Wrap Text
Reviewed preliminary condensed financial results
for the year ended 31 March 2013
Investec Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2008/011366/06)
Share code: IPF ISIN: ZAE000155099
(Income tax reference number 9332/719/16/1)
Reviewed preliminary condensed financial results
for the year ended 31 March 2013
Highlights
- Full year distribution
of 99.99 cpu
7.5% increase on prior year
- Final distribution
of 53.16 cpu
up 7.9% on 2012
- Portfolio growth
of 103% largely due to
R2.1 billion in acquisitions during the year
- R1.5 billion of new equity raised
through oversubscribed rights offer
- Debt capital markets accessed
R3.0 billion DMTN programme in place
R450.0 million utilised
- Low gearing
of 10.7%
provides significant headroom for acquisitions
- Vacancy low
at 2.9%
strong underlying property fundamentals
- 15% increase
in net asset value per unit
- Corporate and secured credit ratings upgraded
now A- and AA-, respectively
Statement of comprehensive income
Year ended Year ended
31 March 31 March
R'000 2013 2012
Revenue, excluding straight-line rental revenue adjustment 331 398 211 558
Straight-line rental revenue adjustment 43 790 30 507
Revenue 375 188 242 065
Property expenses (59 669) (38 498)
Net property income 315 519 203 567
Other operating expenses (3 041) (2 701)
Asset management fee (17 834) (9 157)
Operating profit 294 644 191 709
Fair value adjustments (82 856) (30 507)
Profit on disposal of investment property 39 066
Finance costs (39 184) (6 034)
Finance income 25 143 3 016
Profit before debenture interest 236 813 158 184
Debenture interest (236 576) (158 026)
Profit before taxation 237 158
Taxation (66) (49)
normal taxation (66) (49)
deferred taxation charge (30 251) (25 733)
deferred taxation credit 30 251 25 733
Total comprehensive income attributable to equity holders 171 109
Reconciliation of attributable earnings to distributable earnings
Total comprehensive income attributable to equity holders 171 109
Debenture interest 236 576 158 026
Distributable earnings to linked unit holders 236 747 158 135
debenture interest 236 576 158 026
ordinary dividend 171 109
Number of linked units
Linked units in issue at the end of the year 317 220 000 170 000 000
Weighted average number of linked units in issue 236 430 502 188 787 926
Cents
Distribution per linked unit 99.99 93.02
Earnings per linked unit 100.13 83.76
Headline earnings per linked unit 119.44 96.32
Dividend per share 0.07 0.06
Earnings per share 0.07 0.06
Headline loss per share (40.60) (46.90)
Distribution reconciliation
Profit before debenture interest 236 813 158 184
Less: Straight-line rental revenue adjustment (43 790) (30 507)
Profit on disposal of investment property (39 066)
Add: Fair value adjustments 82 856 30 507
Distributable earnings before tax 236 813 158 184
Tax (66) (49)
Distributable earnings 236 747 158 135
Prior year weighted average number of units in issue has been restated due to the bonus element of the rights issue, as
required by IAS 33. As a result, earnings per linked unit, earnings per share, headline earnings per linked unit and headline
loss per share have been restated accordingly.
