CAPE TOWN - Arrowhead Properties yesterday said that multiple, unexpected tenant failures, the result of shops closing due to the coronavirus keeping customers out was the major risk to results for the year ended September 2020.
“Fortunately, we have not experienced any major tenant failures in the financial year to date, significantly ameliorating this risk. We remain cautious and ready to act in the face of any unexpected events,” management said in a pre-close briefing yesterday.
The group said the operating environment remained difficult, but there had been no other material surprises in the first five months and the portfolio was performing in line with expectations.
It said it remained “cautiously optimistic” that the dividend for the financial year would be in line with guidance provided in September.
The group is disposing of its smaller properties (below R15million), and plans to remain only in properties with a high rental demand and which were capable of growth over the medium to long term.
It sold and transferred properties worth R827m (R551m in 2019 financial year, and R276m in the current financial year). Another R637m of property was in the transfer process.
Arrowhead said it planned to retain properties with high tenant demand and which were capable of growth over the medium to long term. “In the financial year we have disposed of non-core assets at a 1 percent premium to book value. There are, however, sales being negotiated that are at a discount to book value,” the group said.
By book value, the assets disposed of consist of 46 percent retail, 25percent office and 29percent industrial.
Most of the R827m received from sales over 12 months were used to reduce debt, while R84m was used for share repurchases. A further R70m was spent on capital expenditure and solar investments. It said its loan to value was expected to be around 41.5percent by the end of the interim period, compared with 40.5percent at the September 2019 year-end.
The increase was due to a devaluation in the listed investments in Dipula Income Fund, the share repurchase programme, capital expenditure and solar investments. “Intensive hands on asset and property management are making a positive contribution in ensuring our portfolio holds through these turbulent times. Additional resources employed over the last two years are adding tremendous value and helping the portfolio perform,” Arrowhead said.
Arrowhead shares rdeclined 12.77percent on the JSE yesterday to close at R2.05.