Equity One Chairman sees "exciting prospects’’ ahead

Sale of six acres in Mt. Lavinia enables capital gain and debt release

Mr. D.C.R. Gunawardena, the Chairman of Equity One PLC, a listed real estate and property developer, sees "exciting prospects and opportunities" flowing into their business from economic fundamentals that are in place assisting the real estate segment of the economy.

Equity One has closed the financial year ended March 31, 2014 on what the Chairman called a "high note" with overall occupancy at group level rising to 91% from 85% a year earlier.

"However the key highlight for the year was the addition of further 44,000 square feet to the group’s rentable property portfolio with the completion of renovation and refurbishment of the building held by subsidiary company, Equity Two PLC, at assessment No.55, Janadhipathi Mawatha," he said.

"We also succeeded in sourcing a tenant to occupy the entire floor area of the said building, immediately upon completion."

As a result they expect this property to generate what he called "a decent contribution" to the group’s rental income and future earnings although the impact on incremental cash flows will be limited.

This is because the company has received rent advances and deposits against payments due on occupation by the tenants and such funds have already been deployed to finance the project.

The sale of six acres of land in Mount Lavinia during the year under review had helped Equity One to substantially reduce debt by way of repayment.

The decision to sell this land was strategic to reduce borrowings that arose mainly from the cost incurred to pay this land.

"From the losses incurred by the group from property development activities, we have now consolidated to a greater extent with the settlement of a significant portion of the company’s debt," Gunawardena said.

During the year under review Equity One saw the profit after-tax up 48.47% to Rs.127.2 million. However, if the one-off gain on the sale of land and appreciation in fair value of investment property is discounted, the net profit was Rs.47.4 million against the previous year’s Rs.42.1 million.

The one-off gain on the land sale amounted to Rs.79.8 million while the fair value gain on revaluation of investment properties amounted to Rs.68.8 million.

"With the burden of debt affecting the balance sheet eased to a greater extent during the year, your company is well positioned to reap maximum benefits from the real estate sector growth envisaged and reach new heights in time to come," Gunawardena said.

He also reported that the issue of restricted access to Janadhipathi Mawatha remains unresolved up to now. This has an adverse impact on the value potential of their two properties located there.

"However, considering the develop　

ment projects taking place in the Fort area coupled with the admirable level of beautification and township development activities underway in the vicinity, we are optimistic that our properties will be able to realize their full potential in the near future," he said.

Equity One is a member of the Carsons group with a stated capital of Rs.1.09 billion, capital reserves of Rs.13.2 million and revenue reserves of Rs.771.5 million. Total assets ran at Rs.2.44 billion and total liabilities at Rs.497.1 million.

Carson Cumberbatch with 96.27% is the dominant shareholder with all other shareholders owning less than one percent.

Net assets per share had grown to Rs.46.38 from Rs.41.93 the previous year and the share traded at a high of Rs.35.70 and a low of Rs.25.40 during the year under review. This compared with trading range of Rs.41.20 to Rs.22 the previous year.

The sale of the Mount Lavinia land for Rs.571.2 million yielded a net gain of Rs.79.8 million. The renovation of the Janadhipathi property owned by Equity Two PLC, a subsidiary of Equity One, cost Rs.199.6 million and added 44,000 sq. ft. to the group’s total rentable area.

The directors of the company are: Messrs. D.C.R. Gunawardena (Chairman), S. Nagendra, K.C.N. Fernando, E.H. Wijenaike, A.P. Weeratunge, S. Mahendrarajah and P.D.D. Fernando.

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