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With 57% of the portfolio in retail, this is particularly reassuring for Vukile.
At Monday's interim results briefing, Van Zyl stuck to the forecast he made at the start of the year, that Vukile's growth for the year would be at much the same rate as in FY2007.
At half-time (September 30), interim distribution per linked unit was 12.8% up on last year, at 40,25c, and as distribution in FY2007 was 12% up on 2006, so far it is marginally ahead of this target.
Eliminating acquisitions and disposals, comparable rental income was 9,2% higher than a year ago, while all acquisitions were made on initial yields of 9%-plus.
Helped by net property sales of R260m, net finance costs fell by 26% to R18,6m, gearing up the return at net level.
Moreover, only 4% of group debt expires before FY2010, protecting Vukile against higher interest rates.
During the six months group vacancies fell from 2,9% of gross rentals to 2,5%, while almost a quarter of the then vacant space - a single empty area - was let in October Van Zyl says there's an inherent vacancy element for a portfolio like Vukile's, which he puts at about 2%, so it is in practice virtually fully let.
Lease renewals during the six months brought average rent increases of 13,9% for retail and 15,0% for commercial. The increase for industrial of 22,5% was distorted by one property where a 10-year lease with escalations that had taken the rent way above market levels fell due; excluding this, average renewals for industrial property were at 7,7% - surprisingly low, perhaps, given market sentiment that has been shifting in favour of industrial property.
NAV rose by 26% during the six months, to 892c, and is underpinned by external valuations of half the portfolio that come in slightly above the directors' internal valuation, on which the published figure is based.
Market price of the linked units rose by 44% between 2 October 2006 and 30 September 2007, closely tracking the property loan stock sector. If profits meet the target, the final distribution should be about 46c (41c), for a total of about 86,25c (76,75c). At 1 255c, that would yield 6,9%.
Property loan stocks continue to defy Jeremiahs like me, who felt they were overpriced a year or more ago. Intrinsically Vukile looks as sound as any in the sector, and though with a market cap of R3,7bn it's only a medium-sized fund, turnover in the units averages R1,5m a day, enough for all except the biggest investors.
- Fin24
