2004 Constructive year for Paraprop

Posted On Tuesday, 08 February 2005 02:00 Published by eProp Commercial Property News
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The past year has seen business confidence levels in the property industry at an all-time high, fuelled by low interest rates, a relatively strong Rand and a general acceptance that inflation is under control. All of this has been good for the property industry, which has seen occupancy levels improve, rentals firm and a strong appetite for property investment.

Property-Housing-ResidentialManaging Director of the Paramount Property Fund (Paraprop), Rodney Squire-Howe, comments in the company's latest annual report that Paraprop will clearly benefit from these improved circumstances as leases come up for renewal.

"We are confident that our significant new acquisitions during the past year will bring excellent value to unit holders in the future. We have also made strong progress in the restructuring of our balance sheet by reducing the level of our borrowings and significantly marginalising the future impact of our remaining convertible B-debentures. At the same time we’ve achieved modest growth in distributions."

Paraprop's property portfolio performed well in 2004 relative to other listed fund portfolios, winning the Financial Mail/IPD Award for the "Top Listed Fund in the IPD Databank over 2 years, Market Sector: Offices".

IPD (Investment Property Databank) analyses nearly all the major institutional and listed fund portfolios in South Africa and provides objective indices of property performance. Squire-Howe says the award reflects well on the quality of Paraprop's assets and management.

A sluggish rental market resulted in total rental income showing little growth; the trend however is promising, and the negative growth of the past two years was reversed. The portfolio's solid performance was a combination of tight management, with vacancies kept below 4% throughout the year, and improving conditions in the economy and property market.

In line with the Fund's active asset management approach, three properties with a total value of R34-million were sold, two of which were only transferred subsequent to the year-end. Several significant development projects were initiated, which will be completed over the next two financial years. Profits from trading and development activities will serve to stabilise distributions over the next couple of years.

Over the year there was a focus on growing the company's market capitalisation, resulting in the issue of 40,5-million linked units to fund new acquisitions, bringing the market cap to over R480-million by the end of November 2004. Several high profile properties with a total value of R291-million, were acquired, including the landmark Claremont Pick 'n Pay Centre and the Golden Acre retail component.

The Fund's debt ratio was reduced to 55,2% from the previous 64%, and the cost of debt was reduced through active management of borrowings and the renegotiation of some interest rate fixes.

The Board of Directors was restructured and the number of directors reduced to 11 from the previous 15 members. The Board has a good balance of property and financial skills, and plays an active role in the affairs of the company.

Squire-Howe deems 2004 to have been a constructive year for the Fund, which saw the stabilisation of income from the properties, improvements in financial structure, growth in the portfolio through strategic acquisitions, and modest growth in distributions. "This provides the fund with a firm foundation as it moves into the future," he concluded.

 

Last modified on Tuesday, 13 May 2014 14:18

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