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ARROWHEAD PROPERTIES

Arrowhead was formed in September 2011 and debuted in the Real Estate Sector on the JSE in December 2011 as an internally managed PLS company. Arrowhead converted to a REIT on 1 October 2013. Arrowhead owns a diverse portfolio of retail, commercial, industrial and residential properties throughout South Africa.

Its primary objective is to pay increasing income returns to investors, which it achieves through:

Risk is managed by growing and diversifying the portfolio in terms of the number of properties, spread of tenants, spread of locations throughout South Africa and the spread of retail, office, industrial and residential properties.

Interest rates are fixed for 5 years on the majority of Arrowhead’s debt on date of drawdown.

Arrowhead has increased properties under management from R1,4 billion (89 properties) at listing to around R7,3 billion (185 properties), including the investment in Dipula. The asset value has grown more than 5 times since listing, while the number of properties in the portfolio has more than doubled. Importantly, vacancies have reduced during this period.

Assets are managed internally by the executive with property management provided by JHI.

There have been two significant improvements to Arrowhead’s business in the last twelve months: the successful acquisition of Vividend and the addition of over R500 million in residential properties.

The company pays its annual net income to its unitholders in the form of quarterly distributions, has an active investor relations programme and adheres to best practice corporate governance.

LINKED UNIT CLASSES

Arrowhead offers two classes of linked units and is the only listed property company in South Africa to pay quarterly distributions.

- "A" linked units earn the greater of all of the distributable income available up to 60 cents and 50% of the income distributed per annum

- "B" linked units earn the balance of the distributable income

The Arrowhead A and B units shared distributions equally from the first quarter of the 2014 financial year. Both these units will pay the same distributions going forward and the executive believes the company should combine the two units as there is no difference in distributions paid. This would increase the liquidity of the Arrowhead units.

AT A GLANCE

  2014 2013 2012
Distribution per A unit (cents) 66,62 60 60
Distribution per B unit (cents) 66,62 53,01 40,58
Distribution per combined A and B unit (cents) 133,24 113,01 100,58
Closing unit price on JSE on 30 September per A unit (cents) 785 691 650
Closing unit price on JSE on 30 September per B unit (cents) 788 666 585
Closing unit price on JSE on 30 September per combined A and B unit (cents) 1 573 1 375 1 235
Total return per combined A and B unit % 33 19 41
Trading volume A units % 29 64 *
Trading volume B units % 27 36 *
Market capitalisation (R billion) 5,9 2,8 2,1
Property portfolio value (R billion) 7,0 3,1 2,2
Commercial property portfolio m2
868 301 514 021 429 543
Commercial property portfolio let % 94 91 87
Residential units (number) 1 222 -** -**
Residential occupancy (%) 98,8 -** -**
Borrowings (R million) 2 359 719 615
Borrowings as a percentage of property value % 34 23 28
Weighted cost of borrowings % 8,61 8,17 8,13

*Not full 12 months
** Residential acquired during 2014 financial year