| Thu 20 Mar 2003, 15:40 | | Paramount Releases Quarterly Results In Tough Mark |
|
Measures
Paramount Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 1945/019928/06)
JSE code: PRA
ISIN: ZAE000028577
("the company")
PARAMOUNT RELEASES QUARTERLY RESULTS IN TOUGH MARKET BUT TAKES CORRECTIVE
MEASURES
Thursday, March 20, 2003
Listed property loan stock company, Paramount Property Fund (Paraprop), has
declared a quarterly distribution of 12 cents for the quarter ended January
2003, which is, as anticipated, a significant drop in distribution per unit as
compared to the same period last year. As outlined in its October 2002 YE
results and recent shareholder communications, the reduced distribution was
expected.
Managing Director, Rodney Squire-Howe says that due to the current tough
property market conditions, rental income from properties was down, and that
this, when combined with Paramount"s particular financial structure, resulted in
a dilution of distributions. The situation will be worsened in the first two
quarters by vacancies at two properties, which are steadily being closed.
The company has taken action by changing its borrowing structure to reduce its
interest costs, and is making good progress with the letting of vacant space.
Squire-Howe notes, "in addition to looking for increased operational
efficiencies, we will continue to look for opportunities to generate additional
revenue in order to enhance our distributions for the current year"s earnings.
Going forward, we are also looking to significantly change our financial
structure. Our structure involved the issue of non-interest bearing B-
debentures, which were essential to enable the fund to list at the higher
initial yield required by the market. The B-debentures have the effect of
providing better financial returns in a positive environment with growing
property income streams, but of diluting returns if no or negative growth is
experienced from the property portfolio. We have now taken a decision that these
B-debentures will be phased out in future. "
"The downward movement in longer-term interest rates makes it easier to acquire
properties without issuing B-debentures, and going forward, no further B-
debentures will be issued. We are negotiating on several new acquisitions - by
bringing new properties into the fund without issuing B-debentures, the overall
percentage of B-debentures in the fund will be significantly lowered, and thus
their potential negative effect in a continuing depressed market will be
reduced."
Commenting on the company"s expected results for the full financial year, he
said while the overall results for this year will be better than reflected in
this first distribution, they will nevertheless be significantly below last
year"s level.
"The current increasing optimism in our economy is not yet being demonstrated in
the property market. An oversupply of space still exists, rentals have not
improved, and businesses are still carrying the burden of high interest rates
leaving many tenants vulnerable. There is a sense however that the tide is
turning and we are starting to see indications of improved conditions
particularly in the industrial property market, which hopefully is a leading
indicator."
He added that Paramount has an excellent property portfolio located in major
metropolitan areas of South Africa, and is actively managed.
"Vacancies are being contained at about 7 percent, which is a very good
occupancy level in this market. The problem is lower rentals on new lettings and
renewals. However, we believe that the position is stabilising, and the outlook
for the future is good. It is reasonable to expect improving rentals when leases
come up for renewal from 2004 onwards, which will have a positive impact on our
performance," Squire-Howe added.
Cape Town
20 March 2003
Contact: Rodney Squire-Howe, Managing Director, Paramount Property Fund (021)
659-5945; Bruce Kerswill, Executive Director.
Issued by: Nicola Nel; Atmosphere PR; 461-2117;
082 4592288
Sponsor
Nedbank Corporate
