Arrowhead sees little chance of property-sector consolidation
The diversified real estate group’s dividend per share dropped 6.5% in the six months to end-March, in line with expectations, as it continues to only invest in SA
CEO of diversified real estate group Arrowhead Properties, Mark Kaplan, has said that while his fund would like to become involved in consolidation in the listed property sector again, its choices are limited because it doesn’t want to acquire offshore assets in the process.
Arrowhead has been an aggressive acquirer of assets for the past few years, but it is now choosing to sweat its existing portfolio in a challenging operating environment.
"I think the listed property sector needs consolidation, but it hasn’t come. There are a number of smaller funds with good South African assets, but many of these funds have also bought assets offshore and our strategy is to invest in SA only," said Kaplan.
He was speaking at the release of the company’s financial results for the six months to end-March. The group’s dividend per share dropped 6.5% in the period compared to the same period a year earlier, as Arrowhead rebased its dividend pay-out. This was in line with expectations and with forewarning that Arrowhead had given to the market.
Arrowhead declared a dividend of 40.43c per share, indicating that it remained on target to deliver on the guidance provided for the full financial year to September.
Kaplan said Arrowhead remained an opportunistic property fund, which directly holds a diversified portfolio of 49 commercial properties valued at R5.6bn. Through core, separately listed subsidiaries, Indluplace Properties and Gemgrow Properties, the Arrowhead portfolio comprises 360 buildings including 189 commercial and 171 residential properties. The total value of the group’s investment properties had increased 15.5% to R15bn at the end of the interim reporting period as a result of acquisitions by Indluplace and Gemgrow.
Arrowhead also has investments in listed Reits Rebosis Property Fund and Dipula Property Fund.
Chief operating officer at Arrowhead, Riaz Kader said the results were in line with expectations. "We are pleased with our results reported for the past six months, against a backdrop of subdued macro-economic conditions and a fiercely competitive rental market."
The group expected to return to positive dividend growth in the 2019 financial year. Said Kaplan: "We have worked hard over the past six months to deliver these positive results; we maintained a disciplined and conservative approach, which we believe will be rewarding in the long term. We continue to sweat our portfolio and believe that improving consumer and business sentiment, which has started to become evident, will provide an upside to growth."