Arrowhead Properties, the only JSE listed property loan stock company to pay quarterly distributions, reported an excellent maiden set of annual results to the year ended 30 September 2012.
The Fund well exceeded their pre-listing objectives and forecasts as set out in December 2011. The total annualised distribution of 100,58 cents per unit was 2,2% higher than the initial annualised forecast of 98,4 cents per unit. The asset base grew by R750 million or 50% and the market capitalisation almost trebled from R800 million to R2,2 billion.
Arrowhead’s A and B units combined achieved a total return of 40,6% which is well above the market average of 33,23%.
Gerald Leissner, CEO of Arrowhead Properties, attributed this success to the board and executive team who operated strictly within their strategy.
“The key driver for continued success is growing income from our properties. The management team has been disciplined in cost controls, efficient rental renewals and yield enhancing acquisitions. We are delighted with this first year’s performance”
The Arrowhead A and B unit structure caters for investors with different risk and reward appetites, with the A units for risk averse investors, earning distributions of 15 cents or 50% of the distributable income per quarter, whichever is the greater and the B units, for investors with a greater appetite for risk, earning the balance.
It is expected that Arrowhead will achieve an increase of 10% for the year ended September 2013. This equates to total distributions of R1,11 cents for one A, plus one B unit. All growth will be attributable to the B units whose income will increase by 25%. The A unit will see no growth.
Arrowhead holds a diverse portfolio of properties in secondary locations across South Africa. More than R750 million worth of property was acquired during the year.
“Our pipeline is looking healthy and we are pleased with the quality and yield enhancing opportunities available in the market,” Leissner continued.
Occupancy levels are currently at 87%, an increase from 82% at the time of listing. The Fund credits this improvement largely as a function of the acquisition of properties with higher occupancy levels, although there has been success in letting vacant space.
Based on current lease escalation rates, which range from 6% to 12% per annum, it is expected that growth from existing leases will average around 7%.
To date, all acquisitions have been financed by the issue of additional Arrowhead units. Gearing levels subsequently reduced to 28%. Going forward Arrowhead intends to access its debt facilities or use a combination of debt and equity to fund acquisitions. The majority of debt is fixed for 5 years.
“Looking forward to the 2013 financial year, we intend to grow our asset base by at least 30%, increase our market capitalisation to R3 billion and achieve a 10% growth in combined earnings.”
“With our first year of trading as a listed company complete, we remain well positioned for future growth and to meet our main objective, which is to provide unitholders with growing distributions.” Leissner concluded.