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Reviewed interim condensed financial results for the six months to 30 September 2013
Investec Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2008/011366/06)
Share code: IPF ISIN: ZAE000180915
(Income tax reference number 9332/719/16/1)
Reviewed interim condensed
financial results for the six months to
30 September 2013
Highlights
Interim distribution UP 7.7% to 50.46 cps
Acquisitions during the period UP R1.6 billion concluded and announced
Industrial space let 32 800 m2 A further 28 000 m2 committed
Capital structure converted to all-equity REIT status obtained, effective 1 April 2013
Gearing 10.1% Will increase to 31.0% after all announced acquisitions are completed
Term debt market accessed with R500 million facility in place
Vacancy 2.8% Strong underlying property fundamentals
Net asset value per share UP 4.8%
Statement of comprehensive income
Reviewed Unaudited Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'000 2013 2012 2013
Revenue, excluding straight-line rental revenue adjustment 241 556 127 704 331 398
Straight-line rental revenue adjustment 21 046 15 192 43 790
Revenue 262 602 142 896 375 188
Property expenses (52 589) (25 813) (59 669)
Net property income 210 013 117 083 315 519
Other operating expenses (2 918) (1 669) (3 041)
Asset management fee (12 620) (6 616) (17 834)
Operating profit 194 475 108 798 294 644
Fair value adjustments (35 473) (15 192) (82 856)
Profit on disposal of investment property 10 953 39 066
Finance costs (18 500) (20 047) (39 184)
Finance income 5 106 6 081 25 143
Profit before debenture interest 156 561 79 640 236 813
Debenture interest (119 935) (79 561) (236 576)
Profit before taxation 36 626 79 237
Taxation 39 (22) (66)
normal taxation 39 (22) (66)
deferred taxation charge (4 254) (30 251)
deferred taxation credit 4 254 30 251
Total comprehensive income attributable
to equity holders 36 665 57 171
Reconciliation of attributable earnings
to distributable earnings
Total comprehensive income attributable
to equity holders 36 665 57 171
Less: Net fair value adjustment on investment property (96 168)
Straight-line rental revenue adjustment (21 046) (15 192) (43 790)
Profit on disposal of investment property (10 953) (39 066)
Add: Fair value adjustment on interest rate swap derivatives 5 816 5 691 (4 124)
Debenture net fair value adjustment 29 657 9 501 141 820
Debenture interest 119 935 79 561 236 576
Distributable earnings 160 074 79 618 195 419
Number of linked units and shares
Shares in issue at the end of the period 317 220 000
Weighted average number of shares in issue 317 220 000
Linked units in issue at the end of the period 170 000 000 317 220 000
Weighted average number of linked units in issue 170 000 000 236 430 502
Cents
Distribution per linked unit 46.83 99.99
Earnings per linked unit 46.83 100.13
Headline earnings per linked unit 51.38 119.44
Dividend per share 50.46 0.03 0.07
Earnings per share 11.56 0.03 0.07
Headline earnings/(loss) per share 11.56 0.03 (40.60)
Statement of financial position
Reviewed Audited Unaudited
Six months to Year to Six months to
30 September 31 March 30 September
R'000 2013 2013 2012
ASSETS
Non-current assets 4 440 946 4 187 000 2 309 981
Investment property 4 348 177 4 115 125 2 264 282
Straight-line rental revenue adjustment 92 769 71 875 45 699
Current assets 240 143 452 343 111 976
Trade and other receivables 44 162 53 613 16 492
Taxation receivable 3
Cash and cash equivalents 195 981 398 730 95 481
Total assets 4 681 089 4 639 343 2 421 957
EQUITY AND LIABILITIES
Stated share capital 4 092 282 3 172 1 700
Retained earnings 36 665
Debentures 3 940 004 1 845 779
Total shareholders' interest 4 128 947 3 943 176 1 847 479
Non-current liabilities 461 110 455 294 456 860
Long-term borrowings 450 000 450 000 450 000
Other non-current financial liabilities 11 110 5 294 6 860
Current liabilities 91 032 240 873 117 618
Trade and other payables 90 988 76 625 38 000
Taxation payable 44 41
Linked unitholders for interest and dividends 164 207 79 618
Total equity and liabilities 4 681 089 4 639 343 2 421 957
Net asset value per share/linked unit (cents) 1 301.60 1 243.04 1 085.75
Condensed statement of cash flows
Reviewed Unaudited Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'000 2013 2012 2013
Cash generated from operations 197 460 89 442 236 976
Finance income received 4 480 6 081 20 712
Finance costs paid (18 461) (10 409) (29 887)
Taxation paid (41) (22) (28)
Distribution paid to unitholders (164 207) (83 789) (163 404)
Net cash inflow from operating activities 19 231 1 303 64 369
Net cash outflow from investing activities (221 486) (229 389) (1 485 664)
Net cash inflow/(outflow) from financing activities (494) 319 000 1 815 458
Net increase/(decrease) in cash and cash equivalents (202 749) 90 914 394 163
Cash and cash equivalents at the beginning of the period 398 730 4 567 4 567
Cash and cash equivalents at the end of the period 195 981 95 481 398 730
Condensed statement of changes in equity
