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EMI - EMIRA Property Fund - Unaudited financial results for the six months
ended 31 December 2011 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")
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011 AND
INCOME DISTRIBUTION DECLARATION
R272,5 million distributable income
53,81 cents distribution per PI
1 127 cents net asset value per PI
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 31 Dec 30 Jun
2011 2010 2011
Revenue 637 051 610 125 1 223 960
Operating lease rental income and 640 640 611 484 1 232 911
tenant recoveries
Allowance for future rental (3 589) (1 359) (8 951)
escalations
Income from listed property 15 969 10 050 22 373
investment
Property expenses (254 400) (229 669) (444 230)
Management expenses - (8 418) (8 418)
Cancellation payment in respect of (68 250) (129 150) (129 150)
amendment to existing service charge
arrangement
Administration expenses (32 357) (27 230) (57 013)
Depreciation (5 211) (3 884) (9 805)
Operating profit 292 802 221 824 597 717
Net fair value adjustments 39 803 151 694 125 165
Net fair value (deficit)/gain on (12 873) 127 272 89 551
investment properties
Change in fair value as a result of 3 589 1 359 8 951
straight-lining lease rentals
Change in fair value as a result of (790) 2 306 3 117
amortising upfront lease costs
Change in fair value as a result of (15 672) 123 607 77 483
property (depreciation)/appreciation
in value
Unrealised gain on fair valuation of 52 676 24 422 35 614
listed property investment
Profit before finance costs 332 605 373 518 722 882
Net finance costs (174 981) (114 358) (162 892)
Finance income 2 654 7 458 10 205
Interest received 2 654 3 351 6 098
Claw-back of distribution in respect - 4 107 4 107
of participatory interests issued cum
distribution
Finance costs (177 635) (121 816) (173 097)
Interest paid and amortised borrowing (99 546) (81 260) (168 106)
costs
Interest capitalised to the cost of 11 925 1 808 4 115
developments
Preference share dividends paid (5 776) (6 183) (11 895)
Unrealised (deficit)/surplus on (84 238) (36 181) 2 789
interest-rate swaps
Profit before income tax charge 157 624 259 160 559 990
Income tax charge (248) (7 810) (18 269)
SA normal taxation (8 861) - (322)
Deferred taxation 9 191 (7 192) (16 758)
- Revaluation of investment 12 613 (6 977) (12 100)
properties
- Other timing differences including (3 422) (215) (4 658)
allowance for future rental
escalations
STC on preference share dividends (578) (618) (1 189)
paid
Profit for the period attributable to 157 376 251 350 541 721
equity holders
Total comprehensive income 157 376 251 350 541 721
attributable to equity holders
Reconciliation between earnings and headline earnings and distribution
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 2011 31 Dec 2010 30 Jun 2011
Profit for the period 157 376 251 350 541 721
attributable to equity holders
Adjusted for:
Net fair value deficit/(gain) on 12 873 (127 272) (89 551)
revaluation of investment
properties
Deferred taxation on revaluation (12 613) 6 977 12 100
of investment properties
Headline earnings 157 636 131 055 464 270
Adjusted for:
Allowance for future rental 3 589 1 359 8 951
escalations
Amortised upfront lease costs (790) 2 306 3 117
Unrealised deficit/(surplus) on 84 238 36 181 (2 789)
interest-rate swaps
Unrealised gain on listed (52 676) (24 422) (35 614)
property investment
Pre-acquisition income on GOZ - 4 628 4 628
units acquired in 2010
Cancellation payment in respect 68 250 129 150 129 150
of amendment to existing service
charge arrangement
SA normal taxation 8 861 - 322
Deferred taxation - other timing 3 422 215 4 658
differences
Distribution payable to 272 530 280 472 576 693
participatory interest holders
Distribution per participatory
interest
Interim (cents) 53,81 55,21 55,21
Final (cents) - - 58,31
53,81 55,21 113,52
Number of participatory interests 506 466 508 010 508 010
in issue at the end of the period 288 229 229
Weighted average number of 507 828 500 661 504 305
participatory interests in issue 350 139 482
Earnings per participatory 30,99 50,20 107,42
interest (cents)
The calculation of earnings per participatory interest is based on net
profit for the period of R157,4 million (2010: R251,4 million), divided
by the weighted average number of participatory interests in issue
during the period of 507 828 350 (2010: 500 661 139).
