Loyiso Sibali

Property Editor

LISTED property loan stock company Vukile Property Fund expects the financial market turmoil that has gripped the world to affect rental income growth negatively next year.

But the company reported a relatively strong 9,6% increase in distribution income for the six months to September.

Distributions grew from R118,9m in the previous interim period to R130,3m this year, or 44,10c per linked unit.

Net rental income grew 7,2% from R295,14m to R321,42m for the interim period.

The value of the group’s investment properties fell from R4,2bn last year to R4,02bn this year.

CEO Gerhard van Zyl said yesterday he expected a tougher trading environment in future.

Van Zyl said although there were signs that inflation had reached a turning point and that interest rates might start coming down during the first half of the new year, there was still a time lag of 12-18 months before this would filter through to the property market.

He said economic growth would slow, inevitably affecting ren tal income.

He was upbeat about vacancy levels though, saying they were at historic lows and only a limited amount of new stock was coming into the market.

“This should ensure that there will be a continuing demand for space, which in turn will support rental levels.”

Vacancies increased slightly, from 2,8% to 2,9%.

Van Zyl said the vacancies were mainly due to limited demand for office space in Midrand.

During the period Vukile did not make new acquisitions but it did spend R47,3m expanding properties and R44m upgrading Dobsonville Shopping Centre and Durban Phoenix Plaza.

The company has 74 properties in its portfolio, with a gross lettable area of 911907m²

The total contract value for new leases and renewals during the six months was R251m over a total area of 115 579m²

Since the beginning of last month, leases and renewals with a total area of 7640m² and a value of R24,5m were concluded.

Rental growth in industrial properties was 21,2%, while rentals grew 8,2% in the retail property sector.

There was growth of 9% in commercial properties.

Keillen Ndlovu, co head of Stanlib’s property franchise, said “the results were slightly ahead of our expectations”.

“It is interesting to note that Vukile’s vacancy rate and letting activity is holding up well in a slowing market,” said Ndlovu.

Kundayi Munzara, head of research at Investec Property, said vacancy levels were positive and that he expected distribution growth in the 9%-9,5% region over the next 12 months.

He said this was largely because he expect gross retail turnovers (comprising rental income, turnover rentals and parking income among others) to fall to single digit or flat growth as the consumer took more strain.

Vukile stock rose 20c, or 2,27%, on the JSE in the late afternoon yesterday to 900c.

Source: Business Day