JSE-listed real estate investment trust (Reit) Arrowhead Properties recorded a 9.85% year-on-year rise in dividends to 82.55c for the financial year ended September 30.

COO Mark Kaplan told Engineering News Online in a telephone interview that the company had recorded “north of 13%” compound growth for its dividend shares since 2011.

“Our dividend share growth is materially higher than the sector over five years,” he stated, adding that the average year-on-year dividend growth for the sector in 2016 stood at about 6%.

“It is a very difficult environment at the moment and our portfolio is performing extremely well,” Kaplan said.

The company’s core portfolio expanded by 7.9% year-on-year with the effect of gearing.

Arrowhead currently owns 154 office, retail and industrial properties and 116 residential properties through its 60% stake in fellow JSE-listed Reit Indluplace.

The average value of Arrowhead’s properties is about R49-million.

Kaplan pointed out that the average value was expected to grow to about R107-million through a “reverse takeover” of fellow listed Reit Synergy Income Fund, which was approved by shareholders in October, subsequent to the 2016 financial year-end.

He explains that Arrowhead has sold 100 of its smallest properties into Synergy’s portfolio, providing Arrowhead a 55% stake of Synergy. “Arrowhead will only be left with 54 properties, but with an average asset [price] of R107-million.”

The transaction is currently being reviewed by the Competition Commission and Kaplan expects the deal to be approved by early December.

Revenue, inclusive of rental income and expenditure recoverable from tenants, increased from about R1.2-billion in 2015 to about R1.5-billion in the year under review. Kaplan attributed the revenue increase to escalating rentals and property acquisitions.

The vacancy rate for the portfolio stood at 7.8%. “It increased marginally over the year, but we are very pleased with the result,” he said, adding that this represents a positive upside for next year’s budget forecast, as the forecast does not include incomplete acquisitions or the letting of vacant spaces.

Meanwhile, Kaplan noted that the property market was “well poised” for consolidation and that Arrowhead was investigating strategic investments into other listed Reits in a move to position itself “at the forefront of consolidation in the sector”.

“We think that over the next 6 to 12 months there will certainly be more consolidation opportunities.”