JSE-listed real estate investment trust Arrowhead Properties has advised that it remains on track with its disposal programme for the financial year ending September 30.

The company’s current disposal pipeline includes 42 noncore assets with a sales value of R913-million at an average 1% premium to book value.

Of this, R276-million, or 30%, has already transferred and the balance is expected to transfer during the second half of the financial year.

Arrowhead is expecting an increasing discount to book value going forward, given the difficulty being experienced in the sales market.

Arrowhead had sold R551-million worth of assets in the year ended September 30, 2019.

“The successful disposal programme aids in the repositioning of our portfolio and enhances the quality of our overall asset base. Some proceeds have been used for capital expenditure and solar investments to ensure that our assets remain relevant in the areas it operates in.

“A further 10% of the proceeds received have been used to buy back shares while the majority of the funds have been used to reduce debt,” says CEO Mark Kaplan.

With the further devaluation of the listed investments, the share buyback programme, capital expenditure and solar investments during the six-month period, the company expects its loan to value ratio to be around 41.5% at the end of this month.

Tenant retention is expected to be around 85%, a further testimony of the team’s effectiveness. Leasing results have been in line with the company’s expectations and forecast, while vacancies are set to remain stable around 8% when the company reports its interim results.

“The team works closely with tenants to understand their needs and our asset management initiatives have been very effective. Although our portfolio is well positioned, we are cognisant that the recent emergence of the Covid-19 virus globally will have an effect on our portfolio. We remain cautious and continue to monitor events closely,” Kaplan says.

He adds that the additional hands on deck that the company has employed over the past two years have helped its assets to perform optimally during uncertain times.