Wrap Text
Condensed unaudited consolidated interim financial statements for the six months ended 30 June 2013
CAPITAL PROPERTY FUND
(“CAPITAL” OR “THE FUND”)
SHARE CODE CPL ISIN ZAE000001731
(A PORTFOLIO IN CAPITAL PROPERTY TRUST SCHEME, A COLLECTIVE INVESTMENT
SCHEME IN PROPERTY ESTABLISHED IN TERMS OF THE COLLECTIVE INVESTMENT
SCHEMES CONTROL ACT, NO 45 OF 2002)
MANAGED BY PROPERTY FUND MANAGERS LIMITED
(REGISTRATION NO. 1980/009531/06)
(“PFM”)
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 30 JUNE 2013
DIRECTORS’ COMMENTARY
NATURE OF THE BUSINESS
Capital owns the largest portfolio of A-grade logistics facilities in
South Africa. In addition the portfolio includes A and B-grade offices, a
small retail portfolio and listed securities.
STRATEGIC DIRECTION
The Fund has continued to reduce its exposure to smaller retail and office
properties and to invest in the development of new A-grade logistics
facilities. The investments in logistics facilities have now been
separately reported on from the industrial properties which are only
suitable for manufacturing. Capital will retain an exposure to prime and
A-grade office blocks in well sought after nodes.
DISTRIBUTABLE EARNINGS
Capital’s interim distribution of 35,58 cents per unit for the period
ended 30 June 2013 represents an increase of 6,91% over the 33,28 cents
for the interim period ended 30 June 2012.
REVIEW
The property portfolio performed marginally ahead of budget with respect
to both rentals and expenses. The listed portfolio performed well ahead of
budget, particularly the investments in New Europe Property Investments
plc and Rockcastle Global Real Estate Company Limited where distributions
benefited from the depreciation in the Rand. Capital has R1,771 billion in
offshore investments and at 30 June 2013 R1,100 billion of this currency
exposure was hedged.
The logistics properties which constitute 53% of the property portfolio
continued to perform well with reduced vacancies and the only significant
negative reversion related to 118 Brakpan Road. The lease on this property
which is let to DHL was due to expire in November 2013. The decision was
taken to bring forward the renewal date with rentals reduced to market in
exchange for an effective six year renewal. Conditions in the
manufacturing sector, however, remained difficult and rental renewals
remained under pressure. Industrial buildings now constitute only 3% of
the property portfolio.
In a challenging office market characterised by aggressive rental
discounting and extended rent free periods, Capital’s portfolio performed
well. Capital continued to upgrade and redevelop its office portfolio in
order to retain existing tenants and reduce vacancies. The largest
vacancy, Fourways Office Park, is undergoing a major upgrade which has
already had a positive impact on the tenancy. Capital was awarded the best
performing office portfolio by IPD for 2012.
Following the sale of six buildings to Dipula Income Fund Limited,
effective 1 July 2013, Capital’s retail exposure has been further reduced.
The redevelopment of Pineslopes Shopping Centre, a mixed use development,
has resulted in an improved tenant mix including Checkers as an additional
anchor. Checkers will take occupation in October this year. Food Lovers
Market, which opened at The Crescent, Umhlanga in
May 2013 is trading well and has further increased the foot count and
total retail sales for the centre.
In line with a proposed industry initiative under the SA REIT Association,
Capital intends converting to a corporate Real Estate Investment Trust, as
a result of which it would no longer be subject to the Collective
Investment Schemes Control Act (Act 45 of 2002). In addition, and as
previously announced by way of SENS published on 5 April 2013, the board
has in principle agreed to the internalisation of the management of
Capital. The board of Property Fund Managers Limited considers it optimal
to implement the conversion and internalisation simultaneously. These
changes are subject to various regulatory and unitholder approvals. The
timing of this process is currently uncertain and unitholders will be kept
updated by SENS announcements.
