Texton Property Fund records 10,6% rise in distribution per share

Posted On Monday, 25 August 2014 11:33 Published by
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Texton Property Fund's Key Performance Indicators improve despite challenges in the office sector.

Rob Kane

Rob Kane, CEO of Texton Property Fund was upbeat, saying “This has been a busy and positive year for the Fund. The Fund has performed exceptionally well particularly given the tough market conditions. A number of fundamental changes have provided us with a solid platform from which to grow our asset base and deliver sustainable, superior earnings for our shareholders."

Highlights
• Distribution per share up 10,6% to 85,47 cents
• Investment property income rose 25,3% to R271,8 million
• Net asset value increased 15,4% to 993,89 cps
• Portfolio value escalated 40,4% to R2,21 billion
• Net property income 18,8% higher at R184 million
• Tenant retention 82,5%
• Blue chip tenants 79,6%

In early August, Texton changed its name from Vunani Property Investment Fund Limited following the cession and assignment of the asset management agreement to Texton Property Investments (Pty) Limited.

The past twelve months have been challenging, especially in the office sector, but all of the Fund's Key Performance Indicators have improved. Vacancies have improved to 5,3% on a total GLA of 190,116m2, which compare well with the sector average of 11,3%. Importantly, tenant retention remains very high at 82.5%.

Our average lease expiry of 3,96 years coupled with average escalations at 8,6% give the Fund a very stable platform for the future. The Fund's lease expiry profile has been pushed out after a successful years leasing activity. The Fund only has 12.2% of leases expiring in the next year and 5% of those are at an advanced stage. We do not anticipate any rental reversions in 2015. Rent collection has improved to a remarkable 98% and we have very little new arrear rentals.

The Fund has seen a marked increase in acquisition activity, with growth of just over 40%. The Fund acquired four excellent properties, valued at just under R600 million and another R380 million assets currently in the process of being transferred. The imminent transfer of the PD Naidoo portfolio will result in 6,2% of Texton shares being owned by black empowered individuals/entities and will provide the Fund with a minimum Level 3 rating. An additional 20% BBBEE shareholder transaction is at an advanced stage.

At the end of June this year, the Fund had a loan to value of 31,6% and its average cost of debt is 8,27% with just over 49% of the outstanding debt hedged through the use of interest rate swaps. Post balance sheet the Fund hedged another 25% of its debt.

Turning to prospects, Kane said, "We will continue to focus on our strategy of growing the Fund with yield enhancing assets without compromising on quality. The new management structure has produced a solid performance for the year and with increased property skills and deal making ability we are well positioned for future growth. Our deal pipeline has never been this strong.

We believe that diversification of risk is prudent and are considering selected opportunities in the industrial and retail sectors to enhance our offering. The board is also considering opportunities outside of South Africa. As always, the Fund will be prudent and such a strategy will be well researched and thought out before implementation."

"We are confident that the next reporting period will be an exciting phase as we build on the solid platform and skill base established in the past year. We believe that our shareholders will enjoy above market earnings growth coupled with solid capital appreciation, " he concluded.

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