Vunani Property Fund records 19.7% distribution growth
Vunani Property Investment Fund CEO, Rob Kane, commented, “As anticipated at the start of the year, the streetscape remained challenging, requiring us to be innovative so as to maintain solid growth in rental income, contain costs and retain our tenants.
Vunani Property Investment Fund Limited (VPF) on Monday declared that it had increased its distribution by 19.7% to 77.25c per linked unit for the year ended June 30 2013.
The funded had growth in the market value of its units of 21.8%‚ to 1‚005c per linked unit.
The total compounded growth delivered to unitholders for the year was an excellent 41.5% (24.0% for the SA Property Listed Sector). Investment property income increased by 30.8% from R165.86 million to R216.88 million and total property expenses increased by 29.5% from R57.87 million to R74.948 million mainly due to a full 12 month reporting cycle and acquisitions made during the year.
The fund said the past financial year was the toughest trading conditions it had experienced in its eight-year history.
CEO of VPIF, Rob Kane, commented, “As anticipated at the start of the year, the streetscape remained challenging, requiring us to be innovative so as to maintain solid growth in rental income, contain costs and retain our tenants.
“That said, the portfolio has emerged from the year with an improvement in our Key Performance Indicators and I am pleased to report that VPIF has outperformed all property sectors by some margin despite these tough conditions.”
Vunani’s portfolio at year-end consisted of 28 properties with a total market value of R1.6 billion which is a R36.6 million positive revaluation on the prior year. The portfolio is well-represented in most of the South African provinces with 92.5% of the gross income derived from Gauteng, Western Cape and the Eastern Cape.
The Fund has remained consistent in its strategy to operate as an office dominated fund with 93.5% of the gross income being derived from the office sector. Of this, 79.9% of the portfolio is leased to blue chip tenants with an average weighted lease expiry of 4.75 years.
The company obtained linked unitholders’ approval subsequent to the year-end to raise up to R455m through a rights offer‚ the proceeds of which will be used to fund the acquisition of quality A-grade properties in Greenstone Hill Office Park and to pay down R179.1m of existing debt.
Vunani said the capital raised would enable it to acquire assets of R750m without recourse to unitholders.
The same strategy was used on listing.
Vunani said management had a solid pipeline of acquisitions under negotiation and had put in place adequate resources to effect the deals. It anticipated accelerated but controlled acquisition activity in 2014.
Vunani converted to a real estate investment trust (Reit)‚ effective from July 1 2013. The conversion provides capital gains tax benefits and is expected to attract foreign interest as it provides a familiar benchmark for international investors.
On a portfolio level‚ Vunani said the market remained tough despite continued low interest rates as the South African economy continued to stumble along with little direction.
Investor confidence has been shaken by domestic disruption‚ labour unrest and rand volatility. With the economic growth forecast falling and a weaker economic outlook‚ consumer spending has slowed‚ making tenants cautious when assessing their requirements.
The office sector has not been immune to the dull economic forecasts but Vunani said it was comfortable that the office sector was at the bottom of the cycle.
It said it had outperformed all property sectors by some margin.
The fund’s vacancy rate is a stable 5.6%‚ which compares well with the industry average of 10.7%.
Vunani expects vacancies could worsen in 2014 in nodes where speculative development will result in landlords competing for the same pool of tenants.
The fund expects further distribution growth for the upcoming financial year‚ at between 84c and 86c per linked unit.
The annual general meeting will be held in the boardroom at Vunani House‚ 151 Katherine Street‚ Sandton‚ at 11am on Friday‚ September 7 2013.
