SA Corporate Real Estate’s residential portfolio is holding up in a property market weighed down by high interest rates and a sluggish economy.
The group’s distribution per share rose 7.5% to 13.01c, boosted by an increase in student rentals in nonmetro properties, broader residential rental escalations and improved retail letting, renewals and vacancy reversions, the group said in its results for the six months to end-June.
“With the strong occupancy profile and resilience of the tenant base, residential valuations within the portfolio are expected to trend upward in the future, considering that in SA the multifamily sector is gaining traction as a resilient, purpose-built asset class,” the group said.
Headline earnings per share slipped to 13.33c from 14.34c in the previous period.
Net property income increased to R756.6m from R734.5m, supported by stable rental collections and disciplined cost management.
Operating profit fell to R712.3m from R736.3m, reflecting pressure on margins amid a challenging operating environment.
The group’s portfolio year-on-year, like-for-like revenue and net property income (NPI) grew 6.7% and 4.8%, respectively, compared with the last period, while vacancies were reduced to 2.6% at end-June.
The group also reported year-on-year, like-for-like revenue and NPI growth of 5.4% and 5.2% in the residential portfolio.
However, the residential net property income came under pressure from steep municipal rate hikes implemented by the City of Johannesburg on sectional title properties, after a change in the city’s rates policy. The adjustment shaved 1.5 percentage points off like-for-like net property income growth for the period, the group said.
Standout performer
The industrial portfolio remained a standout performer, reporting zero vacancies from end-June. On a like-for-like basis, revenue rose 3.8%, while net property income grew 4% compared with the previous period.
The group maintained a stable net interest cover ratio of two times, unchanged from December 2024, while its net debt-to-loan-to-value ratio improved to 40.3% from 42% at year-end.
Looking ahead, the group expects its residential portfolio to maintain the strong momentum recorded in the interim period, supported by positive rental growth and consistently low vacancy levels.
“Momentum in apartment sales is anticipated to build further as the group strengthens its sales channel capacity. The group’s strategy is to increase its exposure to suburban estates with its inner-city residential portfolio being restricted to the five precincts in which it is currently dominant,” it said.
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