Tougher business conditions have a positive side for property loan stock distributions.
Despite adverse market conditions, property fundamentals should remain fairly strong and unitholders can expect reasonable growth in distributions for the year to March 2009 says property loan stock company Vukile in its 2008 annual report published today.
Chairman Anton Botha says while tougher business conditions will no doubt have a negative effect on the demand for space, these same conditions will also limit the supply of space and should therefore continue to put upward pressure on rentals.
Vukile posted robust results for the year to March 2008, increasing distributions by more than 15% on the back of a strong property performance and the contribution of additional properties acquired during the year as well as expansions and upgrades to existing ones. During the year, the company also experienced its lowest vacancy rate ever of 2,4%.
The report notes that the year was also marked by the successful dual-listing in Namibia which helped to spread the risk of the company's portfolio while potentially increasing the liquidity of its linked units; the rise in the value of its property portfolio to more than R4bn and acquisitions and developments which amounted to some R256m. The company also achieved a projected saving of R2,3m a year through a tender exercise completed during the course of the year and expects to generate additional income of R6m a year from billboard and signage contracts.
Botha says the company had followed a cautious investment approach and did not acquire any properties with unacceptably low yields when the market was in upswing. Instead, a lot of emphasis was placed on growing its portfolio organically by expanding or upgrading existing properties.
During the year, Vukile reduced its gearing ratio by 2% to 27,9% from 29,9% the year before. It also has unutilised bank facilities of R400m. Botha says the company is therefore well positioned to take advantage of any acquisition, redevelopment or expansion opportunities that meet Vukile's risk/reward criteria.
"These prudent and timely measures have equipped the company well to cope during these trying times and the board is of the opinion that Vukile should be able to deliver reasonable growth in distributions for the year to March 2009," he says.
