Roy Cokayne
PUTPROP, the separately listed former property investment company of delisted bus transport operator Putco, is investigating the future possible development of three of its properties with an unnamed listed property fund.
Bruno Carleo, the chief executive of Putprop, said yesterday that these properties were situated in urban areas where the possibility of developing value retail centres existed.
The company also disclosed yesterday that subsequent to its financial year to June, its board had approved the acquisition of a 51 percent holding in a company that was developing a 10 000m2 retail site in Secunda, Mpumalanga.
It did not identify the project or the company developing it but indicated Putprop had allocated an initial investment of R16 million to the project.
Putprop also acquired Bank City, a fully tenanted commercial property in Potchefstroom in the North West, for R16.5m subsequent to its financial year-end, which was the group’s first foray outside the Gauteng area.
Carleo said that the group had actively pursued potential acquisitions during the year to June in terms of its long-term objective of diversifying its property portfolio further into commercial and retail properties and also of reducing the risk of its dependence on its major tenant, Larimar.
During the year, a reduced rental stream arose from the new head lease that was negotiated and signed with Larimar.
Putprop’s portfolio comprises 15 properties situated largely in the Johannesburg and Pretoria metropolitan areas valued at R315.2m.
Carleo said the year again reflected a continuation of the volatile markets of the previous year, with stagnant economic growth in the developed economies and reduced growth in most emerging markets.
He said the local property sector’s operating environment remained challenging, with new market forces and variables evident in the trading year. Rising interest rates, bond market weakness with higher yields and downward pressure on the local currency had all played a part in reducing property yields.
However, Carleo said the performance of Putprop’s investment property portfolio was strong, with average annual property yields of 9 percent. But he said operating conditions remained difficult with rising vacancies, longer collection times and a deterioration of rental escalations on new leases and renewals.
“The local office sector remains under severe pressure with record high vacancy rates and low yields. Vacancies in prime areas of some key nodes have shown increases of over 200 percent.
“Putprop’s exposure is marginal at present in this sector,” he added.
Carleo added that the performance of industrial property continued to be strong, both for the sector and for Putprop.
He said there was some pressure on manufacturing but, due to the nature of Putprop’s current tenant base being largely logistical, there was little effect on the company.
Carleo said the group’s strategy was to enhance its property portfolio by investing in suitable industrial, retail and commercial properties to improve its income streams and to this end would continue to actively pursue the acquisition of additional investments.
Putprop reported unchanged headline earnings a share of 86.3c in the year to June compared with 86.8c in the previous year.
Earnings a share grew by almost 43 percent to R2.483, while gross property revenue rose by 7 percent to R40.1m.
Operating profit before capital items improved by 62 percent year on year to R54.5m. Property expenses declined by 17 percent to R1.7m. Group net profit rose by 43 percent to R71.5m.
The total dividend for the year was unchanged at 36c a share.
The shares were untraded at R7.35 on the JSE yesterday.