Retail-focused listed property loan stock company SA Retail Properties delivered disappointing results for the year to March, with only a 3% increase in distributions to 71,2c a linked unit.

Most retail-focused listed property companies have performed well so far this year, with some reporting double-digit growth in distributions. However, SA Retail said that costs incurred during rival company Hyprop Investment's hostile takeover bid last year had reduced growth.

SA Retail MD Peter Sparks said yesterday that if the costs of Hyprop's corporate action against SA Retail were excluded, the growth in distribution for the period would have been more than 8%.

Sparks said that SA Retail had incurred R3,3m in direct costs as a result of the Hyprop offer. These included fees for advice and announcements as well as legal and sponsor fees.

SA Retail said this had resulted in a 2% reduction in distribution growth.

The company said that before Hyprop's declaration last year of its intention to make an offer to SA Retail's linked unitholders, SA Retail had been in advanced negotiations to buy property worth more than R300m.

Sparks said that in terms of the Securities Regulation Panel's rules, it was not able to carry out transactional activity while the Hyprop offer was in play.

Because of the expected need for funding at this time and the demand for SA Retail linked units, R124m was raised in a capital raising exercise.

"Unfortunately, not only has SA Retail been unable to benefit from the higher property yield on these transactions but the cash raised has generated comparatively low returns. The dilutionary impact of these has been calculated at 3%," SA Retail said.

Catalyst Fund Managers said on Thursday the results were "disappointing" but expected as a result of the effect of the costs incurred by the Hyprop offer.

However, Catalyst said these issues were once-off events and that SA Retail's property portfolio appeared to have the potential to deliver distribution growth in line with the listed property sector average of 8%.

Angelique de Rauville, MD of Investec Listed Property Investments, said it was "disappointing that a company with a dominant retail portfolio" produced 3% earnings growth when its peers delivered far more and had capitalised on a strong economy and a low and stable interest rate environment.

"In the past year, they should have been able to capitalise on the strong consumer market with that dominant retail property portfolio," she said.

Business Day
 
Publisher: I-Net Bridge
Source: I-Net Bridge