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CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012
SA CORPORATE REAL ESTATE FUND
SA Corporate Real Estate Fund
("SA Corporate" or "the Fund")
(Incorporated in the Republic of South Africa)
Share Code: SAC ISIN Code: ZAE000083614
A Collective Investment Scheme in property registered in terms of the
Collective
Investment Schemes Control Act, No. 45 of 2002 and managed by SA Corporate
Real
Estate Fund Managers Limited ("SA Corporate Fund Managers")
(Registration number 1994/009895/06)
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS
ENDED 30 JUNE 2012
Interim distribution growth
- 5.7% higher than June 2011
- 4.8% higher than December 2011
Gearing
- Low gearing of 17.8%
- 98.5% of debt is fixed
Portfolio activity
- Disposal of 10 properties for R547,0m
- Disposal of investment in associate for R178,2m
Property performance
- Overall retention increased to 84.7%
- Reversions increased to 3.6%
1. INTRODUCTION
SA Corporate Real Estate Fund is a JSE listed Property Unit Trust which owns a
portfolio of retail, industrial and commercial buildings located primarily in
the major metropolitan areas of South Africa.
2. REVIEW FINANCIAL RESULTS AND PORTFOLIO PERFORMANCE
The distribution for the first half of the year to June 2012 (15.17cpu)
increased by 5.7% relative to the comparable period in June 2011 (14.35 cpu)
and increased by 4.8% relative to the second half of 2011 (14.48 cpu). The
premium to net asset value (“NAV”) improved to 3.2% at June 2012 (NAV: 330cpu,
Unit price: 341cpu), compared to a discount of 4.2% at June 2011.
Industrial rental growth (8.3%) was underpinned by solid tenant retentions of
85.0% combined with positive rental reversions. Retail rental income decreased
by 3.8%. The reduction is attributable to a combination of the impact of
disposals and a 1.3% increase in vacancies. Retail rental income on the
standing portfolio has improved from 1.1% dilution as at June 2011 to 4.7%
growth as at June 2012, arising from improved retentions (82.2%) and positive
reversions (1.1%). Commercial rental income increased by 8.5%, this is
underpinned by reduced vacancies (14.5%), retentions of 93.1% and 5.2%
positive reversions.
The total standing portfolio rental (excluding recoveries and turnover rental)
increased by 7.5%, mainly due to improved tenant retention and positive rental
reversions.
SA Corporate's investment in Oryx Properties Limited (“Oryx”) was disposed of
during the period which resulted in the income from the associate for the 6
months ended June 2012, decrease by 83.4% compared to the same period last
year. The proceeds have been used to fund the unit buy-back and settle a
R100m loan with an interest rate of 10.57%. This resulted in an enhanced
distribution.
Property expenses increased by 4.0% compared to June 2011. Municipal costs
representing 59.1% of property expenses increased by 5.3%, due to an increase
in electricity and water cost of 13.3% and 7.0% respectively. Bad debts
decreased by 46.6% (R7.4m) compared to June 2011 (R13.8m).
Net interest paid decreased by 10.0% for the 6 months to June 2012 compared to
the same period in 2011. The reduction is attributable to the injection of
disposal proceeds into flexible debt facilities and early settlement of more
expensive debt.
The breakdown of distributable earnings is set out below:
6 months to 6 months to 12 months to
30.06.2012 30.06.2011 31.12.2011
DISTRIBUTABLE EARNINGS (R000) Unaudited Unaudited Audited
Rent (excluding straight line rental
adjustment) 448,382 438,792 891,049
Net property expenses (56,074) (57,440) (116,082)
Property expenses (216,693) (208,433) (431,781)
Recovery of property expenses 160,619 150,993 315,699
Net property income 392,308 381,352 774,967
Taxation on distributable income 698 (440) (93)
Interest income from associate
company (Oryx) 1,402 8,468 16,970
Net funding cost (61,589) (68,431) (140,564)
Interest received 12,115 11,261 23,597
Interest paid (73,704) (79,692) (164,161)
Fund expenses (22,481) (22,158) (50,998)
Other - - (80)
Lapsed distribution on units buy-back 795 - -
Distributable earnings 311,133 298,791 600,202
Units in issue (000) 2,050,917 2,081,869 2,081,869
Distribution (cents per unit) 15.17 14.35 28.83
- Interim 15.17 14.35 14.35
- Final - - 14.48
3. PROPERTY VALUATIONS
The value of the Fund's independently valued property portfolio decreased by
R548,3m to R8,0bn as at June 2012 (December 2011: R8,6bn). The standing
portfolio, representing properties held for the full 12 months in June 2012,
decreased by R36m (0.5%) from December 2011.
