Oversupply and Tenant debts hit Texton Property Fund

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Texton Property Fund CEO Marius Muller. Texton Property Fund CEO Marius Muller.

The current economic situation being experienced in South Africa is putting pressure on the commercial real estate industry, resulting in some tenants battling to meet contractual rental payments.

On the sidelines of Texton Property Fund's results for the six months ended in December, the company reduced its interim dividend, declaring 16,09c a share, which droped 55.5% from the previous period.

The Fund said arrears from Tenants have climbed by more than a third in an environment characterized by limited economic growth and oversupply of office space.

Its distributable earnings decreased 8.8% to R120.9m, with revenue from the UK falling after the disposal of assets.

Vacancies slightly decreased from 9.2% at 30 June 2019 to 9% at 31 December 2019.

The group’s UK property interests were under pressure from continued uncertainty over Brexit during its half-year, the group said, while in SA several speculative property developments came to market in Gauteng even as tenants looked for bargains.

During the period the group sold a noncore office building in Newcastle, known as Tesco Chobe,

Texton said arrears from clients rose 38.7% to R17.9m, though it noted that December was a slow period, and collections should pick up in its second half.

“Our operating environment will remain challenging for the foreseeable future, characterised by pressure on rental incomes and an increasing cost environment,” Texton said.

“Leases are taking longer to sign with tenants driving hard negotiations,” the group said.

In the UK, the victory of the Conservative Party in recent national elections should boost investor confidence, though uncertainty over the UK’s trade deal with the EU persists, the group said.

Texton, which was formed in 2006 and listed on the JSE in 2011, was known as Vunani Property Investment Fund until 2014.

The group has a property portfolio of R4.2bn, of which 60.9% is in SA, and the rest in the UK.


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