WHILE the rental sector of the property market was still struggling, the overall rise in demand for property was a good sign for the sector, said Bruce Kerswill, executive director at Paramount Property Fund (Paraprop).

Kerswill said the downturn in the rental market led to property owners losing out because rental agreements were being rewritten at lower rates.

He said this could change with increased demand for property driving up prices and also soaking up the oversupply of property in the market.

Although Kerswill did not think the recent reduction in interest rates would have any significant effect on Paraprop, he thought it would ease the financing of its future acquisitions.

Paraprop said it would be going on an "aggressive property acquisition campaign".

Kerswill said the campaign would be focused on buying properties from developers rather than from listed entities.

These acquisitions would not be paid-for B-debentures, as they diluted the fund's earnings during periods of low income growth.

Paraprop MD Rodney SquireHowe said that the group was negotiating the acquisition of several properties. In its interim results for the half-year to April, Paraprop said revenue for the group rose from R39,9m to R54,3m, while trading income rose from R32,5m to R44m.

Paraprop declared a distribution of 12c for the second quarter, bringing its six-monthly distributions to 24c for the period.

While this distribution was lower than delivered in the same period last year, it is in line with that of the first quarter of this year.

Squire-Howe said conditions in the property letting market remained demanding, and income continued to be hurt by lower market rentals and two significant vacancies. However, he echoed Kerswill's optimism and said there was "light at the end of the tunnel" and that the group should be through the worst by the end of this financial year.

He said the quality of Paraprop's underlying portfolio was recently recognised by an international property rating agency, Investment Property Databank, which placed Paraprop third out of 17 portfolios.

Squire-Howe said this rating was testimony to Paraprop's solid portfolio and hands-on management team.

The group's vacancy rate is at 4,3%, which is one of the lowest in the listed property sector.

Jun 18 2003 07:20:56:000AM Larry Claasen Business Day 1st Edition