Statement of financial position
31 March 31 March
R'000 2013 2012
ASSETS
Non-current assets 4 187 000 2 065 400
Investment property 4 115 125 2 034 893
Straight-line rental revenue adjustment 71 875 30 507
Current assets 452 343 16 634
Trade and other receivables 53 613 12 064
Taxation receivable 3
Cash and cash equivalents 398 730 4 567
Total assets 4 639 343 2 082 034
EQUITY AND LIABILITIES
Equity ordinary share capital 3 172 1 700
Debentures 3 940 004 1 836 379
Total unitholders' interest 3 943 176 1 838 079
Other non-current liabilities 455 294 1 169
Long-term borrowings 450 000
Other non-current financial liabilities 5 294 1 169
Current liabilities 240 873 242 786
Trade and other payables 76 625 28 097
Current portion of other non-current liabilities 130 900
Taxation payable 41
Linked unitholders for interest and dividends 164 207 83 789
Total equity and liabilities 4 639 343 2 082 034
Net asset value per linked unit (cents) 1 243.04 1 081.22
Statement of cash flows
31 March 31 March
R'000 2013 2012
Cash generated from operations 236 976 173 486
Finance income received 20 712 3 016
Finance costs paid (29 887) (2 285)
Taxation paid (28) (52)
Distribution to unitholders (163 404) (74 346)
Net cash inflow from operating activities 64 369 99 819
Net cash outflow from investing activities (1 485 664) (1 926 152)
Net cash inflow from financing activities 1 815 458 1 830 900
Net increase in cash and cash equivalents 394 163 4 567
Cash and cash equivalents at the beginning of the year 4 567
Cash and cash equivalents at the end of the year 398 730 4 567
Statement of changes in equity
Year to Year to
31 March 31 March
R'000 2013 2012
At the beginning of the year 1 700
Total comprehensive income attributable to equity holders 171 109
Issue of ordinary shares 1 472 1 700
Dividends payable to ordinary shareholders (171) (109)
Balance at the end of the year 3 172 1 700
Segmental analysis
For the year ended 31 March 2013
R'000 Office Industrial Retail Total
Statement of comprehensive
income extracts
Revenue, excluding straight-line rental
revenue adjustment 139 648 115 047 76 703 331 398
Property expenses (23 045) (18 682) (17 942) (59 669)
Segment results 116 603 96 365 58 761 271 729
Statement of financial
position extracts
Investment property opening balance 1 182 600 779 800 103 000 2 065 400
Net additions, acquisitions and disposals 266 443 135 071 1 558 056 1 959 570
Fair value adjustment (including
straight-lining) 50 157 80 679 31 194 162 030
Fair value of investment property 1 499 200 995 550 1 692 250 4 187 000
For the year ended 31 March 2012 Office Industrial Retail Total
Statement of comprehensive
income extracts
Revenue, excluding straight-line rental
revenue adjustment 113 653 88 334 9 571 211 558
Property expenses (16 748) (21 349) (401) (38 498)
Segment results 96 905 66 985 9 170 173 060
Statement of financial
position extracts
Investment property opening balance
Additions and acquisitions 1 128 246 703 706 94 200 1 926 152
Fair value adjustment (including
straight-lining) 54 354 76 094 8 800 139 248
Fair value of investment property 1 182 600 779 800 103 000 2 065 400
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 50 properties in South Africa with a total Gross Lettable Area ("GLA")
of 568 151m(2) valued at R4.2 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.
Financial results
The board of directors is pleased to announce a 7.9% increase in the final distribution to 53.16 cents per unit ("cpu")
for the six months ended 31 March 2013 (31 March 2012: 49.29 cpu). This brings the total distribution for the year
to 99.99 cpu, representing a 7.5% increase over the prior year. These results reflect the defensiveness of the portfolio
and managements' continual focus on the underlying property fundamentals against a backdrop of inflationary
cost pressures. The performance is further underpinned by a significant proportion of high-quality, long-term single
tenancies, low vacancies and an elongated portfolio lease expiry profile. Receivables have been tightly managed
during the year under review and at the year-end gross arrears were limited to R1.9 million; representing 0.55%
of total collectables over the year.
The financial results also include the negative impact of holding cash longer than anticipated due to delays in the timing
of property transfers, caused primarily by delays in obtaining municipal clearances and other statutory requirements,
out of the control of the Fund and its management.
Vacancy levels
At 31 March 2013, the property portfolio reflects a 2.9% vacancy, representing a marginal increase from the 2.7% vacancy at
31 March 2012, primarily due to the expiry and non-renewal of a single tenanted building (6 759m2 office space), as well as
the take on of minor vacancies in Megamark Mall and Balfour Park that were excluded from the acquisition price.
Office Industrial Retail Total
Letting activity Area (m(2)) % of GLA Area (m(2)) % of GLA Area (m(2)) % of GLA Area (m(2)) % of GLA
Tenanted at
31 March 2012 104 067 100.0 268 177 96.0 23 343 100.0 395 587 97.3
Sold (27 381) (27 381)
Acquired* 15 316 11 180 157 288 183 784
Vacated (6 759) (10 231) (992) (17 982)
New leases/renewals 16 752 776 17 528
Tenanted at
31 March 2013 85 243 92.7 285 878 98.2 180 415 97.5 551 536 97.1
* Net GLA (total acquired less vacant space taken on).
