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SA CORPORATE REAL ESTATE FUND - Condensed unaudited consolidated interim financial results for the six months ended 30 June 2013

Release Date: 26/08/2013 11:06
Code(s): SAC     PDF:  
Wrap Text
Condensed unaudited consolidated interim financial results for the six months ended 30 June 2013

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)
REIT status approved

CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013

Interim distribution growth
- 7.3% higher than June 2012
- 8.7% higher than December 2012

Capital structure
- Low gearing of 14.5%
- 58.9m units repurchased
- Premium to NAV increased to 8.8%

Portfolio activity 
- Disposal of 4 properties for R116,5m 
- Purchased 1 property for R65,0m and contracted 5 properties for R575,0m

Property performance
- Industrial vacancy as % of GLA improved to 0.7% 
- Standing portfolio net property income increase of 5.4%

INTRODUCTION
SA Corporate is a JSE listed Property Unit Trust (granted REIT status which will come into effect on 1 January 2014) which owns a portfolio of retail, industrial and commercial buildings located primarily in the major metropolitan areas of South Africa.

REVIEW OF FINANCIAL RESULTS AND PORTFOLIO PERFORMANCE
The interim distribution for the six months to June 2013 (16.28cpu) increased by 7.3% relative to the comparable period in June 2012 (15.17 cpu) and increased by 8.7% relative to the final distribution for the six months to December 2012 (14.98 cpu). While the current period was still impacted by disposals, the Fund achieved standing portfolio net property income growth of 5.4%. The premium to net asset value (NAV) increased to 8.8% at June 2013 (NAV: 362cpu, Unit price: 394cpu), compared to a premium of 3.2% at June 2012.
 
Industrial rental growth (7.3%) was underpinned by positive rental reversions and good tenant retentions of 65.1%. Industrial tenant retentions were impacted by the expiry of a 30 000m2 distribution centre which, although not renewed, was re-let without any downtime. Retail rental income decreased by 15.3%. The reduction is attributable to a combination of the impact of disposals (14 properties in 2012 and 4 in 2013) and a 1.3% increase in vacancies. Retail rental income on the standing portfolio has improved from 4.7% growth as at June 2012 to 6.2% growth as at June 2013, arising from strong tenant retentions (87.4%) and positive reversions (0.9%). Commercial rental income decreased by 11.7%. This reduction is attributable to combination of the impact of disposals and a 5.4% increase in vacancies relative to the comparable period. Commercial rental income on the standing portfolio increased by 1.8%. The total standing portfolio rental (excluding recoveries and turnover rental) increased by 5.6%, mainly due to improved tenant retention and positive rental reversions.

Property expenses decreased by 4.0% compared to June 2012 as a result of the impact of the disposals. Property expenses in respect of the standing portfolio increased by 9.4%. The standing portfolio municipal costs representing 59.7% of property expenses increased by 10.7%, due to an increase in electricity, rates and water costs of 11.3%, 8.8% and 20.4% respectively. The standing portfolio property expenses excluding municipal costs increased by 7.6%. This is driven largely by the increase in Transnet ground rentals representing 3.7% of the total increased costs with the rest of the cost increasing by 3.9%.

Net interest expense decreased by 46.3% for the 6 months to June 2013 compared to the same period in 2012. The reduction is attributable to the settlement of more expensive debt; injection of disposal proceeds into flexible debt facilities and as well as the restructure of the swap facilities.

Fund expenses increased by 34.2% for the 6 months to June 2013, attributable to a further provision for VAT attribution liability to bring this in line with the potential liability to SARS (representing 28.3% of the increase) and increased service fees due to unit price growth (representing 5.5% of the increase). The VAT provision is still being reviewed by SARS and subject to query by the Fund.

The 58,896,063 units repurchased in the open market in January and February 2013, has given rise to a lapsed distribution of R8.8m, as these were purchased cum dividend. These lapsed distributions are available for redistribution as part of the interim distribution.