Reviewed Unaudited Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'000 2013 2012 2013
At the beginning of the period 3 172 1 700 1 700
Capital conversion 4 089 110
Fair value of debentures to stated capital 3 969 175
Fair value of debenture interest to stated capital 119 935
Total comprehensive income attributable to equity holders 36 665 57 171
Issue of ordinary shares 1 472
Dividends paid to ordinary shareholders (57) (171)
Balance at the end of the period 4 128 947 1 700 3 172
Condensed segmental information
For the six months ended
30 September 2013
R'000 Office Industrial Retail Total
Statement of comprehensive income
extracts
Revenue, excluding straight-line rental
revenue adjustment 80 194 62 465 98 897 241 556
Property expenses (12 974) (13 979) (25 636) (52 589)
Segment results 67 220 48 486 73 261 188 967
Statement of financial position extracts
Investment property opening balance 1 499 200 913 050 1 774 750 4 187 000
Net additions, acquisitions and disposals 139 448 82 135 11 315 232 899
Fair value adjustment (including straight-lining) 15 259 5 000 788 21 046
Fair value of investment property 1 653 907 1 000 185 1 786 853 4 440 945
For the six months ended
30 September 2012
R'000 Office Industrial Retail Total
Statement of comprehensive income extracts
Revenue, excluding straight-line rental
revenue adjustment 64 355 49 569 13 780 127 704
Property expenses (12 280) (11 592) (1 941) (25 813)
Segment results 52 075 37 977 11 839 101 891
Statement of financial position extracts
Investment property opening balance 1 182 600 697 300 185 500 2 065 400
Net additions, acquisitions and disposals 1 658 80 039 147 692 229 389
Fair value adjustment (including straight-lining) 10 282 3 593 1 317 15 192
Fair value of investment property 1 194 540 780 932 334 509 2 309 981
Commentary
Introduction
Investec Property Fund Limited ("the Fund") is a Real Estate Investment Trust ("REIT"), having listed on the JSE Limited ("JSE")
on 14 April 2011. It currently comprises a portfolio of 52 properties in South Africa with a total Gross Lettable Area ("GLA") of
590 658m² valued at R4.4 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 7.7% increase in the interim distribution to 50.46 cents per share ("cps")
for the six months ended 30 September 2013 (30 September 2012: 46.83 cpu). The growth in distribution has been
underpinned by 7.1% growth in the net income of the base portfolio (being properties held for 12 months prior to the
beginning of FY13), with further growth derived from the acquisitions made towards the end of FY12. These results
reflect the defensiveness of the portfolio and management's continual focus on the underlying property fundamentals
against a backdrop of statutory 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 R1.8 million;
representing 0.4% (31 March 2013: 0.55%) of total collectables over the period.
Asset growth
SEE RELEASE FOR GRAPH
Top 10 properties
% of % of
Book value portfolio Total area portfolio
Property Sector (R) by value (m2) by area
Woolworths House, Cape Town Office 322 886 794 7.3 30 435 5.2
The Firs, Rosebank Office 306 126 864 6.9 13 787 2.3
Balfour Mall Retail 301 675 473 6.8 36 451 6.2
Alrode Multipark Industrial 278 792 287 6.3 90 762 15.4
Investec Offices, Durban Office 234 123 074 5.3 6 543 1.1
Kriel Mall Retail 215 891 537 4.9 20 848 3.5
Innovation Group, Randburg Office 192 585 201 4.3 15 500 2.6
Investec Offices Pretoria Office 176 479 897 4.0 6 301 1.1
Great North Plaza, Musina Retail 157 228 366 3.5 13 561 2.3
Builders Warehouse, The Glen Retail 138 952 202 3.1 11 113 1.9
Total 2 324 741 695 52.4 245 301 41.6
Geographic spread by GLA
SEE RELEASE FOR GRAPH
Geographic spread by revenue
SEE RELEASE FOR GRAPH
Geographic spread by GLA
SEE RELEASE FOR GRAPH
Geographic spread by revenue
SEE RELEASE FOR GRAPH
Vacancy levels
At 30 September 2013, the property portfolio reflects a 2.8% vacancy, representing a marginal improvement from the
2.9% vacancy at 31 March 2013. The Industrial sector saw significant letting activity, with over 60 000m² of space
being renewed or let (32 800m2 in the period and a further 28 000m² commencing in the second half of the financial year).
Of the 32 800m2 of new leases in the period 11 236m2 achieved positive rental reversions of 33.3%, whilst the remaining
21 565m2 saw a negative reversion of 14.4% as a result of an historical short-term lease at above market rent. There were
no other material changes in the retail or office sectors.
Vacancy levels
SEE RELEASE FOR GRAPH
Office Industrial Retail Total
Area % of Area % of Area % of Area % of
Letting activity (m2) GLA (m2) GLA (m2) GLA (m2) GLA
Tenanted at
31 March 2013 85 243 92.7 285 878 98.2 180 415 97.5 551 536 97.1
Sold (13 822) (13 822)
Acquired (1) 8 036 27 955 35 991
Expiries/cancellations (32 826) (2 818) (35 644)
New leases/renewals (2) 32 801 3 544 36 344
Tenanted at
30 September 2013 93 279 93.2 299 986 98.2 181 140 97.8 574 405 97.2
(1) Net GLA (total acquired less vacant space taken on).
