Vunani delivers value for investors

27 Feb 2013

Johannesburg Stock Exchange (JSE) listed property company Vunani Property Investment Fund (VPIF) reported an increase in cash distributions up to 24.4 percent to 38 cents per linked unit declared and a 16.4 percent increase in linked unit price to 960 cents for the six months ended 31 December 2012.

Johannesburg Stock Exchange (JSE) listed property company Vunani Property Investment Fund (VPIF) reported an increase in cash distributions up to 24.4 percent to 38 cents per linked unit declared and a 16.4 percent increase in linked unit price to 960 cents for the six months ended 31 December 2012.

The fund’s total return for the six month was 21 percent while revenue increased by 53.7 percent to R106.9 million.

Net property income increased by 74.6 percent to R75.0 million year-on-year 6.6 percent portfolio growth to R1.5 billion.

VPIF is the only JSE listed property fund to offer investors significant exposure to commercial offices.

The portfolio comprises 28 strategically located, high quality buildings with a gross lettable area (GLA) of 145 202 square metres independently valued at R1.5 billion.

No fair value adjustments on the properties were made during the reporting period and the portfolio is 80 percent occupied by blue chip tenants at weighted average lease escalation of 7.2 percent.

Rob Kane, chief executive officer of VPIF says despite the toughest market conditions experienced in the Fund’s seven year history, VPIF maintained its excellent rating in all of its key performance indicators.

“Our strategy has remained largely unchanged from inception in 2006, and we will continue to extract value from our chosen market of A+, A and some B-grade offices, while avoiding trophy assets.

“The value of a focused, experienced management team in unlocking value for unitholders is reflected in our performance and we are particularly pleased with our tenant retention of 95 percent,” says Kane.

He explains that refurbishment of existing stock continues to enhance earnings and the fund took transfer of two yield-enhancing properties during the review period.

The portfolio comprises 28 strategically located, high quality buildings with a gross lettable area (GLA) of 145 202 square metres independently valued at R1.5 billion.

Brickfield Property in Salt River with 5 251 square metres of GLA was acquired for R20 million with an acquisition yield of 10.0 percent.

Kane says the lease runs for 10 years and is triple net.

In Gauteng, VPIF bought the Business Centre property in Rivonia Boulevard, Sandton with an acquisition yield of 9.6 percent.

The 4 886 square metre GLA property is single tenanted under a 10 year triple net lease.

According to Kane, the fund remains well capitalised to take advantage of yield enhancing acquisitions and at the reporting date, VPIF had a loan to value of 35.0 percent (30 June 2012: 31.4 percent).

He says the blended average cost of debt is 8.7 percent with 67 percent of outstanding debt hedged through the use of interest rate swaps while the total arrears decreased from R5.6 million at 30 June 2012 to R3.7 million for the period, as a result of cautious management.

The portfolio has stable occupation level of 94.2 percent as a result of its tenant focus consisting predominantly of national government departments, listed and blue chip entities.

Kane points out that 0.2 percent of vacancies are in the retail portfolio (30 June 2012: 0.1 percent) with 5.6 percent in the office portfolio (30 June 2012: 5.7 percent), which includes a vacancy that was acquired, but not paid for at the Foretrust building.

If the Foretrust vacancy is excluded, the portfolio vacancy is 3.5 percent.

VPIF’s refurbishment according to green principles was further recognised with the award of the prestigious Eskom Energy Efficiency Forum Award 2012, for 14 Loop Street, a heritage building.

“We expect market conditions to remain difficult for the remainder of 2013 and our focus is to continue growing the Fund with yield enhancing assets without compromising on quality,” he adds. – Denise Mhlanga

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