‘ Solid’ Arrowhead delivers 2 dividends
ARROWHEAD Properties, which owns commercial properties valued at R9.7 billion, declared a dividend of 115.46 cents per “A” share and 32.99c per “B” share for the year to September 30 after a solid performance from its properties, chief executive Mark Kaplan said yesterday.
The distribution represents a 75 percent payout ratio, enabling the company to retain funds to invest in capital expenditure to maintain its properties. The share price shot up 13.13 percent yesterday morning to R2.15, closing later at R2.03.
“We believe we are well placed to face the challenges of these uncertain times,” he said, adding that good progress had been made in selling non- core properties and at the same time strengthening our balance sheet.
At the end of September, Arrowhead owned 143 commercial properties in South Africa, split 50 percent retail, 33 percent office and 17 percent industrial by revenue, and it indirectly owned 147 residential properties through its 60 percent stake in Indluplace Properties.
Seventy- five assets were sold for R1.7bn during the year, at an average 11 percent forward yield and 7.2 percent discount to book value, of which R840 million was transferred before. Another 30 properties needed to transfer.
Chief financial officer Junaid Limalia said in an interview that the focus with the disposal programme was to focus on quality assets and strengthen the balance sheet, and the group might well sit with a total of about 100 properties by the end of next year.
The disposals strengthened the balance sheet by reducing loans by just more than R900m to R5.6bn ( 2019: R6.5bn), lowering loan to value to 39.3 percent from the 40.5 percent.
The value realised for the disposals also reinforced the group’s confidence that the valuation of the properties on its balance sheet was realistic.
All expiring loan facilities were renewed, and R581m of free cash was held at the end of the financial year.
Limalia said the retail assets proved resilient, because they were well located, were mostly semi- urban, and catered to a broad market, and also benefited from linkages to transport hubs or were dominant within their respective nodes.
The industrial portion held up well, although the office sector showed strain as some corporates had closed and others have scaled down their space requirements with more staff working from home.
Limalia said the group’s office portfolio had not performed worse than the general office market, and the many small and medium business tenants in Arrowhead’s office had been hard hit by the Covid- 19 pandemic.
“The office market is challenging everywhere and we should expect to see some rental reversions and increased vacancies,” said Limalia.
The group average collection rate during April to September was 86 percent before relief and 96 percent if relief was taken into account.
Arrowhead granted R77m of rental relief to its tenants during the lockdown.
There were still a few tenants impacted by the lockdown and were receiving relief, such as the gyms.