ACQUISITIONS AND DEVELOPMENTS
Capital’s major focus is the acquisition of well-located land for the
development of logistics facilities. An additional 12ha of prime land was
acquired for R80,3 million in Linbro Park, Gauteng. The environmental
approvals and re-zoning processes at the 76,6ha Clairwood Logistics Park
are progressing well.
The following developments have been completed:
100%
% GLA Completion
Description owned (m2) Yield date
Raceway Industrial Park 100% 21 345m2 9,7% Jul 13
N1 Business Park 20% 7 355m2 9,1% May 13
14 Fitzmaurice Epping 100% 3 368m2 9,2% Apr 13
The following developments have commenced:
100% Estimated
% GLA Estimated completion
Description owned (m2) yield date
Raceway Industrial Park 100% 40 750m2 9,0% Jun 14
16 Industry Road 100% 11 182m2 8,0% Sep 13
N1 Business Park 20% 12 907m2 9,9% Nov 13
N1 Business Park 20% 5 300m2 9,2% Nov 13
Montague Business Park 25% 4 476m2 8,5% Nov 13
Montague Business Park 25% 3 807m2 8,0% Aug 13
Montague Business Park 25% 2 491m2 8,0% Aug 13
Montague Business Park 25% 1 605m2 9,9% Aug 13
Land available for future developments:
100% Estimated
% GLA Intended commence-
Description owned (m2) use ment date
2
Clairwood Logistics Park 100% 350 000m Logistics Sep 14
Sandton Offices 80% 60 000m2 P-grade offices Feb 14
Tradeport City Deep 100% 52 000m2 Logistics Oct 13
2
Linbro Park 100% 30 000m Logistics Feb 14
Linbro Park 100% 30 000m2 Logistics Oct 13
The following re-developments are planned for the remainder of 2013:
100% Estimated
% GLA Estimated completion
Description owned (m2) yield date
Noursepack Epping 2 100% 14 571m2 8,5% Mar 14
Capital acquired a 20 725m2 logistics facility for R67,5 million in Epping
2, Western Cape at a yield of 10,0%.
DISPOSALS
The following properties were sold during 2013:
Sales Valuation at
proceeds 31 Dec 2012 Exit Effective
Property name R’000 R’000 yield date
Menlyn Dealership 250 000 236 700 9,1% 11 Feb 13
Gezina Galleries 159 330 152 600 9,8% 19 Jul 13
Ziyabuya Shopping Centre 116 000 110 000 9,7% 4 Jul 13
Woodmead Super Value
Mall# 104 660 101 200 9,1% Transfer date
Shoprite Centre Pretoria
North 76 640 70 600 9,0% 15 Jul 13
Blackheath Pavilion 70 500 63 900 9,6% 15 Jul 13
382 Jan Smuts Avenue
Craighall* 68 215 56 300 9,0% 1 Jul 13
63 Wierda Road East
Wierda Valley 63 500 46 600 8,5% 30 Apr 13
The Braides* 57 935 62 000 9,1% 1 Jul 13
Constantia View Office
Park* 56 477 52 000 9,1% 1 Jul 13
3 River Road Bruma* 45 558 44 900 9,1% 1 Jul 13
135 Musgrave Road Durban* 45 307 40 600 9,2% 1 Jul 13
31 Beacon Road Florida
North* 42 612 37 800 9,1% 1 Jul 13
Woodmead Square# 31 900 27 700 9,4% Transfer date
Willowvale* 15 979 17 900 9,2% 1 Jul 13
1 204 613 1 120 800
*Purchase price payable R161 million in cash and R171 million in shares in
Tower Property Fund Limited.
#Not yet transferred.
VACANCIES AND ARREARS
Vacancies improved from 5,9% at 31 December 2012 to 5,1% at 30 June 2013.
