File picture: James White
File picture: James White

Negative rental reversions, rental failures impact almost 10% on corporate shares

By Edward West Time of article published Mar 12, 2020

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CAPE TOWN - SA Corporate Real Estate's distribution sunk 9.9percent to 38.04cents a share in the year to December 30, “substantially impacted” by negative rental reversions, increased vacancies and costs, and provisions for tenant failures. 

Total net property fell 5.6percent R1.35billion (2018: R1.43bn). Total like-for-like net property income declined by 1.5percent to R944.6million (R959.2m). The income distribution for the second half came to 17.66c per share (20.52c). Loan to value stood at 37.9percent, slightly up from 34.6percent in 2018.

Its property portfolio of industrial, retail and residential buildings comprises 193 properties valued at R17.4bn, and a 50percent joint venture in three Zambian properties valued at R930.6m. Total property revenue amounted to R2.28bn (R2.31bn), with the like-for-like portfolio amounting to R1.54bn (R1.52bn). In the traditional portfolio, tenant retention of 74percent was achieved at a weighted average negative reversion of 3percent and overall vacancies increased by 2.1percent.

Afhco portfolio residential rentals increased by 3.9percent (4percent) and Afhco retail rentals escalated by 8.5percent (8.9percent). A 10.4 percent increase in total property expenses to R919.2m was largely due to increased municipal expenses. The ratio of property expenses to revenue increased to 40.2percent from 36percent.

Retail like-for-like net property income (NPI) increased by 1.4percent due to increased administered costs, lease renewal rental reversions of negative 5.4percent, vacancies increasing to 4.4percent (4.1percent) and increased arrears. Industrial like-for-like NPI retracted 4percent due to negative reversions relating to historical long leases, and vacancies rising to 3.2percent from 0.6percent. Net asset value per share fell by 6.1percent to 477c from 508c.

Eight properties, four in the industrial sector, three in the commercial sector and one in the residential sector were sold for a profit to book value of R19.8m.

The company is divesting from non-logistics, poorer quality industrial properties and exiting the commercial sector.


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