SA Retail Properties 'pleasing' performance.

Posted On Wednesday, 06 November 2002 10:01 Published by
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In spite of adverse property fundamentals, fledgling specialist convenience shopping centre property loan stock company, SA Retail Properties, has turned in what it terms a 'robust' six months to September - its first full six month reporting period since its listing last November.
In spite of adverse property fundamentals, fledgling specialist convenience shopping centre property loan stock company, SA Retail Properties, has turned in what it terms a 'robust' six months to September - its first full six month reporting period since its listing last November.

Net rental income from it's portfolio for 18 convenience retail centres around the country came to R45.1m in the current reporting period, compared with R35.5m in the truncated first four-and-a-half months to March end after listing. This enabled SA retail to declare a 31.50 cents dividend per linked unit for the half year.

Fund manager Peter Sparks says he's relatively pleased with the performance given that it occurred during a phase in the property cycle dominated by four interest rate hikes and rising inflation.

These factors have taken their toll on tenants in terms of reducing disposable income which has particularly affected smaller retailers. The fund, as a landlord, has also felt the impact in terms of increased municipal rates, higher services charges, and rising costs of security for its R800m property portfolio comprising centres of between 6 000m2 and 20 000m2 based primarily in Gauteng (50%) with 20% each in KwaZulu-Natal and the Western Cape and the balance in other areas.

The results were underpinned by the fact that 30% of the 300 000m2 portfolio is occupied by Pick 'n Pay and Shoprite. ' In addition to that 60% of our total tenant base is made up of national retailers. We won't consider taking on a centre unless it is in a stable area and has an established anchor tenant,' says Sparks.

This policy has, he believes, contributed to vacancies being held down to 6.2% compared with the national average of 6.5% (Sapix).

As far as the immediate outlook is concerned, Sparks believes this hinges primarily on interest rates. ' We are driven by economists. One school of thought is that we've seen the worst and if that is true we'll see things soften quite quickly, but others are more pessimistic. While I like to be positive I have to be prepared for both scenarios,' he says.

As far as the portfolio is concerned he says a short, medium and long-term upgrade programme is being implemented for all centres in the portfolio with major alterations currently underway at the Quarry Centre, Hilton Road, and Eikestad in Stellenbosch - Eikestad along with the East Rand Galleria in Rosebank, Johannesburg are the portfolio's flagship properties.

As far as disposals are concerned Sparks says several industrial and office properties acquired with portfolios during the listing, and subsequently identified as non-core, are being prepared for disposal (primarily by reducing vacancies) and should go on the market in the new year.

At the same time, he adds, the fund continues to seek convenience shopping centre investment opportunities.

In this regard the conditions of purchase of a portfolio of properties being acquired form Old Mutual Life Assurance Company - announced in August - are still being fulfilled. The six properties spread between Johannesburg, Cape Town and Durban will add about R150m to the value of SA Retail's portfolio.

Sparks adds that a further R200m worth of potential purchases have also been identified.


Publisher: Moneyweb
Source: Moneyweb

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