Union Homes Real Estate Investment Trust, a Lagos-based real estate fund manager, recorded the biggest decline on its funds’ net asset value (NAV) in four years, driven by non-occupancy of key properties.
NAV, which represents the value of a fund’s assets less liabilities, contracted by some 23 percent to N9.8 billion in the period under review compared with N12.7 billion a year earlier..
Two major properties were vacant due to major repairs on them, and significantly weighed down on its operations as they were not occupied for two years, given that rental income accounts for a tangible share in its investment income.
However, the loss of income from this was not stated in the company’s financials.
The Lagos-based REIT recorded gross income of N561 million in full year 2018, masking single-digit growth of 5.81 percent over N530 million posted in the previous period. The growth in gross earnings was buoyed by 29 percent expansion in rental income from N204 million in 2017 to N263 million in 2018.
The real estate fund manager posted improved profitability in the review period despite slump in REIT’s NAV.
Operating margin expanded by 7.2 percent points to 68.4 percent in 2018 compared with 61.2 percent in 2017, triggered by double-digit decline of 13.7 percent in operating expenses.
Operating expenses, which dipped 13.7 percent to N177.4 million in 2018, and 32.3 percent drop in tax expenses to N20.5 million, gave the company impetus to up profit by 23.4 percent from N294.7 million in 2017 to N363.6 million in 2018.
Consequently, profit margin in the review period settled at 65 percent, masking 9.21 percent points rise over 55 percent in the previous year. This implies that for every thousand naira earned from investment income, the fund manager kept N650 as profit.
This made earnings per share to leap from N1.93 in 2018 compared with N1.18 in the prior year. The fund manager proposed for shareholders’ approval a dividend of 1.75 per share.
With shares outstanding of about 250 million units, and upon approval of shareholders, N437.5 million will be paid out as dividends.
Union Homes lost a whopping 18 percent value in total assets to N10.9 billion in 2018 from N13.3 billion in 2017, drop by acute slide in cash & cash equivalents.
Registered as a closed-scheme investment scheme and REIT in Nigeria by the Securities and Exchange Commission under the Investment & Securities Act 2007, the fund aims to provide investors with long term capital appreciation and to optimize their returns by investing in real estate properties.
The company allocated 86 percent of the fund to real estate investment, 5 percent to real estate-related and the other 9 percent to liquid assets in the review year.
Union Homes’ REIT shares have been inactive for the past four five years, trading flat at N45.20 since then.
ISRAEL ODUBOLA
