After listing on the JSE in December, newly established real estate investment trust (REIT) Accelerate Property Fund on Monday posted a better-than-expected aftertax profit attributable to equity holders of R552.81-million for the year ended March 31, 2014, which incorporated a trading period of three months and 20 days.

The distribution a share for the three-month-and-20-day period of 13.77c was marginally higher than the forecast 13.72c a share.

The Tito Mboweni-chaired group generated R3.1-billion through the issue and listing of 638-million shares, which, together with long-term debt financing of R2.4-billion, allowed it to purchase properties worth R5.4-billion. 

Accelerate reported in a preliminary results statement on Monday that its projected annualised yield of 9.71% was above the overall property sector yield and was the result of it maintaining its local blue-chip tenants.

While the REIT said it had also been approached by international retail brands, which was “encouraging” for revenue streams, there were no material changes to the company's property and tenant profiles owing to the short trading period.

Income and expenses were “well managed” and this, combined with the effect of fixing debt interest rates, had a positive effect on profitability.

Accelerate earned gross rental income of R205-million for the trading period, comprising net rentals of R160.7-million and R44.2-million of operating expense recoveries.

The company's major expenses – utility charges, at R49.8-million; security, at R6.4-million; and cleaning costs, at R2.7-million – were largely recovered in terms of its leases.

The company spent R2.8-million on repairs and maintenance at its properties.

“The net property expenses of R21.5-million, or 13.4% of revenue before recoveries, in conjunction with other operating costs of R8.7-million, or 5.4% of income, resulted in Accelerate reporting an 18.8% cost-to-income ratio,” the fund stated.

The company's operating activities resulted in cash inflows of R113.6-million, which were used to pay net finance costs of R51.5-million. 

OPERATING ENVIRONMENT
Elaborating on the environment in which it operated, Accelerate said the interest rate hike earlier this year had increased pressure on consumers to service debt and had depressed consumer spending, subsequently putting the retail sector under pressure.

In addition, the listed property sector had seen a wave of new listings since 2011, which the fund attributed to the demand for higher-yielding investments in a low interest rate environment, the introduction of REITs, unlisted portfolios attempting to benefit from cheaper listed equity capital for expansion and access to growing debt capital markets.

“However, the sector has recently undergone a fair amount of consolidation. The listed property sector continues to offer investors a stable cash flow and consistent capital returns,” it noted.