Logistics and industrial vacancies decreased to 4,3% (31 Dec 2012: 4,5%),
office vacancies decreased to 9,5% (31 Dec 2012: 13,6%) and retail
vacancies increased to 5,2% (31 Dec 2012: 4,9%) based on gross lettable
area. One percent of the retail vacancies relate to the re-development of
Pineslopes Shopping Centre.
There was no material change in arrears and bad debts are well provided
for.
EQUITY INVESTMENTS
June 2013
Market
Number of value
units/shares R’000
New Europe Property Investments plc 13 250 000 887 618
Rockcastle Global Real Estate Company Limited 65 670 000 883 262
Resilient Property Income Fund Limited 16 200 000 870 588
Fortress Income Fund Limited B linked units* 96 000 000 816 000
Fortress Income Fund Limited A linked units* 23 100 000 339 570
Ascension Properties Limited A linked units* 44 200 000 210 834
Ascension Properties Limited B linked units* 53 500 000 139 100
4 146 972
*During the period portions of the investments in Fortress Income Fund
Limited and Ascension Properties Limited were disposed of and, as a
result, are no longer equity accounted and are now reflected as
investments.
FUNDING
Standard Bank has approved a new five year facility to replace the R520
million facility that expired during the period.
Capital increased the size of its DMTN programme from R2 billion to R3
billion and the aggregate notes in issue at 30 June 2013 were R1,765
billion. At 30 June 2013, Capital had R958 million available to draw on
existing bank facilities.
OUTLOOK
The reduction in vacancies bodes well for distribution growth for the
remainder of the financial year. In addition, Capital’s listed investments
are all projected to perform ahead of the 2013 budget. The distributions
for the full financial year are forecast to increase from 4% to 7% to
between 6% and 9%. This forecast has not been reviewed or reported on by
Capital’s auditors.
The forecast is based on the assumptions that a stable macro-economic
environment will prevail, no major corporate failures will occur and that
tenants will be able to absorb the recovery of rising utility costs.
Budgeted rental income was based on contractual escalations and
anticipated market related renewals.
By order of the board
Managing director
Barry Stuhler Rual Bornman
Managing director Financial director
31 July 2013
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
Jun 2013 Dec 2012 Jun 2012
R’000 R’000 R’000
ASSETS
Non-current assets 20 209 838 20 082 071 18 429 247
Investment property 14 946 544 15 910 791 15 783 116
Straight-lining of rental
revenue adjustment 136 744 154 523 122 029
Investment property under
development 979 578 870 009 473 148
Investments 4 146 972 1 788 434 1 230 656
Investment in associate companies – 1 358 314 820 298
Current assets 1 150 984 257 577 271 818
Investment property held for sale 873 888 – –
Straight-lining of rental revenue
adjustment 17 226 – –
Trade and other receivables 251 230 243 524 187 277
Cash and cash equivalents 8 640 14 053 84 541
Total assets 21 360 822 20 339 648 18 701 065
EQUITY AND LIABILITIES
Capital of Fund 14 932 894 13 963 835 12 750 572
Trust capital 9 273 620 9 273 620 9 273 620
Non-distributable reserves 5 659 274 4 690 215 3 476 952
Retained earnings – – –
Total liabilities 6 427 928 6 375 813 5 950 493
Non-current liabilities 4 833 714 4 379 852 2 893 904
Interest-bearing borrowings 4 078 142 3 643 718 2 365 316
Deferred tax 755 572 736 134 528 588
Current liabilities 1 594 214 1 995 961 3 056 589
Trade and other payables 546 355 635 072 626 560
Unitholders for distribution 571 766 586 550 534 805
Taxation payable 6 645 – 2 911
Interest-bearing borrowings 469 448 774 339 1 892 313
Total equity and liabilities 21 360 822 20 339 648 18 701 065
