Diversified property REIT, Texton Property Fund has announced robust final results for the year ended 30 June 2016, declaring a total dividend of 103.63 cents per share (2015: 94.77 cps), a 9.4% increase, following the successful implementation of its diversification strategy geographically into the United Kingdom (UK) and across sectors.
Angelique de Rauville, CEO of Texton, commented:
“We are encouraged by the stellar results despite some unforeseen events in our operating environment. We are not aware of any direct negative impact from Brexit on our UK tenant base given the strength of our, covenants and long term nature of our leases”.
“In South Africa we continued actively managing the legacy portfolio, restructuring the business, disposing of non-core assets and focusing on fewer, larger, better quality assets with long term leases.”
Texton increased its total property portfolio value by 39.3% to R5,77 billion from the prior period.
The portfolio is geographically split by value between the UK (38.8%) and South Africa (61.2%) with a sectoral spread consisting 14% retail, 30% industrial and 56% office by gross lettable area (GLA).
The Company acquired six properties during the year, bolstering its GLA by 22.6% to 427 831m2. Two of the acquired properties are in South Africa and four are in the UK:
· The Grid in Rivonia, Sandton, a commercial building with a total GLA of 4 528m2, occupied by a single tenant Bilfinger Steinmüller Power Africa on a long term, triple net lease for an acquisition price of R105,4 million in cash.
· Golddurb, a retail property in the Durban CBD measuring 13 640 m2 by GLA, anchored by national retail tenants including Truworths and OK Furniture on medium term leases. It was acquired for R190 million in cash.
· Broad Street Mall, located in Reading, west of London, with a total GLA of 35 860m2 for an acquisition price of R570,9 million. The property is 50% owned in a joint venture with Tradehold and consists of two office blocks and the retail centre which is anchored by national retail tenants including New Look, TK Maxx, Argos, 99p and Poundland.
· Bawtry Building, located in Doncaster, an A-grade industrial building with a total GLA of 25 294 m2 for an acquisition price of R368,2 million. The building has DHL as the single tenant on a long term triple net lease.
· Camborne Retail Park in Camborne, measuring 4 465 m2 by GLA, with anchored by B&Q with a long term lease. It was acquired for R224,2 million in cash.
· Caterpillar Building in Peterlee, consisting of two industrial buildings measuring a total of 10 117m2 by GLA, is single tenanted by Caterpillar on a long term, triple net lease and was acquired for R180,7 million in cash.
The Company raised R986 million through a rights offer in October 2015 deploying the proceeds during the year to fund acquisitions in South Africa and the UK. The loan to value improved to 37.2% (2015: 38.8%). The Fund’s average cost of debt is 9.4% on its South African debt and 3.58% on its UK debt. Whilst most of Texton’s debt is fixed, the Company has an element of sterling floating debt which will benefit from the decrease in UK interest rates. The fund remains capitalized to take advantage of yield enhancing acquisitions.
“Balance sheet management is a key consideration of the business and we believe that raising equity at current levels is unattractive. We prefer to fund acquisitions through disposals and debt capacity,” continued de Rauville.
Post the reporting period, the Company disposed of five non-core legacy assets given the headwinds in the South African economy at present. The overall fund vacancy of 9.0% (2015: 7.9%) is expected to improve to 4.5% once the remainder of the non-core assets have been sold.
“We are continuously achieving our goal towards a vastly improved portfolio of properties including reduced government exposure, reduced secondary office exposure and a balanced portfolio across the UK and South Africa”.
The Company advised the market that it is negotiating to acquire two property portfolios in South Africa and the United Kingdom, collectively called the Blend Acquisition, for a total price consideration of R378,04 million which will be funded through a combination of debt facilities and cash generated from the proceeds of non-core property disposals.
Post the year end, the Company renegotiated the transaction to acquire two of the three preferred UK assets resulting in the Blend Acquisition benefitting from the stronger rand, weaker sterling and the lower cost of UK debt.
“In the long term, exposure to fewer but larger assets with long term leases will significantly improve our risk profile, provide positive rental growth and deliver superior returns to our shareholders,” added de Rauville.
The Company also announced that Angelique de Rauville has extended her contract as acting CEO until 31 December 2016. Nic Morris, currently COO, will assume the role of Managing Director from 1 September 2016 and fulfil the permanent CEO role from 1 January 2017. De Rauville will remain involved in the business from 1 January 2017 focusing on the UK business where she is based.
“We have a very experienced team supported by local asset and property management teams with considerable local expertise and knowledge who complement the business and position the Company well for the future,” concluded de Rauville.