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EMI - Emira Property Fund - Unaudited financial results for the six months
ended 31 December 2010 and income distribution declaration
Emira Property Fund
(A property fund created under the Emira Property Scheme, registered in terms
of the Collective Investment Schemes Control Act)
Share code: EMI
ISIN: ZAE000050712
("Emira" or "the Fund")
Innovation
Diversification
Rejuvenation
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010 AND
INCOME DISTRIBUTION DECLARATION
R280,5 million
distributable income
55,21 cents
distribution per PI
1 130 cents
net asset value per PI
+15,7%
6 month total return
Condensed statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 2010 31 Dec 2009 30 Jun 2010
Revenue 610 125 585 204 1 162 179
Operating lease rental 611 484 566 918 1 152 167
income and tenant
recoveries
Allowance for future rental (1 359) 18 286 10 012
escalations
Income from listed property 10 050 - -
investment
Property expenses (229 669) (195 776) (391 807)
Management expenses (8 418) (17 478) (36 171)
Cancellation payment in (129 150) - -
respect of amendment to
existing service charge
arrangement
Administration expenses (27 230) (21 219) (43 214)
Depreciation (3 884) (5 620) (9 704)
Operating profit 221 824 345 111 681 283
Net fair value adjustments 151 694 (114 313) 42 430
Net fair value 127 272 (114 313) 39 661
gain/(deficit) on
investment properties
Change in fair value as a 1 359 (18 286) (10 012)
result of straight-lining
lease rentals
Change in fair value as a 2 306 820 5 329
result of amortising
upfront lease costs
Change in fair value as a 123 607 (96 847) 44 344
result of property
appreciation/(depreciation)
in value
Unrealised gain on fair 24 422 - 2 769
valuation of listed
property investment
Profit before finance costs 373 518 230 798 723 713
Net finance costs (114 358) (76 616) (211 839)
Finance income 7 458 2 574 5 484
Interest received 3 351 2 574 5 484
Claw-back of distribution 4 107 - -
in respect of participatory
interests issued cum
distribution
Finance costs (121 816) (79 190) (217 323)
Interest paid and amortised (81 260) (70 291) (143 219)
borrowing costs
Interest capitalised to the 1 808 501 3 065
cost of developments
Preference share dividends (6 183) (6 854) (13 351)
paid
Unrealised deficit on (36 181) (2 546) (63 818)
interest-rate swaps
Profit before income tax 259 160 154 182 511 874
charge
Income tax charge (7 810) 8 036 2 683
Deferred taxation (7 192) 8 721 4 018
- Revaluation of investment (6 977) 8 492 1 753
properties
-
Other timing differences (215) 229 2 265
including allowance for
future rental escalations
STC on preference share (618) (685) (1 335)
dividends paid
Profit for the period 251 350 162 218 514 557
attributable to equity
holders
Total comprehensive income 251 350 162 218 514 557
attributable to equity
holders
Reconciliation between earnings and headline earnings and
distribution
Unaudited Unaudited Audited
Six months Six months Year
R`000 ended ended ended
31 Dec 2010 31 Dec 2009 30 Jun 2010
Profit for the period 251 350 162 218 514 557
attributable to equity
holders
Adjusted for:
Net fair value (127 272) 114 313 (39 661)
(gain)/deficit on
revaluation of investment
properties
Deferred taxation on 6 977 (8 492) (1 753)
revaluation of investment
properties
Headline earnings 131 055 268 039 473 143
Adjusted for:
Allowance for future rental 1 359 (18 286) (10 012)
escalations
Amortised upfront lease 2 306 820 5 329
costs
Unrealised deficit on 36 181 2 546 63 818
interest-rate swaps
Unrealised gain on listed (24 422) - (2 769)
property investment
Pre-acquisition income on 4 628 - -
GOZ units acquired in 2010
Cancellation payment in 129 150 - -
respect of amendment to
existing service charge
arrangement
Deferred taxation - other 215 (229) (2 265)
timing differences
Distribution payable to 280 472 252 890 527 244
participatory interest
holders
Distribution per
participatory interest
Interim (cents) 55,21 51,84 51,84
Final (cents) - - 56,24
55,21 51,84 108,08
Number of participatory 508 010 487 827 654 487 827
interests in issue at the 229 654
end of the period
Weighted average number of 500 661 139 487 827 654 487 827
participatory interests in 654
issue
Earnings per participatory 50,20 33,25 105,48
interest (cents)
The calculation of earnings per participatory interest is based on
net profit for the period of R251,4 million (2009: R162,2 million),
divided by the weighted average number of participatory interests in
issue during the period of 500 661 139 (2009: 487 827 654).
