MANAGING DIRECTOR’S INTERVIEW

ABSA HOUSE

Acquisition

VICTORIA URBAN TERMINAL

Successful launch

ESG

Clear agenda

Lavastone ended the last financial year on a positive trend. Did this growth momentum continue throughout the year?

Looking at the past year, I am pleased that Lavastone kept the momentum moving forward and consolidated its gains despite operating in a challenging environment. The sanitary crisis itself may be behind us, but it has left lingering and widespread impacts on the economy, business operations, workplace practices, skills and employment, and on the health and wellbeing of communities and society. For Lavastone in particular, the rising costs of construction materials have impacted construction projects, including the ongoing development of PLAY Mourouk Hotel and Victoria Urban Terminal.

Against this backdrop, Lavastone performed commendably. Revenues and operating profit were up by 33% and 60% respectively, driven mainly from new rental income derived from new properties which have been added to the portfolio during FY2022.

We are reaping the benefits of the investment decisions made over the past few years. These investments are not limited to their financial or transactional aspect; they also include the energy, intellectual capital, resources and hard work that went into making each project a reality and on nurturing strong, trusting relationships with our tenants, whose success is inextricably tied to ours. There is no doubt that our sustained resilience lies in the quality of our portfolio, which is the outcome of years of purposeful actions to continually attract and retain quality tenants.

What were the biggest highlights of Lavastone’s operational performance during the year?

This year was marked by several notable achievements:

• We completed one year of leasing the Sunrise Attitude Hotel, which was inaugurated in October 2021, coinciding with the reopening of borders. With promising tourist arrivals over the financial year, we are confident that the value proposition of the hotel, rooted in the principles of environmental and social sustainability, will continue to appeal to today’s travellers, who are increasingly more conscious of their environmental impact.

• In line with our approach to continuously assess the relevance and yielding potential of our properties, we disposed of our buildings and land at Riche Terre in July 2022. The funds from this sale were reinjected into our upcoming developments and towards keeping our gearing level down while continuing to pursue acquisitive opportunities.

• This brings me to our next achievement. Still in July 2022, we completed the acquisition of 100% of the shares of BH Property Investments Ltd, which owns Absa House in Ébène. This is in line with our strategy to secure a foothold in another urban centre besides Port Louis, and adds another quality tenant with strong lease covenants to our ecosystem.

• We successfully completed the acquisition of the 7th floor of Les Cascades Building and are now renovating the space to accommodate the growing needs of IQ-EQ. Our close engagement with them resulted in the extension of their lease agreement until 2027 and a notable increase in their gross letting area. Our case study delves into the lengths we went to in order to retain our anchor tenant and support its business objectives.

• The Victoria Urban Terminal, of which we own 29.01%, became operational in November 2021, the fruit of a special partnership with our peers in the industry and government. The one-of-a-kind modern building, combined with the adaptive reuse of heritage buildings and vestige of the past such as the Casernes Decaen, is a form of sustainable urban regeneration, bringing new life and dynamism into our capital. This marks a new era for Mauritians as it provides a leisure and gathering space that is expected to improve the lives of thousands of commuters. Victoria Urban Terminal also offers a designated space for hawkers, now known as small traders, for them to carry out their activities with dignity. This project holds great potential to restore the capital to its former glory, and serve as a catalyst for sustainable and inclusive growth, which is especially important in the wake of the pandemic and its impact on vulnerable communities.

• Our subsidiary, Lavastone Services Ltd (formally Lochiel Property Services Ltd), was awarded the contract for Property and Facilities Management of the terminal. I would like to applaud our teams for not just rising to the challenge, but also for putting their best foot forward each day, and demonstrating the depth of their knowledge, capabilities and engagement in operating a project of great proportions.

• In October 2022, we obtained the permit and clearances for the 84-plot morcellement at Case Noyale, enabling us to transfer title deeds to individual owners and translating into profits that will be recognised in FY2023 at the level of South West Safari Group. Phase two of this project is expected to be launched in the second half of FY2023 upon receiving the requisite approvals and permits for the masterplan.

• In December 2022, EDITH was awarded a LEED Gold Certificate and is the first mixed-used building in the African continent to receive LEED Gold Certification in LEED OM v4.1. EDITH’s advanced energy-efficient systems and design have resulted in impressive energy savings and a significant reduction in the building’s carbon footprint and operating costs.

How has Lavastone progressed on the execution of its strategy?

