“The growth story is really as a result of the acquisitions that we put in place in the last financial year. This year we were able to start the year with 12 shopping centres on balance sheet at the beginning of the year, and then an additional two shopping centres came on to the balance sheet very shortly thereafter,” Synergy Property Fund CEO William Brooks told CNBC Africa.
“So we had a full year of portfolio performance on pretty much 14 shopping centres. That explains the significant growth in top line earnings as well as in distributable earnings.”
The specialised retail property fund reported that their financial year property assets totalled 1.8 billion rand for the year ended 30 June, and revenue for the same period was also up 400 per cent to 240 million rand.
Their investment property portfolio was up by 60.6 per cent during the year.
The property portfolio, which was started in December 2011, had only three small shopping centres, and focuses on medium-sized communities and small regional shopping centres in high growth nodes.
Synergy now has five reasonably large shopping centres in the 20,000 square metre of GLA size, as well as Atlantis City shopping centre, its sixth large shopping centre, which is due to come on to their balance sheet in a few weeks’ time.
Their property portfolio has so far shifted from the smaller convenience-type shopping centres to the larger community and regional shopping centres. Synergy has also been able to improve its tenant retention ratio.
“The quality of your lease book is really a function of the percentage of national tenants that you have in that book. We set ourselves a target of 85 per cent national at the beginning of the financial year. At that point we were sitting at 81 per cent national in our portfolio. At the end of this financial year, we’ve increased the national tenant ratio to 86 per cent, so achieved a significant improvement in the quality of our tenancy,” Brooks explained.
“It’s been a challenging operating environment for some time now and it continues to be very challenging. Our portfolio is very concentrated on the lower LSM space, the growing demographic in South Africa where trading densities have come off,” said Brooks.
“We’ve seen lots of evidence of trading densities coming down with many of the national retailer groups but it continues to be the area that the national retailer groups are focused on.”