Listed property loan stock company Vukile Property Fund this week reported a moderate 10% increase in distributions for the six months to September, relative to the property sector average.

The listed property sector, particularly those companies with retail-dominated portfolios, experienced a surge in distribution growth this year on the back of sound property fundamentals.

The average distribution growth of companies coming out with results from June 30 on a market capitalisation basis has been 13,8%.

Vukile attributed its double-digit growth to a strong portfolio performance and savings on net finance costs.

Speaking at a media and investor presentation on Monday, Vukile CEO Gerhard van Zyl described the results as "fair to good".

Van Zyl said the net profit available for distribution for the interim period was R98,9m, a 13,4% increase on the R87,2m available for the comparable period last year.

Vukile's subsidiary company, MICC Property Income Fund, contributed R26,7m to net profit before tax, debenture interest and fair value adjustment, and after adjusting for minority interests. This represented a slight improvement on the R25,8m contributed last year. Vukile owns 98,9% of MICC.

Vukile's net asset value a linked unit increased 12,7% to R7,10 from R6,30 a year ago.

The company said net income increased R11m or 9,4% and that while MICC's net rental income decreased R10,8m or 17%, this was offset by the additional 24% of MICC's income now being attributable to Vukile, and lower finance costs.

Over the past year Vukile's interest in MICC has increased from more than 75% to 98,9%.

MICC's net rental income decreased because a number of its properties had been sold off.

Vukile's vacancy levels remained relatively low at 3,8%, while MICC's vacancy level was sitting at 5%.

The combined portfolios of the two companies gave Vukile a 4,1% vacancy level.

But Vukile is set to benefit from a significant reduction in vacancy in MICC's portfolio.

Van Zyl said that 70% of the 5% vacancy factor in MICC's portfolio was contained in three buildings, which have since been sold.

These buildings are in the process of being transferred out of MICC.

Van Zyl said this should more than halve MICC's vacancies.

But Vukile's low liquidity levels still remain a challenge for the company.

From October last year to the end of September this year linked units worth R395m traded, equating to 15% of the company's market capitalisation.

But if the company's major unitholders such as Sanlam and its empowerment partners are excluded from the equation, close to 40% of the company's "free float" traded during the year.

High liquidity is one of the features that will make a listed property company attractive to institutional investors because it makes it easier to buy in or out of an investment.

Van Zyl said Vukile's board had also approved the company's acquisition of an 85% interest in an 11,300m? shopping centre to be developed in Groblersdal.

Van Zyl said the R62m investment should pay dividends because there was a large population in that area but not many retail facilities.

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