Listed property loan stock company ApexHi Properties surprised the market yesterday with a 9,67% increase in its combined distribution for the year to June.

ApexHi Properties CEO Gerald Leissner said the increase to 244c a combined unit was more than "expected".

"We thought we would have an 8% increase in distributions. It's more than expected. The last quarter of the financial year was very good," said Leissner.

He attributed the solid results to the performance of the underlying portfolio, including stronger rentals and better cost control.

ApexHi reported that its total distribution for "A" units was 109,80c, a 7,65% increase on the previous financial year.

Its "B" unit distribution increased 11,37% to 134,20c from the previous year.

Leissner said the 227c threshold was "exceeded for the first time this year" and that "A" unitholders had started participating in the growth from the first quarter of the 2006 financial year.

ApexHi's linked unit structure differs from other listed property companies in that it is divided into A and B units. A-unit holders are guaranteed a distribution of 102c for as long as it takes the total distribution to reach 227c.

B-unit holders have a higher risk, but also higher returns in future as all future growth in income until the 227c mark goes to them. Once the 227c mark is reached, 45% of the distribution goes to A-unit holders and 55% to the B-unit holders.

Leissner said the company had also reported a 31% increase in profits from investment properties because of R1,7bn worth of property acquisitions.

Leissner said the company's goal was to add another R1bn in properties to its portfolio by the end of the next financial year.

"It's difficult at present because there has been a lot of activity in the last few years, but it has become more difficult to acquire properties in line with our strategy. They have to be revenue-enhancing properties and the price has to be right," said Leissner. ApexHi's property portfolio is now worth R6,7bn.

The company's net asset value also increased by 32% to R20,90 a combined unit.

ApexHi was one of the major property stocks whose unit price was knocked by recent jitters in the listed property sector.

The combined share price is now just under R24, down from about R33 in early May.

"We lost about a third of our value from the top. We have recovered slightly," said Leissner.

The entire listed property sector was negatively affected from early May by emerging market concerns following a hike in interest rates in the US.

Although they recovered, the recent local interest rate hike caused listed property prices to fall further. And the volatility is expected to continue in the listed property sector because of the threat of further interest rate hikes in SA and globally.

Angelique de Rauville, MD of Investec Listed Property Investments, said ApexHi's distributable earnings were ahead of "everyone's expectations" including ApexHi management, analysts and listed property investors.

"In addition to the very promising growth in distributions it was very encouraging to see the meaningful increase in net asset value. Both the increase in distributable earnings and net asset value confirm that inherent property fundamentals are stronger than anticipated and that property values have been understated historically or previously," said De Rauville.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge