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Interim condensed financial results for the six months to 30 September 2012
Investec Property Fund Limited
(Registration number 2008/011366/06)
Share code: IPF
ISIN: ZAE000155099
Interim condensed financial results
for the six months to 30 September 2012
Highlights
- 7.1% distribution growth to 46.83 cpu
- 11.8% growth in property portfolio following two acquisitions during the period
- Debt capacity significantly enhanced with R1.0 billion DMTN programme now in place
- Successful R1.5 billion Rights Offer closed 5 November 2012 to fund new acquisitions post period end
Statement of comprehensive income
Unaudited Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'000 2012 2011 2012
Revenue, excluding straight-line rental
revenue adjustment 127 704 95 047 211 558
Straight-line rental revenue adjustment 15 192 11 863 30 507
Revenue 142 896 106 910 242 065
Property expenses (25 813) (16 386) (38 498)
Net property income 117 083 90 524 203 567
Other operating expenses (1 669) (1 321) (2 701)
Asset management fee (6 616) (4 303) (9 157)
Operating profit 108 798 84 900 191 709
Fair value adjustments (15 192) (11 863) (30 507)
Finance costs (20 047) (6 034)
Finance income 6 081 1 335 3 016
Profit before debenture interest 79 640 74 372 158 184
Debenture interest (79 561) (74 298) (158 026)
Profit before taxation 79 74 158
Taxation (22) (25) (49)
normal taxation (22) (25) (49)
deferred taxation charge (4 254) (3 322) (25 733)
deferred taxation credit 4 254 3 322 25 733
Total comprehensive income attributable
to equity holders 57 49 109
Reconciliation of attributable
income to distributable earnings
Total comprehensive income attributable to equity holders 57 49 109
Debenture interest 79 561 74 298 158 026
Distributable earnings to linked unitholders 79 618 74 347 158 135
debenture interest 79 561 74 298 158 026
ordinary dividend 57 49 109
Number of linked units
Linked units in issue at the end of the period 170 000 000 170 000 000 170 000 000
Weighted average number of linked units in issue 170 000 000 170 000 000 170 000 000
Cents
Distribution per linked unit 46.83 43.73 93.02
Earnings per linked unit 46.83 43.73 93.02
Headline earnings per linked unit 51.38 43.73 106.96
Dividend per share 0.03 0.03 0.06
Earnings per share 0.03 0.03 0.06
Headline earnings/(loss) per share 0.03 0.03 (52.08)
Statement of financial position
Unaudited Audited Reviewed
30 September 31 March 30 September
R'000 2012 2012 2011
Assets
Non-current assets 2 309 981 2 065 400 1 708 363
Investment property 2 264 282 2 034 893 1 696 500
Straight-line rental revenue adjustment 45 699 30 507 11 863
Current assets 111 976 16 634 92 910
Trade and other receivables 16 492 12 064 11 363
Taxation receivable 3 3
Cash and cash equivalents 95 481 4 567 81 547
Total assets 2 421 957 2 082 034 1 801 273
Equity and liabilities
Equity ordinary share capital 1 700 1 700 1 700
Non-current liabilities debentures 1 845 779 1 836 379 1 710 163
Total unitholders' interest 1 847 479 1 838 079 1 711 863
Other non-current liabilities 456 860 1 169
Long-term borrowings 450 000
Other non-current financial liabilities 6 860 1 169
Current liabilities 117 618 242 786 89 410
Trade and other payables 38 000 28 097 15 038
Current portion of other non-current liabilities 130 900
Taxation payable 25
Linked unitholders for interest and dividends 79 618 83 789 74 347
Total equity and liabilities 2 421 957 2 082 034 1 801 273
Condensed statement of cash flows
Unaudited Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'000 2012 2011 2012
Cash generated from operations 89 442 76 712 173 486
Finance income received 6 081 1 335 3 016
Finance costs paid (10 409) (2 285)
Taxation paid (22) (52)
Distribution paid to unitholders (83 789) (74 346)
Net cash inflow from operating activities 1 303 78 047 99 819
Net cash outflow from investing activities (229 389) (1 696 500) (1 926 152)
Net cash inflow from financing activities 319 000 1 700 000 1 830 900
Net increase in cash and cash equivalents 90 914 81 547 4 567
Cash and cash equivalents at the beginning
of the period 4 567
Cash and cash equivalents at the end
of the period 95 481 81 547 4 567
Condensed statement of changes in equity
Unaudited Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'000 2012 2011 2012
Balance at the beginning of the period 1 700
Total comprehensive income attributable to equity holders 57 49 109
Issue of ordinary shares 1 700 1 700
Dividends payable to ordinary shareholders (57) (49) (109)
Balance at the end of the period 1 700 1 700 1 700
Condensed segmental information
For the six months to
30 September 2012
R'000 Office Industrial Retail Total
Statement of comprehensive
income extracts
Revenue, excluding straight-line
rental revenue adjustment 64 355 49 569 13 780 127 704
Property expenses (12 280) (11 592) (1 941) (25 813)
Segment results 52 075 37 977 11 839 101 891
Statement of financial
position extracts
Investment property opening balance 1 182 600 697 300 185 500 2 065 400
Additions and acquisitions 1 658 80 039 147 692 229 389
