Ascension's day as it buys properties

The acquisition‚ combined with another two pending transfers‚ will push Ascension's asset base to almost R3.5bn from R800m at listing a year ago.

The black-managed and substantially black-owned office property fund has a bias towards government tenants‚ with the balance of the portfolio made up of predominantly A-grade private sector tenants.

The Shell House and Ovenstone House properties comprise 26‚236m² of office space and 570 undercover parking bays.

Ascension executive director Shaun Rai said due to pressure on the office market as well as the creation of new nodes such as Century City‚ office property in Cape Town's central business district (CBD) had "repriced itself over the past two or three years"‚ with rents declining from about R120/m² to just below R100/m².

This provided a good opportunity for smaller property companies to buy "significant properties in the CBD" at "sensible" prices.

Government tenants

"The acquisition will see Ascension's government bias decline from 65% to 62% of its portfolio but this was likely to be temporary as there was scope to house more government tenants in Shell House‚" Rai said.

Ascension expected to "comfortably maintain" portfolio growth of about R1bn a year over the next two to three years‚ although Rai said that the growth would depend on finding the right assets.

Rai said that In addition to acquisitive growth‚ the fund had focused on a significant amount of redevelopment work on several of its existing properties.

"Another strategy of ours is to manage each asset aggressively. We don't have more than 10 assets per asset manager - so that we can get the best out of them."

The fund's average value per building has increased to R122m‚ while vacancies have remained constant at about 8%.

Rai said Ascension's successful growth since listing - with the fund having comfortably exceeded its R1bn growth target in its first year - together with yield-accretive acquisitions and lower cost of capital meant Ascension was confident of strong growth of its distribution payments in the future.

The fund expected its distributions per B-linked unit for the 2014 financial year to improve from 21.29c to 22.5c per unit‚ a growth of 20% over the previous year.

Ascension has a dual-unit structure‚ with A-units having a preferential right to distributions that rise 5% a year for the first five years‚ and by the lower of either 5% or inflation thereafter. The B-units are entitled to the residual income after the distribution on the A-units has been paid.

Source: Business Day via I-Net Bridge