Headline earnings per 31,04 26,18 92,06
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 R157,6
million (2010: R131,1 million), divided by the weighted average number
of participatory interests in issue during the period of 507 828 350
(2010: 500 661 139).
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
R`000 31 Dec 2011 31 Dec 2010 30 Jun 2011
Assets
Non-current assets 7 886 284 7 521 751 7 622 477
Investment properties 7 327 848 7 067 340 7 174 508
Allowance for future rental 142 254 161 479 147 089
escalations
Unamortised upfront lease costs 34 087 36 713 32 557
Fair value of investment 7 504 189 7 265 532 7 354 154
properties
Listed property investment 382 007 256 219 268 235
Deferred taxation 88 - 88
Current assets 154 696 165 708 190 433
Accounts receivable 115 612 83 347 95 921
Cash and cash equivalents 39 084 82 361 94 512
Non-current assets held for sale 636 092 832 369 823 054
Total assets 8 677 072 8 519 828 8 635 964
Equity and liabilities
Participatory interest holders` 5 706 586 5 745 621 5 839 850
capital and reserves
Non-current liabilities 2 078 561 1 680 190 1 508 621
Redeemable preference shares - 200 000 -
Interest-bearing debt 1 929 879 1 231 014 1 350 748
Deferred taxation 148 682 249 176 157 873
Current liabilities 891 925 1 094 017 1 287 493
Short-term portion of interest- 200 000 499 298 700 000
bearing debt
Accounts payable 280 945 221 065 237 060
Derivative financial instruments 138 450 93 182 54 212
Distributions payable to 272 530 280 472 296 221
participatory interest holders
Total equity and liabilities 8 677 072 8 519 828 8 635 964
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R`000 31 Dec 2011 31 Dec 2010 30 Jun 2011
Cash generated from operations 387 590 347 714 738 268
Finance income 2 654 7 458 10 205
Interest paid (99 546) (81 260) (168 106)
Preference share dividends paid (5 776) (6 183) (11 895)
Taxation paid (3 774) (652) (1 270)
Cancellation payment in respect (68 250) (129 150) (129 150)
of amendment to existing service
charge arrangement
Pre-acquisition income on GOZ - 4 628 4 628
units acquired in 2010
Distribution to participatory (296 221) (274 354) (554 826)
interest holders
Net cash utilised in operating (83 323) (131 799) (112 146)
activities
Acquisition of and additions to, (182 675) (148 540) (297 785)
investment properties and
fixtures and fittings
Proceeds on disposal of 210 645 55 100 75 300
investment properties and
fixtures and fittings
Acquisition of investment in (61 096) (116 758) (117 582)
listed property fund
Net cash utilised in investing (33 126) (210 198) (340 067)
activities
Participatory interests (18 110) 244 442 244 442
(repurchased)/issued
Increase in interest-bearing 79 131 138 649 259 085
debt
Cash balance from subsidiary - 586 2 517
acquired
Net cash generated from 61 021 383 677 506 044
financing activities
Net (decrease)/increase in cash (55 428) 41 680 53 831
and cash equivalents
Cash and cash equivalents at the 94 512 40 681 40 681
beginning of the period
Cash and cash equivalents at the 39 084 82 361 94 512
end of the period
Basis of preparation and accounting policies
The condensed consolidated interim 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 2011.
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, even though Emira has no direct
or indirect shareholding in STREM. This report was compiled under the
supervision of Peter Thurling, the Chief Financial Officer.
Related parties and related party transactions
MMI Holdings Limited (MMI) is the major participatory interest holder.
At 31 December 2011, MMI held 10,4% 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 77,6% were widely
held.
