Tenants, and sub-tenants of head leases, are battling to cope with rental increases due to the ‘tough consumer environment’
03 May 2019 - 17:56
byAlistair Anderson
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Residential-focused Indluplace is concerned about SA's weak economy, as are many property groups. Picture: SUPPLIED
Residential real estate fund Indluplace Properties has warned that its dividend for the year to September will plunge as the company struggles to find tenants that can meet its rental expectations in a recessionary environment.
CEO Carel de Wit, said the company expected dividends per share for the year to September to fall by up to 10%.
“We are working in a very tough consumer environment and we have not met our budgets in terms of the income we expected to receive,” said De Wit.
The group had also failed to renew bulk contracts at Highveld View in Witbank. Indluplace had used a head lease at Highveld View, for a period. Head leases are agreements signed with one tenant, who then sub-lets the property to other clients.
Last year, the tenant at Highveld View chose not to extend the lease as it could not find enough sub-letters.
“Although negotiations around bulk contracts at Highveld View continue, none have been concluded. In addition, trading conditions experienced by the company across the portfolio have been more challenging than anticipated,” De Wit said.
Indluplace tried to use rent specials to incentivise leasing, but vacancies and evictions of non- paying tenants have risen with associated legal costs.
“We need some kind of recovery in our economy. Businesses are not giving their staff increases and it then becomes difficult for those people, who are our tenants, to be able to digest inflation-linked or higher-than-inflation increases in their rent,” De Wit said.
The company expects its dividend per share for the six months to March 2019 to be approximately 37.4c, which is 23% lower than the dividend per share of 48.6c for the six months to March 2018.
Dividends per share for the year to September 2019 are expected to be down by about 20%, compared with the prior year.
De Wit said Indluplace will provide details on the company’s plans to improve its prospects next Thursday when it releases financial results for the six months to March 2019.
Evan Robins of Old Mutual Investment Group said there has been pressure on rental growth for SA-listed property groups in recent months, which have affected Indluplace and other residential property funds, including Transcend and Balwin Properties.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Indluplace warns its dividend will dive
Tenants, and sub-tenants of head leases, are battling to cope with rental increases due to the ‘tough consumer environment’
Residential real estate fund Indluplace Properties has warned that its dividend for the year to September will plunge as the company struggles to find tenants that can meet its rental expectations in a recessionary environment.
CEO Carel de Wit, said the company expected dividends per share for the year to September to fall by up to 10%.
“We are working in a very tough consumer environment and we have not met our budgets in terms of the income we expected to receive,” said De Wit.
The group had also failed to renew bulk contracts at Highveld View in Witbank. Indluplace had used a head lease at Highveld View, for a period. Head leases are agreements signed with one tenant, who then sub-lets the property to other clients.
Last year, the tenant at Highveld View chose not to extend the lease as it could not find enough sub-letters.
“Although negotiations around bulk contracts at Highveld View continue, none have been concluded. In addition, trading conditions experienced by the company across the portfolio have been more challenging than anticipated,” De Wit said.
Indluplace tried to use rent specials to incentivise leasing, but vacancies and evictions of non- paying tenants have risen with associated legal costs.
“We need some kind of recovery in our economy. Businesses are not giving their staff increases and it then becomes difficult for those people, who are our tenants, to be able to digest inflation-linked or higher-than-inflation increases in their rent,” De Wit said.
The company expects its dividend per share for the six months to March 2019 to be approximately 37.4c, which is 23% lower than the dividend per share of 48.6c for the six months to March 2018.
Dividends per share for the year to September 2019 are expected to be down by about 20%, compared with the prior year.
De Wit said Indluplace will provide details on the company’s plans to improve its prospects next Thursday when it releases financial results for the six months to March 2019.
Evan Robins of Old Mutual Investment Group said there has been pressure on rental growth for SA-listed property groups in recent months, which have affected Indluplace and other residential property funds, including Transcend and Balwin Properties.
andersona@businesslive.co.za
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