Arrowhead pleased to have delivered on 2017 forecast despite challenges

Westgate Mall
Westgate Mall; one of the commercial properties that makes up Arrowhead's property portfolio.

Arrowhead, the JSE-listed SA REIT, has announced its annual results for the year ended 30 September 2017.

Summary of results:

  • Dividend of 87,52 cents per share, growth of 6,02%
  • Well positioned balance sheet; Company LTV of 28,2%
  • Average asset size increased to R110 million
  • Successful conclusion of the Gemgrow transaction

 “The current uncertain political and economic circumstances have caused a rapid deterioration in our operating environment. These factors have greatly impacted our tenants. The combined effect of the challenging macroeconomic situation and political uncertainty have a negative impact on rentals, tenant installations and broker commissions and are pleased to have delivered on our 2017 forecast.”

– Mark Kaplan, CEO of Arrowhead

During the reporting period Arrowhead successfully concluded the Gemgrow transaction. Gemgrow is a specialist high yielding, high growth vehicle that is positioned to acquire different asset class properties. This unique offering sees significant opportunities as it falls outside the focus area of most funds in the listed property sector.

Arrowhead owned a portfolio of 154 retail, office and industrial properties directly and 116 residential properties indirectly through Indluplace at 30 September 2016. As a result of the successful Gemgrow transaction, Arrowhead owned 51 commercial properties directly, 129 commercial properties indirectly through Gemgrow and 125 residential properties indirectly through Indluplace at the end of the reporting period.

Vacancies have increased from 7,7% at 30 September 2016 to 12,1% at 30 September 2017 due to the weakening market conditions and single tenant lease expires that resulted in a strained office market.

At year end, Arrowhead reported a LTV of 28,2%, while the group LTV was 31,5%. The interest rate swaps of R3,0 billion as well as the fixed rate loan of R237 million resulted in interest on R3,2 billion of the total loans of R4,7 billion being fixed. This equates to 69% of the total borrowings for the group and 71% for the company at an average rate of 8,98%. Post year end, the group has hedged around 77% of it’s borrowings.

We are comfortable with the current level of gearing in the Fund and across the group. We believe this conservative position to be wise during the current uncertainty. This, combined with our strong balance sheet, still allows some headroom for Arrowhead to take advantage of potential income enhancing acquisitions as we remain opportunistic and acquisitive as a Fund

– Imraan Suleman, CFO of Arrowhead

We expect the current macroeconomic environment to remain under pressure during 2018 and had to take some tough decisions during the year.

– Mark Kaplan, CEO of Arrowhead