Arrowhead declared a dividend of 87,52 cents per share for the year ended 30 September 2017, resulting in growth of 6,02% from the previous reporting period.
Mark Kaplan, CEO commented: “The current uncertain political and economic circumstances have caused a rapid deterioration in our operating environment. These factors have greatly impacted our tenants. The combined effect of the challenging macroeconomic situation and political uncertainty have a negative impact on rentals, tenant installations and broker commissions and are pleased to have delivered on our 2017 forecast."
Arrowhead owned a portfolio of 154 retail, office and industrial properties directly and 116 residential properties indirectly through Indluplace at 30 September 2016. As a result of the successful Gemgrow transaction, Arrowhead owned 51 commercial properties directly, 129 commercial properties indirectly through Gemgrow and 125 residential properties indirectly through Indluplace at the end of the reporting period.
Vacancies have increased from 7,7% at 30 September 2016 to 12,1% at 30 September 2017 due to the weakening market conditions and single tenant lease expires that resulted in a strained office market. A major contributor to the increased vacancy was the 1 Sturdee building where Sasol vacated from 1 January 2017. Good letting progress has been made with 6 404 m² re-let by 1 August 2017 and a further 1 900 m² re-let post year-end. A residential conversion is currently being explored at the Hill Street building in Randburg.
At year end, Arrowhead reported a LTV of 28,2%, while the group LTV was 31,5%. The interest rate swaps of R3,0 billion as well as the fixed rate loan of R237 million resulted in interest on R3,2 billion of the total loans of R4,7 billion being fixed. This equates to 69% of the total borrowings for the group and 71% for the company at an average rate of 8,98%. Post year end, the group has hedged around 77% of it's borrowings.
“We are comfortable with the current level of gearing in the Fund and across the group. We believe this conservative position to be wise during the current uncertainty. This, combined with our strong balance sheet, still allows some headroom for Arrowhead to take advantage of potential income enhancing acquisitions as we remain opportunistic and acquisitive as a Fund,” commented Imraan Suleman, CFO of Arrowhead.
During the reporting period Arrowhead successfully concluded the Gemgrow transaction. Gemgrow is a specialist high yielding, high growth vehicle that is positioned to acquire different asset class properties. This unique offering sees significant opportunities as it falls outside the focus area of most funds in the listed property sector.
“This year was a transformative year for Arrowhead as we focused on improving the quality of our portfolio by increasing the average asset size from R49 million to R110 million. As a Fund we will see more transitioning of our tenant profile from single-tenant to multi-tenant to aid with risk mitigation," said Riaz Kader, COO of Arrowhead.
“We expect the current macroeconomic environment to remain under pressure during 2018 and had to take some tough decisions during the year. We are confident that the measures implemented will not only ensure sustainability over time, but will reposition Arrowhead optimally to deliver long-term sustainable growth for shareholders,” concluded Kaplan.