Acquisitions and disposals
During the year the Fund completed R2.1 billion of new acquisitions, all of which are anticipated to be accretive to unitholders.
This has taken the portfolio from R1.7 billion at listing in April 2011 to R4.2 billion at year-end, more than doubling the size of
the portfolio within 2 years through the acquisition of quality assets.
Cost GLA
Acquisitions (R million) (m2)
Office 442.3 20 088
The Firs 272.3 13 787
Investec Offices Pretoria 170.0 6 301
Industrial 119.1 11 180
General Electric Property* 119.1 11 180
Retail 1 547.8 159 061
Great North Road Plaza 145.0 13 561
Balfour Park 295.8 36 311
Megamark Mall 202.3 23 103
Nonquebela Mall 99.4 7 778
Giuricrich Portfolio (12 assets) 742.8 70 782
BMW Boksburg 62.5 7 526
Total 2 109.2 190 329
*Inclusive of R42.3 million refurbishment GLA split into 42% office and 58% industrial.
The Fund, subsequent to year-end, has announced the acquisition of three properties with a combined acquisition cost of
R254.2 million.
During the year the Fund disposed of two non-core properties for a total consideration of R242 million, resulting in a capital
profit of R39.1 million. Post-year-end, the Fund disposed of Monsanto for R37.5 million, resulting in a profit of R8.9 million.
Fair value adjustments of investment property
The Fund's policy is to value investment properties at year-end, with independent valuations performed on a rotational
basis to ensure each property is valued at least every 3 years by an independent external valuer. The directors' valuation
methods include using the discounted cash flow model and the capitalisation model. Total revaluations for the current
year amounted to R162.0 million.
Capital funding
During the year, the Fund was successful in raising R1.5 billion of new equity by way of an oversubscribed rights offer
that closed on 2 November 2012. Units were issued at a clean price of R13.25 (a further 57 cents represented
antecedent interest that was returned to the unitholders in December 2012 as part of the interim distribution) and
the proceeds of the issue were used to fund R1.9 billion of new acquisitions, with the remaining R0.4 billion being raised via
two vendor placements, resulting in a total of 147.22 million new units being issued.
As noted in our 2012 Annual Report, the Fund registered a R1 billion domestic medium-term note ("DMTN") programme,
drawing down R450 million in April 2012 to fund acquisitions. Together with an interest rate swap that ensured that 75%
of our borrowings were fixed, the notes were placed at an all in cost of borrowing of 8.2% pa, supported by a credit rating
on a secured basis of an A (unsecured BBB+). These credit ratings were both subsequently upgraded to AA- and A-,
respectively, underpinned by the Fund's performance, cash flow predictability, property fundamentals, funding flexibility
and low gearing levels.
The Fund's gearing ratio remained low at 10.7% at year-end, well below the stated range of 30% to 40% providing
significant headroom to pursue attractive acquisitions, further supported by extensive debt facilities.
During the year the Fund decided to create a security SPV structure to facilitate the raising of term debt in the future,
establishing a clear debt strategy and debt planning process as well as a firm platform for growth. In addition,
the Board approved the extension of the DMTN programme from R1 billion to R3 billion to further strengthen
the Fund's borrowing capacity.
Share and debenture capital
The authorised share capital is one billion ordinary shares of 1 cent each at 31 March 2013. 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. During the current year a rights offer and two vendor placements were
undertaken, having the effect of increasing share capital by R1.5 million and the debenture component by R1.9 billion, net
of issue costs. Furthermore, fair value adjustments of R0.2 billion were taken to the debenture component during the year.
REIT legislation
On 1 April 2013, National Treasury introduced South African Real Estate Investment Trust ("REIT") regulations. The Fund
intends to make the necessary applications to the JSE by 1 July 2013 to be listed as a REIT. In relation to the conversion of
the Funds capital structure, a decision will be taken by the board and put to shareholders once legislation certainty has been
obtained from National Treasury.
Sustainability
The Fund acknowledges its environmental responsibility and that it is an integral part of the Fund's future success.
As such it has embarked on a sustainability programme to improve the efficiency of the Fund's utility consumption.