Unaudited Unaudited Audited
Six months Six months Year
R`000 ended ended ended
31 Dec 2011 31 Dec 2010 30 Jun 2011
The following transactions were
carried out with related parties:
Strategic Real Estate Managers
(Proprietary) Limited
Expenditure comprising asset - 8 418 8 418
management fees - pre-amendment
to service charge arrangement
Cancellation payment in respect 68 250 129 150 129 150
of amendment to existing service
charge arrangement
Segmental information
R`000
Sectoral segments Office Retail
Revenue 276 157 262 986
Revenue 281 457 260 572
Allowance for future rental escalations (5 300) 2 414
Segmental result
Operating profit 147 559 139 675
Investment properties 3 841 121 2 932 960
Geographical segments
Revenue
- Gauteng 201 190 176 645
- Western and Eastern Cape 37 414 21 268
- KwaZulu-Natal 23 520 40 345
- Free State 14 033 24 728
276 157 262 986
Investment properties
- Gauteng 2 849 747 1 916 082
- Western and Eastern Cape 572 182 304 769
- KwaZulu-Natal 285 900 449 009
- Free State 133 292 263 100
3 841 121 2 932 960
R`000 Administrative
Sectoral segments Industrial and corporate Total
Revenue 97 908 637 051
Revenue 98 611 640 640
Allowance for future rental (703) (3 589)
escalations
Segmental result
Operating profit 69 434 (63 866) 292 802
Investment properties 1 366 200 8 140 281
Geographical segments
Revenue
- Gauteng 72 034 449 869
- Western and Eastern Cape 11 406 70 088
- KwaZulu-Natal 14 468 78 333
- Free State 38 761
97 908 637 051
Investment properties
- Gauteng 1 024 200 5 790 029
- Western and Eastern Cape 166 500 1 043 451
- KwaZulu-Natal 175 500 910 409
- Free State 396 392
1 366 200 8 140 281
Condensed consolidated statement of changes in equity
Revaluation
Participatory and other
R`000 interest reserves
Balance at 1 July 2010 3 511 484 2 015 526
Participatory units issued 244 442
Non-controlling interest in subsidiary
acquired
Total comprehensive income for the period
Distribution to participatory interest
holders
Transfer to fair value reserve (net of 104 656
taxation)
Balance at 31 December 2010 3 755 926 2 120 182
Balance at 1 July 2011 3 755 926 2 081 521
Participatory units repurchased (18 110)
Total comprehensive income for the period
Distribution to participatory interest
holders
Transfer to fair value reserve (net of (115 154)
taxation)
Balance at 31 December 2011 3 737 816 1 966 367
Condensed consolidated statement of changes in equity continued
Non-
Retained controlling
R`000 earnings interest Total
Balance at 1 July 2010 (1 345) - 5 525 665
Participatory units issued 244 442
Non-controlling interest in 4 636 4 636
subsidiary acquired
Total comprehensive income for the 251 350 251 350
period
Distribution to participatory (280 (280 472)
interest holders 472)
Transfer to fair value reserve (net (104 -
of taxation) 656)
Balance at 31 December 2010 (135 123) 4 636 5 745 621
Balance at 1 July 2011 (1 356) 3 759 5 839 850
Participatory units repurchased (18 110)
Total comprehensive income for the 157 376 157 376
period
Distribution to participatory (272 (272 530)
interest holders 530)
Transfer to fair value reserve (net 115 154 -
of taxation)
Balance at 31 December 2011 (1 356) 3 759 5 706 586
Commentary
The Board of directors of Strategic Real Estate Managers (Proprietary)
Limited ("STREM") hereby announces a distribution of 53,81 cents per Emira
participatory interest (PI) for the six months to 31 December 2011. This is
a reduction of 2,5% on the previous comparable period, which is in line with
the prospects statement in the Fund`s June 2011 results announcement
released in August 2011, and represents an income return for the six months
of 4,4%, being distributions actually paid out during the period under
review. Emira is the 6th most traded listed property fund on the JSE by
value, with R1,3 billion traded in the six month period.
The highlight of the financial year-to-date has been a restructuring of a
significant portion of the Fund`s debt together with the raising of new
facilities, totalling R1,2 billion. On 12 August 2011, Emira raised funding
of R500 million, by way of a four-year secured AA rated corporate bond, at
three month JIBAR plus an all in margin of 163 basis points. The funds were
used to repay the R500 million that was raised through the Freestone Finance
Series 1 commercial mortgage backed securitisation (CMBS) in 2006. Although
the margin payable on the corporate bond is higher than that paid on the
CMBS, the facility is for four years, resulting in Emira`s debt facilities
now being staggered between 2013 and 2019, reducing risk to Emira PI
holders. A new R500 million facility was also raised with Rand Merchant
Bank, which will be used for the capital requirements of the Fund as
outlined below. Furthermore, the R200 million Nedbank redeemable preference
share facility was repaid on 2 February 2012, by way of a new three-year
term loan received from Nedbank, which bears interest at three month JIBAR
plus a margin of 155 basis points.