Headline earnings per 26,18 54,95 96,99
participatory interest
(cents)
The calculation of headline earnings per participatory interest is
based on net profit for the period, adjusted for non-trading items,
of R131,1 million (2009: R268,0 million), divided by the weighted
average number of participatory interests in issue during the period
of 500 661 139 (2009: 487 827 654).
Condensed statement of financial position
Unaudited Unaudited Audited
R`000 31 Dec 2010 31 Dec 2009 30 Jun 2010
Assets
Non-current assets 7 521 751 7 353 086 7 655 558
Investment properties 7 067 340 7 138 446 7 334 034
Allowance for future 161 479 171 112 162 838
rental escalations
Unamortised upfront 36 713 43 528 39 019
lease costs
Fair value of 7 265 532 7 353 086 7 535 891
investment properties
Listed property 256 219 - 119 667
investment
Current assets 165 708 84 101 103 526
Accounts receivable 83 347 54 997 62 845
Derivative financial - 4 271 -
instruments
Cash and cash 82 361 24 833 40 681
equivalents
Non-current assets held 832 369 346 980 347 039
for sale
Total assets 8 519 828 7 784 167 8 106 123
Equity and liabilities
Participatory interest 5 745 621 5 447 680 5 525 665
holders` capital and
reserves
Non-current liabilities 1 680 190 1 882 309 1 535 150
Redeemable preference 200 000 200 000 200 000
shares
Interest-bearing debt 1 231 014 1 444 929 1 093 067
Deferred taxation 249 176 237 380 242 083
Current liabilities 1 094 017 454 178 1 045 308
Short-term portion of 499 298 - 498 596
interest-bearing debt
Accounts payable 221 065 201 288 215 357
Derivative financial 93 182 - 57 001
instruments
Distributions payable 280 472 252 890 274 354
to participatory
interest holders
Total equity and 8 519 828 7 784 167 8 106 123
liabilities
Abridged condensed statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 2010 31 Dec 2009 30 Jun 2010
Cash generated from 347 714 331 973 691 269
operations
Finance income 7 458 2 574 5 484
Interest paid (81 260) (70 291) (143 219)
Preference share (6 183) (6 854) (13 351)
dividends paid
Taxation paid (652) (838) (1 523)
Cancellation payment (129 150) - -
in respect of
amendment to existing
service charge
arrangement
Pre-acquisition income 4 628 - -
on GOZ units acquired
in 2010
Distribution to (274 354) (255 914) (508 804)
participatory interest
holders
Net cash (utilised (131 799) 650 29 856
in)/generated from
operating activities
Acquisition of (148 540) (89 630) (139 337)
investment properties
and fixtures and
fittings
Proceeds on disposal 55 100 5 676 12 189
of investment
properties and
fixtures and fittings
Acquisition of (116 758) - (116 898)
investment in listed
property fund
Net cash utilised in (210 198) (83 954) (244 046)
investing activities
Participatory 244 442 - -
interests issued
Increase in interest- 138 649 71 613 218 347
bearing debt
Cash balance from 586 - -
subsidiary acquired
Net cash generated 383 677 71 613 218 347
from financing
activities
Net 41 680 (11 691) 4 157
increase/(decrease) in
cash and cash
equivalents
Cash and cash 40 681 36 524 36 524
equivalents at the
beginning of the
period
Cash and cash 82 361 24 833 40 681
equivalents at the end
of the period
Basis of preparation and accounting policies
The condensed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") including
IAS 34, and are in compliance with the Listings Requirements of the JSE
Limited. The accounting policies used in the preparation of these financial
statements are consistent with those used in the annual financial statements
for the year ended 30 June 2010.