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Unaudited
for the six for the year for the six
months ended ended months ended
Jun 2013 Dec 2012 Jun 2012
R’000 R’000 R’000
Net rental and related revenue 653 190 1 446 479 700 478
Recoveries and contractual rental
revenue 997 157 2 140 307 1 055 427
Straight-lining of rental revenue
adjustment (553) 29 110 (3 384)
Rental revenue 996 604 2 169 417 1 052 043
Property operating expenses (343 414) (722 938) (351 565)
Distributable income from investments 64 500 73 822 29 506
Fair value gain on investment
property and investments 725 351 1 496 665 267 698
Fair value gain on investment
property 79 884 930 742 8 951
Adjustment resulting from straight-
lining of rental revenue 553 (29 110) 3 384
Fair value gain on investments 644 914 595 033 255 363
Gain on disposal of portion of
associates 45 690 62 218 21 758
Administrative expenses (47 919) (91 030) (43 984)
Income from associates 83 918 189 255 34 835
– non-distributable 44 302 117 907 –
– distributable 39 616 71 348 34 835
Profit before net finance costs 1 524 730 3 177 409 1 010 291
Net finance costs 54 122 (413 082) (262 227)
Finance income 206 624 13 334 603
Fair value adjustment on
derivatives 201 762 12 231 –
Interest received 4 862 1 103 603
Finance costs (152 502) (426 416) (262 830)
Interest paid on borrowings (182 669) (408 112) (209 050)
Capitalised interest 39 633 56 855 19 033
Fair value adjustment on
derivatives (9 466) (75 159) (72 813)
Profit before income tax expense 1 578 852 2 764 327 748 064
Income tax expense (38 027) (199 778) 16 672
Profit for the period attributable
to equity holders 1 540 825 2 564 549 764 736
Total comprehensive income for
the period 1 540 825 2 564 549 764 736
Basic earnings per unit (cents)* 95,88 159,59 47,59
*The Fund has no dilutionary instruments in issue.
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND
DISTRIBUTABLE INCOME
Unaudited Audited Unaudited
for the six for the year for the six
months ended ended months ended
Jun 2013 Dec 2012 Jun 2012
R’000 R’000 R’000
Profit for the period attributable
to equity holders 1 540 825 2 564 549 764 736
Adjusted for: (67 755) (812 044) (20 717)
– Fair value gain on investment
property (79 884) (930 742) (8 951)
– Adjustment resulting from
straight-lining of rental revenue (553) 29 110 (3 384)
– Fair value adjustment on investment
property of associates – (80 464) –
– Income tax effect 12 682 170 052 (8 382)
Headline earnings 1 473 070 1 752 505 744 019
Reconciliation of profit for the
period to amount available
for distribution
Profit for the period attributable
to equity holders 1 540 825 2 564 549 764 736
Straight-lining of rental
revenue adjustment 553 (29 110) 3 384
Fair value gain on investment
property (79 884) (930 742) (8 951)
Adjustment resulting from straight-
lining of rental revenue (553) 29 110 (3 384)
Fair value gain on investments (644 914) (595 033) (255 363)
Gain on disposal of portion of
associates (45 690) (62 218) (21 758)
Income from associates –
non-distributable (44 302) (117 907) –
Fair value adjustment on derivatives (192 296) 62 928 72 813
Income tax expense 38 027 199 778 (16 672)
Distributable income 571 766 1 121 355 534 805
Less: distribution declared (571 766) (1 121 355) (534 805)
Interim (571 766) (534 805) (534 805)
Final – (586 550) –
Income not distributed – – –
Headline earnings per unit (cents) 91,67 109,06 46,30
Basic earnings per unit is 95,88 cents (Dec 2012: 159,59 cents; Jun 2012:
47,59 cents). The calculation of basic earnings per unit is based on a
weighted average number of units in issue during the period of 1 606 986
279 (Dec 2012: 1 606 986 279; Jun 2012: 1 606 986 279) and earnings of R1
540,825 million (Dec 2012: R2 564,549 million; Jun 2012: R764,736
million).
