Capital Property Fund increases distributions 6.32%

Property unit trust Capital Property Fund (CPL) reported on Wednesday a 6.32% increase in total distributions to 69.78c per unit for the year ended December 31.

MD Barry Stuhler said that in the existing economic environment characterised by low business confidence “we’ve produced what we feel are very good results for the environment that we are in”.

Capital said its industrial properties‚ which make up 74% of its gross lettable area‚ had performed well.

“Warehousing and distribution properties within the portfolio continue to perform well.

“Areas such as Linbro Park‚ Longmeadow and Raceway Industrial Park have experienced strong tenant demand. Interest in large A-grade warehouses remains firm‚ while demand for manufacturing space continues to decline in line with the downward trend in this sector in SA‚” Capital said.

Capital owns a portfolio of 262 industrial‚ office‚ and retail properties‚ with its main focus on industrial and office properties.

The office market has been under pressure‚ with most property groups reporting high vacancy rates in the sector.

Stuhler said Capital had changed its strategy last year as greater demand for properties had seen A-grade property prices increase rapidly.

The fund therefore decided to enter the development arena‚ as building costs were relatively low‚ and would focus mainly on developing A-grade industrial properties‚ he said.

Capital said that with the exception of a few nodes including the Sandton central business district (CBD)‚ “the office market remains characterised by high vacancy rates with resultant pressure on rentals”.

In order to ensure its office properties were “attractive to the letting market”‚ Capital said it had “expended considerable resources” on ensuring that the properties in its office portfolio were well maintained and refurbished.

In line with its strategy of acquiring strategically located land for warehousing and distribution facilities‚ Capital acquired Clairwood Racecourse during the year under review.

The property‚ to be renamed Clairwood Logistics Park‚ was acquired at a cost of R430m.

About 400‚000m² of warehousing would be developed at a construction cost exceeding R2bn.

The fund also entered into an agreement to purchase an 80% undivided share in two prime office sites in the Sandton CBD.

Capital sold two large portfolios of properties with government associated tenants‚ which reduced its office exposure in the portfolio.

In line with other property groups‚ Capital said it expected the office market in particular to “remain challenging during 2013”.

“The growth in the South African economy has been revised down to 2.6%‚ which will negatively affect the property market‚” Capital said.

However‚ the fund said the quality of its portfolio “places it in a position to provide a solid performance”.

The board forecast growth in distributions of between 4% and 7% per Capital unit for the 2013 financial year.