In November 2011 the Board approved the implementation of a PI repurchase
programme and at the annual general meeting of the Fund this programme also
received the necessary support of Emira PI holders. In terms of the
programme, the proceeds from the sale of properties will be used to
repurchase PIs in the open market, which is expected to be earnings
enhancing to the Fund. By 31 December 2011 Emira had repurchased 1 543 941
PIs in the open market at a cost of R18,1 million, an average of R11,73 per
PI. The PIs were cancelled in January 2012, resulting in a small net benefit
to the Fund in the period to December 2011.
During the period, a significant amount of effort has gone into improving
the quality of the Emira portfolio. Not only has there been a greater focus
on reducing vacancies, retaining tenants and improving the quality of the
existing buildings, but the asset management team has been expanded to
improve the skills within the Fund. Moreover, in line with the long-term
strategy of the Fund, the quality of the Emira portfolio continues to be
improved through (i) the disposal of those properties deemed to be non-core
(ii) the acquisition of new properties and (iii) the refurbishment of
existing assets.
Disposals
The strategy to dispose of non-core buildings was met with some good success
during the period, with 11 buildings being transferred out of the Fund or
sold unconditionally for a total of R266,3 million - Crocker Road Industrial
Park, Flexitainer, Ciros House, Umhlanga Centre, Dresdner House, Hurlingham
Office Park, Linkview and a unit at Georgian Place were all transferred for
a total of R210,6 million, while three further properties have been sold
unconditionally but not yet transferred - Century Gate, Starsky House and
Gift Acres - for a total of R55,7 million. A further 15 non-core properties,
worth approximately R636,1 million remain on the disposal list.
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 below, acquisitions or, in the event
that the returns are sufficiently rewarding, PI repurchases.
Acquisitions
As was reported previously, in January 2011 the Board approved the
acquisition of a new 13 782mSquared A grade office building being developed
by Eris Property Group, on the corner of Corobay Avenue and Aramist Avenue,
in Menlyn Pretoria, for R306,9 million. The development of the building,
which is 70% pre-let to KV3 Engineers for 10 years and has a one-year gross
rental warranty on the balance of the vacant space from completion from the
developer, is well advanced and is expected to be complete by 30 June 2012
and to yield 9,1% per annum. Emira has also agreed to acquire two high
quality, well located A-grade office buildings for a total of R254 million,
although these transactions are still conditional on the conclusion of
certain suspensive conditions.
These acquisitions are in line with the Fund`s policy of reducing its
exposure to B-grade office space and increasing the quality of its portfolio
by buying large, high quality properties.
Refurbishments and extensions underway
Several other projects worth approximately R300,6 million are underway, the
most significant of which include (i) the redevelopment of Podium at Menlyn,
comprising the construction of 9 239m2 of prime, ideally located 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 opposite
the Gautrain station in Centurion (R36,3 million) (iii) the construction of
a new Audi dealership with a ten-year lease and refurbishment of the Virgin
Active at Cresta Corner (R31,3 million) (iv) the extensions to Market Square
Shopping Centre for Edgars and Clicks (R28,8 million), and (v) the
refurbishment of Albury Office Park in Dunkeld West (R19,4 million). The
Fund is actively marketing the vacant space at Podium at Menlyn and expects
progress to be made in this regard by the time the development is completed
in April.
Refurbishments and extensions approved
The following projects have been approved by the Board and should commence
shortly: (i) the expansion of the Woolworths Food store at Boskruin Shopping
Centre for approximately R10 million and (ii) the reconfiguration of tenants
at Lynnridge Mall for approximately R9,5 million.
In July 2011 Emira invested a further R61 million in Growthpoint Properties
Australia (GOZ), an Australian property trust listed on the Australian Stock
Exchange, by acquiring 4,4 million stapled securities at a price of AUD$1,90
per stapled security, through its participation in the AUD$102,7 million
rights issue by GOZ, to facilitate its acquisition of Rabinov Property Trust
and to reduce its level of gearing. This took Emira`s current holding in GOZ
to 23,8 million stapled securities, or 6,3% of the GOZ securities in issue.
This was valued at R382 million at 31 December 2011 compared to the cost to
the Fund of R296 million.
Results
As expected, conditions in the period under review remained tough, with
tenants, particularly in the office sector, unwilling to commit to new space
due to the uncertainty surrounding global and local economic growth. Rentals
continued to be under pressure and landlords needed to be competitive when
trying to attract or retain tenants, particularly in the office sector. In
contrast, the industrial sector continued to perform well, with vacancies
declining notably.