Our strategy is to have a diversified portfolio of yielding properties, which we grow in several ways: through acquisitions, property development or a mix of both. We achieve this by focusing on four pillars: Operational excellence, Customer service and retention, Sustainability and Employee engagement, all of which allow us to create long-term sustainable value for our shareholders.

We drove down our operating costs as a result of our efforts to make our operations more efficient. Digitalisation is a key element of boosting efficiency. We accelerated the automation of several processes to become leaner, enabling our teams to work more productively and dedicate more time to enhancing the tenant experience. Our occupancy and retention rates are a reflection of these efforts, and provide the impetus for us to continue improving our standards and service levels.

Our ability to deliver high service levels and retain our customers is rooted in having strong relationships with our stakeholders, particularly our people and our tenants. I often like to remind our employees that we are in the business of relationships and enriching places. Beyond offering the right infrastructure and facilities to our tenants, we spare no effort in creating spaces that will serve both their current and future needs. This includes renovating spaces, keeping channels of communication open, and even organising events to enhance their visibility.

Sustainable and inclusive development is another area of focus for us. The roadmap defined with Dynamia sets out clearly-defined and realistic actions to reduce our emissions not just across our business operations and new developments, but also in our asset operations. This can only be achieved through working in partnership with our tenants. To align our ecosystem of stakeholders around common environmental objectives, we aim to work closely with each one of them and set measurable goals to help them improve the sustainability of their operations. In doing so, we also hope to attract like-minded tenants who share our environmental values. Please refer to our ESG report for more information on our ambitious roadmap.

Coming back to our people, who are the driving force behind our business, we continued prioritising their growth and wellbeing. Cohesion was a dominant theme this year, in light of the disruptions caused by the pandemic over the past two years. We completed a transformational culture programme and held several team building events to reinforce our team spirit and align everyone around our strategy and shared values. The senior management team was heavily involved in these events to ensure that all leaders imbibe our values and set the tone from the top.

Looking ahead, what are the biggest challenges and opportunities facing the Group?

As we turn the page on this financial year, we remain ever more prudent about this coming year. Whilst the impact of the downturn was relatively mild for Lavastone this year, we must remain cautious as there are several variables and compounding effects to consider. Balancing our growth objectives with prudent gearing levels and ensuring we can comfortably service our debt in an environment of rising interest rates will be key. We also intend to continue being attuned to the changing needs of our tenants and address them as best we can.

At the same time, we are focusing on delivering on our pipeline of projects in the coming year. Our priority is to accelerate the renovation of PLAY Mourouk Hotel in Rodrigues, which we expect to open by June 2023 subject to no further disruptions. Our renovations of Les Cascades Building for IQ-EQ will pursue well into the year, as will the development of the morcellement in Case Noyale. Alongside this, we are exploring opportunities in the industrial space to rebalance our portfolio.

While a significant part of our properties are concentrated in Port Louis, we are taking bold steps in growing our portfolio beyond the capital city. Our recent acquisitions of Absa House in Ébène and the development of our hotels in the East Coast of Mauritius and in Rodrigues are a testament to our diversification into new geographies.

Are there any learnings or takeaways you would like to share from these past two years?

Operating in a competitive environment has been an opportunity for me to reflect on what makes us stand out, and what we define as ‘the Lavastone way’. I have come to the conclusion that the key to growing a company is to have a great team to manage our properties and care for the quality tenants inhabiting them. Our teams spend a significant part of their day at work, which inevitably calls for us, as employers, to create an environment that is conducive to their engagement, learning, growth and wellbeing, and also to offer them a career that lends them a sense of purpose. I, along with the rest of the management team, am committed to doing just that.

Do you have any closing thoughts before signing off?

I would like to thank our teams for bringing our investments to fruition whilst ensuring our existing properties held commendable occupancies with healthy yields. Their tireless efforts and collaborative spirit were on full display, as evidenced in the materialisation of major projects in spite of the challenging context. I would like to extend my appreciation to all 42 of them, as well as our network of service providers and collaborators – from the technicians, handymen and contractors, to the engineers and architects – who brought their unique expertise and craftsmanship to our projects.

As always, my gratitude goes out to our Chairman, Colin Taylor, and my fellow Directors for their support and guidance in navigating another challenging, yet rewarding, year.

