Arrowhead to purchase 15 new properties

Arrowhead Properties (AWA‚ AWB)‚ which listed on the JSE 13 months ago‚ said on Monday it would acquire‚ from various sellers‚ 15 quality and yield enhancing office‚ retail and industrial properties.

The company said it had made significant progress over the past few months in its acquisition strategy‚ which aimed to grow the portfolio by R660m‚ or 30%‚ in its current financial year.

Arrowhead intends to increase its portfolio to R10bn by 2016 through the acquisition of secondary properties that offer attractive yields.

The company has trebled its market capitalisation to more than R2.4bn since listing in December 2011.

The 15 properties to be acquired are in Gauteng‚ KwaZulu-Natal‚ North West Province‚ Free State and the Northern Cape‚ and had a combined purchase consideration of R489m and an average net yield of 11%.

The acquisitions would be funded through debt‚ with the cost of funding at about 9% per annum.

Chief operating officer Mark Kaplan said the properties offered good value at an attractive yield‚ “which will enhance the earnings and growth prospects of Arrowhead”.

After concluding the transactions‚ Arrowhead will own a portfolio valued at R2.9bn‚ with debt of R950m.

Arrowhead was established through an unbundling of a portfolio of 98 properties from Redefine Properties (RDF) in November 2011.

The company listed with a market capitalisation of R800m.

“We intend to continue growing the portfolio‚ but not at the expense of yield.

“Our aim is to increase our market capitalisation to R3bn this year‚” Kaplan said.

Arrowhead‚ which pays quarterly distributions‚ expected to achieve an increase of 10% in distributions to R1.11 per combined A and B unit for the year ended September 2013 - 60 cents for the A unit and 51 cents for the B unit.

The company reported a distribution of 100.58c per unit for the year to September 2012‚ which was 2.2% higher than the initial annualised forecast of 98.4c per unit for the year.

Over the period‚ the A and B units combined achieved a total return of 40.6%‚ above the market average of 33.2%.

On Monday‚ the group’s A linked units increased 1.45% to close at R7‚ while its B linked units were 0.44% higher at R6.85 at market close.

Over the past 12 months‚ Arrowhead’s B units had outperformed A units‚ rising 72% compared to the 23.3% increase by A units.

The A units are for risk-averse investors who earn distributions of 15c or 50% of the distributable income per quarter — which ever is the greater‚ while the B units cater for investors with a greater appetite for risk‚ who earn the balance.