Although income from the listed property investment rose and management
expenses declined as a result of the amendments to the Trust Deed approved
by PI holders in September 2010, distributions payable declined fractionally
due to muted net property income growth and rising finance costs following
the increased level of debt in the Fund due to on-going capital expenditure
and acquisitions.
Vacancies decreased from 11,5% in June 2011 to 11,3% by December 2011 as a
result of a pleasing decline in vacancies within the industrial portfolio,
as well as the sale and transfer of non-core buildings during the period. On
an adjusted basis (excluding properties under refurbishment or
redevelopment), vacancies declined from 10,3% to 10,0%.
Excluding the straight-line adjustments from future rental escalations,
revenue rose by 4,8% over the comparable period. This was the result of
organic growth in income from the existing portfolio, the conclusion of
several capital projects in the previous financial year which contributed
for the full period under review, increased recoveries of municipal
expenses, offset slightly by the disposal of several properties listed
below. Excluding municipal recoveries, revenue growth would have been 2%.
Contractual cost escalations were well managed, however growth in net
property income was impacted by sharply rising municipal charges, a
substantial increase in building maintenance, higher leasing charges on the
comparable period and significantly higher refurbishment costs. The net
effect is that property expenses rose by 12,2% and net income from
properties was 0,3% higher. Excluding the increase in municipal charges,
maintenance, leasing charges and refurbishments, property expenses rose by
5,7%, in line with inflation.
The income from the listed investment of R16,0 million, representing the
Fund`s holding in Growthpoint Australia (GOZ), represents the distributions
from GOZ for the period to 31 December 2011 and shows an increase of 8,8%
year-on-year. The like-on-like increase from this investment - excluding the
additional distribution included in December 2010 income and also the income
from the GOZ rights offer that took place in July 2011 - amounted to 16,5%,
illustrating the benefits of diversification for Emira PI holders of this
investment.
Asset management expenses declined by 32,7% on the comparable period,
following the amendment to the service charge payable to STREM in September
2010. Net interest costs excluding unrealised gains or losses on interest-
rate swaps as well as capitalised interest rose by 15,9% as a result of
increased levels of gearing in the Fund.
Net asset value declined by 2,0% in the six months from 1150 cents (1181
cents excluding the deferred tax provision) at 30 June 2011 to 1127 cents
(1156 cents), largely as a result of the payment of the balance owing to
STREM in respect of the amendment to the service charge arrangement, the
repurchase of PIs during the period and the deficits on interest rate swaps
and investment property revaluations.
Distribution statement
Six months Six months
ended ended
R`000 31 Dec 2011 31 Dec 2010
Operating lease rental income and tenant 640 640 611 484
recoveries excluding straight-lining of
leases
Property expenses excluding amortised (255 190) (227 363)
upfront lease costs
Net property income 385 450 384 121
Income from listed investment 15 969 14 678
Per statement of comprehensive income 15 969 10 050
Pre-acquisition income received - 4 628
Management expenses (8 746) (12 992)
Per statement of comprehensive income - (8 418)
Reimbursement to STREM in respect of (8 746) (4 574)
management expenses
Administration expenses (23 572) (22 605)
Per statement of comprehensive income (32 357) (27 230)
Management expenses incurred by STREM 8 785 4 625
included in the above
Depreciation (5 211) (3 884)
Net finance costs (91 360) (78 846)
Finance costs (93 975) (86 253)
Interest paid and amortised borrowing costs (99 546) (81 260)
Interest capitalised to the cost of 11 925 1 808
developments
Preference share dividends paid (5 776) (6 183)
STC on preference share dividends paid (578) (618)
Investment income 2 615 7 407
Per statement of comprehensive income 2 654 3 351
Investment income earned by STREM (39) (51)
Claw-back of distribution in respect of - 4 107
participatory interests issued cum
distribution
Distribution payable to participatory 272 530 280 472
interest holders
Number of units in issue 506 466 288 508 010 229
Distribution per participatory interest 53,81 55,21
(cents)
Distribution statement continued
Year
% ended
R`000 change 30 Jun 2011
Operating lease rental income and tenant 4,8 1 232 911
recoveries excluding straight-lining of
leases
Property expenses excluding amortised 12,2 (441 113)
upfront lease costs
Net property income 0,3 791 798
Income from listed investment 8,8 27 001
Per statement of comprehensive income 58,9 22 373
Pre-acquisition income received (100,0) 4 628
Management expenses (32,7) (20 085)
Per statement of comprehensive income (100,0) (8 418)
Reimbursement to STREM in respect of 91,2 (11 667)
management expenses
Administration expenses 4,3 (45 244)
Per statement of comprehensive income 18,8 (57 013)
Management expenses incurred by STREM 89,9 11 769
included in the above
Depreciation 34,2 (9 805)
Net finance costs 15,9 (166 972)
Finance costs 9,0 (177 075)
Interest paid and amortised borrowing costs 22,5 (168 106)
Interest capitalised to the cost of 559,6 4 115
developments
Preference share dividends paid (6,6) (11 895)
STC on preference share dividends paid (6,5) (1 189)
Investment income (64,7) 10 103
Per statement of comprehensive income (20,8) 6 098
Investment income earned by STREM (23,5) (102)
Claw-back of distribution in respect of (100,0) 4 107
participatory interests issued cum
distribution
Distribution payable to participatory (2,8) 576 693
interest holders
Number of units in issue (0,3) 508 010 229
Distribution per participatory interest (2,5) 113,52
(cents)
Directorate
Following the granting of regulatory approval, Mr Vuyisa Nkonyeni, the
deputy CEO of Kagiso Tiso Holdings, was appointed to the Board as a non-
executive director on 24 August 2011, in place of Mr Nkunku Sowazi, who
resigned on that date.