The capitalisation and discount rates used for the valuations in the Fund's
standing portfolio at June 2012 were as follows:
Property type Capitalisation Discount rate (%) Change in standing
rate (%) portfolio (%)
30.06.2012 31.12.2011 30.06.2012 31.12.2011 30.06.2012 31.12.2011
Retail 9.4 9.5 15.4 15.5 (2.9) (2.1)
Industrial 9.8 9.9 15.9 15.9 1.8 4.3
Commercial 10.0 10.0 16.0 16.0 0.3 (0.8)
Portfolio total 9.7 9.7 15.7 15.7 (0.5) 0.7
The portfolio valuation gives rise to a NAV of 330cpu, a 4.9% decrease
compared to June 2011 (347cpu).
4. PORTFOLIO INVESTMENT ACTIVITY
The portfolio comprised 147 properties (159 properties as at June 2011 and 157
properties as at December 2011). The sectoral and geographic weightings by
value are set out below:
Sectoral Spread
Retail
48%
R3,9bn
454 988m2
36 properties
Industrial
43%
R3,4bn
695 220m2
89 properties
Commercial
9%
R0,7bn
94 994m2
22 properties
Geographic Spread
Gauteng
47%
R3,7bn
615 569m2
68 properties
KwaZulu-Natal
42%
R3,4bn
500 717m2
59 properties
Western Cape
9%
R0,7bn
104 423m2
14 properties
Other
2%
R0,2bn
24 494m2
6 properties
Development activity during the period.
Developments Cost (Rm) Completion Yield Sector Region
date forecast 1st
12 months
(%)
Musgrave Shopping
Centre, Durban 144 04/2012 7.3 Retail KwaZulu-
Natal
Hayfields Mall,
Pietermaritzburg 22 07/2012 9.0 Retail KwaZulu-
Natal
Whirlprops 25 (Pty)
Ltd, Durban 20 07/2012 9.3 Industrial KwaZulu-
Natal
8 Paul Smith Street,
Anderbolt 17 10/2012 10.0 Industrial Gauteng
There were no acquisitions for the 6 months ending 30 June 2012.
Disposals recognised during the period.
Properties Transfer Proceeds Carrying Exit yield
date (Rm) value at on sale
date of price (%)
sale (Rm)
Highland Mews Shopping
Centre, Witbank 06/2012 130,0 136,9 10.1
Renbro Shopping Centre,
Pretoria 06/2012 107,0 103,5 8.3
Hubyeni Shopping Centre,
Limpopo 06/2012 80,8 80,8 10.0
The Village Centre,
Richdens 05/2012 79,6 80,0 9.6
Van Riebeeckshof Shopping
Centre, Belville 06/2012 38,0 37,6 9.8
Nzhelele Valley Shopping
Centre, Makhado 06/2012 30,6 29,7 7.6
Ermelo Game Centre, Ermelo 06/2012 26,0 26,3 9.2
Dube Village Mall, Inanda 06/2012 25,0 27,9 9.0
6 Lanner Road, Durban 01/2012 22,5 22,5 7.0
94 Intersite Avenue, Durban 01/2012 7,5 7,5 8.1
547,0 552,7 9.3
Investment in Oryx
Properties Limited 01/2012 178,2 178,2 *10.2
Total Disposals 725,2 730,9 9.48
* Historic yield
5. LEASE EXPIRIES AND VACANCIES
Vacancies in terms of rentable area and rental income were as follows:
Property type Vacancy as % of GLA Vacancy as % of rental income
30.06.2012 31.12.2011 30.06.2011 30.06.2012 31.12.2011 30.06.2011
Retail 11.5 9.7 10.2 5.9 6.6 9.6
Industrial 3.7 1.4 1.7 2.2 1.5 1.4
Commercial 14.5 13.6 17.2 9.5 9.2 16.2
Portfolio total 7.4 5.6 6.3 4.9 5.0 7.1
* GLA=Gross lettable area
Retail vacancies (11.5%) increased since June 2011 (10.2%) predominantly due
to disposals, large box tenant failures and strategic areas held for expansion
for existing and prospective tenants. Refurbishment projects have contributed
positively to the overall occupancy levels.
