Arrowhead Properties, the South African JSE listed Real Estate Investment Trust, has declared a distribution of 36,43 cents per combined A and B unit for the quarter ended 30 September 2014. This is a 24,2% improvement on the 29,33 cents distribution over the same period in 2013. Distribution for the year to September 2014 is therefore 133,24 cents per combined A and B unit, a 17,9% increase in distribution over the prior year.
Two major factors transformed Arrowhead Properties’ business during the year, the acquisition of Vividend Income Fund and entering the residential market.
“We are pleased with the results, which reflect our efforts during the year. We continued to improve the quality and size of our portfolio through acquisitions in line with our strategy and capitalized on the consolidation that took place in the sector with the successful acquisition of Vividend which added approximately R2,3 billion worth of retail, office and industrial properties to Arrowhead’s portfolio. We also diversified the Fund through the establishment of Arrowhead Residential,” commented Mark Kaplan, COO of Arrowhead.
The property portfolio, including shares in Dipula, increased from R3,1 billion to R7,3 billion and the market capitalization from R2,8 billion to R5,9 billion at year end.
“The quality of the assets in our portfolio increased over the past year and it is clear that the current Arrowhead is no longer the Arrowhead it was at listing with perceived secondary properties. Excluding the residential portfolio, the number of individual assets that we manage has increased from 89 at listing in 2011 to 155 at present. The average value per property also increased from R17 million to R45 million, as we concentrated on building size and quality,” Gerald Leissner CEO of Arrowhead said.
Arrowhead grew it’s net property income on the core portfolio by 6,9% and 9,1% after gearing, This was ahead of the market distribution growth of 8,5% with gearing.
Vacancies within the portfolio have decreased from 9% to 6,26% on the commercial (retail, office and industrial) portfolio and 1,2% on the residential portfolio. Over 75% of leases that expired during the year were renewed and the average lease expiry profile was extended to 3,49 years.
During the period under review, Arrowhead entered into interest rate swap agreements to further hedge its exposure to interest rate fluctuations on 91% of its debt. The loans of R2,3 billion (2013: R720 million) measured against investment properties valued at R7 billion (2013: R3,1 billion) represents a loan to value ratio of 33% (2013: 23%). The average cost of funding for the year was 8,61%.
“We are very comfortable with 91% of our borrowing of R2,3 billion being fixed for five years from date of drawdown and negotiated competitive rates from the banks,” says Imraan Suleman, CFO of Arrowhead.
“I am excited about the year ahead. Arrowhead is targeting to acquire R1 billion of commercial (retail, office and industrial) property over the next financial year and we want to increase our stake in Dipula Property Fund. There is an additional R1 billion of residential property in the pipeline, setting the course to implement what we believe to be very unique opportunities in the residential property sector going forward.
“We expect that the portfolio of properties as at 30 September 2014 should produce distribution growth per combined A and B linked unit of 11% for the year ended 30 September 2015,” concluded Leissner.