As a result of the amendment to the service charge arrangements, in terms of
IFRS, the risk and rewards of the manager of Emira, Strategic Real Estate
Managers (Proprietary) Limited (STREM) are deemed to be attributable to Emira.
The financial statements of STREM have therefore been consolidated with those
of Emira, with effect from 15 September 2010, even though Emira has no direct
or indirect shareholding in STREM. Had the amendment to the service charge
arrangement taken place on 1 July 2010, the net profit after tax of Emira
would have increased by R5,3 million.
Related parties and related party transactions
Momentum Group ("Momentum") is the major participatory interest holder. At 31
December 2010, Momentum owned 14,7% of the Fund`s participatory interests and
the Fund`s BEE partners - The Tiso Group, The Shalamuka Foundation, Avuka
Investments, The RMBP Broad Based Empowerment Trust and Mr B van der Ross -
held 12,0%. The remaining 73,3% were widely held.
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 2010 31 Dec 2009 30 Jun 2010
The following
transactions were
carried out with
related parties:
Strategic Real Estate
Managers (Proprietary)
Limited
Expenditure comprising 8 418 17 478 36 171
asset management fees
Cancellation payment 129 150 - -
in respect of
amendment to existing
service charge
arrangement
Relationship: Manager
of Emira Property Fund
Rand Merchant Bank a
division of FirstRand
Bank Limited
Long-term interest- -* 954 475 1 099 475
bearing debt
Net finance cost in -* 44 841 93 617
respect of long-term
interest-bearing debt
Cash on call -* - 5 000
Cash reserve -* 2 000 2 000
Finance income on cash -* 701 1 572
on call
Relationship:
Associated company of
the FirstRand Group*
Eris Property Group -* 29 550 58 773
(Proprietary) Limited
Expenditure -* 27 402 53 409
comprising: property
management fee and
letting commissions
Development fees -* 2 148 5 364
relating to
refurbishments and
extensions
* As a result of the disposal of Momentum Group Limited by FirstRand Bank
Limited and the subsequent unbundling of the shares in MMI Holdings Limited,
FirstRand Bank Limited and Eris Property Group (Proprietary) Limited are no
longer associates of Emira.
The above transactions were carried out on commercial terms and conditions no
more favourable than those available in similar arm`s length dealings at
market-related rates.
Segmental information
R`000
Sectoral segments Office Retail Industrial
Revenue 269 799 245 410 94 916
Revenue 274 265 240 946 96 273
Allowance for future rental (4 466) 4 464 (1 357)
escalations
Segmental result
Net income from property 157 493 133 714 65 973
rental operations
Investment properties 3 789 482 2 948 409 1 360 010
Geographical segments
Revenue
- Gauteng 199 790 161 818 70 497
- Western and Eastern Cape 35 936 21 326 10 603
- KwaZulu-Natal 22 926 40 367 13 816
- Free State 11 147 21 899 -
269 799 245 410 94 916
Investment properties
- Gauteng 2 788 006 1 965 104 1 033 510
- Western and Eastern Cape 576 124 271 163 160 100
- KwaZulu-Natal 304 600 476 000 166 400
- Free State 117 100 239 794 -
3 785 830 2 952 061 1 360 010
Segmental information (continued)
Adminis-
R`000 trative and
Sectoral segments corporate Total
Revenue - 610 125
Revenue - 611 484
Allowance for future rental - (1 359)
escalations
Segmental result
Net income from property rental (135 356) 221 824
operations
Investment properties - 8 097 901
Geographical segments
Revenue
- Gauteng - 432 105
- Western and Eastern Cape - 67 865
- KwaZulu-Natal - 77 109
- Free State - 33 046
- 610 125
Investment properties
- Gauteng - 5 786 620
- Western and Eastern Cape - 1 007 387
- KwaZulu-Natal - 947 000
- Free State - 356 894
- 8 097 901
Condensed statement of changes in equity
Revaluation
Participatory and other Retained
R`000 interest reserves earnings
Balance at 1 July 2009 3 511 484 2 028 213 (1 345)
