Johannesburg — PROPERTY loan stock company Vukile 's distributions for the six months to September increased 6,6% to R138,9m, or 47c per linked unit, but higher electricity and rates and taxes charges had a negative effect on distributable earnings as these charges were not fully recovered from tenants.

Releasing the results yesterday, CEO Gerhard van Zyl said while there were some indications that the economy had turned the corner and was starting to improve, it would take some time for this to have a positive effect on the property sector.

"We therefore expect trading conditions to remain difficult for the rest of this financial year, but we also believe that we will be able to achieve reasonable growth in distributions," he said.

Van Zyl said about 90% of electricity charges and 70% of rates and taxes were recovered from tenants -- government tenants do not pay rates and taxes.

Trading conditions for the six months to September were difficult and characterised by increasing vacancies, higher bad debts and little scope for higher rentals. Ever more companies had to close their doors and a record number of jobs were lost in the economy, he said.

Net rental income had increased 9,8% over the period. But Van Zyl said part of the increase was attributable to the delay in the completion of maintenance and refurbishment projects beyond September.

If the deferred expenditure was taken into account, the increase in net revenue over the comparable period reduced to 6,4%, which was in line with expectations following a period characterised by increasing vacancies and rising bad debts.

The company, with a combined property portfolio of 74 properties, declared an interim distribution of 47,0c per linked unit , an increase of 6,6%, or 2,9c, per linked unit.

Vukile, with a sectoral spread by gross rentals comprising 28% commercial, 56% retail and 16% industrial, had concluded new leases and renewals with a total area of 76486m² and a contract value of R185m.

Since last month leases and renewals with a total area of 8407m² -- 18,4% of the total vacant area -- and a contract value of R28,2m had been concluded.

Van Zyl said bad debt write- offs had been in line with expectations for the six-month period.

The provision for doubtful debts at the end of September was R7,3m, up from R6,5m at the end of March, which was considered adequate at this stage.

The vacancy profile indicated that the overall vacancy percentage had increased from 3,2% at the end of March to 4,5% at the end of September.

Industrial vacancies increased from 3,3% to 7,7% of gross rentals, mainly as a result of new vacancies at Randburg Tungsten, Sony Building and Randburg Trevallyn. But 6343m² (33%) of the industrial vacancies had been let since the beginning of last month.