Metboard's distribution for each linked unit increased to 18,5c from 18c in the previous period, with joint-fund managers Estienne de Klerk and Jeffrey Sher attributing the improvement to the fund being able to retain many tenants and sign new leases at better than expected rentals. The group released its results late on Wednesday.

When announcing its results for the year ended March 31, Metboard highlighted the restrictive nature of "reversionary" pressures on rental levels when renewing leases and had expected distributions to be flat for the year ended March next year.

Catalyst Securities MD Andre Stadler said yesterday that in some cases in the industrial property market a tenant signed a 10-year lease with an annual rental increase of 10%- 12%.

But Stadler said the industrial property market had been weak until fairly recently and market rentals had not increased at that rate.

He said when leases expired the property owner was forced to bring the rentals back to market levels. Stadler said the strengthening industrial property market and a shortage of space had reduced the gap between the market rentals and the rent the tenant was paying at the expiry of the lease.

Metboard also reduced its vacancies from 5,2% to 3,6% across its 175 properties.

Stadler said this reduction was a feature of the improving industrial property market where space was being taken up by tenants.

Stadler said he thought 2007 would be the more important period for Metboard because the effect of the reversions on rentals should be less severe as the industrial property market continued to strengthen .

Metboard's revenue also increased 18,9% to R107,2m in the six months to September this year, while net operating income increased 17,7% to R82,7m .

De Klerk and Sher attributed these increases mainly to the acquisition of 16 new properties for a total of R144,3m during the period. Metboard also sold underperforming properties during the period.

"These acquisitions and disposals are yieldenhancing and should have a positive impact on the future distributions of the company," De Klerk and Sher said.