'Old stock hurting Pangbourne'

Posted On Friday, 01 September 2006 02:00 Published by
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Listed property loan stock company Pangbourne's below-average distribution growth of 7,3% could be indicative of its older property portfolio
 
By Nick Wilson

Listed property loan stock company Pangbourne's below-average distribution growth of 7,3% could be indicative of its older property portfolio.

Pangbourne, which yesterday reported a total distribution of 103c a unit for the year to June, is in the process of selling off some older obsolete property stock and replacing it with new developments.

Mariette Warner, head of property funds at Stanlib, said Pangbourne's distribution growth was below the listed property sector's average of "about 10%, if not higher".

"This is probably because its existing property portfolio is relatively old and the rejuvenating asset management actions it has taken has yet to be reflected in the earnings growth," Warner said.

Warner said that in older properties, there was lower rental growth because there was less demand for old premises as "they have an element of obsolescence".

She said older buildings also required higher maintenance expenditure.

But Warner said that she expected Pangbourne's relative distribution performance to "improve going forward".

Pangbourne also reported high occupancy levels of 96,5% in its portfolio.

Warner said the high occupancy levels were "confirmation of the still-buoyant property market, with extremely high building costs rendering replacement costs well in excess of existing valuations".

"This is an indication there is still scope for significant market rental growth across the board, particularly the industrial market," she said.

Pangbourne CEO Craig Hutchison said the company was using the demand in the market for property to move out of its "functionally obsolete buildings".

"We have already sold about R86m worth of buildings during the current year and we are looking to sell another R200m over the next 12 months," said Hutchison.

He said Pangbourne had also acquired new properties from a transaction with the Transnet Retirement Funds.

Pangbourne delivered a total annualised return to investors of 26,5%.

The company's property and investment portfolio had also increased from R2,9bn to R4,2bn.

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

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