Synergy Income Fund hits its targets

CEO William Brooks said although it was not easy to acquire shopping centres in rural areas and townships because of strong demand from buyers‚ the company‚ which specialises in shopping centres catering to lower living standards measure (LSM) sectors‚ continued to be on the look out for such assets.

"There is a perception that rural and township retail developments are driven by social grants. While there is no denying that social grants play an important role‚ there is also an element of government employment also assisting‚" he said.

"We are focused on new developments but also on the look out for existing shopping centres specifically in the lower living standards measure (LSM). I think there is scope for growth in rural and township retail developments due to undersupply and I see this while traveling across the country‚" Brooks said.

The company posted distributions of 44.22 c per A linked unit and 19.53c per B linked unit for the year ended June‚ which was in line with its pre-listing projections.

Brooks attributed the performance to significant portfolio growth‚ the fund's focused investment strategy‚ higher portfolio occupancy‚ increasing rental income and Synergy's growing ability to attract capital.

Synergy‚ which listed in December grew its assets 218% in the six-month period ended June.

This month‚ the company‚ which operates closely with retail group Spar group took transfer of two further properties‚ growing the portfolio value to R1.7 bn.

It also successfully closed a substantially oversubscribed vendor consideration placement of R376m in new linked units‚ to fund new assets.

Brooks said the Spar Group‚ which previously held a 20% stake in the company's management company had to sell the stake due to competition authorities' opposition.

He said the company had to reach a compromise with competition authorities with the Spar group selling its stake.

"I think the authorities took a view that the Spar group could not own a stake in the management company of a listed property fund."

At the end of June Synergy's property portfolio comprised 12 geographically diverse properties. Seven of these properties were transferred to the company in June‚ which was later than expected because of delays in gaining competition authority approvals.

Direct active management reduced overall portfolio vacancies from 5.8% at the end of December to 4.6% at the end of June - a 21% improvement over the last six month period.