Indluplace Properties rental units hold firm
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CAPE TOWN - DEMAND for Indluplace Properties’ affordable residential rental units, situated mainly in Gauteng, remained strong, and the group ended the financial year to September 22 with a solid balance sheet and steady cash generation.
The distribution for the past year was down 43.8 percent to R44.02 a share, following a lowering of the payout ratio to 75 percent from 100 percent and the impact of Covid-19 on the group. Contractual rental fell to R527.3 million compared with R546.5m the previous year, as residential vacancies rose to 11.3 percent at the end of September.
Assistance to tenants affected by the lockdown had been mainly through deferring rental payments. The amounts involved had been relatively small, however, and most of it had been recovered.
Chief executive Carel de Wit said it would likely take years for the economy to recover from the effects of the pandemic. Major rental reversions were unlikely, but he warned it would be difficult to achieve growth in rentals in the short term.
Financial director Terry Kaplan said in a telephone interview that vacancies were at a historically high level, but the company had the right team in place, and, with the continuing disposal of non-performing, smaller assets, they hoped to make a dent in the vacancies and the impact of tough competition in the new financial year.
Revenue fell 1.9 percent to R643.01m in the past year. Operating profit was 22 percent lower at R282.6m.
The company owns 9 668 residential units and 18 870m² of associated retail space, valued at R3.8 billion in total.
The company’s average monthly rental was about R4 500, and tenants at this end of the market were very sensitive to rent increases, Kaplan added.
At the end of the reporting period, the group’s secured financial liabilities were marginally lower at R1.44bn from R1.48bn, and it held available cash of R150m, resulting in a relatively conservative loan to value ratio of 35 percent.
De Wit said although tenant turnover increased to 5 percent from 3 percent last year, as tenants under financial pressure moved out, the group was encouraged by the good letting performance of the past few months at current rentals.
“This shows our rental offering represents good value for money and that we will be able to hold our own in attracting quality tenants, despite a very competitive market.”
He said operations were fine-tuned during the lockdown, which had resulted in greater efficiencies, more hands-on management, improvements to systems and a focus on service delivery and communication with customers. “We have had some of the biggest letting months in our history,” Kaplan said.
The capital expenditure programme would be expanded to ensure the units continue to offer value and properties would be disposed of that no longer fitted the strategy, a process that started in 2019last “Residential rentals are not immune to economic stresses, but the diversity in our portfolio and a hands-on management team have demonstrated their resilience,” said De Wit.
He said the focus for the year ahead would be value for money offering and service to tenants, and he anticipated that the company’s performance in 2021 would be at a similar level as in 2020. Twenty-two properties were being sold for about R80m.