Total comprehensive - - 162 218
income for the period
Distribution to - - (252 890)
participatory interest
holders
Transfer to fair value - (90 672) 90 672
reserve (net of
deferred taxation)
Balance at 31 December 3 511 484 1 937 541 (1 345)
2009
Balance at 1 July 2010 3 511 484 2 015 526 (1 345)
Participatory 244 442 - -
interests issued
Non-controlling - - -
interest in subsidiary
acquired
Total comprehensive - - 251 350
income for the period
Distribution to - - (280 472)
participatory interest
holders
Transfer to fair value - 104 656 (104 656)
reserve (net of
deferred taxation)
Balance at 31 December 3 755 926 2 120 182 (135 123)
2010
Condensed statement of changes in equity (continued)
Non-
controlling
R`000 interest Total
Balance at 1 July 2009 - 5 538 352
Total comprehensive income for the - 162 218
period
Distribution to participatory interest - (252 890)
holders
Transfer to fair value reserve (net of - -
deferred taxation)
Balance at 31 December 2009 - 5 447 680
Balance at 1 July 2010 - 5 525 665
Participatory interests issued - 244 442
Non-controlling interest in subsidiary 4 636 4 636
acquired
Total comprehensive income for the - 251 350
period
Distribution to participatory interest - (280 472)
holders
Transfer to fair value reserve (net of - -
deferred taxation)
Balance at 31 December 2010 4 636 5 745 621
Commentary
The Board of directors of Strategic Real Estate Managers (Proprietary) Ltd
("STREM") is pleased to announce a distribution of 55,21 cents per Emira
participatory interest (PI) for the six months to 31 December 2010. This
represents good growth in distributions of 6,5% on the previous comparable
period, in line with the prospects statement in the Fund`s final results
announcement released in August 2010.
Emira PI holders enjoyed a healthy total return of 15,7% during the six months
to 31 December 2010, comprising capital appreciation of 11,2% and an income
return of 4,5%, which represents the distributions actually paid out during
the period under review. During the period capital values in the listed
property sector benefited from a search for yield from investors, while lower
than expected domestic inflation also benefited bond yields, to which property
yields are closely related. The percentage of weighted average PIs in issue
that traded in the 12-month period equated to 15,9%.
The main highlight during the period under review was the announcement by the
Fund on 16 September 2010 that the conditions precedent required for the
amendments to the Trust Deed had been met. The amendments, which became
effective on 15 September 2010, would enable the Scheme to: (i) extend the
ambit of the Manager`s investment policy so that the Fund can invest in a
broader class of assets; (ii) increase the limit of borrowing by the Scheme
from the current limit of 30% to 40% of the value of the underlying assets
comprising the relevant portfolio; and (iii) amend the existing service charge
arrangement in respect of the Fund from a monthly charge based on enterprise
value, to a monthly charge equal to the actual operating costs incurred by the
Manager in administering the Fund, and the payment of a cancellation payment
of R197,4 million - R68 million of which is deferred until October 2011 - to
the Manager.
Not only were the amendments approved by virtually all PI holders who cast
their ballots, but, in terms of a general resolution granted at the Fund`s
AGM, Emira was able to raise an amount of R244 million to fund the
cancellation payment, as well as other capital requirements, through the issue
of PIs for cash. Further supporting the Board`s view that the amendments were
extremely positive for PI holders, the sharp rise in the PI price for the
period under review meant that the fund benefited immediately from the
amendment to the service charge arrangement.
