There has been growth in demand for prime office space in and around Colombo and suburbs over the recent past with two properties owned by Equity One PLC, a Carson Cumberbatch Company, achieving full occupancy during the current financial year, an interim report from the company to shareholders said.
A professional valuation done last year had placed total value of the Equity One group’s property portfolio within Colombo city and its suburbs at Rs.2.4 billion as at March 31, 2012.
Average occupancy for the group during this period had stood at 83%, the report said.
The managers also reported that it was refurbishing and renovating its building at No.55, Janadhipathi Mawatha, with the group anticipating increasing future demand for rentable office space in the Fort area with the opening of access to Janadhipathi Mawatha via Chatham Street and developments in the vicinity.
In this context, the group expects increasing demand for Fort office space in the event of a possible opening of Janadhipathi Mawatha for vehicular and pedestrian traffic.
Their subsidiary company, Equity Two PLC, has therefore contracted to refurbish and renovate the now abandoned building at Janadhipathi Mawatha, which the company acquired in 2005 and has remained unoccupied since due to significant damages caused by the Central Bank bomb attack in 1996.
This refurbishment and renovation project would cost approximately Rs.175 million according to preliminary estimates. The work which will be mainly funded through bank borrowings is expected to be completed by June and will add 40,000 sq. ft. of rentable office space to existing capacity.
This addition would mean that the group would command rentable office space of around 190,000 sq. ft., Carsons Management services (Pvt) Limited, Managers of Equity One said.
They anticipate further enhancement in demand for office space within Colombo with economic growth in the country and rapid infrastructural developments in the city. The Managers expect further improvement in the earning potential of the group down the road.
"With the on-going developments, the group is set to absorb the maximum value addition to its shareholders in the long term. The yield these properties could derive by means of capital appreciation, being located across the commercial hub of the country is substantial and hence we remain optimistic over the future of these properties," the managers said.
During the nine months under review Equity One posted group turnover of Rs.94.2 million against Rs.105.8 million a year earlier with revenue from the mainstream business of renting office and storage space registering a value of Rs.89.2 million, up 6% from Rs.83.8 million during the corresponding period the previous year.
"Annual rent reviews and increased occupancy at Dharmapala Mawatha property had a favourable impact on the rental income growth, while decreased occupancy at Janadhipathi Mawatha property prevented the group achieving its full potential," the statement said.
Profit before tax of the group stood at Rs.32.0 million against Rs.22.1 million registered in the previous period, an increase of 45%, largely attributable to the decrease in finance costs due to settlement of bank loans in full. Income tax expenses for the period increased by 353% over the corresponding period, mainly due to withdrawal of concessionary tax rate of 10% which was in existence through the corresponding period.
The Managers also said that the company registered a turnover of Rs.70.6 million for the period, compared to Rs.78.8 million recorded in the corresponding period in 2011. While the income from renting office and storage space has increased, reduction in the proceeds from sale of residential plots, due to completion of the project, has resulted in recording less turnover against the comparative period. Decline in dividend income and increased income tax expenses have a significant impact over the financial performance of the company, whereby the net profit for the period dropped by 11% against the comparative period.
Carsons owns 96.27% of Equity One with all other shareholders individually owning less than 0.5%.
Net assets of the Equity One share stood at Rs.38.93 as at December 31, 2012, up from Rs.36.77 a year earlier and the share traded at a high of Rs.39.90 and a low of Rs.28 during the December quarter.
The directors of the company are: Messrs. D.C.R. Gunawardena (Chairman), S. Nagendra, K.C. Fernando, E.H. Wijenaike, A.P. Weeratunge, S. Mahendrarajah and P.D.D. Fernando.