Roy Cokayne
SA CORPORATE Real Estate, the listed property company, plans to divest from non-performing B grade and C grade buildings in its office portfolio.
Terence Mackey, the managing director, said yesterday that the office market remained challenging in the current economic climate, with commercial vacancies increasing to 12.7 percent in the year to December from 11.8 percent in the previous year.
He said stand-alone office vacancies fell by 0.65 percent while retail office vacancies, which were offices in or above retail centres, had increased by 5.4 percent.
SA Corporate has expanded its inner-city residential property portfolio despite vacancies increasing in this sector at the end of the year.
However, Mackey said it was a trend for inner-city residential vacancies to increase in December because tenants vacated flats over the vacation period.
SA Corporate in July acquired the Afhco Group for R249.36 million to enter the residential Johannesburg inner-city sector and diversify the fund’s portfolio.
Afhco had a portfolio of more than 5 000 residential apartments in 33 buildings valued at about R1.47 billion.
SA Corporate said Afhco’s residential vacancies had increased to 7.9 percent in December, but reduced to 4.9 percent last month. Afhco retail/commercial vacancies had declined to 1.8 percent from 3.1 percent when the portfolio was acquired in July.
Mackey said the consolidated profit for the year included R50.6m that was attributable to Afhco, while revenue for the year included R71.8m from Afhco.
He said group revenue would have been R1.48bn and the profit for the year R1.02bn, if Afhco had been part of the fund from January last year.
After SA Corporate’s year-end in December, the fund acquired Morulat Property Investment 4 for R122.65m.
Mackey said the acquisition was aligned to the strategic intent of SA Corporate to grow its inner city residential portfolio.
The Competition Tribunal in December unconditionally approved the merger between Afhco Holdings and Morulat, which owns five residential properties with retail space in the Johannesburg CBD.
Morulat was a subsidiary of Afhco prior to the original transaction with SA Corporate but was excluded from that transaction because the parties could not agree on the terms of a purchase and sale agreement.
Overall, vacancies in the fund’s total property portfolio as a percentage of gross lettable area declined to 6.1 percent in December from 6.3 percent in the previous year.
SA Corporate yesterday reported a 9.4 percent growth in distribution a unit to 18.02 cents in the six months to December to boost the increase in distributions for the full year to 35.70c, a 9 percent improvement on the 32.75c in the previous year.
Growth
Mackey said the growth in distributions was in line with guidance given during the fund’s interim announcement, adding that the R1.1bn business acquisition of Afhco Holdings and its subsidiaries and another R305.9m acquisition of investment properties had impacted positively on distribution growth.
Total net property income increased by 19.4 percent to R918.5m, which was attributed mainly to R1.7bn of acquisitions over the last two years.
Mackey said property expenses rose 11.9 percent due to net positive acquisitions, but expenses relating to the standing portfolio were marginally down by 0.4 percent.
He said the platform had been set for sustainable growth by SA Corporate and distribution growth in excess of inflation was expected.
SA Corporate shares remain unchanged to close at R5.10 yesterday.