Headline earnings per unit is 91,67 cents (Dec 2012: 109,06 cents; Jun
2012: 46,30 cents). The calculation of headline earnings per unit is based
on a weighted average number of units in issue during the period of 1 606
986 279 (Dec 2012: 1 606 986 279; Jun 2012: 1 606 986 279) and headline
earnings of R1 473,070 million (Dec 2012: R1 752,505 million; Jun 2012:
R744,019 million).
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Audited Unaudited
for the six for the year for the six
months ended ended months ended
Jun 2013 Dec 2012 Jun 2012
R’000 R’000 R’000
Net cash inflow/(outflow) from
operating activities 43 559 (29 373) 12 640
Cash outflow from investing
activities (178 505) (398 350) (209 447)
Cash inflow from financing
activities 129 533 377 377 216 949
(Decrease)/increase in cash
and cash equivalents (5 413) (50 346) 20 142
Cash and cash equivalents at the
beginning of the period 14 053 64 399 64 399
Cash and cash equivalents
at the end of the period 8 640 14 053 84 541
Cash and cash equivalents consist of:
Cash on call iro securitisation – – 53 280
Current accounts 8 640 14 053 31 261
8 640 14 053 84 541
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS’ INTEREST
Non-dis-
Trust tributable Retained
capital reserves earnings Total
Unaudited R’000 R’000 R’000 R’000
Balance at
31 December 2011 9 273 620 3 247 021 – 12 520 641
Total comprehensive income
for the period 764 736 764 736
Transfer to non-distributable
reserves 229 931 (229 931) –
Distribution (534 805) (534 805)
Balance at 30 June 2012 9 273 620 3 476 952 – 12 750 572
Total comprehensive income
for the period 1 799 813 1 799 813
Transfer to non-distributable
reserves 1 213 263 (1 213 263) –
Distribution (586 550) (586 550)
Balance at 31 December 2012 9 273 620 4 690 215 – 13 963 835
Total comprehensive income
for the period 1 540 825 1 540 825
Transfer to non-distributable
reserves 969 059 (969 059) –
Distribution (571 766) (571 766)
Balance at 30 June 2013 9 273 620 5 659 274 – 14 932 894
PREPARATION AND ACCOUNTING POLICIES
The interim condensed unaudited consolidated financial statements have
been prepared in accordance with the measurement and recognition
requirements of IFRS, the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Reporting Pronouncements
as issued by the Financial Reporting Standards Council, the information
required by IAS 34: Interim Financial Reporting, the JSE Listings
Requirements, the requirements of the South African Companies Act and the
Collective Investment Schemes Control Act (Act 45 of 2002). This report
was compiled under the supervision of Rual Bornman CA(SA), the financial
director.
The accounting policies adopted are consistent with those applied in the
prior periods.
The directors are not aware of any matters or circumstances arising
subsequent to 30 June 2013 that require any additional disclosure or
adjustment to the financial statements.
The interim financial statements have not been audited or reviewed by the
Fund’s auditors.
SUMMARY OF FINANCIAL PERFORMANCE
Jun 2013 Dec 2012 Jun 2012 Dec 2011
Distribution per
unit (cents) 35,58 36,50 33,28 34,27
Units in issue 1 606 986 279 1 606 986 279 1 606 986 279 1 606 986 279
Net asset value R9,29 R8,69 R7,93 R7,79
Interest-bearing debt
to asset ratio* 21,3% 21,7% 22,8% 22,2%
*The interest-bearing debt to asset ratio is calculated by dividing
interest-bearing borrowings by total assets.
FACILITIES
Facility Margin
Expiry R’ million over Jibar
2013 465 0,21%
2014 500 1,53%
2015 1 062 1,37%
2016 – –
2017 3 050 1,70%
2018 520 1,52%
5 597 1,49%
The overall cost of borrowings at 30 June 2013 was 8,62%.