The Fund's industrial vacancy as at June 2012 was 3.7% (June 2011: 1.7%).
Minimal speculative industrial development together with the quality of the
portfolio ensured that the industrial portfolio remains well let and better
than the sector average. The increase in the vacancy rate is as a result of
space not renewed and reported as vacant as at June 2012. This space has been
largely re-let and vacancy levels should remain constant at around 2.0% to
2.5% of the total industrial portfolio.
The commercial vacancy (including commercial in retail) as at June 2012 was
14.5% marginally up from December 2011 (December 2011: 13.6%) but much
improved from the June 2011 vacancy rate for the commercial portfolio of
17.2%. A high proportion of the Fund's commercial vacancies relate to office
space in retail centres. The over supplied office market remains challenging
particularly with regard to B and C grade office buildings which highlights
the two-tiered market which has developed, with prime space performing much
better than buildings of B and C grade quality.
The lease expiry profile and vacancies (by GLA) are set out below:
Property Vacant (%) Expiring (%)
type Monthly 2012 2013 2014 2015 Thereafter
Retail 11.5 5.7 13.0 16.6 18.0 16.7 18.4
Industrial 3.7 2.2 12.4 18.8 12.7 17.6 32.6
Commercial 14.5 3.3 15.2 18.0 13.0 13.7 22.2
Total 7.4 3.6 12.8 18.0 14.7 17.0 26.6
6. TENANT RETENTION AND RENTAL REVERSION
The table below reflects the Fund retention ratio and rental reversion per
sector for a rolling 12 month period ending June 2012:
Property type Expiries (m2) Retention (m2) Retention (%) Retention
reversion (%)
Retail 80,600 66,219 82.2 1.1
Industrial 166,670 141,679 85.0 6.1
Commercial 17,471 16,259 93.1 5.2
Total 264,741 224,157 84.7 3.6
7. BORROWINGS
Gearing remained low with debt amounting to 17.8% of the total portfolio (June
2011: 20.2%). 98.5% of the debt is fixed, with the earliest fix expiring in
December 2012. The debt profile is detailed below:
Type Maturity Fixed Rm Interest Swap
date expiry Rate
date (%)
Fixed 31.12.2012 31.12.2012 500 8.53 Yes
Fixed 11.09.2014 05.06.2013 400 9.74 Yes
Fixed 13.08.2013 31.07.2014 270 9.07 Yes
Fixed 13.08.2013 31.07.2014 30 9.07 Yes
Fixed 29.04.2015 31.07.2015 200 10.09 Yes
Variable 25.07.2016 25.07.2016 21 7.87 No
Total 1,421 9.20
The Fund has an additional R200m floating facility, of which R21.4m was
partially used to fund capital expenditure.
8. PROSPECTS
Business conditions remain very tight and, even taking into account the
possible positive spin-offs of the reduction in the repo rate announced by the
SA Reserve Bank (“SARB”) recently, are expected to remain tight for the
foreseeable future. This is a result of the fact that the world economy is
barely growing due to, inter alia, the European crisis which seems to be far
from over and, although it appears as if Greece have managed to pull back from
disaster, there is evidence that there are similar problems in Italy and
Spain. In addition, the US economy remains sluggish and SARB has reduced its
forecast for the South African GDP growth.