Straight-line rental revenue adjustment 10 282 3 593 1 317 15 192
Fair value of investment property 1 194 540 780 932 334 509 2 309 981
For the six months to
30 September 2011
R'000 Office Industrial Retail Total
Statement of comprehensive
income extracts
Revenue, excluding straight-line
rental revenue adjustment 51 279 35 906 7 862 95 047
Property expenses (7 073) (9 157) (156) (16 386)
Segment results 44 206 26 749 7 706 78 661
Statement of financial
position extracts
Investment property opening balance
Additions and acquisitions 976 500 545 800 174 200 1 696 500
Straight-line rental revenue adjustment 6 760 3 957 1 146 11 863
Fair value of investment property 983 260 549 757 175 346 1 708 363
Commentary
Introduction
Investec Property Fund Limited (the "Fund") is a variable loan stock property company having listed on the JSE Limited
("JSE") on 14 April 2011. It currently comprises a portfolio of 34 properties in South Africa with a total Gross Lettable Area
("GLA") of 431 926 m(2) valued at R2.3 billion.
The objective of the Fund is to grow its asset base by investing in well-priced income-producing properties in the office,
industrial and retail sectors to optimise capital and income returns over time for unitholders. Effectively, all rental income,
less operating costs and interest on debt, is distributed to unitholders semi-annually. The Fund does not distribute
capital profits.
Financial results
The board of directors is pleased to announce a 7.1% increase in the interim dividend to 46.83 cents per unit ("cpu")
for the six months to 30 September 2012 (30 September 2011: 43.73 cpu). This has been achieved, despite a tough
economic and operating environment, through strong focus on tenant retention, renewals of lease expiries, marketing of
vacant space and the addition of yield-enhancing properties to the portfolio.
The financial results include the impact of a cash drag resulting from delays in the timing of property transfers, caused
primarily by delays in obtaining municipal clearances and other statutory requirements, which are out of the control of
the Fund.
Vacancy levels
At 30 September 2012, the property portfolio reported a 3.3% vacancy, representing a marginal increase from the
2.7% vacancy at 31 March 2012. The decline relates mainly to one office tenant vacating the Business Connexion
building (6 759 m(2)). Excluding this impact, the remainder of the portfolio showed a vacancy rate at period end of 1.8%,
with industrial vacancies reducing from 4.1% at 31 March 2012 to 2.6%, although the Fund expects a marginal uptick in
vacancy rates in this sector in the second half of the year. The increase in the retail vacancy rate is due to the enlarged
property portfolio.
Sectoral vacancies
Vacant Vacant
Total GLA 30 September 31 March
(m(2)) 2012 2012
Office 104 067 6.5% 0.0%
Industrial 279 737 2.6% 4.1%
Retail 48 122 0.7% 0.0%
Total 431 926 3.3% 2.7%
Forward lease expiries by GLA and revenue
The forward lease expiry profile of the Fund's portfolio for years ending 31 March is detailed below: (Please see press for graph)
Reconciliation of lease expiries with renewals and new leases
The table below provides a summary of lease expiries, renewals and new leases over the six month period from
1 April 2012 to 30 September 2012:
Average
Average gross rent
Expiries gross Renewals on renewals
and expiry and and new Average
cancellations rent new leases leases escalation
(m(2)) (Rm(2)) (m(2)) (Rm(2)) (%)
Office 6 759 80.04
Industrial 7 718 27.82 12 302 29.84 8.9
Retail 334 154.00
Total 14 811 52.72 12 302 29.84 8.9
The following table places the six month pattern of expiries, renewals and new leases within the context of an overall
reconciliation of change in the GLA of the Fund's combined portfolio:
GLA at Renewals Net GLA at
31 March and new change in 30 September
2012 Expiries leases GLA 2012
(m(2)) (m(2)) (m(2)) (m(2)) (m(2))
Leased 395 588 (14 811) 12 302 24 475 417 554
Vacant 11 118 12 598 (10 160) 816 14 372
Total 406 706 (2 213) 2 142 25 291 431 926
Acquisitions
During the period, the Fund made the following two acquisitions from third parties, both fully funded by debt:
Weighted
average
Transfer GLA Forward annual
date Cost (m(2)) yield escalation
General Electric
Property* 25 July 2012 R76.8 million 11 180 9.0% 8.5%
Great North Road
Plaza** 6 June 2012 R145.0 million 13 561 9.2% 8.3%
* The property is entirely let to General Electric South Africa Proprietary Limited, a wholly-owned subsidiary of
the General Electric Company. The lease is a triple net lease that expires in December 2019. In terms of the
sales agreement as announced on 17 November 2011, the Fund has undertaken the obligation of the Vendor
to refurbish the property for a total fixed cost of R42.3 million (the "Refurbishment"). The Fund entered into a
separate development agreement with Investec Property Limited, a related party, to effect this Refurbishment, with
an anticipated date of completion of December 2012.The Refurbishment will not adversely impact the forward yield
of the property.
