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Summary of audited final results for the 11 months ended 31 August 2013
Fountainhead Property Trust Management Limited
Summary of audited final results for the 11 months ended 31 August 2013
(Reg number 1983/003324/06)
The directors of Fountainhead Property Trust Management Limited, manager of Fountainhead Property Trust (Trust or
Fountainhead), submit the audited results of the Trust for the 11 months ended 31 August 2013. During the period under
review the Trust changed its financial year-end from 30 September to 31 August. These financial statements have been
summarised from the audited financial statements on which KPMG Inc. has issued an unmodified audit opinion and which
are available for inspection at the managers registered office.
Statement of financial position
31 August 30 September
2013 2012
R000 R000
ASSETS
Non-current assets 11 183 361 10 794 992
Investment properties 11 105 125 10 794 992
Fair value of investment property for accounting purposes 10 739 966 10 477 200
Unamortised letting commission and tenant installation 13 046 16 775
Straight-line rental income accrual 352 113 301 017
Interest rate swaps 78 236 -
Current assets 415 279 454 612
Trade and other receivables 96 739 93 653
Cash and cash equivalents 318 540 360 959
Total assets 11 598 640 11 249 604
UNITHOLDERS FUNDS AND LIABILITIES
Unitholders funds 8 249 107 8 062 932
Capital of the fund 2 874 030 2 874 030
Retained income 359 357 317 852
Non-distributable reserve 5 015 720 4 871 050
Other non-current liabilities 2 131 319 1 983 205
Interest-bearing liabilities 2 131 319 1 983 205
Deferred taxation - -
Current liabilities 1 218 214 1 203 467
Trade and other payables 190 443 129 885
Interest-bearing liabilities 750 000 750 000
Unitholders for distribution 277 771 323 582
Total unitholders funds and liabilities 11 598 640 11 249 604
Number of units in issue 1 162 709 1 162 709
Net asset value per unit (excluding deferred tax)(cents) 709 694
Statement of comprehensive income
11 months 12 months
to August to September
2013 2012
R000 R000
Revenue
Property portfolio 1 089 260 1 074 471
Contractual rental income 1 047 754 1 042 217
Straight-line rental income accrual 41 506 32 254
Direct property operating expenses (216 539) (202 434)
Net property income 872 721 872 037
Changes in fair values of properties and financial instruments 144 621 242 179
Profit on disposal of investment property 49 11 786
Administrative expenses (74 149) (59 564)
Income from operations 943 242 1 066 438
Net finance costs (175 712) (131 079)
Interest income 20 283 23 750
Interest expense (195 995) (154 829)
Profit before taxation 767 530 935 359
Taxation - -
Profit and total comprehensive income for the period ended 767 530 935 359
Basic earnings per unit (cents) 66.01 80.45
Diluted earnings per unit (cents) 66.01 80.45
Statement of cash flows
31 August 30 September
2013 2012
R R
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 815 829 763 121
Interest income 20 283 23 750
Interest expense (195 995) (154 829)
Distributions paid (627 166) (646 001)
Net cash generated/(utilised) from operating activities 12 951 (13 959)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition and development of investment properties (233 732) (1 741 205)
Proceeds on disposal of investment properties 30 249 47 749
Net cash utilised from investing activities (203 484) (1 693 456)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in interest-bearing borrowings 148 114 1 684 265
Net cash generated from financing activities 148 114 1 684 265
Net decrease in cash and cash equivalents (42 419) (23 150)
Cash and cash equivalents at the beginning of the period 360 959 384 109
Cash and cash equivalents at end of period 318 540 360 959
Statement of changes in unitholders funds Capital Non-
of the distributable Retained
fund reserve earnings Total
R000 R000 R000 R000
Balance at 1 October 2011 2 874 030 4 617 085 285 598 7 776 713
Profit and total comprehensive income for the year - - 935 359 935 359
Transactions with unitholders, recorded directly in equity
Profit and fair value reserve realised on sale of property transferred to - 11 786 (11 786) -
non-distributable reserve
Fair value adjustment on investment properties transferred to - 274 433 (274 433) -
non-distributable reserve
Straight-line lease adjustment - (32 254) 32 254 -
Income distributions - - (649 140) (649 140)
Total transactions with unitholders - 253 965 (903 105) (649 140)
Balance at 30 September 2012 2 874 030 4 871 050 317 852 8 062 932
Profit and total comprehensive income for the period - - 767 530 767 530
Transactions with unitholders, recorded directly in equity
Profit and fair value reserve realised on sale of property transferred to - 49 (49) -
non-distributable reserve
Fair value adjustment on investment properties transferred to - 107 890 (107 890) -
non-distributable reserve
Straight-line lease adjustment - (41 505) 41 505 -
Fair value adjustment on interest rate swaps - 78 236 (78 236) -
Income distributions - - (581 355) (581 355)
Total transactions with unitholders - 144 670 (726 025) (581 355)
Balance at 31 August 2013 2 874 030 5 015 720 359 357 8 249 107
Commentary
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results have been prepared in accordance with International Financial Reporting Standards, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the requirements of the Collective Investment Schemes
Control Act of South Africa, and the JSE Limited Listings Requirements. The accounting policies are consistent, in all
material respects, with those applied in prior years. The results have been prepared under the supervision of Aaron Suckerman
ACCA (UK).