Another highlight during the period was the acquisition of a further 9,175
million stapled securities in Growthpoint Properties Australia (GOZ) for a
total consideration of A$17,43 million (R116,8 million). The increased
investment in GOZ, secured via a rights issue that took place in September
2010, results in Emira`s stake in GOZ rising to a total of 19.426m stapled
securities, at a total cost of R233,7 million, or 9.1% of the total securities
in issue. This investment in GOZ, which had a market value of R256,2 million
as at 31 December 2010, represents a small (3.2% of Emira`s total assets),
passive stake in a high quality, but under-rated, listed Australian REIT,
backed by extremely secure, long-term leases with blue-chip tenants at a yield
higher than that which is achievable by buying South African commercial
property. The transaction was earnings enhancing from the date of purchase
and, is expected to be realised on a re-rating of the stapled securities,
which is expected to occur in the medium to long-term.
In line with the long-term strategy of the Fund, management continues to
improve the quality of the Emira portfolio through: (i) the acquisition of new
properties; (ii) the refurbishment of existing assets; as well as (iii) the
disposal of those properties deemed to be non-core. Activity in the portfolio,
which has been increased in the period under review, comprises the following:
- Acquisitions: In June 2010, Emira, in partnership with the Eris Property
Group, agreed to purchase a 50% undivided share in a 12 500m2, multi-tenanted
office building located at 80 Strand Street, Cape Town for R124 million
(Emira`s share is R62 million). The property comprises several ground floor
retail units, with ten floors of offices above and, when compared to other
Cape Town CBD commercial buildings, a high parking ratio of 3,0 bays per
100m2. The anticipated yield on transfer (11 October 2010) is expected to be
10,4%;
- In January 2011, the board approved the acquisition of a new 13 782mSquared
A grade office development, on the corner of Corobay Avenue and Aramist
Avenue, in Menlyn Pretoria, for R306,9 million. The building, which is 70% pre-
let to KV3 Engineers for 10 years and has a 1 year gross rental warranty on
the balance of the vacant space from completion, from Eris Property Group, is
expected to be complete by 30 June 2012 and to yield 9,1% in the first year.
- Refurbishments and extensions concluded: Six earnings enhancing projects
totalling R134,0 million were concluded during the period, which consisted of
(i) extensions to and the refurbishment of Randridge Mall (R110m) for existing
blue-chip tenants including Pick n Pay, Woolworths and Dis-Chem; (ii) the
refurbishment of Rigel Park (R14m); (iii) extensions for Woolworths at Market
Square shopping centre (R3.8m); (iv) refurbishment of WGA Epping for Santam
(R3.2m); as well as smaller projects at One Highveld and Tin Roof for national
tenants;
- Refurbishments and extensions underway: A further five projects worth
approximately R255,4 million are underway, which include: (i) the
redevelopment of Podium Office Park in Menlyn, comprising the construction of
9 239m2 of prime office space by April 2012 at a total cost of R176,1 million,
for which tenants are being sought; (ii) the complete refurbishment of 267
West, located in West Street opposite the Gautrain station in Centurion (R33,7
million); (iii) the construction of a new Audi dealership and refurbishment of
the Virgin Active at Cresta Corner (R32,0 million); (iv) the general upgrade
of Wesbank House in the Cape Town CBD (R11 million); and (v) the refurbishment
of the A-grade Lincolnwood Office Park in Woodmead (R4,0 million);
- Refurbishments and extensions approved: Three further projects totalling
R100 million - FNB Heerengracht, Gift Acres and Market Square - have been
approved by the Board, however have yet to be initiated as the Fund is waiting
for the conclusion of certain leases before commencing construction;
- Disposals: The disposal of non-core buildings continued during the period,
with four properties being transferred out of the Fund - Howick Gardens,
Standard Bank Glenwood, QD House and 8 Grader Road - for R55.1 million, while
Nampak Building was transferred in January 2011 for R20,5 million. Offers have
been accepted for Starsky House, Sandgate Office Park and CRB House (all in
Kramerville) at in excess of book value, although these sales are still
conditional.
