Premium’s interim distributions up 45,8 cents or 13.1%

Posted On Monday, 27 October 2008 02:00 Published by eProp Commercial Property News
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Managing Director of Premium Properties Limited Jeffrey Wapnick, attributes the pleasing results to the growth of it’s Pretoria and Jo’burg CBD property portfolio and the upgrades and redevelopment of its properties, as well as the positive office and residential letting markets

Jeffrey WapnickDistribution growth was negatively impacted by the phased take-up of units at phase 1 of the mixed-use development in Hatfield as well as the cost of borrowings which exceeded the initial yield on the project. Premium anticipates that the first phase of the mixed-use Hatfield development, which comprises 677 residential units as well as 4 000m² of retail space, should be let by the end of the financial year and the benefit of this development will impact positively on Premium’s distribution growth in 2010 and beyond.

“The results continue “Premium’s impressive growth record,” says Wapnick. “The difficult trading environment which is impacted by a slowing economy and reduced consumer spending is expected to continue in the short to medium term, however the residential and office letting market is expected to remain buoyant. Provided market conditions do not deteriorate significantly, Premium expects to deliver further growth in distribution for the year ending 28 February 2009”.

As a result of the re-valuation of Premium’s property portfolio, the value increased by R97,0 million to R2,5 billion. This upward revaluation contributed to the increase in the net asset value per linked unit of 5.7% to 1097 cents.

The ongoing strong trading conditions in the residential and office sectors, and Premium’s pro-active approach to letting, resulted in rental increases, excluding acquisitions, of 10.9%. Premium’s rental income and net rental income increased by 24.2% and 20.2% respectively, in comparison to the previous interim period. However, increased assessment rates were a major factor in Premium’s increased operating cost margin, which grew to 38.5%.

Premium’s residential portfolio, which comprises 3 002 units, continued to deliver strong growth in rental income of 8.1%. “This is underpinned by low vacancies and good demand for affordable and secure accommodation,” says Wapnick. Keeping costs well under control and management’s ongoing programme of upgrades and redevelopment have also made a significant contribution to the increase in Premium’s distributable earnings per linked unit.

Based on the positive performance of its residential portfolio, Premium now has a committed residential development pipeline to build in excess of 370 units which includes a residential conversion in the Johannesburg CBD and a ‘greenfields’ project in Arcadia Pretoria. The total cost of these projects amounts to R150 million with a yield of approximately 10%.

Wapnick explains that Premium continues to focus on acquiring and redeveloping properties in the Pretoria and Johannesburg CBD’s and surrounding areas.

During the period, Premium invested R23 million on various projects and upgrades including Gilboa, Potsil and phase two of mixed-use development in Hatfield, which has commenced and includes a four level parking bay, A-grade offices and retail space as well as a hotel. The total cost of phase 2 of the mixed-use Hatfield development is R332 million with a total lettable area of 28 000m².

The vacancies of 22.2% of total lettable area, which includes vacancies on properties acquired where little or no consideration was paid for the vacant space offers excellent potential to extract value and grow distributable earnings.
Premium’s gearing at 31 August 2008 was slightly lower at 30% as against 31% at
29 February 2008. Interest rates in respect of 95% of borrowings have been fixed at an average interest rate of 11.4%.  The fixed rates contracts mature at various dates ranging from April 2009 to April 2018.

Interest income and dividends Premium received from associate company IPS increased to R7.5 million due to the strong performance of IPS’s portfolio as well as the advance of additional funds to IPS to fund IPS’s growth. IPS’s property portfolio is valued in an amount of in excess of R790 million in addition to its residential development pipeline of 977 residential units at an investment cost of R339 million. The majority of these units will be built at Kempton City in Kempton Park, Tayob Towers and Corporation Place in the Jo’burg CBD.


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