2. INCOME DISTRIBUTION PER UNIT
Fountainhead Property Trust has declared a distribution of 23.89 cents per unit for the five months ended 31 August
2013 which, combined with the distribution of 26.11 cents for the six months ended 30 March 2013, results in a total
distribution of 50.00 cents per unit for the 11 months. The distribution is in line with the managers market guidance and
is 2% below the distribution for the 11 months to 31 August 2012.
The distribution for the period includes advisory costs of R12 million which were incurred as a result of the two
offers to acquire the assets of the Trust which were subsequently withdrawn.
The core portfolio excluding properties acquired, properties disposed of, and properties under development showed
growth of 5.9% with contractual rental showing growth of 6.7% despite tough market conditions.
Distributable income 11 months to 12 months to
31 August 30 September
2013 2012
R000 R000
Rent (excluding straight-line rental adjustment) 913 633 910 822
Net property expenses (99 136) (86 233)
Property expenses (424 154) (411 079)
Recovery of property expenses 325 018 324 846
Net property income
Sundry revenue 16 510 14 869
Net finance costs (175 712) (131 079)
Interest income 20 283 23 750
Interest expense (195 995) (154 829)
Trust expenses (73 940) (59 239)
Distributable income 581 355 649 140
Units in issue 1 162 709 1 162 709
Distribution (cents per unit) 50,00 55,83
Interim 26.11 28.00
Final 23.89 27.83
3. BORROWINGS
Interest-bearing liabilities comprise:
Current facilities Facility Loan Facility Fixed/ All in
number balance maturity floating rate
Standard Bank 1 700 544 278 30-Jun-15 Floating JIBAR + 1.98%
Standard Bank Facility 2,3,6,7 750 000 000 30-Nov-13 Floating JIBAR + 1.25%
Standard Bank Facility 4A* 350 000 000 31-May-15 Fixed 6% + 2.42%
Standard Bank Facility 4B* 560 775 030 31-May-15 Floating JIBAR + 2.6%
Standard Bank Facility 5 500 000 000 28-Feb-16 Fixed 6.33% + 2.39%
Standard Bank Facility 5B 20 000 000 28-Feb-16 Floating JIBAR + 2.39%
Rand Merchant Bank Bridge - 30-Jun-14 Floating JIBAR + 1.3%
debt facility
* Term loan 4 - the Blue Route Mall Development loan facility - interest expensed from 1 February 2013 on the total
development cost.
During the period, the percentage of debt hedged against changes in interest rates through interest rate swap
agreements and fixed rate loans, increased to 47% and, subsequent to period-end has been further increased in terms of the
revised strategic mandate to 55%.
4. MAJOR CAPITAL PROJECTs
Bryanston
The R94 million refurbishment and extension of the Bryanston Shopping Centre is in full swing with an expected
completion date of June 2014.
The strategy of re-tenanting the centre with an exclusive and niche tenant mix is already having a positive impact.
In addition, the convenience aspect of the centre is being significantly enhanced by adding 192 parking bays, improving
access and egress as well as a substantial expansion of the Checkers store to 4 036m2.
Centurion Mall
Refurbishment of the Malls open-air spine has supported higher foot counts and contributed to consistent tenant
turnover growth. A further R25 million capital improvement initiative includes a 1 000m2 extension and conversion of the
existing Fruit & Veg City into a new Food Lovers Market, measuring 2 500m2. Planning for a further expansion and an
upgrade of common areas is at an advanced stage and additional value-enhancing opportunities are being explored at this
super-regional shopping complex.
Blue Route Mall
Extensive redevelopment of this 55 504m2 mall was completed (99% let) in March 2012 and an additional 2 000 parking
bays at the main entrance were opened in December 2012. Since opening, foot count has risen by (on average) 6% in 2013
and vacancies stood at 0,2% of GLA at 31 August 2013.