** The property is located in Musina, a vibrant commercial retail trading centre in Northern Limpopo Province. National
tenants and national brand franchises occupy 88% of the combined space and contribute 83% of the contractual
income.
Fair value adjustments of investment properties
With the exception of the two recently acquired properties that were valued on acquisition, the entire property portfolio
was independently valued at 31 March 2012. As such, the board does not believe that a revaluation of the properties is
warranted for this reporting period, as the board is not aware of any factors which would materially affect the valuation
of the properties.
Arrears
Receivables have been tightly managed during the period under review and at the period end, arrears were limited to
0.2% (31 March 2012: 0.7%) of total collectables over the period.
Borrowings
At 30 September 2012, the Fund's loan to value ratio was 19.5% (31 March 2012: 6.3%) with R450 million of long-term
debt placed. In line with the Fund's hedging commitment, 75% of long-term borrowings have been fixed giving the Fund
a weighted average funding cost of 8.2%.
During the period, the Fund registered a R1 billion Domestic Medium Term Note ("DMTN") programme, of which
R450 million was placed, the repayment profile of which is set out below. Additionally, the Fund has in place a
R500 million bridge facility that at period end was unutilised. This bridge facility carries interest at JIBAR plus 2.25%.
DMTN programme Expiry Interest rate R'million
Tranche 1 13 April 2015 3-month JIBAR + 1.40% 134.0
Tranche 2 13 April 2016 3-month JIBAR + 1.55% 40.0
Tranche 3 13 April 2017 3-month JIBAR + 1.55% 50.0
Tranche 6 13 April 2017 Fixed at 8.80% 226.0
Total long-term borrowings 450.0
The Fund will continue to evaluate its optimal long-term debt funding strategy that will support the acquisition strategy
of the Fund.
Note: Included in other non-current liabilities is R6.8 million relating to the fair value adjustment of the interest rate swap
entered into on 28 March 2012, the terms of which remain unchanged from the year end.
Post-balance sheet events
As announced on 5 November 2012, the Fund successfully raised R1.5 billion by way of a Rights Offer to existing
unitholders, the proceeds of which will be used to part settle the consideration payable for the acquisitions set out
below. The 113.2 million new linked units were issued at a Rights Offer Issue Price of R13.82 per linked unit, which
effectively included an estimated accrued distribution of 57 cents for the period from 1 April 2012 to 4 November 2012.
On this basis, the Rights Offer Issue Price excluding the accrued distribution for the applicable periods ("Clean Price")
at which the Rights Offer Linked Units were issued was R13.25 per linked unit. The new linked units were issued on
5 November 2012.
Estimated Cash
transfer Vendor consider-
date Cost placement ation Yield Segment
R'million R'million R'million R'million R'million
Guiricich Portfolio November 2012 742.8 208.9 533.9 8.3% Retail
The Firs November 2012 272.3 215.2 57.1 8.8% Office
Investec Pretoria November 2012 169.9 169.9 8.0% Office
Balfour November 2012 397.0 397.0 9.0% Retail
Megamark Mall December 2012 218.0 218.0 9.0% Retail
Nonkqubela Mall December 2012 100.5 100.5 9.0% Retail
1 900.5 424.1 1 476.4
The Guiricich portfolio comprises 12 retail properties (primarily triple net leases) from various subsidiaries of
S Giuricich Holdings Proprietary Limited. Part of the R742.8 million consideration will be settled by way of a vendor
placement of 17 million new linked units at an issue price of R12.29, calculated with reference to the 30-day volume
weighted average traded Clean Price of the Fund's linked units as at 3 July 2012.