In spite of this, there are signs that vacancies are coming down and there are
indications that rentals are growing, albeit at a pedestrian pace. This growth
is evident in the industrial portfolio which has been performing well and is
expected to continue to do so. In contrast to this, the retail portfolio in
Gauteng remains under pressure. On the positive side, there are signs that the
retail portfolio in KwaZulu-Natal has turned the corner and it is expected
that it should perform to expectations.
Although we are expecting an improved performance from the property portfolio,
it is anticipated that the relatively high volume of sales out of the
portfolio which have not yet been countered by acquisitions, will continue to
have a negative effect on distribution growth. In spite of this, the Board is
of the opinion that the Fund should be able to deliver positive growth in
distributions for the full year.
9. CONDENSED CONSOLIDATED STATEMENT 30.06.2012 30.06.2011 31.12.2011
OF FINANCIAL POSITION (R000) Unaudited Unaudited Audited
Assets
Non-current assets 7,645,819 8,681,765 8,036,164
Investment property 7,418,385 8,330,417 7,812,992
- At valuation 6,757,925 7,603,000 7,178,125
- Straight line rental adjustment (214,440) (208,783) (210,833)
- Under development 874,900 936,200 845,700
Letting commission 26,404 *23,358 41,114
Investment in associate - 157,154 -
Rental receivable straight line
adjustment 190,199 170,836 182,058
Interest rate swap derivative 10,831 - -
Current assets 1,209,116 962,651 1,269,891
Properties held for disposal 370,400 243,788 527,700
Investment in associate held for
disposal - - 175,208
Trade receivables 18,042 19,900 26,555
Other receivables and accrued interest 130,626 *140,125 138,002
Rental receivable straight line
adjustment 24,240 37,947 28,775
Capital gains taxation 824 - -
Cash and cash equivalents 664,984 520,891 373,651
Total assets 8,854,935 9,644,416 9,306,055
Unitholders' funds and liabilities
Unitholders' funds 6,777,333 7,217,128 6,967,767
Non-current liabilities 1,062,767 1,625,029 1,332,077
Interest bearing borrowings 920,976 1,499,842 1,222,982
Interest rate swap derivative 29,227 *1,140 13,732
Deferred taxation 112,564 124,047 95,363
Current liabilities 1,014,835 802,259 1,006,211
Interest bearing borrowings 500,000 285,196 500,000
Trade and other payables 172,258 180,161 179,424
Capital gains taxation and secondary
taxation on companies 56 19,810 2,415
Unclaimed distributions 879 1,742 4,148
Distributions payable 311,133 298,791 301,411
Interest rate swap derivative 30,509 *16,559 18,813
Total unitholders' funds and
liabilities 8,854,935 9,644,416 9,306,055
NAV cpu 330 347 335
* Adjusted to disclose non-current letting commissions and interest rate swap
derivative in non-current assets and liabilities respectively.
