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Fountainhead lifts half-year distribution growth 11%

10th April 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JSE-listed real estate investment trust (REIT) Fountainhead Property Trust on Thursday declared an interim distribution of 29c/unit for the six-month period to February 28, representing distribution growth of 11% from the first half of the prior fiscal year.

The group also upwardly revised its prospects for the full-year, anticipating distribution growth of between 7% and 8% from previous guidance of between 6.25% and 7.25%.

Fountainhead currently had a diversified portfolio of properties valued at R11.8-billion, comprising 64 properties of which 75% were well-established metropolitan shopping centres, 16% were offices, 6% were industrial and 3% were specialised properties.

Commenting on the performance, CEO Len van Niekerk said Fountainhead’s core portfolio delivered net property income growth of 7.3% during the review period, despite challenging market conditions.

“Positive rental reversions on lease renewals of 4.5% were achieved. While total vacancies increased from 7.1% to 9.1% during the period, vacancies in the retail portfolio remain stable at a low 3.8% and tenant retention remains robust, with 86% of leases expiring during the year being renewed,” he noted.

Van Niekerk added that office and industrial vacancies increased during the period as a result of a few larger tenants vacating, but these premises were already under negotiation to be relet.

Meanwhile, he said the group continued to make meaningful progress in improving the quality of the portfolio, thereby enhancing long-term sustainable income and capital growth prospects, with current approved capital projects amounting to over R1-billion with the potential to increase further as other projects, currently under consideration, came to fruition.

The majority of the approved projects kicked off from April and were expected to be completed in the latter half of 2015.

Major development projects currently under way included the extension of the Checkers store at the Bryanston Shopping Centre, in Johannesburg, by 2 000 m2 to 4 000 m2 and construction of two new parking decks with direct access to the centre, while the company continued to drive the improvement of the centre’s tenant mix.

Other developments included upgrading and expanding the Centurion Mall, in Gauteng, by 3 500 m2, the addition of 4 600 m 2 at the Cape Town-based Kenilworth Centre and improvements to the mall’s parking deck.

Boulders Shopping Centre in Midrand, meanwhile, would be increased by 7 200 m2, including a new 3 500 m2 food anchor.

The trust continued to investigate redevelopment proposals for Brightwater Commons, in Randburg, as well as the potential conversion of the AMR Office Park, in Bedfordview, into a college campus.

Agreements were concluded to dispose of Fountainhead’s minority interests in Johannesburg’s Westgate, Southgate and the Southgate Value Market for a total consideration of R944-million.

The proceeds from these disposals would be used to fund capital projects and acquisitions.

“We are focusing the activities of the trust on core assets that could enhance performance … and, to this end, Fountainhead intends disposing of the majority of its smaller properties during the course of this calendar year,” Van Niekerk added.

Growing its portfolio during the period, Fountainhead acquired and took transfer of the strategically located CIB office complex, in Bedfordview, for a total consideration of R159-million at an initial yield of 8.15% with a long, triple net lease in place.

It also entered a sale and leaseback agreement with steel manufacturer Robor to acquire the Robor Elandsfontein property for R570.7-million at an initial yield of 8.5% with an initial lease period of ten years escalating at 8% a year.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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