Property Reporter

ALLAN Gray Property Trust (Grayprop), the largest property unit trust with a market capitalisation of R2,9bn, declared relatively flat earnings for the year ended September 30 in line with the expectations of analysts.

Grayprop MD John Rainier said yesterday an important contributing factor was that all the capital received for selling properties with high yields, but poor income growth prospects, had been ploughed into the redevelopment, refurbishment and extension of the fund's shopping centres.

In the short term these projects were not income-producing .

However, the company is expected to benefit substantially from these projects in 2005.

The fund declared distributions for the year of 30,9c for each unit, marginally up on last year's 30,7c and in line with the forecast in its 2002 annual report.

The company also said that the budgeted distributable income for 2004 would be similar to that of 2003.

Headline earnings for each unit dropped slightly to 29,9c from 30,7c .

Mariette Warner, head of fund management and securitisation at Standard Bank Properties and manager of the Standard Bank Property Income Fund, said she had expected the results .

"The money they are ploughing into developments does not generate any income until completion. In the past they would capitalise interest on developments. Because the properties have been transferred from property companies to be held directly by the trust, they are no longer allowed to do this."

Warner said, however, that the refurbishments, redevelopments and extensions would generate very high returns

Rainier said that the company had invested heavily in its shopping malls.

"We're spending about R200m at the Centurion Shopping Centre ," he said.

Grayprop had also spent about R60m on repositioning the Randburg Waterfront as The Brightwater Commons.

Its distributable income was 15,9c for each unit for the final six months of the year, 1,3% up.

The fund reported that the key feature of the year had been the transfer of Grayprop's properties from fixed property companies to the trust, as allowed for by the Collective Investment Schemes Control Act of 2002.

The process was now almost complete, and while this had triggered minimal capital gains tax in the trust, Grayprop would be able to sell properties without the burden of this tax in future.

"The net asset value of the trust will therefore be protected in future and savings in expenses will be able to be passed on to unit holders," said Rainier.

Grayprop also announced it would be acquiring MIFA Industrial Park in Midrand from the Motor Industry Fund Administrators for R36m as well as the Boulders Shopping Centre for R140m.

Oct 31 2003 07:36:28:000AM Nick Wilson Business Day 1st Edition