Releasing its maiden full-year results and dividends to March, Sparks said lower interest rates expected during the next 12 months, coupled with the tax cuts introduced during the March budget, would further strengthen the retail property sector.

Established three years ago, SA Retail invests in retail convenience shopping centres in stable communities with strong tenant bases and anchored by primary national retailers.

Sparks said the market offered significant potential for acquisitions, including the co-ownership in regional shopping centres that would generate "appropriate yields". He expected to make an announcement regarding the co- ownership of a Gauteng-based regional centre in the current quarter.

He dismissed investing in the KwaZulu-Natal based regional centres Pavilion and Gateway, but indicated that the proposed investment was in a property of similar size and dimension.

Sparks believed SA Retail was well-positioned to acquire prime retail properties, despite the current high interest rates. He said expanding the property loan stock company into regional centres diversified the risk, but retained the interest in retail investments.

He said regional centres were showing strong performance growth and offered sound investment opportunities.

The company aimed to raise its property portfolio to more than R1,2-billion in the current year from the current R902-million, and Sparks said the 60% exposure to national tenants ensured the quality of the income stream and underpinned prospects for steady growth.

The portfolio has grown from R835-million when SA Retail listed on the JSE Securities Exchange SA in November 2001.

The company declared a total distribution of 62,35c (no comparative figures) a linked unit, equating to R97,8m in its first full trading year. Sparks said that this declaration was in line with management's expectations.

In the four months to March last year, the company paid out a 24c dividend, which Sparks said annualised to the levels achieved in the current reporting period.

The yield was 12,5% on the initial listing price of 500c.

Sparks said the core portfolio of 26 neighbourhood shopping centres performed "admirably" in a period of high interest rates, global uncertainty and the limited growth of the SA economy.

Retailers Pick 'n Pay and Shoprite, which account for more than 30% of SA Retail's rental income, produced exceptional trading results that yielded higher-thanexpected turnover rentals.

However, Sparks said pressure on the smaller line shops resulted in bad debts amounting to 1,8% of gross revenue.

The current portfolio vacancy factor of 6,2% was below the 7,1% industry benchmark.

In December, the company acquired an undivided 50% share of six community-based shopping centres worth R146-million, while the Westwood Village centre was acquired last month for R14,6-million.

The properties were acquired at an average yield of 14%.

The Hilton Quarry Spar has been extended at a cost of R4,2-million and the Eikestad Mall in Stellenbosch was being refurbished at a cost of R4,5-million. Major extensions and improvements were planned for the East Rand Galleria.

Business Day