Premium Properties, a JSE-listed Company offering significant residential sector exposure, this morning announced its unaudited interim results for the six months ended 31 August 2013.
Jeffrey Wapnick, Managing Director of Premium Properties, commented; “Premium continued to deliver strong earnings growth with a distribution increase of 10,3%, despite the lacklustre economy. Strong growth in the residential portfolio underpinned by low vacancies and high demand for quality and secure accommodation contributed significantly to the increase in rental income.”
The Company’s rental income and net rental income increased by 10,5% and 6,4% respectively. Bad debts, write-offs and provisions decreased from 1,4% to 0,4% of total tenant income. Arrears and doubtful debt provisions remained at acceptable levels and no significant deterioration is anticipated. The percentage of cost recovery from tenants was maintained during the year despite rapidly escalating utilities charges.
Premium had three major projects under construction for the period, totalling approximately R86,8 million of which R58 million had already been spent by 31 August 2013. The construction of an additional residential block at The Fields in Hatfield, Pretoria is progressing well and will create a further 87 residential units and 87 parking bays at an estimated cost of R71.3 million. This development is scheduled to be completed in November 2013 with an expected yield of 8,3% once fully let.
The upgrade of Prinsman Place, a mixed-use property was completed in September 2013 at a total cost of R8 million and a R7,5 million residential and retail upgrade of the Demar Building, will be completed in October 2013. Both buildings are located in Pretoria CBD. Finally, The Hangar in Centurion, comprising six blocks of residential accommodation, was transferred on 31 July 2013 and will further enhance Premium’s residential property portfolio. The total purchase consideration amounted to R114,7 million.
“We have seen a significant increase in demand for well located residential accommodation in both Pretoria and Johannesburg CBDs. Not only have the close proximities to the Gautrain stations added significant value, but revived interest by both private and government businesses has propelled the need to enhance our offering.
“As such, our efforts to improve the quality of our assets through redevelopments and upgrades have been fruitful with core vacancies reducing from 13.9% to 13,0%. Significant progress was made in letting some of the retail and office space at The Fields. A 6 296m² office space lease commenced in May 2013 at a rental of R135 per m², added Wapnick.
The Company’s investment in IPS Investments Proprietary Limited (“IPS”) provided strong growth with profits earned from the associate company, excluding fair value gains, increasing 40,6% on the prior period to R14.5 million. The performance of IPS was positively impacted by the improved occupancy levels achieved during the year at Craig’s Place and the mixed-use developments of Kempton Place and Tali’s Place. The construction of Jeff’s Place (previously known as Marchie Mansions), a greenfield residential development situated in the Pretoria CBD, commenced in February 2012 and is expected to be completed in November 2013. The total cost of the project is R139 million and it is anticipated that this will yield an initial return of 9,2% once fully let.
The Company’s loan to value ratio as at 31 August 2013 was 33,7% of the total value of the investment portfolio compared with 31,5% as at 28 February 2013. Interest rates in respect of 41,7% of borrowings have been hedged, maturing at various dates ranging from May 2017 to August 2018. The weighted average annual cost of debt was 7,8% with unutilised banking facilities in excess of R431,8 million.
“We successfully launched a R1 billion Domestic-Medium-term Note Programme in March 2012 which resulted in significant savings in finance costs. Earlier this year, we increased our debt capital market issuance to R465 million or 28% of our borrowings and following this Global Credit Ratings upgraded our long and short-term ratings to A- (ZA) and A1-(ZA) respectively.
“We are well positioned to continue to take advantage of opportunities in the CBDs supported by the high demand for safe, clean and affordable accommodation, favourable market conditions for CBD ground floor retail space with the return of food and fashion retailers to the city centres and infrastructure expenditure by Government,” Wapnick concluded.
Premium anticipates that the percentage growth rate in distributions per linked unit for the full twelve month period should be similar to the sector average growth rate.
A dividend of 0,33 cents (H1 2012: 0,30 cents) per ordinary share (out of income reserves) and interest of 65,87 cents per debenture (H1 2012: 59,70 cents) has been declared for the period 1 March 2013 to 31 August 2013.