Newpark REIT Limited, the property holding and investment company that owns commercial and industrial assets, has published its financial results for the year ended February 2024, reporting a 3.3% increase in revenue to R130.9 million with its funds from operations (FFO) increasing by 20.70% to R81.1 million.
The Groups total dividend increased to 70.37 cents per share, up 4.73% with its net asset value (NAV) decreasing to R6.03, down 32.47%.
The REIT’s property portfolio consists of four properties, two of which are in Sandton namely the JSE building with 18 533m2 of gross lettable area (GLA), an adjoining mixed-use property (24 Central) with 16 526 GLA and an asset in Linbro Business Park with 13 713m2 od GLA. The fourth property is in Crown Mines (11 277m2 of GLA). The latest combined valuation of these assets at the end of February 2024 was R1.12 billion.
Newpark’s loan-to-value (LTV) ratio of 41.1% was negatively impacted primarily by a reduction in the value of the JSE property (FY23: 30.90%).
The positive impact of the capital investment and extended lease at the Linbro Park asset were offset by the change in valuation of the other properties with a fair value decrease of R274.7 million (19.9%) relative to the value of the assets during FY23.
Rental escalations, operating cost efficiencies, and improved debtor recoveries resulted in cash generated from operations for the financial year increasing by 31.1% from R95.7 million to R125.5 million.
Its Board declared a final cash dividend of 35.37 cents per share (FY23: 42.19 cents per share) with the total dividend for the financial year 70.37 cents per share (FY23: 67.19 cents per share) representing 86.80% of FFO and an increase of 4.72% over the 67.19 cents per share declared the prior year (FY23: 100% of FFO).
Funding from its revolving credit facility was utilised during the year to finance capital costs for extensions and solar power installations at the Linbro Park and at 24 Central properties, which resulted in greater lettable areas and enhanced income levels at both properties. The board has decided to retain a portion of FFO generated during the year to fund a portion of the capital expenditure.
The increased borrowings arising from capital expenditure coupled with the decrease in property valuations resulted in an increase in the Secured Properties loan-to-value ratio to 42,5% at yearend. Whilst the ratio is above the requirement of 40% in terms of the Group’s debt agreements, Newpark’s lender has agreed to condone the ratio excess to the 31st of August 2024, at which date the loan terms will be subject to a further review. All other debt covenants have been met.
Newpark’s hedged borrowings are contracted at an average interest rate of 6,52% per annum before banker’s average margin of 1,99%, with 60,1% of Newpark’s borrowings hedged at yearend. The hedges will mature in June 2024 and November 2024 and Newpark will replace these hedges during the course of the year to ensure that the exposure to interest rate risk is limited appropriately.
Newpark will continue to focus on the management of its existing assets with the lease renewal of the JSE property lease a key management priority. 43% of leases by GLA are due to expire in 2026 and 2027, of which the JSE property lease comprises 31%.
