JSE-listed Gemgrow Properties has declared a full-year dividend, exceeding its earlier forecasts, of 73.51c for each B share and 101.87c for each A share as the real estate investment trust (Reit) delivered its maiden full-year results with a reconstituted property portfolio.
The Reit, previously named Synergy Income Fund, ended the financial year to September 30 with a 20.65% loan-to-value ratio, a strong balance sheet, more than 90% hedged debt, vacancies of 7.71% and revenue of R666-million.
This followed a repositioning a year ago that resulted in the then-Synergy undertaking an asset exchange and an acquisition and subsequently emerging as Gemgrow, a “specialist high-yielding, high-growth diversified Reit” with a portfolio spanning retail, office and industrial assets.
In October 2016, Synergy acquired Vukile Asset Management from Vukile Property Fund; exchanged its entire portfolio of 14 retail properties for 29 of Vukile’s retail, office and industrial assets and acquired Arrowhead Properties subsidiary Cumulative, which boasted 100 properties.
Gemgrow’s portfolio is now valued at R4.5-billion, a significant rise on the R2.4-billion as at September 30, 2016.
This meant that a comparison of the financial results of the company for the first year following the transaction with the financial results of the company for the same period last year on a like-for-like basis cannot be made.
The company also completed R580-million in acquisitions – 90% of which are retail, 5% office and 5% industrial – at a weighted average yield of 11.85%, with the final transfers set to take place early in the new financial year, said Gemgrow COO Alon Kirkel.
The entire secured debt funding for the acquisitions is hedged at 9.74%, in line with Gemgrow’s efforts to mitigate exposure to fluctuations in interest rates in a volatile environment.
Some R525-million in loans had been refinanced at a forward hedged five-year rate of 9.39%.
Going forward, Gemgrow remained focused on its core portfolio, letting and cost containment, while streamlining efficiencies, applying new innovations and removing as much red tape as possible, said Kirkel.
“We are trying to do things differently,” he added.
Gemgrow forecast a 7% to 9% growth in dividends for its B shares and a lower 5% or consumer price index growth rate for its A shares during the 2018 financial year.
Arrowhead holds 61.7% of the issued B shares in Gemgrow, equating to 55.2% of Gemgrow’s total issued share capital, while Vukile holds 29.5% of the B shares, representing 27.4% of Gemgrow’s total issued share capital.