Newpark Reit disappoints as weak economy bites
Owner of the JSE’s Sandton head office and three other buildings struggles with vacancies in a weak economy
Newpark Reit, the property company that owns the JSE’s office building, has released one of this reporting season’s worst set of financial results, with its dividend falling 6.4% in the six months to August as the company struggled to fill vacancies.
Newpark is one of the smallest specialist property companies listed on the JSE with a market capitalisation of about R600m and four real estate assets worth about R1.38bn. It was listed with the aim of providing investors with consistent dividend growth.
Distributable earnings for the reporting period declined 6.4% to 24.95c per share for the first half of the 2019 financial year compared with 26.65c per share for the comparative 2018 period.
The board declared an interim dividend of 24.94859c per share.
The company owns the JSE’s Sandton head office; retail centre 24 Central which lies next to it; a property in Linbro Business Park; and another in Crown Mines. It blamed weak economic growth and a lack of demand for space at 24 Central for its poor performance. It also said a major office tenant had left one of its office buildings.
“The vacancies, which started to increase during the six months to February 28 2018, continued further with a large tenant deciding to consolidate its office footprint into their main office space. Expense controls were applied to mitigate the impact of this loss of revenue but could not compensate entirely for the impact on distributable earnings,” the company said.
The group said overall group vacancies had increased significantly during the period to 17.4% from 11.2% at the end of February 2018, and it made no acquisitions during the reporting period but was considering ways of expanding in SA and abroad.
“The strategy is to seek well-positioned prime commercial and industrial properties which provide quality cash flows with the potential of upward rating on lease renewals and/or redevelopment opportunities within the medium to long term.”