Nicolas Vaudin

Managing Director

MANAGING DIRECTOR’S
INTERVIEW

Balancing our growth objectives with prudent gearing levels and ensuring we can comfortably service our debt in an environment of rising interest rates will be key.

ABSA HOUSE

Acquisition

VICTORIA URBAN TERMINAL

Successful launch

ESG

Clear agenda

Lavastone ended the last financial year on a positive trend. Did this growth momentum continue throughout the year?

Looking at the past year, I am pleased that Lavastone kept the momentum moving forward and consolidated its gains despite operating in a challenging environment. The sanitary crisis itself may be behind us, but it has left lingering and widespread impacts on the economy, business operations, workplace practices, skills and employment, and on the health and wellbeing of communities and society. For Lavastone in particular, the rising costs of construction materials have impacted construction projects, including the ongoing development of PLAY Mourouk Hotel and Victoria Urban Terminal.

Against this backdrop, Lavastone performed commendably. Revenues and operating profit were up by 33% and 60% respectively, driven mainly from new rental income derived from new properties which have been added to the portfolio during FY2022.

We are reaping the benefits of the investment decisions made over the past few years. These investments are not limited to their financial or transactional aspect; they also include the energy, intellectual capital, resources and hard work that went into making each project a reality and on nurturing strong, trusting relationships with our tenants, whose success is inextricably tied to ours. There is no doubt that our sustained resilience lies in the quality of our portfolio, which is the outcome of years of purposeful actions to continually attract and retain quality tenants.

What were the biggest highlights of Lavastone’s operational performance during the year?

This year was marked by several notable achievements:

• We completed one year of leasing the Sunrise Attitude Hotel, which was inaugurated in October 2021, coinciding with the reopening of borders. With promising tourist arrivals over the financial year, we are confident that the value proposition of the hotel, rooted in the principles of environmental and social sustainability, will continue to appeal to today’s travellers, who are increasingly more conscious of their environmental impact.

• In line with our approach to continuously assess the relevance and yielding potential of our properties, we disposed of our buildings and land at Riche Terre in July 2022. The funds from this sale were reinjected into our upcoming developments and towards keeping our gearing level down while continuing to pursue acquisitive opportunities.

• This brings me to our next achievement. Still in July 2022, we completed the acquisition of 100% of the shares of BH Property Investments Ltd, which owns Absa House in Ébène. This is in line with our strategy to secure a foothold in another urban centre besides Port Louis, and adds another quality tenant with strong lease covenants to our ecosystem.

• We successfully completed the acquisition of the 7th floor of Les Cascades Building and are now renovating the space to accommodate the growing needs of IQ-EQ. Our close engagement with them resulted in the extension of their lease agreement until 2027 and a notable increase in their gross letting area. Our case study delves into the lengths we went to in order to retain our anchor tenant and support its business objectives.

• The Victoria Urban Terminal, of which we own 29.01%, became operational in November 2021, the fruit of a special partnership with our peers in the industry and government. The one-of-a-kind modern building, combined with the adaptive reuse of heritage buildings and vestige of the past such as the Casernes Decaen, is a form of sustainable urban regeneration, bringing new life and dynamism into our capital. This marks a new era for Mauritians as it provides a leisure and gathering space that is expected to improve the lives of thousands of commuters. Victoria Urban Terminal also offers a designated space for hawkers, now known as small traders, for them to carry out their activities with dignity. This project holds great potential to restore the capital to its former glory, and serve as a catalyst for sustainable and inclusive growth, which is especially important in the wake of the pandemic and its impact on vulnerable communities.

• Our subsidiary, Lavastone Services Ltd (formally Lochiel Property Services Ltd), was awarded the contract for Property and Facilities Management of the terminal. I would like to applaud our teams for not just rising to the challenge, but also for putting their best foot forward each day, and demonstrating the depth of their knowledge, capabilities and engagement in operating a project of great proportions.

• In October 2022, we obtained the permit and clearances for the 84-plot morcellement at Case Noyale, enabling us to transfer title deeds to individual owners and translating into profits that will be recognised in FY2023 at the level of South West Safari Group. Phase two of this project is expected to be launched in the second half of FY2023 upon receiving the requisite approvals and permits for the masterplan.

• In December 2022, EDITH was awarded a LEED Gold Certificate and is the first mixed-used building in the African continent to receive LEED Gold Certification in LEED OM v4.1. EDITH’s advanced energy-efficient systems and design have resulted in impressive energy savings and a significant reduction in the building’s carbon footprint and operating costs.

