Gemgrow advantageously positioned for future acquisitions

Alon Kirkel, COO of Gemgrow.
Alon Kirkel, COO of Gemgrow Properties.
  • Dividend of 52,18 cents per A share and 38,52 cents per B share for six months; in line with guidance.
  • Seven times cash cover on A shares.
  • Strong, de-risked balance sheet; LTV of 29%.
  • Debt expiry profile improved to 3,8 years.
  • R549 million of acquisitions transferred and integrated within the portfolio.

Gemgrow has released its interim results for the quarter ending 31st of March 2018, declaring a dividend of 26.09 cents (52.18 cents for six months) per A share and 19.34 cents (38.52 cents for six months) per B share for the period.

COO Alon Kirkel commented, “Gemgrow is positioned to deliver on its guidance of 7% to 9% on its B share. Gemgrow’s focus is to reshape and improve on the performance of its core portfolio by unlocking further potential from existing properties, effecting strategic disposals, undertaking refurbishments to unlock income on vacant space and pursuing yield enhancing acquisitions. Bolstering our team of talented professionals and improving operating efficiencies through alternative income and cost containment measures, is a key strategy in ensuring delivery in an environment that has seen subdued growth.”

The value of properties under management increased from R4,5 billion at the end of September 2017 to R5,0 billion at the end of March 2018. The revenue stream from the portfolio is diversified across retail (27%), office (46%) and industrial (27%), with GLA up by 10% to 759 964m2.

Vacancies increased from 8% to 9% in the period under review, in line with expectations, as the company executed its strategy to improve its leasing profile. Some month-to-month tenants were successfully migrated to longer term leases. A quarter of the increase in vacancies was attributable to the vacancies relating to acquisitions, secured at no cost to the company. This and the improved leasing profile represent upside for Gemgrow.

Gemgrow maintains a strong, de-risked balance sheet, with a loan to value ratio of 29%, and 97% of debt hedged. CFO Junaid Limalia explained: “We have achieved an improvement in the weighted average debt expiry profile from twelve months at the same time last year to 3,8 years currently. We achieved this through the refinancing of existing loans and additional debt funding for acquisitions totalling R550m, all of which have five-year terms.  Our borrowing being 97% hedged materially reduces our exposure to interest rate fluctuations in the long term.”

COO Alon Kirkel added, “We believe that Government’s planned growth strategy for the South African economy will provide Gemgrow with a platform of accelerated growth in the future as a purely South African focused property income fund. Gemgrow continues to explore acquisition opportunities that will deliver sustainable income growth for investors.”