The breakdown of distributable earnings is set out below:

                                     6 months to  6 months to  12 months to
                                      30.06.2013   30.06.2012    31.12.2012
DISTRIBUTABLE EARNINGS (R000)          Unaudited    Unaudited       Audited

Rent (excluding straight line rental 
adjustment)                              424,333      448,382       893,877
Net property expenses                    (47,664)     (56,074)     (116,803)
 Property expenses                      (206,144)    (216,693)     (442,587)
 Recovery of property expenses           158,480      160,619       325,784

Net property income                      376,669      392,308       777,074

Taxation on distributable earnings           103          698           699

Interest income from associate 
company (Oryx)                                 -        1,402         1,402

Net funding cost                         (33,095)     (61,589)     (108,655)
 Interest income                          10,519       12,115        30,547
 Interest expense                        (43,614)     (73,704)     (139,202)

Fund expenses                            (30,174)     (22,481)      (54,707)

Lapsed distribution                        8,812          795           795

Distributable earnings                   322,315      311,133       616,608

Units in issue (000)                   1,980,093    2,050,917     2,038,989

Weighted units in issue (000)          1,991,406    2,065,576     2,057,569

Distribution (cents per unit)              16.28        15.17         30.15
 Interim                                   16.28        15.17         15.17
 Final                                         -            -         14.98

PROPERTY VALUATIONS
The value of the Fund's independently valued property portfolio increased by R239,2m (2.9%) to R8,4bn as at June 2013 (December 2012: R8,1bn). The standing portfolio, representing properties not under development and held for the full 12 months to June 2013, increased by R278,5m (3.5%) from December 2012.

The capitalisation and discount rates in the Fund's portfolio at 30 June 2013 was calculated on a weighted basis:

Property type      Capitalisation     Discount rate (%)  Growth in standing
                         rate (%)                             portfolio (%)
            30.06.2013 31.12.2012 30.06.2013 31.12.2012          30.06.2013

Industrial         9.4        9.5       14.9       15.0                 2.9
Retail             8.8        9.0       14.3       14.5                 4.7
Commercial         9.8        9.9       15.3       15.4                 0.6
Portfolio total    9.2        9.3       14.7       14.8                 3.5

The portfolio valuation contributed to a 9.7% increase in the NAV of 362cpu, (June 2012: 330cpu).
       
PORTFOLIO INVESTMENT ACTIVITY
The portfolio comprised 136 properties (147 properties as at June 2012 and 139 properties as at December 2012). The sectoral and geographic weightings by value as at 30 June 2013 are set out below:

Sectoral Spread

Retail
46%
R3,9bn
393 955 m2
27 properties

Industrial
45%
R3,7bn
697 234 m2
88 properties

Commercial
9%
R0,8bn
77 532 m2
21 properties

Geographic Spread

Gauteng (GT)
47%
R3,9bn
602 335 m2
65 properties

KwaZulu-Natal (KZN)
44%
R3,7bn
459 077 m2
54 properties

Western Cape (WC)
7% 
R0,6bn
82 828 m2
11 properties

Other
2%
R0,2bn
24 481 m2
6 properties

Developments:

Properties             Cost  Completion         Yield     Sector     Region
                       (Rm)        date  forecast 1st
                                            12 months
                                                  (%)
Corner of Rudo Nel & 
Tudor Streets, Jet Park  39     11/2013          10.8  Industrial    Gauteng
Middelburg Pick 'n Pay, 
Middelburg                5     07/2013          11.6      Retail Mpumalanga
Town Square Shopping 
Centre, Weltevreden Park  9     11/2013           8.4      Retail    Gauteng

Acquisitions:

Property               Cost Acquisition         Yield     Sector     Region
                       (Rm)        date  forecast 1st
                                            12 months
                                                  (%)
PwC, 102 Essenwood 
Road, Durban           65,0     05/2013          10.6     Office   KwaZulu-
                                                                      Natal

Contracted and conditional acquisitions:

Properties                        Purchase price (Rm)    Expected Yield (%)

