Focus on growth at Synergy delivers favourable financial results
Synergy Income Fund CEO William Brooks said bulking up its property base with yield-enhancing acquisitions had contributed to the solid performance in the year ended on June 2013.
Listed property loan stock company Synergy Income Fund, which internalized property management operations last year, on Monday posted a very positive performance in the financial year ended on June 2013.
The specialised retail property fund with a specific focus on medium-sized community and small regional shopping centres in high-growth nodes, announced full-year distributions of 82.66 cents per Synergy A linked unit, up 5.0% in line with forecasts, while distributions to Synergy B linked unitholders of 51.38 cents per unit grew a remarkable 78.0%.
Synergy Income Fund CEO William Brooks says: “We’re pleased to report these results for our first full year of operation as a listed company. We have met our targets and delivered the distribution growth we promised our investors.”
Brooks attributes the strong growth in distributions to the positive effect of Synergy’s acquisitions in the prior financial year, with 12 of Synergy’s 14 property assets on its balance sheet for the full financial year.
“Our acquisition of Gugulethu Square and Setsing Crescent shopping centres, which transferred to Synergy in late August 2012, also contributed strongly to Synergy’s favourable annual results,” notes Brooks.
In line with this, Synergy’s investment property portfolio increased by 60.0% during the year. Its property assets totalled R1,9 billion at year end. Its revenue also grew by R192 million, to R240 million.
Synergy began trading as a REIT on the JSE from 1 July 2013. Synergy’s investment favours commuter-oriented centres located in township areas and rural towns.
During the year, Synergy successfully completed a unit placement of R376 million in equity. Its market capitalisation doubled to R1,3 billion on 30 June 2013. It also reported a conservative loan-to-value ratio of 30.4% with interest rates hedged on 73% of its total borrowings at a weighted average rate of 9.11% and a total weighted average cost of borrowings of 8.7%.
The company reduced vacancies by 28%, from 4.6% to 3.3%. It also improved its national tenant ratio by 6.0% from 81.0% to 86.0%, meeting its target of 85.0% or higher. Synergy’s leasing achieved rental reversions of 6.9% and a tenant retention ratio of 88% during the year.
Brooks notes that operating conditions are likely to remain challenging for retailers, who continue to face pressure from increasing occupation costs, especially electricity and rates and taxes.
It’s R334 million acquisition of Atlantis City Shopping Centre, which has a market value of R353,8 million, comes into effect from 1 September 2013 and will boost its property portfolio to 15 assets across South Africa with a combined value of R2,231 billion.
The company forecasts growth in B linked units of between 12.0% and 16.0% for its 2014 financial year, with A linked unit distributions growing at the 5% preferential entitlement.