- The Board recently approved the disposal of a further 16 non-core properties
worth close to R600 million, mainly comprising B-grade office space. The
disposal of these properties will significantly improve the quality of the
portfolio, reduce vacancies and also allow management to focus on larger
buildings, with better income growth prospects. The proceeds from the
disposals are expected to be utilised for the Fund`s significant capital
expenditure project pipeline mentioned above, acquisitions or, in the event
that the returns are sufficiently rewarding, PI buybacks.
Results
The period under review was characterised by tough underlying trading
conditions in the physical portfolio, mitigated by the benefits of the
amendments approved by PI holders in September 2010 and the Fund`s investment
in GOZ.
The period under review was more difficult than expected, with all three
sectors of the portfolio being impacted. As a result vacancies rose from 9,2%
in June 2010 to 11,4% at December 2010. On an adjusted basis (excluding
properties under refurbishment or redevelopment), vacancies rose from 7,9% to
10,0%. Despite the rising vacancies, with a substantial portion of Emira`s
portfolio on long-term, escalating leases, property income continued to grow.
Excluding the straight-line adjustments from future rental escalations,
revenue rose by 7,9% over the comparable period. This was the result of
organic growth in income from the existing portfolio, the inclusion of the
acquired properties from the effective dates, the conclusion of several
capital projects in the previous financial year which contributed for the full
period under review, as well as increased recoveries of municipal expenses.
Contractual cost escalations were well managed, however growth in net property
income was impacted by sharply rising municipal charges, an increase in
building maintenance and higher leasing charges on the comparable period.
Tenant arrears also continued to rise, resulting in the actual bad debts
charge for the period increasing when compared to the comparable period,
however remaining constant when compared to the second half of the previous
financial year. The net effect is that property expenses rose by 16,6% and net
income from properties was 3,3% higher.
The income from the Fund`s holding in GOZ of R14,7 million represents the
distributions from GOZ for the period to 30 June 2010 and the recently
announced distribution to 31 December 2010. Although the distribution from GOZ
to 30 June 2010 was only received in August 2010, Emira has received advice
that this income is attributable to the period in which GOZ trades ex-
dividend, being the financial year to 30 June 2010. As a result, income from
the listed investment in the current period is higher than expected by an
amount of R5,7 million.
Asset management expenses declined as a result of the amendment to the service
charge that became effective on 15 September 2010. As per the amendment, after
this date, asset management expenses paid only reimburse the manager for the
operating costs actually incurred in the management of Emira, resulting in a
net saving to Emira. Net interest costs excluding unrealised gains or losses
on interest rate swaps rose by 5,5%. This was the result of increased levels
of gearing in the Fund, offset by investment income earned from the issue of
PIs in September 2010.
Net asset value declined marginally (-0,2%) in the six months from 1 133 cents
(1 182 cents excluding the deferred tax provision) at 30 June 2010 to 1 130
cents (1 179 cents), largely as a result of the issue of new PIs during the
period.
