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Premium's CBD investments pay dividends

26 Apr 2013

Property loan stock company Premium Properties reported distribution growth of 9% to 126.2c per linked unit for the year to February.

Premium‚ which unusually for the listed property sector has significant residential investments‚ benefited from upgraded and redeveloped properties‚ as well as a higher quality tenant base and greater focus on leasing‚ according to managing director Jeffrey Wapnick.

Residential rentals comprised 29% of total rentals‚ and "core vacancies" in this sector - which excludes properties held for redevelopment - were just 0.3% at the end of the period.

Premium and its listed sister company Octodec Investments are both managed by City Properties. The companies invest in retail‚ industrial‚ office and residential properties in Gauteng's central business districts (CBDs).

During the period‚ Premium established its presence in the debt capital market. The company's weighted average cost of debt "significantly reduced" over the period‚ Premium said.

The company had five projects under construction with costs for these projects estimated at R196m. By the end of the financial year R146m had been spent on these projects.

The expenditure included a R15.9m upgrade of the Protea Towers office block in Pretoria's CBD‚ and a R43.2m upgrade of Centre Walk's 5‚258m² retail component also in Pretoria's CBD.

Premium also undertook other upgrades and additions to residential and retail properties in the city. The company has a large focus on converting office space into residential units aimed at "the up and coming middle class" and students.

Wapnick said the portfolio's retail component was trading "exceptionally well" with low vacancies and strong demand. A number of the large food and fashion retailers were returning to CBDs.

Premium concluded an agreement to acquire The Hangar in Centurion for R114.9m. The property comprises six blocks of residential accommodation and the acquisition is expected to be effective in June‚ subject to various conditions.

Anthony Stein‚ financial director of both Premium and Octodec‚ said the company's strong performance was driven by lower funding costs‚ largely due to the new bond programme‚ as well as various upgrades "where we've extracted value out of properties and pushed rents significantly".

He said there was little in the way of acquisitive growth but rather "organic growth‚ or unlocking value in the existing portfolio".

Source: I-Net Bridge

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