affected and subsequently, are closed for the time being". In its results for the six months to 31st August 2023 the company reported revenue up 16,75% and headline earnings per share (HEPS) down 57,33%. The company said, "Net finance costs have escalated to R126,335m from R70,437m in the comparative period, an increase of R55,898m or 79.4%. The increase is partially a consequence of the increase in interest-bearing debt net of positive cash balances (c.60% of the increase) and partially a consequence of increases in interest rates (c.40% of the increase). The additional debt was incurred mainly to fund the acquisition of a 50% undivided share in Mamelodi Square and the non-controlling interest in the Mall of Thembisa, to fund the development of Bizana Walk and KwaBhaca Mall, and to fund the continued roll-out of roof-top mounted solar plants". The only problem from a private investor's point of view is that the share is very thinly traded - which makes it unworkable as an investment.