Other developments and Capital expenditures
The Trust is considering a number of further major developments at Kenilworth Centre, Boulders Shopping Centre and
Brightwater Commons totalling approximately R1 billion, all designed to improve the asset quality and sustainable
long-term income growth. The Trust also has numerous committed capital expenditure projects totalling R255 million aimed at
improving quality, operational efficiency, and lettability of its properties.
5. ACQUISITIONS AND DISPOSALS
No properties were acquired during the period. However, subsequent to the year-end the Trust has entered into an
agreement to acquire the strategically located CIB building in Bedfordview for a total consideration of R159 million at an
initial yield of 8,15%. The existing lease with CIB expires in 2024. The acquisition will be debt funded from the
Trusts existing facilities.
The Trust disposed of Essex Park during the period for a net consideration of R30.2 million (valuation R30.2
million).
6. SEGMENTAL INFORMATION
11 months August 2013 12 months September 2012
Revenue Net income % of Revenue Net income % of
Rm Rm total Rm Rm total
Retail 752 585 101 735 583 90
Office 182 152 26 186 156 24
Industrial 81 63 11 88 70 11
Specialised 33 32 5 33 33 5
Unallocated - (251) (43) - (192) (30)
Total 1 048 581 100 1 042 650 100
7. PORTFOLIO VALUATIONS
The composition of the Trusts portfolio, retail valued by Rode and Associates CC and the office and industrial
portfolio valued by Mills Fitchet CC at 31 August 2013 is as follows:
Cents/ Cents/
Value unit unit % of portfolio
Sector (Rm) Income 2013 2012 2013 2012
Retail 8 419 585 725 707 76 76
Office 1 691 152 146 145 15 16
Industrial 651 63 56 47 6 5
Specialised 344 32 30 30 3 3
Total property 11 105 832 957 929 100 100
Interest-bearing liability (2 881) (249) (235)
Net current liabilities (468) (40) (39)
Net current assets 493 41 39
Net asset value 8 249 709 694
8. LETTING ACTIVITY
This table reflects the movement in vacancies during the period:
Retail Offices Industrial
Area (m2) % of Area (m2) % of Area (m2) % of
area area area
Vacant at
30 September 2012 13 092 3.0 27 721 16.5 13 489 8.0
Sold - - (310) (0.2) - -
Acquired - - - - - -
Vacated 13 421 3.0 8 295 4.9 10 623 6.4
New leases (9 607) (2.2) (8 476) (5.0) (11 076) (6.6)
Vacant at
31 August 2013 16 906 3.8 27 230 16.2 13 036 7.8
* The retail and office vacancy as at 30 September 2012 has been restated for vacant office area previously
included at the retail centres.
The following table reflects tenant retention and rental reversions by sector:
Rental
Sector Expiries Retention Retention reversion
% %
Retail 63 217 49 676 79 4.3
Office 17 247 11 052 64 7.0
Industrial 81 914 64 560 79 5.0
Total 162 378 125 288 77 4.5
The following table reflects the weighted average gross monthly rental per m2 (GMR) and the weighted average lease
escalation %:
Sector GMR (m2) GMR (m2) Escalation Escalation
2013 2012 2013 2012
(%) (%)
Retail 164 141 8.2 8.3
Office 138 115 8.1 8.2
Industrial 50 47 8.9 8.0
Specialised 107 109 8.7 8.8
Total 133 117 8.4 8.3
9. VACANCY LEVELS
Sector GLA (m2) GLA (m2) August September
2013 2012 2013 2012
Retail 16 906 13 092 3.8% 3.0%
Office 27 230 27 721 16.2% 16.5%
Industrial 13 036 13 489 7.8% 8.0%
Total 57 172 54 302 7.1% 6.7%
Vacancy levels in terms of rentable area were as follows:
By value, vacancies were 4.3% of the rent roll for August 2013, compared with 3.5% for 30 September 2012.
The retail vacancy of 3.8% is primarily in The Brightwater Commons and Dekema Mall.
The office vacancy of 16.2% is primarily in Centurion Mall offices component adjoining Grayston Ridge and AMR
Office Park.
The Industrial vacancy of 7.8% is primarily in Supreme Industrial Park and the Jet Park mini-units.
10. LEASE EXPIRY PROFILE BY AREA (m2)
11. CHANGES TO PROPERTY MANAGEMENT
During the course of 2013 Fountainhead repositioned the remainder of its property management activities which have
been outsourced to Fountainhead Property Administration (Pty) Limited (FPA), a wholly owned subsidiary of Redefine
Properties Limited. FPA has approximately 60 employees, including the Chief Executive Officer and Financial Director, and is
dedicated to the asset, property and financial management of the Trust. As of 1 October 2013 all of the Trusts
properties, other than those co-owned, are managed by FPA. Greater focus and alignment between management and the Trust will
improve efficiencies and effectiveness, and is expected to result in savings of approximately R5 million in property
management fees in the 2014 financial year.