Mrs Ulana van Biljon was appointed as an executive director on 14 February
2012. On the same day Mr Warren Schultze, who was previously an executive
director, became a non-executive director.
Prospects
The take up of vacancies in the portfolio remains key to the future
performance of the Fund. Although there appears to be improved interest from
tenants in the early part of 2012, they have been reluctant to commit to
new, long-term leases and improved clarity on local and global economic
growth is required for vacancies to begin to show a material improvement.
Expectations are that the performance for the financial year ending 30 June
2012 will show a similar trend to that for the six months to 31 December
2011, with subdued gross income growth, relatively high increases in
property expenses and increasing interest costs, partially offset by
benefits from the Fund`s offshore investment and from the amendments to its
management agreement. As a result, the level of distributions from the Fund
for the financial year is still expected to be below that achieved in the 12
months to 30 June 2011. The forecast financial information on which this
statement has been based has not been reviewed and reported on by the Fund`s
auditors.
Income distribution declaration
Notice is hereby given that an interim cash distribution of 53,81 cents
(2010: 55,21 cents) per participatory interest has been declared payable to
participatory interest holders, on 12 March 2012. 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, 2 March 2012
Participatory interests trade ex distribution Monday, 5 March 2012
Record date Friday, 9 March 2012
Payment date Monday, 12 March 2012
PI certificates may not be dematerialised or rematerialised between Monday,
5 March 2012 and Friday, 9 March 2012, both days inclusive.
By order of the STREM Board
Martin Harris
Company Secretary
Ben van der Ross
Chairman
James Templeton
Chief Executive Officer
Sandton
14 February 2011
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
2011
Property Sector Location
Georgian Place (Section 17) Office Kelvin, Gauteng
Crocker Road Industrial Park Industrial Wadeville, Gauteng
Flexitainer Industrial Midrand, Gauteng
Ciros House Office Sandton, Gauteng
Umhlanga Centre Retail Umhlanga, KwaZulu-Natal
Dresdner House Office Sandton, Gauteng
Hurlingham Office Park Office Hurlingham, Gauteng
Linkview Office Randburg, Gauteng
Properties transferred out of Emira during the six months to December
2011 continued
Valuation Sale Exit
GLA Jun `11 price yield Effective
(m2) (Rm) (Rm) (%) date
709 3,1 3,1 9,3 26 July 2011
9 882 22,0 22,0 11,6 25 August 2011
1 725 6,5 6,5 12,6 13 October 2011
1 803 9,7 9,7 13,3 19 October 2011
5 816 35,7 37,5 8,9 15 November 2011
886 11,2 11,2 4,5 1 December 2011
16 206 113,3 113,3 9,3 8 December 2011
1 496 7,3 7,3 11,3 8 December 2011
210,6 9,6
Properties sold but not yet transferred out of Emira at December 2011
Property Sector Location
Century Gate Office Century City, Western Cape
Starsky House Industrial Kramerville, Gauteng
Gift Acres Retail Lynnwood Ridge, Gauteng
Properties sold but not yet transferred out of Emira at December 2011
continued
Valuation Sale Exit Anticipated
GLA Jun `11 price yield effective
(m2) (Rm) (Rm) (%) date
1 366 8,5 8,7 10,7 February 2012
2 450 7,0 7,0 14,1 February 2012
8 982 65,3 40,0 6,2 March 2012
55,7 7,9
Vacancies
Vacancies decreased from 11,5% in June 2011 to 11,3% by December 2011, with
the office and retail sectors experiencing tougher letting conditions, while
demand for industrial space showed a significant improvement. If the
vacancies in the buildings that are currently either under refurbishment or
pending refurbishment (FNB Heerengracht (6 519m2 office), 267 West (5 225m2
office), Albury Office Park (2 001m2 office), Cresta Corner (1 945m2
retail), Market Square (2 921m2 retail) and Park Boulevard (1 512m2 retail)
are removed, adjusted portfolio vacancies drop to 10,0%.