Distribution statement
Six months Six months Year
ended ended % ended
31 Dec 2010 31 Dec 2009 change 30 Jun 2010
Operating lease 611 484 566 918 7,9 1 152 167
rental income and
tenant recoveries
excluding
straight-lining
of leases
Property expenses (227 363) (194 956) 16,6 (386 478)
excluding
amortised upfront
lease costs
Net property 384 121 371 962 3,3 765 689
income
Income from 14 678 - - -
listed property
investment
Per statement of 10 050 - - -
comprehensive
income
Income earned 4 628 - - -
prior to
acquisition of
stapled
securities
Management (12 992) (17 478) (25,7) (36 171)
expenses
Management (8 418) (17 478) - (36 171)
expenses per
statement of
comprehensive
income
Reimbursement to (4 574) - - -
STREM in respect
of management
expenses
Administration (22 605) (21 219) 6,5 (43 214)
expenses
Administration (27 230) (21 219) - (43 214)
expenses per
statement of
comprehensive
income
Management 4 625 - - -
expenses incurred
by STREM included
in the above
Depreciation (3 884) (5 620) (30,9) (9 704)
Net interest cost (78 846) (74 755) 5,5 (149 356)
Interest paid and (81 260) (70 291) 15,6 (143 219)
amortised
borrowing costs
Interest 1 808 501 260,9 3 065
capitalised to
the cost of
developments
Preference share (6 183) (6 854) (9,8) (13 351)
dividends paid
STC on preference (618) (685) (9,8) (1 335)
share dividends
paid
Investment income 7 407 2 574 187,8 5 484
Investment income 3 351 2 574 - 5 484
per statement of
comprehensive
income
Investment income (51) - - -
earned by STREM
Claw-back of 4 107 - - -
distribution in
respect of
participatory
interests issued
cum distribution
Distribution 280 472 252 890 10,9 527 244
payable to
participatory
interest holders
Number of units 508 010 229 487 827 654 4,1 487 827 654
in issue
Distribution per 55,21 51,84 6,5 108,08
participatory
interest (cents)
Prospects
The underlying conditions in the commercial property sector were tougher than
expected in the period under review. Indications are that tenant interest has
picked up in 2011, however this has yet to be translated into a reduction in
vacancies.
Emira PI holders are, nevertheless, expected to continue to benefit from the
amendment to the service charge implemented in September 2010.
As a result, the level of growth in distributions from the Fund for the
financial year is expected to be similar to that achieved in the six months to
31 December 2010. The forecast financial information on which this statement
has been based has not been reviewed or reported on by the Fund`s auditors.
Income distribution declaration
Notice is hereby given that a final cash distribution of 55,21 cents (2010:
51,84 cents) per participatory interest has been declared payable to
participatory interest holders on 14 March 2011. The source of the
distribution comprises: Net income from property rentals; income earned from
the Fund`s listed property investment and interest earned on cash on deposit.
Please refer to the statement of comprehensive income for further details.
Last day to trade cum distribution Friday, 4 March 2011
Participatory interests trade
ex distribution Monday, 7 March 2011
Record date Friday, 11 March 2011
Payment date Monday, 14 March 2011
Participatory Interest certificates may not be dematerialised or
rematerialised between Monday, 7 March 2011 and Friday, 11 March 2011, both
days inclusive.
By order of the STREM Board
Martin Harris
Company secretary
Ben van der Ross
Chairman
James Templeton
Chief executive officer
Sandton
15 February 2011
Acquisitions
Properties purchased and transferred to Emira during the six months to
December 2010
Purchase
Property Sector Location GLA price (Rm)
(mSquared)
80 Strand Office Cape Town 12 500 6,20
Street (50% CBD
undivided
share)
Forward
Property yield (%) Effective date Tenants
80 Strand Street 10,4 11 Oct 2010 De Vries Inc,
(50% undivided CK Friedlander,
share) Medway Holdings
Disposals
In accordance with the strategy of the Fund, certain properties that are
underperforming or pose excessive risk to the Fund are earmarked and disposed
of.
Properties transferred out of Emira during the six months to December 2010
Valuation
Jun `10
Property Sector Location GLA (m2) (Rm)
Howick Gardens Office Midrand 3 075 20,7
Standard Bank Retail Durban 368 4,5
Glenwood
QD House Industrial Kyalami 3 470 14,9
8 Grader Road Industrial Spartan 3 437 10,3
Properties transferred out of Emira during the six months to December 2010
Sale price Exit Effective
Property (Rm) yield (%) date
Howick Gardens 21,0 9,4 30 August 2010
Standard Bank 5,0 11,6 22 September 2010
Glenwood
QD House 16,6 11,7 30 September 2010
8 Grader Road 12,5 9,0 13 December 2010
Property sold, not yet transferred out of Emira at December 2010
Valuation
Jun 10
Property Sector Location GLA (m2) (Rm)
Nampak Industrial Denver 24 880 18,0
Building
Property sold, not yet transferred out of Emira at December 2010
Sale price Exit Effective
Property (Rm) yield (%) date
Nampak Building 20,5 8,5 4 January 2011
Vacancies
Vacancies increased from 9,2% in June 2010 to 11,4% by December 2010, with all
three sectors of the portfolio experiencing tougher letting conditions. If the
vacancies in four buildings that are currently either under refurbishment or
pending refurbishment (FNB Heerengracht (office), Podium Office Park (office),
267 West (office) and Cresta Corner (retail)) are removed, adjusted portfolio
vacancies drop to 10,0%.
