RIL Property banks on future commercial space demand for growth

RIL Chairman Sunil Wijesinha ringing the bell, flanked by RIL CEO/Executive Director Hiroshini Fernando (left), CSE Chairman Vajira Kulatilaka (right) and other RIL and CSE officials
Pic by Pradeep Pathirana

By Chandeepa Wettasinghe
Commercial property development group, RIL Property Limited (RIL), yesterday started trading on the Colombo Stock Exchange, with the share opening at Rs.9, one rupee above the issue price to later settle down at Rs.8.40-50 levels. 
RIL CEO/Executive Director Hiroshini Fernando noted that in a demand-heavy market, RIL will find ample opportunities for growth through G
rade-A commercial spaces.

“There is a 500,000 square feet requirement to be filled even with the existing supply under construction, which are Colombo City Centre, Shangri-La and John Keells,” she said.
RIL currently has approximately 240,242 square feet (sq ft) of rentable office space under its assets, of which the 194,345 sq ft Parkland building is Grade-A. 
Majority of the Rs. 960 million raised through the initial public offering will go towards refurbishing the 45,897 sq ft Readywear office building to modern standards.
According to Fernando, rental yields of RIL’s Grade-A commercial spaces would increase by around 20 percent year-on-year (YoY) for the foreseeable future due to current promotional rates offered at PARKLAND, and refurbishment of Readywear.
She also dismissed worries over a property bubble, noting that problems, if any, would only surface in the residential segment.
She said that the group’s 196-perch land off Morgan Road will be sold in 14 months once its lease agreement with a client expires. 
“It’s not on a commercial business development area. It’s more suited for leisure investments,” Fernando said.
However, she refused to rule out RIL’s options in mixed development and leisure segments in the long-term, when the group plans to make use of another 155-perch land.
“The land area which is underutilized, we would be looking at what the market needs and addressing accordingly. Currently our focus is commercial space because we’ve been focused on it, (but) we will anyway watch the market accordingly and supply to bridge the gap,” she said.
She also added that there are currently no plans to introduce new franchises to the group’s successful food and beverage arm, and expansions are expected to grow the segment by more than doubling the current 7-branch BreadTalk franchise to 16 branches within Colombo and selected suburbs.
The group posted a net profit of Rs. 930.36 million, an 81 percent YoY deterioration, for the 4th quarter ended March 31, 2017. Excluding fair value gains, net profits were Rs. 75.76 million, a 477 percent increase YoY.
For 2017 financial year, RIL posted a net profit of Rs. 1.14 billion, down 77 percent YoY due to changes in fair value gains, excluding which the company made a net profit of Rs.283 million, a 665 percent increase YoY.
Earnings per share increased to Rs. 0.59 from Rs. 0.10 YoY while all profits were held as retained earnings. Total revenue for the year increased 270 percent YoY to Rs. 1 billion, which RIL attributed to increasing rental rates and occupancies at its flagship Parkland office complex, and a 37 percent YoY revenue growth through the BreadTalk franchise, which posted a topline of Rs.395 million.