12. STRATEGY
In 2013 Fountainhead celebrates its 30th year since listing in 1983. In that time the value of the Trusts assets
has increased from R201 million to R11.1 billion. The near R1 billion redevelopment of Blue Route Mall and consolidation
of the Trusts ownership of the Centurion Mall precinct at a cost of another R1 billion in recent years resulted in
initial income dilution but enhanced the Trusts long-term sustainable growth.
Following the acquisition by Redefine Properties Limited of the Manager and its subsequent purchase of a majority
interest in the trust and the injection of new management, a comprehensive property by property investment review was
conducted and the Board approved a new strategic plan to enhance the quality of the portfolio and to commence a new phase of
sustainable long-term growth in income. Consequently, Fountainhead has embarked on a number of potential development,
disposal and acquisition initiatives. While the Trust will retain its prime focus on large retail assets, it will also
pursue investments in other sectors where it is able to identify high-quality growing income.
In addition to the significant changes to the operating structure already mentioned, Fountainhead is engaging
through the SA REIT Association with regulators to consider further changes to its legal, management and regulatory structure
in due course.
13. CHANGE of YEAR-END
The Trust changed its financial year-end from 30 September to 31 August, with effect from 27 August 2013, being the
date of approval by the Registrar of Collective Investment Schemes. The change in year-end was a result of the
significant change in unitholding of the Trust which has created an accounting requirement for the results to be consolidated by
the major unitholder and, for administrative purposes, the year-ends were aligned.
14. SIGNIFICANT CHANGE IN UNITHOLDING
During the period Redefine Properties Limited acquired 49.6% of the units in issue of the Trust. Subsequent to the
year-end Redefine made an offer to acquire up to 250 million units which equates to 21,5% of units in issue.
15. CHANGES TO THE board of directors
Mr John Rainier retired from the Board effective 30 June 2013. The following appointments took place during the
period: Aaron Suckerman was appointed Financial Director. Len van Niekerk was appointed as the Chief Executive Officer
effective 1 July 2013. Subsequent to year-end, Messrs Tom Wixley and Marius Barkhuysen have been appointed to the Board
subject to approval by the Financial Services Board. Mr Wixley has also been appointed as a member of Fountainheads Audit
and Risk Committee.
16. CHANGE TO THE TRUSTEE
FirstRand Bank Limited was appointed as Trustee under the Collective Investment Schemes Control Act effective from
16 November 2012.
17. PROPOSALS TO ACQUIRE THE ASSETS OF THE TRUST
Redefine Properties Limited and Growthpoint Properties Limited withdrew their respective offers to acquire the
assets of the Trust on 11 March 2012 and 30 May 2013, respectively.
18. REIT STATUS
The Trust commenced trading as a Real Estate Investment Trust (REIT) with effect from 1 September 2013 being the
start of the new financial year.
19. PROSPECTS
Barring a significant deterioration in economic conditions, Fountainhead anticipates the distribution for the 12 months
to 31 August 2014 to be 16% to 17% higher than the distribution for the 11 months to 31 August 2013. Annualised for
2013, this represents growth of between 6,25% and 7,25%.This forecast has not been reviewed or reported on by
Fountainheads auditors.
20. DECLARATION OF INCOME DISTRIBUTION
Notice is hereby given of distribution number 61 of 23.89 cents per unit for the five months ended 31 August 2013. The
source of the distribution is net income from property rentals. The distribution is not regarded as a dividend and
therefore no dividend withholding tax is payable on the distribution amount.
The last date to trade cum distribution will be Friday, 25 October 2013. The units of Fountainhead Property Trust
will commence trading ex-distribution on Monday, 28 October 2013 and the record date will be Friday, 1 November 2013. The
distribution will be paid on Monday, 4 November 2013.
Unit certificates may not be dematerialised or rematerialised between Monday, 28 October 2013 and Friday, 1 November
2013 both dates inclusive.
BY ORDER OF THE BOARD
10 October 2013
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107) Secretary: Broll Property Group (Pty) Limited, Broll House, 27 Fricker Road, Illovo,
Johannesburg, 2196 (PO Box 1455, Saxonwold, 2132) Registered office: Redefine Place, 2 Arnold Road, Rosebank, Johannesburg
(PO Box 1731, Parklands, 2121) Directors: WM Kirchmann (Chairman), VA Christian, AJ Konig, HY Laher, B Nackan, DH Rice,
DS Savage, A Suckerman, LB van Niekerk (CEO), M Wainer, Sponsor: Standard Bank
www.fountainheadproperty.co.za
Date: 10/10/2013 01:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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