Texton Property Fund today announced solid interim results for the six months ended 31 December 2015, declaring an interim dividend of 51,52 cents per share. This represents growth of 15,3% on the dividend of 44,68 cents per share declared for the six months ended 31 December 2014 (“the comparative period”).
Angelique de Rauville, CEO of Texton commented: “Much work has been done on implementing our UK strategy efficiently over the past 18 months. Our timing into the market has been opportune, with immediate benefits for our shareholders, especially considering a relatively muted performance of the South African portfolio as a result of low economic growth.”
During the reporting period, the Company moved closer to achieving its long term objective of a 50% portfolio exposure – by value – to the UK real estate market. This follows considerable investments into acquiring strategically located industrial and retail assets over the past 18 months.
“Given the headwinds facing the global economy in general and South Africa particularly, we believe a diversification strategy into relatively high-growth, hard currency earning economies makes sense. Our investment property income from the UK increased by 100% to R34,9 million”.
“At the same time we bolstered the local portfolio with strategic acquisitions, increasing the Company’s total GLA by 21,8% from 322 007 m2. We also successfully disposed of some non-core assets locally, reducing our geographic risk and single tenant exposure, improving the portfolio’s diversification across sectors,” De Rauville continued.
Texton acquired two UK assets during the reporting period:
– A 50% interest in Broad Street Mall, located in Reading, approximately 36 km west of London for a total purchase consideration of GBP 61 128 000 (excluding acquisition costs of GPB 3 545 000) in a joint venture with JSE listed Tradehold (who holds the remaining 50%).
Broad Street Mall with a total GLA of 35 860 m2 consists of 75 retail units, 740 parking bays, 6 kiosks and 2 office buildings. The weighted average lease expiry of the mall is 5,4 years and is anchored by national tenants including New Look, TK Maxx, Argos, 99p and Poundland.
Texton funded its 50% interest by way of pound sterling loan facilities in order to mitigate currency risk as much as possible, as well as through capital raised by way of a vendor placement. The transaction, concluded in July 2015 was Texton’s largest to date.
– On 23 December 2015, Texton took transfer of the Bawtry building in Doncaster from DHL Supply Chain Limited (“DHL”), a company that is part of the world’s leading postal and logistics company Deutsche Post DHL Group. The A-grade warehouse with an approximate GLA of 25 294 m2 15 years remaining on the lease. Texton acquired the asset for a purchase consideration of GBP 17 million, excluding VAT, funded from existing cash resources. No external borrowings were required to affect the acquisition.
With recent acquisitions in the United Kingdom, the Board is considering consolidation of its property management functions in the UK as part of its overall strategy to improve operational efficiencies in the business. At 31 December 2015, the Fund had a loan to value of 38,4% (2014: 34,7%) and remains capitalised to take advantage of yield-enhancing acquisitions. Texton’s average cost of debt across South Africa and the UK is 5,26% with South African debt at the end of the reporting period 8,29% (2014: 8,27%) and 3,51% (2014: 0%) on its UK debt.
At the end of the reporting period, Texton owned a total property portfolio of R5,1 billion, up 62,7% from the comparative period. The portfolio is evenly split geographically between the UK and South Africa, with a sectoral spread consisting 60,4% office, 10,8% retail, and 28,8% industrial by gross lettable area.
“The fundamentals of our South African portfolio remain in place, but we are concerned about continued headwinds on the back of a low-growth economy. The directors and management have consequently taken a very cautious approach to property valuations. Some of the valuations independently obtained across the portfolio in June 2015 were written down to what management believes are market related prices, in order to reflect this reality”.
“We will continue to dispose of non-core assets, including assets that create a drag on earnings. As a result, approximately 19 assets with a total combined GLA of 51 295 m2 were held for sale at the end of the reporting period,” concluded de Rauville.
Notwithstanding expected increased challenges facing the domestic economy, Texton’s portfolio continues to perform well and the company forecasts achieving double-digit distribution growth for the full year to 30 June 2016. The Fund expects to continue benefitting from its offshore strategy, its yield-enhancing transactions, optimal asset management and a softer Rand.
“Our executive management has been bolstered significantly with highly skilled and capable individuals. We now have a very experienced and capable team in place and have every confidence in their ability to grow shareholder value,” concluded de Rauville.
Read more here: Texton Interim Results Dec 2015
