227 cents threshold exceeded, A units share in growth in distributions

ApexHi Properties Limited will distribute 66 cents per combined unit for the fourth quarter, delivering a total distributable income of R557-million, or 244 cents per combined unit, for the year ended 30 June 2006. This represents a 10% increase in combined distributions compared to the 2005 financial year.

ApexHi CEO Gerald Leissner says the 227 cents threshold was exceeded for the first time this year and A unit holders started participating in the growth from the first quarter of the 2006 financial year. This means the A units receive 45% of the distributable income (109,80 cents per unit) and the B units receive 55% of the distributable income (134,20 cents per unit). 

“The A units have, for the first time, shared in the growth in distributable income, achieving 8% growth on distributions, while the B units delivered an 11% increase in distributions,” he says.

ApexHi recorded a 31% increase in profits from investment properties, which is mainly attributable to the acquisition of R1,7-billion  of properties acquired at an average yield before gearing of 11,9% and organic growth in the core portfolio.

“Fifteen properties were disposed of including three high yielding Johannesburg inner city office properties. The proceeds of R219,5-million were used to reduce floating debt currently bearing interest at 10% per annum. A surplus of R45,5-million on the original cost was recorded,” he says.

At 30 June 2006, the property portfolio comprised 444 properties with a gross lettable area of 2,5-million square meters. Leissner says the portfolio was valued by external valuers, resulting in a fair value adjustment in the income statement of R690,6-million. The valuation of the R6,7-billion property portfolio represents an average forward yield of approximately 13%.

Borrowings increased by 34% from R1,162-billion to R1,556-billion, of which 88% - or R1,365-billion – has been fixed. Gearing as a percentage of the property portfolio decreased to 23%. The floating debt of R191-million currently bears interest at an average rate of 9,97% per annum. “The weighted average all-inclusive rate of the borrowings decreased from 10,74% at 30 June 2005 to 9,97% at 30 June 2006, mainly as a result of the restructuring of R700-million of debt through a debt capital market finance arrangement with Standard Bank,” says Leissner.

Leissner says the ratio of property expenses to property income has steadily reduced over the years, and decreased from 29% to 26% in 2006 as a result of effective and continued cost control and as a result of the growth in market rentals experienced during the last year.

“In fact, rentals on renewals increased by 27,5%, with an average rental of R40/m2 in 2006, compared to R31,50/m2 in 2005. ApexHi concluded 1 411 leases worth more than R1-billion, covering a total of 458,657m2, which resulted in a reduction in vacancies from 10% to 9%” he says.

Importantly, there has been a reduction in the exposure to inner cities. ”In 2005, 44% of the operating profit from investment properties was generated from major metropolitan inner cities. This has now reduced to 33%,” says Leissner.

ApexHi delivered total returns of 28% for the financial year, compared to the property loan stock average of 23%. The combined share price increased 17%, with high trading volumes being maintained - 54% of the A units and 49% of the B units traded in the period under review.
 
“This is the fifth full set of annual results delivered by ApexHi since listing in March 2001. The company has delivered growth in distributions every year and has established an excellent track record based on a sound strategy,” he says.

Ends
 

For further information, please contact:

Gerald Leissner
ApexHi Properties
Tel: (011) 283 0150