Durban - The Martprop Property Fund increased its dividend for the year to July by 2 percent to 24c a unit, despite pressure on rental income caused by the expiry or review of 28 percent of its leases.

A total return in excess of the sector average boosted headline earnings for the R1.36 billion fund by 3 percent to 23.55c a unit and net profit, including capital movements, by 36 percent to 23.1c a unit.

Roger Perkin, the managing director, said at the weekend that while Martprop's sizeable industrial portfolio had counted against the fund in recent years, industrial rentals were picking up and driving the growth in rental income.

"While the 11.3 percent increase in net property income to R158.9 million was due largely to the acquisition of new properties, the existing portfolio also generated improved earnings in line with management's expectations," he said.

The portfolio was actively traded and 14 properties were acquired during the year for R163.3 million.

Undivided half shares in six community-based shopping centres, costing R70.7 million, had bolstered Martprop's retail exposure and brought further stability to property earnings, he said.

The seven prime industrial properties acquired for R81.6 million had all been let on long leases to major industrialists.  

Perkin said the most significant aspect of the acquisitions was that the rentals were all at, or below, current market levels and the properties were acquired at an average yield in excess of 13 percent.

"This augurs well for the next five or six years, as we can expect consistent rental growth from these leases against static or declining borrowing costs," he said.

The fund sold 14 properties, comprising two underperforming office blocks in Pretoria, 11 industrial properties and one piece of vacant land for R45 million.

The disposals are expected to have a positive effect on earnings in the short to medium term as the proceeds were reinvested into assets guaranteeing consistent rental growth.

"Agreements for the sale of another 20 properties, which no longer match Martprop's investment profile, have been concluded and will realise a further R98.9 million," Perkin said.

The sale of these assets is expected to reduce vacancies to below 4 percent.

The fund was confident that unit holders would continue to enjoy earnings growth during the current financial year.