SWAP PROFILE
Average
swap/CAP
Expiry R’ million rate
2014 200 7,87%
2015 600 7,97%
2016 800 8,21%
2017 700 7,22%
2018 800 7,68%
2019* 700 6,45%
2020 200 6,32%
4 000 7,48%
*Includes a CAP of R200 million.
SECTORAL SPLIT
Based on GLA Book value
Logistics 71% 53%
Industrial 4% 3%
Offices 16% 29%
Retail 8% 14%
Other 1% 1%
100% 100%
LEASE EXPIRY PROFILE
Rental
Based on GLA revenue
Vacant 5,1%
Dec 13 14,1% 12,7%
Dec 14 23,2% 23,7%
Dec 15 22,0% 21,6%
Dec 16 15,7% 17,8%
Dec 17 9,5% 12,2%
>Dec 17 10,4% 12,0%
100,0% 100,0%
SEGMENTAL ANALYSIS
Unaudited Audited Unaudited
Jun 2013 Dec 2012 Jun 2012
R’000 R’000 R’000
Segmental revenue – recoveries and
contractual rental revenue
Logistics 503 722 1 051 191 509 473
Industrial 43 855 74 933 35 964
Offices 292 438 653 129 330 543
Retail 142 755 311 488 155 378
Other 14 381 49 566 24 069
Total 997 151 2 140 307 1 055 427
Property operating expenses
Logistics (160 577) (349 803) (162 726)
Industrial (22 589) (35 800) (18 135)
Offices (103 871) (216 267) (109 874)
Retail (52 346) (109 948) (55 014)
Other (4 031) (11 120) (5 816)
Total (343 414) (722 938) (351 565)
Segmental revenue – rental revenue
Logistics 508 033 1 064 020 509 677
Industrial 44 230 75 899 38 676
Offices 284 443 654 546 324 485
Retail 152 670 323 773 155 463
Other 7 228 51 179 23 742
Total 996 604 2 169 417 1 052 043
Profit for the period
Logistics 343 094 1 156 134 340 590
Industrial 21 267 75 728 20 337
Offices 224 557 627 915 211 946
Retail 134 359 421 829 121 687
Other 10 350 66 505 18 253
Corporate 807 198 216 438 51 923
Total 1 540 825 2 564 549 764 736
CAPITAL COMMITMENTS
Unaudited Audited Unaudited
Jun 2013 Dec 2012 Jun 2012
R’000 R’000 R’000
Authorised and contracted 575 150 555 212 637 443
Authorised and not yet contracted 46 518 58 355 174 926
621 668 613 567 812 369
INCOME DISTRIBUTION
Notice is hereby given that an interim cash distribution of 35,58 cents
interest per unit, being number 60 for Capital Property Fund, has been
declared in respect of the period 1 January 2013 to 30 June 2013 and is
payable to the unitholders recorded in the books of Capital at the close
of business on the record date, Friday 23 August 2013. Unitholders are
advised that the last day to trade cum distribution will be Friday 16
August 2013. The units will trade ex distribution from Monday 19 August
2013. Payment will be made on Monday 26 August 2013. Unit certificates
may not be dematerialised or rematerialised during the period 19 August
2013 to 23 August 2013, both days inclusive.
Registered office
4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191
(PO Box 2555, Rivonia, 2128)
Transfer secretaries
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
Java Capital
Company secretary
Inge Pick CA(SA)
Changes to the board of directors
On 13 February 2013, Des de Beer resigned from the board and David Lewis
was appointed as an executive director. Effective 15 April 2013, Fareed
Wania was appointed as an alternate director to Andrew Teixeira.
Directors
Willy Ross (chairman)*, Barry Stuhler (managing director), Iraj Abedian*,
Rual Bornman, Andries de Lange, David Lewis, Protas Phili*, Andrew
Teixeira, Banus van der Walt*, Tshiamo Vilakazi*, Trurman Zuma*, Fareed
Wania (alternate to Andrew Teixeira)
*Independent non-executive director
Date: 31/07/2013 03:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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