6 months to 6 months to 12 months to
10. CONDENSED CONSOLIDATED STATEMENT 30.06.2012 30.06.2011 31.12.2011
OF COMPREHENSIVE INCOME (R000) Unaudited Unaudited Audited
Revenue 604,666 605,832 1,235,323
Income 618,183 632,692 1,300,061
Rent 448,382 438,792 891,049
Straight line rental adjustment (4,335) 16,047 28,575
Recovery of property expenses 160,619 150,993 315,699
Income from associate company 1,402 15,599 41,141
- Interest income 1,402 8,468 16,970
- Share of post-acquisition reserves - 7,131 24,171
Interest 12,115 11,261 23,597
Expenses (312,878) (310,283) (646,940)
Accounting and secretarial fees (2,943) (5,184) (10,205)
Audit fees (28) (799) (1,517)
Administrative fees (2,095) (2,122) (7,737)
Interest expense (73,704) (79,692) (164,161)
Property expenses (216,693) (208,433) (431,781)
Service fees (17,415) (14,053) (31,539)
Operating income 305,305 322,409 653,121
Revaluation of interest rate swap (16,360) 13,842 (1,004)
Debt restructure costs (19,002) (13,737) (27,473)
Capital (loss)/profit on disposal of
investment properties (13,422) 3,767 3,276
Revaluation of investment properties (46,379) 108,115 (28,892)
- Investment properties (50,714) 124,162 (317)
- Straight line rental adjustment 4,335 (16,047) (28,575)
Revaluation of investment property
under development 11,905 (36,750) (206,875)
Impairment of investment in associate - (5,869) (4,855)
Taxation
Taxation credit/(charge) (15,762) (15,330) 27,463
Net profit attributable to unitholders 206,285 376,447 414,761
Amortisation of debt restructure 13,737 13,737 27,473
Total comprehensive income attributable
to unitholders' 220,022 390,184 442,234
Headline earnings 270,388 323,102 626,191
Units in issue (000) 2,050,917 2,081,869 2,081,869
Weighted units in issue (000) 2,069,385 2,081,869 2,081,869
Cents Cents Cents
Distribution per unit 15.17 14.35 28.83
- Interim 15.17 14.35 14.35
- Final - - 14.48
Net profit per unit 10.06 18.08 19.92
- Interim 10.06 18.08 18.08
- Final - - 1.84
Headline earnings per unit 13.18 15.52 30.08
6 months to 6 months to 12 months to
11. CONDENSED CONSOLIDATED STATEMENT 30.06.2012 30.06.2011 31.12.2011
OF CHANGES IN UNITHOLDERS’ FUNDS (R000) Unaudited Unaudited Audited
Unitholders' funds at the beginning
of the 6 months 6,967,767 7,217,128 7,125,735
Unitholders' funds at the beginning
of the period 6,967,767 7,125,735 7,125,735
Total comprehensive income for the
period 220,022 390,184 442,234
Net profit for the period 206,285 376,447 414,761
Amortisation of debt restructure costs 13,737 13,737 27,473
Buy-back of units (100,000) - -
Unit buy-back cost (118) - -
Lapsed distribution on units buy-back 795 - -
Distribution attributable to
unitholders (311,133) (298,791) (600,202)
Unitholders' funds at the end of
the period 6,777,333 7,217,128 6,967,767
6 months to 6 months to 12 months to
12. CONDENSED CONSOLIDATED STATEMENT 30.06.2012 30.06.2011 31.12.2011
OF CASH FLOW (R000) Unaudited Unaudited Audited
Net cash flows from operating activities 32,386 *26,493 23,091
Net cash flows from investing activities 665,542 *83,212 1,430
Net cash flows from financing activities (406,595) 100,708 38,652
Net increase in cash 291,333 210,413 63,173
Cash resources at beginning of period 373,651 310,478 310,478
Cash resources at end of period 664,984 520,891 373,651
* Letting commission reflected in investing activities to align with
reclassification.
13. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial information has been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the AC 500
standards as issued by the Accounting Practices Board, the requirements of the
Collective Investment Schemes Control Act and the information as required by
IAS 34: Interim Financial Reporting. The results have been prepared using
accounting policies that are consistent with those applied in the financial
statements for the prior year.