World Trade Center, Sandton                     360,0                  9.0%
Eveready & Continental Tyres, 
New Brighton, Port Elizabeth                    124,5                  9.0%
Nampak, Denver; UPM Raflatac, 
Longmeadow and Wepco Tools, 
Founders View                                    90,5                  9.0%
Total                                           575,0                  9.0%

Disposals:

Properties                 Transfer        Gross     Carrying    Exit yield
                               date      selling     value at       on sale
                                           price      date of     price (%)
                                            (Rm)    sale (Rm)

425 West Street, Durban     01/2013         54,5         54,5          10.0 
The Ridge, Wilgeheuvel      03/2013         30,0         30,0           9.0 
Clubview Corner, Pretoria   01/2013         27,0         29,4           8.4 
Main Street, Gingindlovu    06/2013          5,0          5,4          6.6^
Total                                      116,5        119,3          9.2#

Contracted disposals:

Properties                 Expected        Gross     Carrying    Exit yield
                       	   Transfer	 selling     value at       on sale
                               date        price      30 June     price (%)
                                            (Rm)     2013(Rm)

106 Johan Avenue, Sandton   07/2013         35,0         35,0          4.4*
131 Jan Hofmeyer Road, 
Westville                   08/2013         23,9         23,9          7.8^
13 Wellington Road, 
Parktown                    08/2013         17,8         17,8          6.6^
Philani Valley Shopping 
Centre, Umlazi              09/2013         40,5         40,5           3.5
Total                                      117,2        117,2          5.1#

* Transferred in July 2013
# Weighted on gross selling price
^ Estimated yield as building is fully vacant

LEASE EXPIRIES AND VACANCIES
Vacancies in terms of rentable area and rental income were as follows:

Property	Vacancy as % of GLA*    		   Vacancy as % of rental income
type
          30.06.2013 31.12.2012 30.06.2012 30.06.2013 31.12.2012 30.06.2012
Industrial       0.7        1.3        3.7        0.4        1.5        2.2
Retail          11.9       10.6       11.5        6.2        5.8        5.9
Commercial      19.9       19.2       14.5       14.1       14.1        9.5
Portfolio 
total  		 6.0        5.9        7.4        4.5        4.9        4.9

* GLA=Gross lettable area

The Fund's industrial vacancies at 0.7% (June 2012: 3.7%) is better than the sector average and is indicative of the quality of the portfolio. The Fund continues to focus on retention strategy and partnering with its tenants.

Retail vacancies (11.9%) increased since June 2012 (11.5%) predominantly due to strategic areas held for expansion in respect of existing and prospective tenants and large box tenant failures. With the support of Broll good progress has already been made post 30 June 2013 in securing tenants for vacancies of 2.5%.
 
The commercial vacancy (including commercial in retail) as at June 2013 was 19.9% marginally up from December 2012 (December 2012: 19.2%) but substantially up from June 2012 (June 2012: 14.5%). The commercial vacancy, excluding C grade offices held for sale, will reduce to 14.1%.

The lease expiry profile and vacancies (by GLA) are set out below:

Property    Vacant (%)  Expiring (%)		
type                    Monthly    2013    2014    2015    2016  Thereafter

Industrial     0.7          3.5    10.4    13.4    25.0     7.1        39.9
Retail        11.9          7.9     8.3    16.5    18.0    13.7        23.7
Commercial    19.9          7.8     9.1    16.6    14.3     5.2        27.1 
Total          6.0          5.3     9.6    14.7    21.8     9.2        33.4

Good progress has been made in reducing the monthly expiries from 9.2% in December 2012 to 5.3% in June 2013, through longer lease negotiation or re-tenanting, while the focus on retention has seen the expiries for 2013 reduce from 18.5% to 9.6% since December 2012.

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 2013:

Property type      Expiries m2    Retention m2  Retention (%)        Rental
                                                              reversion (%)

Industrial             136,965          89,178           65.1           5.3 
Retail                  69,688          60,883           87.4           0.9 
Commercial              17,545           9,739           55.5          (1.0)
Total                  224,198         159,800           71.3           2.4

The reduction in overall tenant retentions were impacted by the expiry and re-letting of the 30 000m2 distribution centre referred to previously, representing a larger proportion of the Industrial expiries in the last 12 months. Both the retail and commercial retentions have improved over the same period.

