Synergy Income Fund today reported its interim results for the six-month period to 31 December 2012 showing significant growth in its core retail property business and delivering on all performance projections to its investors.
The company announced distributions of 24.75 cents per unit to its B linked unitholders representing growth of 31.0% in comparison to the six months to June 2012. Distributions of 40.32 cents were announced for its A linked units, in line with the company’s projections.
Synergy’s market capitalisation grew 87.0% during the period to R1,2 billion.
William Brooks, CEO of Synergy, ascribes this strong performance to Synergy’s acquisition-driven portfolio growth, positive tenancy trends and the direct active management model it adopted during the period.
“Our successful execution of value enhancing acquisitions, our new management structure and the overall quality of our retail tenants all contributed positively to these results,” says Brooks.
Brooks confirms that Synergy is on track to achieve its forecast distributions for all unitholders for the full year, and its 2014 financial year.
“The Synergy portfolio continues to perform in line with projections. Our continuing focus on acquisition driven growth supported by a strong management structure will be key to future performance,” says Brooks. “During the period, we not only grew our property portfolio but also invested heavily in our operational infrastructure to position us for future growth.”
JSE-listed Synergy is a specialised retail property fund with a specific focus on medium-sized community and small regional shopping centres in high-growth nodes. Its portfolio of 14 shopping centres highlights commuter-oriented centres in township areas and rural towns. The Synergy property portfolio is geographically diverse. It now owns property assets in seven provinces.
During the period, Synergy’s property portfolio value increased by 48.0% from nearly R1,2 billion to over R1,7 billion. This was driven mainly by its acquisition of the 21,542sqm Setsing Crescent Shopping Centre in the Free State and the 25,338sqm Gugulethu Square Shopping Centre in the Western Cape with a combined market value of R565 million.
“We have made excellent progress in growing the size and quality of our property portfolio, our occupancy rate improved by 1.2% during the period from 95.4% to 96.6%. Around 1.6% of the 3.4% vacancy level is earmarked for refurbishment and redevelopment,” says Brooks. At the same time, rentals across the portfolio grew by 7.1% on new and renewed leases.
Strategic leasing targeting the underlet parts of the portfolio has improved the overall quality of the tenant mix. “During the six-months, the ratio of national tenants in the portfolio increased from 81.1% to 85.6%,” reports Brooks. “We’re pleased that we have now comfortably reached our target national tenant ratio of 85% or higher.”
From October 2012 Synergy brought its full property management processes in-house. This simpler, more efficient structure helped deliver better value to investors. “It is a significant investment in our business that better aligns management structures to investor objectives and produces many long-term benefits,” says Brooks. “It involves direct active management of our portfolio and a clear investment focus to drive growth of our property portfolio into the future.”
Synergy’s operating cost ratio is in line with sector standards at 25.2% of contractual rental income.
Reporting conservative gearing levels, Synergy’s loan-to-value ratio was 32.7% at the end of the half-year. The company has good relationships with several major banks and unutilised long-term facilities of R177,5 million.
“We will continue our strategic focus to grow our portfolio through value enhancing acquisitions as well as continuing to invest in additional operational capacity in order to deliver performance and provide sustainable and growing income for our investors,” says Brooks.