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Growthpoint - Audited Results For The Year Ended 30 June 2005
- Impact Of Accruing For Lease Income On A Straight Line Basis
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT & ISIN: ZAE000037669
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2005 - IMPACT OF ACCRUING FOR LEASE
INCOME ON A STRAIGHT LINE BASIS
On 31 August 2005, Growthpoint Properties Limited ("Growthpoint") published on
SENS its unaudited preliminary results for the year ended 30 June 2005.
These results did not include the accrual of future rental escalations as
required in terms of circular 7/2005 issued by the South African Institute of
Chartered Accountants in August 2005. The company was not in a position to
determine these figures at the time, as this involved having computer programmes
written to extract the information, verifying the data and checking and auditing
the results.
This process has been completed and the company"s annual report was posted to
linked unitholders on 8 November 2005.
The impact of the accrual of future rental escalations on a straight line basis
is set out below:
2005 2005 2004 2004
R"000 R"000 R"000 R"000
Before After Before After
Income statement effect:
Revenue 1,013,939 1,013,939 836,739 836,739
Straight line lease - 167,775 - 117,850
income accrual
Revenue including 1,013,939 1,181,714 836,739 954,589
straight line lease
income accrual
Fair value adjustments 60,690 60,690 43,330 43,330
Adjustment for straight - (167,775) - (117,850)
line lease income accrual
Fair value adjustments 60,690 (107,085) 43,330 (74,520)
after straight line lease
income accrual
Balance sheet effect:
Investment property 9,119,162 9,119,162 6,131,500 6,131,500
Less:straight line lease - (335,898) - (168,123)
income accrual
Investment property after 9,119,162 8,783,264 6,131,500 5,963,377
straight line lease
income accrual
Straight line lease - 335,898 - 168,123
income accrual
Property assets 9,119,162 9,119,162 6,131,500 6,131,500
The increase in Revenue has resulted in an opposite reduction in the fair value
adjustment on revaluation of Investment property, with the result that earnings
remained unchanged in each period.
These adjustments are purely accounting entries and do not impact on cash flows
or distributions to linked unitholders.
The company believes that accounting for future lease escalations in current
periods is misleading and does not reflect the economic and legal realities. In
the South African context operating leases contain escalation clauses to take
into account expected future inflation. In our view, it is fundamentally wrong
that no account is taken of the time value of money in averaging operating lease
income over the period of the leases.
Linked unitholders are advised that the Annual General Meeting of the company
will be held at 9.00 a.m. on Wednesday 30 November 2005 at 100 Grayston Drive,
Sandton.
9 November 2005
Sponsor
Investec Bank Limited
Date: 10/11/2005 12:30:04 PM Supplied by www.sharenet.co.za
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