BORROWINGS
The debt profile is detailed below as at 30 June 2013:

Type                 Maturity date            Value           Interest Rate
                                               (Rm)                     (%)

Fixed                   13.08.2018              270                    7.45
Fixed                   13.08.2018               30                    7.45
Variable                31.12.2014              300                    6.80
Fixed                   11.09.2014              400                    7.41
Fixed                   29.04.2015              200                    8.23
Variable                25.07.2016               16                    7.15
Total                                         1,216                    7.40

Gearing remained low with debt amounting to 14.5% of the total portfolio (30 June 2012: 17.8%). The Fund entered into new swap arrangements, effective January 2013, hedging R720m (59.2%) of the Fund's effective borrowings.
 
STRATEGY AND PROSPECTS
The Fund has made good progress with the execution of its four pillar strategy presented at the beginning of the year.
 
In respect of the first pillar relating to the Fund's investment strategy, the initial focus has been to make acquisitions to further enhance its quality industrial portfolio, acquire premium grade offices in prime locations, whilst divesting from largely vacant C grade offices in secondary nodes and retail properties not of a quality compatible with the long term strategy. The purchase of four industrial buildings for a total consideration of R215m in two separate transactions has been contracted whilst the Fund is in advanced negotiations for the acquisition of a further industrial property for R65m. The purchase of a premium grade office tower in Sandton for R360m has been contracted in addition to the office building situated in Durban already acquired. The sale of three largely vacant C grade office buildings and one of its underperforming retail centres, represents a divestment of R117,2m. The Fund is actively pursuing a number of acquisitions with a view to improving the growth of its retail portfolio. An important component of the Fund's investment strategy is to exploit redevelopment opportunities and in this regard obstacles to the redevelopment of two of its prime retail properties, East Rand Galleria and Umlazi Mega City, have been unlocked and planning on these projects has commenced.
 
Regarding the second pillar, being the procurement of sector best property management services to secure optimal performance of the Fund's portfolio, Broll Property Group was appointed effective 1 July 2013 and has already made good progress particularly in respect of retail vacancies. Property management expenses are expected to reduce by circa 20% from 1 July. The Fund has entered into a memorandum of understanding with Retail Africa who in return for the opportunity to co-invest 25% in the redevelopment of certain of the Fund's retail properties requiring renewal, will provide their expertise and experience in retail property redevelopment. This is done at a level which will ensure the Fund's NAV is not diluted. The partnership incentivises Retail Africa to introduce new investment.
 
With respect to the third pillar, establishing an optimal and cost efficient capital structure, the Fund has achieved good pricing on expiring borrowing facilities to ensure that the weighted average cost of debt supports the growth in core income. The Fund achieved its inaugural long term rating of A1-za by Global Credit Rating and will enter the debt capital markets with its inaugural issuance this year to coincide with its funding requirements. To mitigate interest rate volatility and the Fund's progress with acquisitions the Fund secured swaps on 24 July 2013 and renegotiated its long term debt on 14 August 2013, bringing the hedging of its long term debt to 91.8% and its weighted average cost of debt to 7.86%.

In the execution of the final pillar, being the alignment of investor and management interests, the Fund is still in discussions with Old Mutual Property. The aforementioned transaction would enable the conversion to a REIT company and the Fund's management is proactively engaging the Financial Services Board, National Treasury and SARS with other REIT Collective Investment Schemes in Property on formulating the process for this conversion.

The Board is confident that Management are in a position to continue to deliver the execution of the strategy such that a similar level of distribution growth is achievable for the full financial year.

