ACUCAP Properties yesterday attributed its strong increase in distributions for the year to March to good rental growth on renewal of leases in its retail portfolio.

The listed property loan stock company delivered a total distribution of 221,11c a unit for the year, compared with 189,92c the previous year.

Acucap MD Paul Theodosiou said that on average there was 20% growth in rentals on renewal in its retail portfolio.

While the retail property market has been dampened by a drop in retail sales on economic weakness, Acucap’s portfolio has been “defensive” in nature.

Theodosiou said the company’s retail rentals were on average “very low” at R81,50/m²

“It is a very defensive rental when retail sales slow down. This has enabled us to increase the rentals on renewal,” he said.

Even though rentals were increased 20%, they were still below market rentals, on average more than R110/m²

“Even if turnover drops, tenants won’t be squeezed by excessive rents,” he said.

Theodosiou said the cheaper rental base was a function of Acucap’s “young portfolio”.

“A lot of our centres are newer and typically one finds high rental levels in more mature, established centres.”

The company’s vacancy level was also low at less than 2%, and Theodosiou did not expect an increase in net vacancies in the current cycle.

About 67% of Acucap’s portfolio consisted of retail properties, and 31% of it was offices.

The company had a 2% exposure to industrial property, but would be increasing this through a development programme.

Theodosiou said Acucap’s development programme included two major industrial parks, one at Montague Gardens in Cape Town, and the other in Midrand, Gauteng.

The company’s property portfolio value had also increased dramatically from R2,8bn to R5bn during the period under review.

This was due to the acquisition of Atlas Properties, an 18,5% interest in Sycom Property Fund, as well as a property portfolio from Intaprop.

Theodosiou said Acucap still intended a merger with Sycom at a later stage.

However, because of extreme pricing volatility in the listed property sector this would not happen in the short term.

The company said that while there had been a fallout in listed property prices in general, the physical property fundamentals generally remained sound.

It said the office and industrial sectors had been “characterised by a shortage of supply and rapidly rising replacement costs, resulting in firm rentals and good rental growth prospects in these segments”.