The use of B debentures to grow the property portfolio of Paramount Property Fund has backfired, contributing to the reduction of the group's distribution this year.
As a result, the group has taken a decision to discontinue the issue of these B debentures. "We have now taken a decision that these B debentures will be phased out in future," says MD Rodney Squire-Howe.
Distribution for the first quarter ended January came at 12c which, according to the group, represented a significant drop from the comparable quarter of the previous financial year.
Squire-Howe said that the drop in distribution was due to tough property market conditions as well as Paramount's particular financial structure the issue of the B debentures.
"We are looking to significantly change our financial structure," said Squire-Howe.
He said the B-debentures had the effect of providing better financial returns in a positive environment with growing property income streams, but diluted returns if no or negative growth was experienced from the property portfolio.
He said rental income from properties was down, reflecting the current harsh market conditions.
Business Day
Publisher: Business Day
Source: Business Day