Office vacancies rose from 18,4% to 19,8% (17,5% adjusted), with the major
vacancies, besides those mentioned above, being located in Oracle House (5
922m2), Braamfontein Centre (5 541m2) Fleetway House (4 924m2) and Woodmead
Office Park (4 444m2).
Retail vacancies increased from 7,5% to 8,2% (7,1% adjusted) - Lynnridge
Mall (4 172m2), Worldwear Shopping Centre (3 691m2), Gift Acres (2 930m2)
and Montana Value Centre (2 769m2).
Industrial vacancies decreased from 7,2% to 4,4% - Industrial Village Kya
Sands (3 680m2), Highway Business Park IST (2 428m2) and Executive City (2
424m2).
Number
of Jun `11 Vacancy
buildings GLA (m2) Jun `11 %
Office 73 443 802 81 761 18,4
Retail 40 387 455 29 072 7,5
Industrial 48 354 823 25 494 7,2
Total 161 1 186 080 136 327 11,5
Number
of Dec `11 Vacancy
buildings GLA (m2) Dec `11 %
Office 68 419 961 83 028 19,8
Retail 39 387 736 31 741 8,2
Industrial 43 342 908 14 935 4,4
Total 150 1 150 605 129 704 11,3
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, directors valuations are used.
Total portfolio movement
Jun `11 Dec `11
Sector (R`000) R/m2 (R`000)
Office 3 794 720 8 550 3 584 087
Retail 2 905 769 7 500 2 932 960
Industrial 1 345 723 3 793 1 366 200
Property under development 130 996 257 034
8 177 208 8 140 281
Total portfolio movement continued
Difference Difference
Sector R/m2 (%) R`000
Office 8 534 (5,6) (210 633)
Retail 7 564 0,9 27 191
Industrial 3 984 1,5 20 477
Property under development 96,2 126 038
(36 927)
Investment properties decreased by R36,9 million made up of capital
expenditure including capitalised interest of R194,6 million, less disposals
of R210,6 million, depreciation of R5,2 million and a net downward revision
in property values of R15,7 million.
Debt
Emira has a relatively low level of gearing of 24,5%, with available debt
facilities at attractive margins which will enable the Fund to acquire good
quality properties with sustainable income streams.
A new three year, R500 million facility at the three month JIBAR rate plus
153 basis points has been arranged with Rand Merchant Bank, which was used
to redeem the Freestone securitisation notes in June 2011. This loan was
repaid on 19 August 2011, using the proceeds of a new issue of Domestic
Medium Term Notes (DMTN) which were auctioned on 12 August 2011. The
facility is now being used to fund the Corobay and Podium projects which are
currently underway.
The R200 million preference share issue to Nedbank was redeemed on 2
February 2012 out of a new three year term loan granted by Nedbank, at the
three month JIBAR rate plus 155 basis points.
Emira has entered into various swap agreements a summary of which is set out
below. As a result, 103,8% of the Fund`s debt at 31 December 2011 has been
fixed for periods of between four and 13 years. As at 31 December 2011, the
weighted average cost of debt equated to 9,83%.
Weighted Weighted Amount %
average rate average term (R`m) of debt
%
Debt- Swaps 9,73 7 years 7 2 216,6 103,8
months
Debt- Floating 7,11 (80,7) (3,8)
Total 9,83 2135,9 100,0
Less: Costs (6,0)
capitalised not yet
amortised
Per balance sheet 2129,9
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*, V Nkonyeni*, WK Schultze*, PJ Thurling, U van
Biljon *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: 15/02/2012 16:47:01 Supplied by www.sharenet.co.za
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