Paraprop portfolio grows

Posted On Wednesday, 07 December 2005 02:00 Published by eProp Commercial Property News
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Paraprop lifts distributions as portfolio grows, costs dip

Mariette WarnerStrong growth from its property portfolio and lower financing costs contributed to listed property loan stock company Paramount Property Fund's (Paraprops) 6,9% increase in distributions to 54,5c for the year to October.

Paraprop MD Rodney Squire-Howe on Tuesday said the company was reorganising debt and establishing better financial structures to benefit from lower interest rates.

"We've also had a small element of property trading. We've sold buildings where we thought we could better deploy our resources," said Squire-Howe.

He said active asset management had also contributed to the positive results.

Mariette Warner, head of property funds at Stanlib Asset Management, said the results were in line with her expectations.

"I think going forward Paraprop will perform better than the (listed property) sector average because of value-adding asset management," said Warner.

She said Paraprop's original capital structure had hurt the company and had been "very dilutionary" for earnings.

But Warner said this profile had "almost run its course" and what was left had been "heavily diluted" by growth in the portfolio.

When Paraprop was launched in March 2001 it had a B-class debenture system in place. When management bought properties for the company, it paid 60% in cash, 20% in linked units and 20% in convertible B-class debentures.

Every year, a fifth of debentures were converted into linked units and, in the interim, the B-debentures carried no interest payments.

When management launched the fund it believed economic growth and growing income streams would offset any dilutionary consequences of the B-debenture system, but poor growth had led to significant dilution.

Catalyst Fund Managers MD Andre Stadler said the results were a positive surprise.

"We expected good growth from the next year and the year after but the growth has come through earlier than anticipated," said Stadler.

 

Last modified on Monday, 05 May 2014 12:06

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