Indluplace CEO Carel de Wit
JSE-listed real estate investment trust Indluplace says its occupancy rate going into the lockdown was at its best levels for years, with vacancies having improved to 5.5% in the six months ended March 31, compared with a vacancy rate of 8.5% in the six months ended March 31, 2019.
However, Covid-19 and the lockdown measures implemented to curb its spread have now put a strain on the company’s residential tenants. Indluplace has responded by offering payment holidays to those that can prove their financial circumstances were suffering as a result of the pandemic.
Indluplace is also prioritising payment to its local, small business contractors such as electricians, cleaning companies and security companies that provide services to its buildings.
The company has a portfolio of 9 668 residential units and 18 834 m2 of associated retail space, valued at just over R4-billion.
CEO Carel de Wit and FD Terry Kaplan tell Engineering News that the quantitative impacts of Covid-19 cannot be reliably determined yet, but the company’s rental collections were around 85% for April and about 70% for May.
They say it is likely that property values and revenues will decline in the short term, owing to the expected economic downturn as a result of the restrictive measures imposed, rental concessions granted to tenants and increased provision for bad debts.
Although the company generated a distributable income of 34.17c a share for the six months under review, compared with distributable income a share of 37.49c apiece in the prior comparable six months, Indluplace withdrew its guidance and postponed its interim dividend payment.
The company’s balance sheet remains resilient and loan-to-value (LTV) is at a relatively conservative level of 34.7% with total debt amounting to R1.5-billion at a weighted average cost of debt of 8.99%.
With 67% of drawn down debt hedged, Kaplan is comfortable that the company is well positioned to weather the storm, with available cash facilities of R93-million and an interest cover ratio of 2.5.
De Wit emphasises the importance of a strong balance sheet and an LTV as low as possible for a property company to weather uncertain economic times.
Indluplace's operating profit decreased by 1.3% year-on-year to R167-million.
Earnings a share were R1.20 in the reporting six months, compared with earnings a share of R35.25 in the prior comparable six months.
De Wit says Indluplace's earnings have been negatively affected by the fair value adjustments in relation to investment property of R35.2-million, derivatives of R19.4-million and loans to the participants of the Indluplace share purchase and option scheme of R42.6-million.