    	                                   As at        As at         As at
CONDENSED GROUP STATEMENT             30.06.2013   30.06.2012    31.12.2012  
OF FINANCIAL POSITION (R000)           Unaudited    Unaudited       Audited

Assets

Non-current assets                     8,328,842    7,645,819     7,990,017
 Investment property                   8,055,905    7,418,385     7,733,791
 - At valuation                        8,103,125    6,757,925     7,903,575
 - Straight line rental adjustment      (221,020)    (214,440)     (233,084)
 - Properties under development          173,800      874,900        63,300
 Letting commission and tenant 
 installation                             55,897       26,404        53,521
 Interest rate swap derivative            31,668       10,831         2,854
 Rental receivable - straight line 
 adjustment                              185,372      190,199       199,851

 Current assets                          544,268    1,209,116       754,215
 Properties held for disposal            112,040      370,400       182,900
 Letting commission and tenant 
 installation                                637            -           835
 Trade receivables                        23,330       18,042        20,186
 Other receivables and accrued interest   88,642      130,626       108,956
 Rental receivable - straight line 
 adjustment                               35,648       24,240        33,233
 Capital gains taxation                        -          824           824
 Cash resources and short term 
 investments                             283,971      664,984       407,281

Total assets                           8,873,110    8,854,935     8,744,232

Unitholders' funds and liabilities

 Unitholders' funds                    7,168,527    6,777,333     6,973,355
 
 Non-current liabilities               1,216,014    1,062,767       767,719
 Interest-bearing borrowings           1,216,014      920,976       620,975
 Interest rate swap derivative                 -       29,227             -
 Deferred taxation                             -      112,564       146,744

 Current liabilities                     488,569    1,014,835     1,003,158
 Trade and other payables                161,951      172,258       170,283
 Interest-bearing borrowings                   -      500,000       520,000
 Capital gains taxation                       31           56            56
 Unclaimed distributions                   1,173          879         1,034
 Distributions payable                   322,315      311,133       305,475
 Interest rate swap derivative             3,099       30,509         6,310

Total unitholders' funds and 
liabilities                            8,873,110    8,854,935     8,744,232

NAV cpu                                      362          330           34

                                        6 months     6 months          Year
                                           ended        ended           end
CONDENSED GROUP STATEMENT             30.06.2013   30.06.2012    31.12.2012 
OF COMPREHENSIVE INCOME (R000)         Unaudited    Unaudited       Audited

Revenue                                  570,158      604,666     1,227,838

Income                                   580,677      618,183     1,259,787
 Rent                                    424,333      448,382       893,877
 Straight line rental adjustment         (12,655)      (4,335)        8,177
 Recovery of property expenses           158,480      160,619       325,784
 Interest income from associate company        -        1,402         1,402
 Interest income                          10,519       12,115        30,547

Expenses                                (279,932)    (312,878)     (636,496)
 Accounting and secretarial fees          (3,041)      (2,943)       (5,893)
 Audit fees                                 (787)         (28)       (1,661)
 Administrative fees                      (7,818)      (2,095)      (11,594)
 Interest expense                        (43,614)     (73,704)     (139,202)
 Property expenses                      (206,144)    (216,693)     (442,587)
 Service fees                            (18,528)     (17,415)      (35,559)

Operating income                         300,745      305,305       623,291
 Revaluation of interest rate swap        32,025      (16,360)      (30,141)
 Debt restructure costs                  (10,504)     (19,002)      (32,739)
 Capital loss on disposal of 
 investment properties                    (4,995)     (13,422)      (20,075)
 Revaluation of investment properties    271,891      (46,379)      245,611
 - Revaluations                          259,236      (50,714)      253,788
 - Straight line rental adjustment        12,655        4,335        (8,177)
 Revaluation of investment property 
 under development                       (14,354)      11,905           625

Income before taxation                   574,808      222,047       786,572

Taxation                                 146,847      (15,762)      (49,939)
 Current capital gains and normal 
 income taxation                             103        1,439         1,441
 Deferred taxation on property 
 transactions                            146,744      (17,201)      (51,380)
 Deferred taxation on straight line 
 valuation adjustment                    (21,815)        (445)          846
 Deferred taxation on straight line 
 rental adjustment                        21,815          445          (846)

