Arrowhead Properties has reported, during an investor update, that its portfolio is performing in line with expectations despite the prevailing uncertainty in the market.
Impressed with the team’s hands on asset and property management, CEO Mark Kaplan commented: “The additional hands on deck employed over the past two years have certainly made a difference to our business, adding tremendous value in the management of our assets to ensure it performs optimally during uncertain times.”
The Company’s disposal programme is progressing very well and after excluding the R551 million of asset disposals that transferred at the end of 2019, Arrowhead’s current disposal pipeline includes 42 non-core assets with a sales value of R913 million at an average 1% premium to book value. Of this, R276 million (30% of current disposals) has already transferred and the balance is expected to transfer during the second half of the financial year.
“We do expect an increasing discount to book value going forward given the difficulty being experienced in the current sales market“.
Kaplan commented: “The successful disposal program aides in the repositioning of our portfolio and enhances the quality of our overall asset base. Some proceeds have been used for capital expenditure and solar investments to ensure that our assets remain relevant in the areas it operates in. A further 10% of the proceeds received have been used to buy back shares while the majority of the funds have been used to reduce debt.”
With the further devaluation of the listed investments, the share buyback program, capital expenditure and solar investments during the 6-month period, the Company expects the LTV to be around 41.5% as at 31 March 2020.
Tenant retention (lease renewals and re-lets of space not renewed) is expected to be around 85%, a further testimony of the team’s effectiveness. Leasing results have been in line with the Company’s expectations and forecast while vacancies are set to remain stable around 8% when the Company reports its interim results.
“The team works closely with tenants to understand their needs and our asset management initiatives have been very effective. Although our portfolio is well positioned, we are cognisant that the recent emergence of the COVID-19 virus globally will have an effect on our portfolio. We remain cautious and continue to monitor events closely,” concluded Kaplan.