How has Lavastone progressed on the execution of its strategy?

Our strategy is to have a diversified portfolio of yielding properties, which we grow in several ways: through acquisitions, property development or a mix of both. We achieve this by focusing on four pillars: Operational excellence, Customer service and retention, Sustainability and Employee engagement, all of which allow us to create long-term sustainable value for our shareholders.

We drove down our operating costs as a result of our efforts to make our operations more efficient. Digitalisation is a key element of boosting efficiency. We accelerated the automation of several processes to become leaner, enabling our teams to work more productively and dedicate more time to enhancing the tenant experience. Our occupancy and retention rates are a reflection of these efforts, and provide the impetus for us to continue improving our standards and service levels.

Our ability to deliver high service levels and retain our customers is rooted in having strong relationships with our stakeholders, particularly our people and our tenants. I often like to remind our employees that we are in the business of relationships and enriching places. Beyond offering the right infrastructure and facilities to our tenants, we spare no effort in creating spaces that will serve both their current and future needs. This includes renovating spaces, keeping channels of communication open, and even organising events to enhance their visibility.

Sustainable and inclusive development is another area of focus for us. The roadmap defined with Dynamia sets out clearly-defined and realistic actions to reduce our emissions not just across our business operations and new developments, but also in our asset operations. This can only be achieved through working in partnership with our tenants. To align our ecosystem of stakeholders around common environmental objectives, we aim to work closely with each one of them and set measurable goals to help them improve the sustainability of their operations. In doing so, we also hope to attract like-minded tenants who share our environmental values. Please refer to our ESG report for more information on our ambitious roadmap.

Coming back to our people, who are the driving force behind our business, we continued prioritising their growth and wellbeing. Cohesion was a dominant theme this year, in light of the disruptions caused by the pandemic over the past two years. We completed a transformational culture programme and held several team building events to reinforce our team spirit and align everyone around our strategy and shared values. The senior management team was heavily involved in these events to ensure that all leaders imbibe our values and set the tone from the top.

Looking ahead, what are the biggest challenges and opportunities facing the Group?

As we turn the page on this financial year, we remain ever more prudent about this coming year. Whilst the impact of the downturn was relatively mild for Lavastone this year, we must remain cautious as there are several variables and compounding effects to consider. Balancing our growth objectives with prudent gearing levels and ensuring we can comfortably service our debt in an environment of rising interest rates will be key. We also intend to continue being attuned to the changing needs of our tenants and address them as best we can.

At the same time, we are focusing on delivering on our pipeline of projects in the coming year. Our priority is to accelerate the renovation of PLAY Mourouk Hotel in Rodrigues, which we expect to open by June 2023 subject to no further disruptions. Our renovations of Les Cascades Building for IQ-EQ will pursue well into the year, as will the development of the morcellement in Case Noyale. Alongside this, we are exploring opportunities in the industrial space to rebalance our portfolio.

While a significant part of our properties are concentrated in Port Louis, we are taking bold steps in growing our portfolio beyond the capital city. Our recent acquisitions of Absa House in Ébène and the development of our hotels in the East Coast of Mauritius and in Rodrigues are a testament to our diversification into new geographies.

Are there any learnings or takeaways you would like to share from these past two years?

Operating in a competitive environment has been an opportunity for me to reflect on what makes us stand out, and what we define as ‘the Lavastone way’. I have come to the conclusion that the key to growing a company is to have a great team to manage our properties and care for the quality tenants inhabiting them. Our teams spend a significant part of their day at work, which inevitably calls for us, as employers, to create an environment that is conducive to their engagement, learning, growth and wellbeing, and also to offer them a career that lends them a sense of purpose. I, along with the rest of the management team, am committed to doing just that.

Do you have any closing thoughts before signing off?

I would like to thank our teams for bringing our investments to fruition whilst ensuring our existing properties held commendable occupancies with healthy yields. Their tireless efforts and collaborative spirit were on full display, as evidenced in the materialisation of major projects in spite of the challenging context. I would like to extend my appreciation to all 42 of them, as well as our network of service providers and collaborators – from the technicians, handymen and contractors, to the engineers and architects – who brought their unique expertise and craftsmanship to our projects.

As always, my gratitude goes out to our Chairman, Colin Taylor, and my fellow Directors for their support and guidance in navigating another challenging, yet rewarding, year.

Nicolas Vaudin

Managing Director