Arrowhead Properties’ dividend shrinks by nearly a third as investments disappoint
The diversified real estate group's investments in other property funds have underperformed
Arrowhead Properties, the diversified property company which was listed in December 2011 by late real estate veteran Gerald Leissner, has released the worst results in its history, with its dividend falling nearly a third in the six months to March.
The group's woeful results announcement on Wednesday was compounded by the news of the resignation of CFO Imraan Suleman following "an instance of the unauthorised use of company resources".
CEO Mark Kaplan said Suleman had used "rewards points linked to a corporate credit card, some of which were, on the face of it, used for personal rather than corporate expenditure".
"The board is satisfied that the issues identified have no financial implications for the company and in no way go to the content or integrity of the company’s financial results," said Arrowhead in a Sens statement.
Kaplan said that it was "very unfortunate" for the company to lose Suleman, who had been in his role since Arrowhead was founded in 2011.
Contacted for comment, Suleman said he did not have "anything to add to what was already contained in the Sens announcement".
Arend de Kock has been appointed acting CFO.
Kaplan said Arrowhead's core portfolio of South African assets performed strongly in the reporting period but all of its investments in other funds had disappointed which placed pressure on the company.
Its directly owned 49 South African commercial properties achieved net income growth of 2.75% before gearing.
"We took the decision to invest in a number of funds years ago and could not have anticipated the challenges those funds would face. Their struggles have come through in our results for this period but our forecasts for the next six months are positive," said Kaplan.
Shopping centre and government tenanted office owner Rebosis Property Fund, of which Arrowhead holds 16.4%, saw its market value shrink in the period. The company did not pay an interim dividend.
Residential rental landlord Indluplace Properties, of which Arrowhead owns 59.6%, struggled to grow its rental rates. Gemgrow, its 53.3% subsidiary, reported earlier in May that its B-share dividend had shrunk 8% in the half year to December as its office vacancies climbed to 14%.
Arrowhead declared a dividend of 27.80c for the six months to March 2019, 31% lower than the 40.43c it declared in the six months a year before.
But Kaplan said the group's core assets had had a strong six months and that Arrowhead's management was working on ensuring the company started paying dividends again which grew regularly.
"We continue to position Arrowhead to create long-term sustainable value for shareholders by focusing on direct physical property and, over time, divesting of listed investments that are not part of the Arrowhead group," he said.
Arrowhead is in the process of merging with Gemgrow, which Kaplan said he hoped would be completed in the next few months. The resultant fund would have a market capitalisation of about R6.7bn and would focus on buying a range of property types with no limits on size or price.