Capital reports 6% rise in distributions

PROPERTY unit trust Capital Property Fund reported on Wednesday a 6.32% increase in total distributions to 69.78c per unit for the year ended December 31.

MD Barry Stuhler said that in the existing economic environment, which is characterised by low business confidence, "we’ve produced what we feel are very good results for the environment that we are in".

Capital said its industrial properties, which make up 74% of its gross lettable area, had performed well.

"Warehousing and distribution properties within the portfolio continue to perform well.

"Areas such as Linbro Park, Longmeadow and Raceway Industrial Park have experienced strong tenant demand. Interest in large A-grade warehouses remains firm, while demand for manufacturing space continues to decline, in line with the downward trend in this sector in South Africa," Capital said.

Capital owns a portfolio of 262 industrial, office, and retail properties, with its main focus on industrial and office properties.

The office market has been under pressure, with most property groups reporting high vacancy rates in the sector.

Mr Stuhler said Capital had changed its strategy last year as greater demand for properties had seen A-grade property prices increase rapidly. The company decided to enter the development arena, as building costs were relatively low, and it would focus mainly on developing A-grade industrial properties, he said.

Capital said, with the exception of a few nodes, including the Sandton central business district, "the office market remains characterised by high vacancy rates with resultant pressure on rentals".

To ensure its office properties were "attractive to the letting market", Capital said it had "expended considerable resources" on maintaining and refurbishing them.

In line with its goal of acquiring strategically located land for warehousing and distribution facilities, Capital acquired Clairwood Racecourse during the year under review.

The property, to be renamed Clairwood Logistics Park, was bought for R430m.

About 400,000m² of warehousing would be developed at a construction cost exceeding R2bn.

The company also entered into an agreement to purchase an 80% undivided share in two prime office sites in the Sandton central business district.

Further, Capital sold two large property portfolios, with government-associated tenants, which reduced its office exposure.

In keeping with other property groups, Capital said it expected the office market, in particular, to "remain challenging during 2013".

"The growth in the South African economy has been revised down to 2.6%, which will negatively affect the property market," Capital said.

However, the company said the quality of its portfolio "places it in a position to provide a solid performance".

The board forecast growth in distributions of between 4% and 7% per Capital unit for the 2013 financial year.

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