Net profit attributable to unitholders   721,655      206,285       736,633

Other comprehensive income
Amortisation of debt restructure          10,515       13,737        27,473

Total comprehensive income attributable 
to unitholders                           732,170      220,022       764,106

CONDENSED GROUP STATEMENT OF         6 months to  6 months to  12 months to 
CHANGES IN UNITHOLDERS                30.06.2013   30.06.2012    31.12.2012 
FUNDS (R000)                           Unaudited    Unaudited       Audited

Unitholders' funds at the beginning 
of the period                          6,973,355    6,967,767     6,967,767 

Total comprehensive income for the 
period                                   732,170      220,022       764,106
 Net profit for the period               721,655      206,285       736,633
 Amortisation of debt restructure         10,515       13,737        27,473

Repurchase of units                     (222,986)    (100,000)     (142,489)
Unit repurchase cost                        (509)        (118)         (216)
Lapsed distribution on units 
repurchased                                8,812          795           795
Distribution attributable to 
unitholders                             (322,315)    (311,133)     (616,608)

Unitholders' funds at the end of 
the period                             7,168,527    6,777,333     6,973,355

                                     6 months to  6 months to  12 months to 
CONDENSED GROUP STATEMENT             30.06.2013   30.06.2012    31.12.2012 
OF CASH FLOWS (R000)                   Unaudited    Unaudited       Audited

Operating profit before changes in 
working capital                          354,722      371,234       744,552 
Changes in working capital                11,504       24,494        31,663 
Cash generated from operations           366,226      395,728       776,215 
Changes in operating activities         (337,668)    (363,342)     (721,539)
Net cash flows from operating activities  28,558       32,386        54,676 
Net cash flows from investing activities (12,236)     665,542       708,137 
Net cash flows from financing 
activities                              (139,632)    (406,595)     (729,183) 
Net (decrease)/increase in cash 
resources and short term investments    (123,310)     291,333        33,630 
Cash resources and short term 
investments at beginning of period       407,281      373,651       373,651 

Cash resources and short term 
investments at end of period             283,971      664,984       407,281

NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS

The condensed financial information has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Collective Investment Schemes Control Act and the information as required by IAS 34: Interim Financial Reporting. The report has been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial statements for the year ended 31 December 2012. The results and prospects have not been audited or reviewed by the Group's auditors, Deloitte & Touche.

1. Reconciliation of headline earnings to distributable earnings attributable to unitholders

                            6 months to      6 months to       12 months to
                             30.06.2013       30.06.2012        31.12.2012
                             Unaudited        Unaudited           Audited
                            R 000    CPU     R 000    CPU     R 000     CPU

Net profit for the period 721,655 36.24*   206,285  9.99*   736,633  35.80*

Adjustments for:
 Capital loss on disposal 
 of investment properties   4,995           13,422           20,075
 Revaluation of 
 investment properties   (271,891)          46,379         (245,611)
 Revaluation of 
 investment property 
 under development         14,354          (11,905)            (625)
 Taxation on adjustments (125,032)          16,207           49,093

Headline earnings         344,081 17.28*   270,388 13.09*   559,565  27.20*
Straight line rental 
adjustment                 12,655            4,335           (8,177)
Taxation on straight line 
rental adjustment         (21,815)            (445)             846
Debt restructure costs     10,504           19,002           32,739
Other                         103              698              699
Lapsed distribution on 
units repurchased           8,812              795              795
Revaluation of interest 
rate swap                 (32,025)          16,360           30,141

Distributable earnings 
attributable to 
unitholders               322,315 16.28    311,133 15.17    616,608  30.15
 
 Interim                  322,315 16.28    311,133 15.17    311,133  15.17
 Final                          -     -          -     -    305,475  14.98

