Nick Wilson

Property Editor

RENTAL growth from its core property portfolio as well as proceeds from the sale of a residential property helped boost ApexHi Properties’ combined unit distributions by 18% to 337c for the year to June.

The listed property loan stock company, which has three unit structures that offer different returns and risk profiles, reported that its revenue growth had been driven by solid growth in rentals of 19% when leases came up for renewal.

CEO Gerald Leissner said the 18% increase in distributions included a once-off item, which was the proceeds of the sale of residential units in The Berea Centre in Durban.

Another non-property income item included in the distributions was a guarantee fee paid to ApexHi by Clearwater for a black economic empowerment transaction that ApexHi concluded with it last year.

Leissner said this could be considered a recurring income item because it was taken into account on a quarterly basis until 2011.

Nevertheless, the core property portfolio still generated double-digit growth. The company’s core income grew from R2,72 per unit to R3,27, which represented a 20% increase.

“It’s mainly due to rental growth and our costs only grew at 8%, as opposed to rental growth of 14%,” said Leissner.

The company has managed to keep its borrowings low at only 15% of total assets. Total borrowings are R1,4bn.

In general, the listed property sector has kept borrowings low. Leissner said there had not been many acquisitions in the sector using borrowings.

ApexHi reported its vacancy factor was 7%. Although this was a slight increase on the 6% in the same period last year, Leissner said this related to vacancies the company created in centres where it was undertaking upgrades.

In centres where refurbishments were taking place, ApexHi had to move tenants out while these were under way. “When the refurbishments are complete, that space will be relet and the vacancy factor will come down again to about 6%,” said Leissner.

As far as the company’s prospects were concerned, ApexHi said it expected rental income to grow 11% in the next financial year.

Evan Jankelowitz, co-head of Stanlib Property Franchise, said ApexHi did “exactly what was in line with their strategy”.

“They counted on the opportunities the market presented to them. They did superbly well in the circumstances. However, we must understand what we are dealing with going forward. Their forecasts are somewhat softer than previously stated, which is understandable in light of the weaker rental market, weaker consumer market and their current portfolio,” said Jankelowitz.

He said he was “very happy” to see how ApexHi managed to scale down on once-off revenue streams and supplement them with stronger “core earnings”.

“But they are still coming off a high base considering the non-repeatable earnings.”

Source: Business Day