LISTED property loan stock company Freestone Property Holdings has beaten its own forecast, reporting a 15% surge in distributions to 61c a unit for the year to June this year.
Freestone executive director Michael Aitken (pictured) attributed the increase to 61c a unit to a combination of underlying rental growth in the company's property portfolio, as well as a much lower vacancy factor. Aitken said the vacancy level on June 30 was 4,3%, a "material drop" from the 7% level a year before.
"The drop in vacancies reflects the buoyancy in the property market in general," he said.
Freestone's revised distribution forecast at half-year was 11% growth in distributions year on year.
Offices make up 40% of Freestone's property portfolio, while industrial and retail property each make up 30%.
"Retail has been performing very well and industrial was the second sector to perform after retail and now we're seeing offices performing," said Aitken. "The results are all round very good and they reflect the benefits of the restructuring."
The company, formerly called Arnold Property Fund, was restructured over two years under new management.
Aitken said Freestone also aimed to bulk up its property portfolio in the future. The company currently has R1,6bn worth of properties. "We are looking to expand the portfolio and our target is to try to take it to above R2bn over the next year to 18 months," he said.
Ndabe Mkhize, investment analyst at Coronation Fund Managers, said Freestone had reported a "very strong set of results" and the 15% distribution growth was better than the listed property sector average distribution growth of 10%.
"This was on the back of strong rental growth, which is up 23%. It's driven by increased occupancy levels and restructuring of the portfolio."
But he said Freestone's growth was "slightly dampened" by an increase in property management expenses, "which grew faster than rental income".
"Going forward, the forward clean yield is about 10,5%, while the sector average is 9%," said Mkhize.
Freestone's net asset value also rose, growing 49% to 660c a unit during the year under review, and the company delivered a total return for the year of37%.
The company said the success of its commercial mortgage-backed securitisation programme, implemented in June this year, had affirmed the "confidence of institutional investors in the strength of Freestone's portfolio" and had helped reduce the company's borrowing levels to 40% of total assets.
The market response to the commercial mortgage backed securitisation programme was an almost double oversubscription for bond notes.
The company said it had made seven sales with a value of about R54m during the period, as well as three acquisitions totalling R48m. Freestone said two shopping centres and an industrial property in Gauteng were acquired.
It said that in order to "support future growth" it was in the process of "scorecarding compliance" with the trade and industry department's black economic empowerment codes and the property sector transformation charter.