Office vacancies rose from 16,2% to 18,0% (15,1% adjusted), with the major
vacancies, besides those mentioned above, being located in Knightsbridge Manor
(4 331m2), Midrand Business Park (4 080m2) and Fleetway House (4 027m2).
Industrial vacancies rose from 5,1% to 8,0% - Isando Unitrans (4 970m2), Fosa
Park (4 200m2) and Aeroport Fulcrum (3 805m2) - although there is tenant
interest in certain portions of this space.
Retail vacancies increased fractionally from 5,3% to 6,9% (6,2% adjusted).
Sector GLA Jun Vacancy % GLA Dec Vacancy %
(m2) 10 Jun 10 10 Dec 10
Office 447 289 72 293 16,2 448 851 80 855 18,0
Retail 384 640 20 454 5,3 386 563 26 690 6,9
Industrial 386 061 19 746 5,1 379 308 30 354 8,0
Total 1 217 990 112 493 9,2 1 214 722 137 899 11,4
Valuations
One-third of Emira`s portfolio is valued by independent valuers at the end of
every financial year, with the balance being valued by the directors. At the
interim stage, director`s valuations are used.
Total portfolio movement
Jun 2010 Dec 2010
Sector (R`000) R/m2 (R`000)
Office 3 696 931 8 265 3 785 830
Retail 2 846 316 7 400 2 952 061
Industrial 1 339 683 3 470 1 360 010
Total 7 882 930 8 097 901
Total portfolio movement
Difference Difference
Sector R/m2 (%) (R`000)
Office 8 434 2,4 88 899
Retail 7 637 3,7 105 745
Industrial 3 586 1,5 20 327
Total 214 971
After capital expenditure and capitalised interest of R150,4 million,
disposals of R55,1 million and depreciation of R3,9 million, investment
properties increased in value by R215,0 million, implying a slight upward
revision in property values of R123,6 million.
Debt
Emira has a relatively low level of gearing, with available debt facilities at
attractive margins which will enable the Fund to acquire good quality
properties with sustainable income streams.
Emira has entered into various swap agreements as set out below. As a result,
95,9% of the Fund`s debt has been fixed for periods of between three and 13
years. As at 31 December 2010, the weighted average cost of debt equated to
9,43%.
Weighted Weighted Amount (Rm) % of debt
average average term
rate %
Debt - Swaps 9,53 8,3 years 1 856,6 95,9
Debt - Floating 7,08 79,9 4,1
Total 9,43 1 936,5 100,0
Less: Costs (6,2)
capitalised not
yet amortised
Per balance sheet 1 930,3
Fund Manager: Strategic Real Estate Managers (Proprietary) Limited
Directors of the Fund manager: BJ van der Ross (Chairman)*, JWA Templeton
(Chief executive officer), MS Aitken*, BH Kent*, V Mahlangu*, NE Makiwane*, W
McCurrie*, MSB Neser*, WK Schultze, NL Sowazi*, PJ Thurling *Non-
executive director
Registered address: 3 Gwen Lane, Sandton, 2146 Sponsor: Rand Merchant Bank
(a division of FirstRand Bank Limited)
Transfer secretaries: Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg, 2001
www.emira.co.za
Date: 16/02/2011 17:43:01 Supplied by www.sharenet.co.za
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