The Firs, Investec Pretoria and Balfour were acquired from Investec Property Limited, a related party. Part of the
total consideration of R839.2 million will be settled by way of a vendor placement of 17 million new linked units at an
issue price of R12.66, calculated with reference to the 30-day volume weighted average traded Clean Price of the
Fund's linked units as at 19 July 2012.
Share and debenture capital
The authorised share capital is one billion ordinary shares of 1 cent each. Each ordinary share is linked to one unsecured
variable rate debenture of 999 cents. The ordinary shares and debentures trade as linked units on the JSE. In terms of
the debenture trust deed, the interest payable on the debenture component of the linked unit is 999 over 1 000 times
the profit before debenture interest.
No linked units were issued during the period.
Unitholders
Investec Limited and Stanlib are the only unitholders holding in excess of 5% of the Fund's total issued linked units at
30 September 2012, holding 50.01% and 8.64% thereof, respectively.
Prospects
The board expects underlying property performance in the second half of the year to be in line with that of the first half.
The acquisitions made by the Fund as part of the Rights Offer will support this growth. The second half's results will be
impacted by the cash drag resulting from the delay in transfer of several of these properties, which cannot be predicted
with any degree of certainty for the reasons explained earlier.
This forecast has not been reviewed or reported on by the Fund's independent external auditors.
On behalf of the board of Investec Property Fund Limited
Sam Hackner Sam Leon
Chairman Chief Executive Officer
15 November 2012
Basis of accounting
The condensed financial results for the six months to 30 September 2012 has been prepared in accordance with
the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), the presentation and
disclosure requirements of IAS 34: Interim Financial Reporting, the AC 500 Standards as issued by the Accounting
Practices Board and the Companies Act 71, of 2008.
The accounting policies applied in the preparation of the results for the period ended 30 September 2012 are consistent
with those adopted in the financial statements for the year ended 31 March 2012. These interim condensed financial
results have been prepared under the supervision of Dave Donald, CA(SA).
Investment property comprises land and buildings held to generate rental income and capital growth over the long
term and is carried at fair value. Should any properties no longer meet the company's investment criteria and be sold,
anyprofits or losses will be of a capital nature and will be taxed at rates applicable to capital gains. Deferred taxation on
the revaluation of investment property is offset against the deferred taxation asset that arises on the revaluation of the
company's issued debentures.
Distribution
Notice is hereby given of an interim dividend declaration number 3 of 0.034 cents per share (after applying the
dividend withholding tax of 15% would provide a net dividend of 0.0289 cents per share) and debenture interest
payment number 3 of 46.800 cents per linked unit totalling 46.834 cents per linked unit for the six months ended
30 September 2012, payable to holders of the linked units as recorded in the books of the company at the close
of business on Friday, 07 December 2012. No secondary tax on companies credits were utilised in the net dividend
determination.
The salient dates relating to the distribution are as follows:
Last day to trade in order to participate in the distribution Friday, 30 November 2012
Linked units to trade ex distribution Monday, 03 December 2012
Record date Friday, 07 December 2012
Distribution posted/paid to certificated linked unitholders Monday, 10 December 2012
Accounts credited by CSDP or broker to dematerialised linked unitholders Monday, 10 December 2012
Linked units may not be dematerialised between Monday, 03 December 2012 and Friday, 07 December 2012, both
days inclusive. The above dates and times are subject to amendment. Any such amendment will be released on SENS
and published in the press.
Numbers of units in issue: 283 220 000
Tax number: 9332719161
By order of the board
Investec Bank Limited
Company Secretary
15 November 2012
Directors
S Hackner^ (Chairman)
SR Leon^ (Chief Executive Officer)
MP Crawford (Lead Independent Director)
DAJ Donald^
S Mahomed
CM Mashaba
MM Ngoasheng
GR Rosenthal
^ Executive
Independent non-executive
Changes to the board
S Mahomed was appointed to the board effective 14 May 2012. There were no other changes during the period.
Investec Property Fund Limited
(Registration number 2008/011366/06)
Share code: IPF
ISIN: ZAE000155099
Registered office
C/o Company Secretarial, Investec Limited
100 Grayston Drive, Sandown
Sandton, 2196
Transfer secretary
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street
Johannesburg, 2001
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown
Sandton, 2196
For a copy of the Fund's results, refer to the website:
http:/www.investecpropertyfund.com
Date: 15/11/2012 08:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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