Category Archives: Oryx Properties

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SUMMARY RATING RATIONALE

Global Credit Ratings has accorded the above credit rating(s) to Oryx Properties Limited (“Oryx”) based on the following key criteria:

Oryx is a leading player in the Namibian property sector. The fund’s local knowledge remains its core competitive advantage, and growth has been strongly supported by domestic financial institutions and unitholders, who have demonstrated a willingness to provide funding. Nevertheless, its small size constrains the rating.

High concentration is inherent to Oryx, with the largest and second largest properties comprising 48% and 13% respectively. As the majority of planned development activity is to focus on the two largest properties over the short to medium term, this concentration will become even more acute. This risk is mitigated by the fund’s high quality tenant profile, with the majority of leases with South African national retailers or large local companies. In addition, close relationships with tenants have resulted in a retention rate of around 90% and a vacancy rate below 1% over most of the review period, despite rising competition from new developments.

Rental income rose by 32% to NAD266m in F15, reflecting the contribution of acquisitions and expansions, while escalations of around 8% and the initial contributions from electricity generation and provision saw annualised rentals climb 11% in 1H F16. Efforts to expand income streams through the provision of electricity and the potential investment in listed investments could provide some income diversification. Although the property expense ratio has increased, this is a result of the provision of electricity. Aside from this, Oryx has managed its costs by renegotiating service level agreements and internalising the core property management functions.

The reduction in debt to NAD692m at 1H F16 (FYE15: NAD872m) saw the gross LTV ratio reduce to 30.4%, from around 40% over the prior three years, and gross debt to EBITDA fall to 381% (FYE15: 488%). Both metrics are within GCR’s benchmark for highly rated property funds, but GCR expects gearing to rise over the next 2 years as funds are drawn for developments. Interest coverage of 2.4x is in line with similarly rated funds, but the low hedged position does expose Oryx to the rising interest rate environment. Funding flexibility is considered high, given the NAD281m in utilised revolving credit facilities. This is complimented by the relatively high level of unencumbered properties, which suggests an ability to raise additional facilities through other institutions. The fund has also established a DMTN programme to provide an alternative source of funding, but no notes have been issued to date.

The property environment in Namibia is challenging, with the retail sector evidencing an oversupply of GLA, exacerbated by the high asking prices for acquisitions. Accordingly, Oryx plans to focus on developing its existing properties further as such a strategy entails less risk, further mitigated by the staggered nature of the development pipeline.

Positive rating movement is dependent on sustained long term earnings growth, despite the challenging operating environment. The successful implementation of one of the larger medium term projects, or an acquisition that substantially enhances the size of the fund (and reduces concentration) would also be positive considered. Conversely, a weak performance from Maerua Mall would have a negative impact on the results of the group as a whole. A sustained increase in the LTV ratio above 40% and/or an inability to raise capital for further growth would be negatively viewed.

https://globalratings.net/news/article/gcr-affirms-oryx-properties-limiteds-rating-of-bbbna-outlook-stable