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Premium properties reports a robust 16.6% increase in distributions

Posted On Tuesday, 22 April 2008 02:00 Published by eProp Commercial Property News
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JSE-listed property loan stock Premium Properties Limited has reported a total distribution for the year to investors of 84,5 cents per linked unit, some 16.6% higher than that paid for its previous financial year.

Jeffrey WapnickThe company declared a final distribution of 44 cents per linked unit for its second interim period.

Premium’s results for the 12 months, ended 29 February 2008, pinned its assets in excess of R2,5 billion. The company’s investment property portfolio, taking into account prevailing market rentals, occupation levels and capitalisation rates, increased in value by R223 million. This contributed to an increase in its net asset value of 23%, to 1265 cents.

Premium Properties Limited managing director Jeffrey Wapnick attributes the company’s continuing record of impressive growth to its focused strategic objective of acquiring and redeveloping properties in the Pretoria and Johannesburg CBD and surrounding areas. “Premium has benefited from strong trading conditions in these areas driven by high demand predominantly coming from the emerging black middle class,” says Wapnick.

Wapnick reports that continuing healthy trading conditions resulted in rental increases before acquisitions of 15%. He notes that the office component of Premium’s property portfolio profited from the slowing of delivery of new office space and increasing demand for properties at affordable rentals.

Wapnick said that the residential portfolio performed extremely well and noted that there were no vacancies in the portfolio.  He reported that the residential portfolio makes up 30% of the total portfolio.

Accordingly, the company’s rental income and net rental income increased by 31.8% and 29.0% respectively, compared with the previous 12-month period.

However, Wapnick cautions that there was evidence of an increase in bad debts during the period. “In order to minimize the impact of this trend, management continues to focus on the policies and procedures relating to the placement of tenants and the collection of rent,” notes Wapnick.

During the year Premium acquired eight properties in the Pretoria and Johannesburg CBD’s for a total of R104 million at an average yield of 10%. Significant benefit has already been derived from the acquisitions as a result of strong letting. These properties include ABSA Pretorius Street, a property in Loveday Street, Northvaal, Provisus, Pavillion, Gilboa, Armadale, MBA building.

The first phase of Premium’s landmark R311 million mixed-use Hatfield development which is situated in Burnett Street, was completed and the letting is progressing well. This initial phase creates 677 residential units, as well as 4,000m2 of retail space and, once fully let, the anticipated yield is approximately 10%. It is expected to be fully let by 28 February 2009. The second phase has already commenced and includes a four-level parking bay, with discussions already underway with a hotel group.

“The phased take-up of the units, which is expected for a project of this nature, as well as the cost of borrowings which are higher than the yield on the project, will adversely affect Premium’s distribution growth to 28 February 2009. The yield is expected to increase in subsequent years and therefore the benefit of this development will impact positively on distribution growth in 2010 and beyond,” says Wapnick.

He notes that the remaining portfolio is expected to perform well as a result of the benefits of the ongoing refurbishment of properties and strong tenant demand for CBD space and the take up of vacant offices.

Ensuring the ongoing quality of the properties within its portfolio, Premium invested an amount of R5,6 million on the upgrade of its buildings Amanda, Govpret and Silway, and reports that the letting of these properties is progressing well.

Premium’s R20 million residential project Brisk Place, situated in the Johannesburg CBD, was completed during the financial year and is fully let, with the yields achieved in excess of expectations.

During the period 16,499,403 new linked units were issued at an average price of 1,388 cents, which includes a notional distribution pre-payment of R3,5 million. Some of the proceeds of R229 million were utilised to fund The Hatfield development, refurbishments of properties and acquisitions.

Premium’s gearing at the end of the financial year was a conservative 33%. Interest rates in respect of 58% of borrowings at 29 February 2008 have been fixed at an average interest rate of 10.6%, maturing at various dates ranging from May 2009 to September 2010.

“It is the policy of the company to hedge the majority of its exposure to interest rate fluctuations thereby ensuring the sustainability of future growth in distributions,” explains Wapnick.

Due to the strong performance of the associate company IPS, as well as the advance of additional funds to fund IPS’s growth, interest income and dividends received increased to R10,1 million. IPS’s property portfolio is valued in excess of R650 million.

Last modified on Monday, 21 April 2014 20:19

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