A benchmarking exercise was conducted on the entire portfolio to establish baselines and from the results a sample
of buildings that are not performing optimally have been identified. These will, as part of a pilot project, be further
analysed to identify opportunities for new initiatives and technologies. Technologies will be tested over the medium term
and successful alternatives will be rolled out to the entire portfolio over the medium term.
Related party transactions
The Fund entered into the following significant related party transactions during the year with Investec Limited and its
subsidiaries:
- Acquisition of The Firs, Investec Offices Pretoria, General Electric Property and Balfour Park total value of R857.1 million
- Refurbishment of General Electric Property and 4 Protea Place R42.3 million and R17.8 million respectively
- Asset management fee R17.8 million
- New linked units as part of the rights offer and vendor placement 73.6 million units
- Short-term debt repayment R130.9 million
Unitholders
Investec Limited, Stanlib and S Giuricich Holdings Proprietary Limited are the only unitholders holding in excess of 5% of the
Fund's total issued linked units at 31 March 2013, holding 50.01%, 7.98% and 5.36% thereof respectively.
Numbers of units in issue 317 220 000
Number of unitholders 2 746
Changes to the Board
Suliman Mahomed and Luigi Giuricich were appointed to the Board as non-executive directors effective 14 May 2012
and 1 December 2012 respectively.
Prospects
Despite the uncertain economic outlook, highly competitive property landscape and upward pressure on administration
and operating costs, the Board anticipates distribution growth in the region of 6% 8% in the forthcoming financial year.
This forecast is based on the assumptions that the macro-economic environment will not deteriorate markedly, no major
corporate failures will occur, budgeted renewals will be concluded and that clients will be able to absorb the recovery of
rising rates and utility costs. Budgeted rental income was based on contractual escalations and market related renewals.
The information and opinions contained above are recorded and expressed in good faith and are based upon sources
believed to be reliable. No representation, warranty, undertaking or guarantee of whatever nature is made or given
concerning the accuracy and/or completeness of such information and/or the correctness of such opinions.
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
23 May 2013
Basis of accounting
The reviewed preliminary condensed financial information for the year ended 31 March 2013 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 International Accounting Standards Board (IASB), and the Companies Act, 2008.
The accounting policies applied in the preparation of the results for the year ended 31 March 2013 are consistent with
those adopted in the financial statements for the year ended 31 March 2012. These reviewed preliminary condensed
financial statements 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. Should any properties no longer meet the company's investment criteria and be sold, any profits 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.
Review conclusion
Ernst & Young Inc., the Fund's independent auditors, have reviewed the preliminary condensed financial results and
have expressed an unmodified review conclusion on the preliminary condensed financial results, which is available
for inspection at the company's registered office.
Distribution
Notice is hereby given of a final dividend declaration number 4 of 0.0358 cents per share (after applying the dividend
withholding tax of 15% would provide a net dividend of 0.03043 cents per share) and debenture interest payment
number 4 of 53.1257 cents per linked unit totalling 53.1615 cents per linked unit for the six months ended
31 March 2013, payable to holders of the linked units as recorded in the books of the company at the close
of business on Friday, 14 June 2013. 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, 07 June 2013
Linked units to trade ex distribution Monday, 10 June 2013
Record date Friday, 14 June 2013
Distribution posted/paid to certificated linked unitholders Tuesday, 18 June 2013
Accounts credited by CSDP or broker to dematerialised linked unitholders Tuesday, 18 June 2013
Linked units may not be dematerialised between Monday, 10 June 2013 and Friday, 14 June 2013, 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.
Number of units in issue: 317 220 000
Tax number: 9332719161
By order of the Board
Investec Bank Limited
Company Secretary
23 May 2013
Directors
S Hackner* (Chairman)
SR Leon* (Chief Executive Officer)
MP Crawford (Lead Independent Director)#
DAJ Donald*
LLM Giuricich
S Mahomed#
CN Mashaba#
MM Ngoasheng#
GR Rosenthal#
* Executive
# Independent non-executive
Investec Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2008/011366/06)
Share code: IPF ISIN: ZAE000155099
(Income tax reference number 9332/719/16/1)
Registered office
C/o Company Secretarial, Investec Limited
100 Grayston Drive, Sandown, Sandton, 2196
Transfer secretary
Computershare Investor Services (Pty) 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:
www.investecpropertyfund.com
Date: 23/05/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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