13.1 Headline earnings and distribution attributable to unitholders
6 months to 6 months to 12 months to
30.06.2012 30.06.2011 31.12.2011
Unaudited Unaudited Audited
R 000 CPU R 000 CPU R 000 CPU
Net profit for the year 206,285 10.06 376,447 18.08 414,761 19.92
Adjustments for:
Capital loss/(profit) on
disposal of investment
properties 13,422 (3,767) (3,276)
Taxation on capital
profit on disposal of
investment properties (1,439) 11,057 (3,052)
Revaluation of investment
properties 46,379 (108,115) 28,892
Revaluation of investment
property under
development (11,905) 36,750 206,875
Taxation on revaluations 17,646 4,861 (22,864)
Impairment of investment
in associate - 5,869 4,855
Headline earnings 270,388 13.18 323,102 15.52 626,191 30.08
Straight line rental
adjustment 4,335 (16,047) (28,575)
Taxation on straight line
rental adjustment (445) (588) (1,547)
Share of associate company's
after tax profit - (7,131) (24,171)
Debt restructure costs 19,002 13,737 27,473
Other 698 (440) (173)
Lapsed distribution on
units buy-back 795 - -
Revaluation of interest
rate swap 16,360 (13,842) 1,004
Distributable income 311,133 298,791 600,202
Distributable income
attributable to
unitholders 311,133 15.17 298,791 14.35 600,202 28.83
Interim 311,133 15.17 298,791 14.35 298,791 14.35
Final - - - - 301,411 14.48
13.2 Segmental analysis (R000)
Business segment Industrial Commercial Retail Group
Extract from statement of
comprehensive income
Revenue 230,875 51,964 321,827 604,666
Rental income (excluding
straight line rental adjustment) 190,283 44,206 213,893 448,382
Net property expenses (14,889) (8,060) (33,125) (56,074)
Property expenses (40,404) (17,033) (159,256) (216,693)
Recovery of property expenses 25,515 8,973 126,131 160,619
Net property income 175,394 36,146 180,768 392,308
Straight line rental adjustment 15,077 (1,215) (18,197) (4,335)
Income from associate company - - - 1,402
Net interest paid - - - (61,589)
Debt restructure costs - - - (19,002)
Group expenses - - - (22,481)
Deferred taxation on straight
line rental adjustment (346) (12) 803 445
Revaluation of interest rate swap - - - (16,360)
Headline earnings 270,388
Properties 3,281,310 723,188 3,775,846 7,780,344
At valuation 3,283,200 729,000 2,745,725 6,757,925
Classified as held for
disposal 12,000 20,200 338,200 370,400
Under development 99,800 - 775,100 874,900
Straight line rental
adjustment (113,690) (26,012) (83,179) (222,881)
Revaluation of investment
properties excluding straight
line adjustment, net of
taxation 41,281 (2,168) (95,123) (56,010)
Segment growth rates Industrial Commercial Retail Group
% % % %
Rental income (excluding straight
line rental adjustment) 8.3 8.5 (3.8) 2.2
Property expenses 2.1 24.9 2.6 4.0
Recovery of property expenses (5.2) 32.7 5.1 6.4
Net property income 9.4 6.7 (3.4) 2.9
14. DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice is hereby given of the declaration of distribution no. 35 in respect of
the income distribution for the period 1 January 2012 to 30 June 2012. The
distribution amounts to 15.17 cpu and has been declared out of earnings. No
dividend withholding tax has been withheld.
Last date to trade cum distribution Thursday, 20 September 2012
Units will trade ex-distribution Friday, 21 September 2012
Record date to participate in the distribution Friday, 28 September 2012
Payment of distribution Monday, 01 October 2012
Unit certificates may not be dematerialised or re-materialised between Friday,
21 September and Friday, 28 September 2012 both days inclusive.
SA Corporate Real Estate Fund Managers Limited
Registered office
5th Floor
Mutual Park
Jan Smuts Drive
Pinelands
7405
PO Box 333
Mutual Park 7451
Tel: (021) 530-4500
Registered auditors
Deloitte & Touche
1st Floor
The Square
Cape Quarter
27 Somerset Road
Cape Town
8005
Transfer secretaries
Computershare Investor Services
(Pty) Ltd
Ground Floor
70 Marshall Street
Johannesburg
2001
PO Box 61051
Marshalltown
2107
Sponsor
Nedbank Capital
A division of Nedbank
Limited
135 Rivonia Road
Sandton
2196
Managed by Old Mutual Property
A licenced financial services provider
Directors: RJ Biesman-Simons (Acting Chairman), G van Zyl (Managing)*,
AM Basson (Finance)*, GP Dingaan, KJ Forbes, P Levett, SH Mia, R Morar,
ES Seedat
* Executive
OLD MUTUAL PROPERTY (PTY) LTD
SECRETARIES
20 August 2012
Date: 20/08/2012 11:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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