Roy Cokayne
Initiatives by Vukile to contain recurring property expenses resulted in recurring costs to property revenue ratios, excluding electricity and municipal rates and taxes, declining to 18.4 percent in the year to March from 20.5 percent in the previous year.
The property loan stock company said yesterday that a large proportion of these increases were recovered from tenants but it had implemented several measures to alleviate these costs as they could ultimately affect the tenant’s ability to pay rentals.
The bulk of the year-on-year increases in recurring property expenses were due to excessive increases in electricity and municipal rates and taxes.
The company said it had reduced energy consumption by replacing older technology with energy-efficient technology and was embarking on various new initiatives to reduce energy consumption at its properties.
These initiatives included the installation of check meters at its properties, appointing energy consultants to perform energy audits and recommend actions to reduce consumption.
Energy-efficient equipment would be installed in all new developments and upgrades.
In addition, Vukile had appointed a specialist to value all the group’s properties where the municipal valuations appeared to be higher than the market value and to lodge the appropriate objections and appeals.
An appropriate percentage of such savings were refunded to the tenants.
Vukile yesterday reported a 6.4 percent increase in profit available for distribution in the year to March to R439 million.
The company declared and paid an early distribution last month of 70.5c a unit for the six months to March, increasing the growth in distribution for the full year by 6 percent to R1.25 a unit.
The early distribution was done to avoid any dilution resulting from the issue of linked units required to partially fund the R1.5 billion acquisition of a portfolio of 20 properties from Sanlam, which was concluded last month.
Laurence Rapp, Vukile’s chief executive, said the company’s property portfolio performed well in a difficult trading environment in which the industry faced higher vacancies, escalating costs and an uncertain economic outlook.
Vukile’s vacancies as a percentage of gross rentals increased to almost 7 percent from 5 percent in the previous year but would decrease to 6 percent if “development” vacancies were excluded, he said.
The development vacancies are at Randburg Square where phase one of the R80m revamp of the centre is almost complete and phase two is in the final planning stage, with vacancies not filled pending this major revamp.
Group corporate administrative expenditure of R26m was similar to the previous year.
New leases and renewals of 202 129m2 with a contract value of R580m were concluded during the year and 74 percent of leases that expired during the year were renewed or were in the process of renewal, compared with 82 percent in the previous year.
Rapp said the reduction in renewals was mostly due to government leases that were still in the process of being renewed at year-end and a number of lease renewals that were held back pending the large refurbishment at Randburg Square.
The group’s property portfolio comprises 72 properties with gross lettable area of 922 221m2.
Rapp expected trading conditions to continue to be challenging in the year ahead, but said the group’s retail centres would continue to perform well. He was confident that the group would once again deliver reasonable growth in distributions.
Vukile’s share prices added 1.9 percent on the JSE yesterday to end trade at R16.09.
This gave the property group a market capitalisation of R6.6bn.