* calculated on weighted units in issue

2. Primary operational segments (R000)

Business segment              Industrial     Retail  Commercial       Group

Extract from statement of 
comprehensive income

Revenue                          225,798    297,925      46,435     570,158

Rental income (excluding 
straight line rental adjustment) 204,219    181,087      39,027     424,333
Net property expenses            (20,576)   (19,445)     (7,643)    (47,664)
 Property expenses               (48,192)  (140,496)    (17,456)   (206,144)
 Recovery of property expenses    27,616    121,051       9,813     158,480

Net property income              183,643    161,642      31,384     376,669
Straight line rental adjustment   (6,037)    (4,213)     (2,405)    (12,655)
Net interest expense                   -          -           -     (33,095)
Debt restructure costs                 -          -           -     (10,504)
Fund expenses                          -          -           -     (30,174)
Deferred taxation on straight 
line rental adjustment             1,123     20,692           -      21,815
Revaluation of interest rate swap      -          -           -      32,025

Headline earnings                178,729    178,121      28,979     344,081

Other information
Properties                     3,607,390  3,815,707     743,130   8,166,227
 At valuation                  3,665,500  3,750,925     686,700   8,103,125
 Classified as held for 
 disposal                              -     35,300      76,740     112,040
 Property under development       65,300    108,500           -     173,800
 Straight line rental 
 adjustment                     (123,410)   (79,018)    (20,310)   (222,738)
Revaluation of investment 
properties excluding straight 
line adjustment, net of 
taxation                         101,763    286,102       3,761     391,626

Segment growth rates          Industrial     Retail  Commercial       Group
                                       %          %           %           %
 Rental income (excluding 
 straight line rental adjustment)    7.3      (15.3)      (11.7)       (5.4)
 Property expenses                  19.3      (11.8)        2.5        (4.9)
 Recovery of property expenses       8.2       (4.0)        9.4        (1.3)
 Net property income                 4.7      (10.6)      (13.2)       (4.0)

3. Unit repurchases

The Board approved the implementation of a unit repurchase programme for which approval was given by the unitholders at the annual general meeting in 2012. In terms of the programme, a portion of the proceeds from the sale of the properties can be used to repurchase units in the open market which would then be cancelled. In January to February the programme was concluded by the repurchase of 58,896,063 units at an average price of 378.61c (2012: 42,879,535 units at an average price of 332.30c).

4. Deferred taxation

During the reporting period, the JSE Limited approved the Fund's application for the Real Estate Investment Trust (REIT) status. SA Corporate will qualify as a REIT with effect from the commencement of its next financial year, being 1 January 2014. In determining the aggregate capital gain or capital loss of a REIT or a controlled property company for purposes of the Eighth Schedule, of the Income Tax Act 1958, as amended, any capital gain or capital loss determined in respect of the disposal of immovable property; a share in a REIT; or a share in a controlled property company, must be disregarded. This resulted in a reversal of the Group's deferred taxation liability of R146.74m.

DISTRIBUTION DECLARATION AND IMPORTANT DATES

Notice is hereby given of the declaration of distribution no. 37 in respect of the income distribution period 1 January 2013 to 30 June 2013. The distribution amounts to 16.28 cpu. 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 investments. Please refer to the statement of comprehensive income for further details. The distribution is not regarded as a dividend and therefore no dividend withholding taxation is payable on the distribution amount.

Last date to trade cum distribution             Thursday, 19 September 2013
Units will trade ex-distribution                Friday, 20 September 2013
Record date to participate in the distribution  Friday, 27 September 2013
Payment of distribution                         Monday, 30 September 2013

Unit certificates may not be dematerialised or re-materialised between Friday, 20 September and Friday, 27 September 2013 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: J Molobela (Chairman appointed 3 May 2013), TR Mackey (Managing)*, AM Basson (Finance)*, RJ Biesman-Simons, GP Dingaan, KJ Forbes, P Levett, SH Mia, R Morar, ES Seedat, GJ Van Zyl (resigned 3 June 2013)

* Executive

This report has been prepared under the supervision of AM Basson, CA(SA).

OLD MUTUAL PROPERTY PROPRIETARY LIMITED
SECRETARIES
26 August 2013

Date: 26/08/2013 11:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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