(2) New leases account for 31 505m2 of industrial and 2 188m2 of retail space.
Vacancy movement
Average GLA GLA
Expiry rent New rent escalation expiries and new leases/
Sector R/(m2) R/(m2) (%) cancellations renewals
Office
Industrial 37.65 36.48 9.1 32 826 32 801
Retail 133.88 129.52 8.1 2 849 3 544
Total 45.48 44.94 8.6 35 675 36 368
Lease expiry profile by sector
SEE RELEASE FOR GRAPH
Acquisitions and disposals
During the period the Fund completed R254.1 million of acquisitions and announced R1.3 billion of acquisitions that
are expected to transfer before the end of the financial year. This will take the portfolio to R5.7 billion, up 36% from
31 March 2013. Additionally, on 18 October 2013, the Fund invested R235.5 million (AUD25 million) in the newly
JSE-listed Investec Australia Property Fund ("IAPF"), equating to an 18.7% stake in IAPF and representing circa
4% of the Fund's asset base.
Transfer date Sector Cost GLA
Acquisitions (R million) (m2)
SA Ladder, Alrode (3) April 2013 Industrial 75 25 000
5 Bond Street, K101 Midrand (3) May 2013 Office 118 5 870
Minolta, Belville May 2013 Office 25 2 166
Minolta, Centurion May 2013 Industrial 36 2 955
Total completed acquisitions 254 35 991
Announced acquisitions
Bigbox retail portfolio, national (3) October 2013 (1) Retail 207 38 475
Bigen Africa, Innovation Hub, Pretoria (3) October 2013 (1) Offfice 125 5 545
Martin & Martin, Isando (3) December 2013 (2) Industrial 89 19 972
Nonkqubela Link extension; Khayelitsha February 2014 (2) Retail 32 2 911
RPP Portfolio, Bryanston, Roodepoort
and Tyger Valley March 2014 (1) Office/Industrial (4) 572 35 206
Nicol Main Office Park, Bryanston Various (5) Office 298 11 863
Total announced acquisitions 1 323 113 972
Investment in Investec Australia
Property Fund 236
Total 1 813 149 963
(1) Effective dated acquisitions.
(2) Expected transfer date.
(3) Related party acquisitions Investec Property (Pty) Ltd.
(4) Office GLA is 26 284m2, Industrial GLA is 8 923m2.
(5) Transfer of portions of the properties will occur in three tranches: March 2014, July 2014 and November 2014.
During the period the Fund disposed of the Monsanto and SABB Mayville properties for a total consideration of R52.0 million,
resulting in a capital profit of R10.9 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 three years by an independent external valuer. The directors' valuation
methods include using the discounted cash flow model and the capitalisation model. Revaluations were not undertaken at
period-end as the directors are not aware of any factors which would materially affect the valuation of the properties.
Other fair value adjustments
Fair value adjustments in the statement of comprehensive income consist of the folllowing:
30 September 30 September 31 March
2013 2012 2013
R'm R'm R'm
Fair value adjustment on interest rate swap (5.8) (5.7) (4.1)
Debenture fair value adjustment (29.7) (9.5) (197.0)
Net investment property revaluation 118.2
(35.5) (15.2) (82.9)
Capital funding
During the period the Fund registered a Special Purpose Vehicle (SPV) structure to facilitate the raising of term debt,
establishing a clear debt strategy and debt planning process as well as a firm platform for growth. A R500 million facility has
been committed by Nedbank and Standard Bank to fund some of the announced acquisitions, with support to increase this
facility in the future. The Fund may consider accessing the DMTN market to fund the remaining portion of the acquisitions.
The Fund's gearing ratio remained low at 10.1% (27.2% after the completion of all announced acquisitions), providing
significant headroom to pursue future acquisitions, supported by the extensive bank and corporate bond facilities.
The Fund remains cautious with respect to interest rate risk and, as such, continues to ensure that at least 75% of its long-
term debt is hedged. At the date of this report, the Fund had entered into R792.5 million forward starting swaps to match
the funding requirement of announced acquisitions at an average swap rate of 7.5%, with 91% of these hedging out five-
year interest rate risk. The Fund's all-in cost of borrowing, including the debt required to fund the announced acquisitions,
has increased marginally to 8.3%, resulting from the uptick in long-bond rates since May 2013.
Long-term borrowings:
Amount
At 30 September 2013 Expiry Rate (R'm)
DMTN Programme
Tranche 1 April 2015 JIBAR + 140 bp 134
Tranche 2 April 2016 JIBAR + 155 bp 40
Tranche 3 April 2017 JIBAR + 165 bp 50
Tranche 6 April 2017 Fixed @ 8.8% 226
Total DMTN 450
Facilities available (1)
Investec bridge facility 12 months' notice JIBAR + 225 bp 500
Standard Bank term debt facility (2) October 2016 JIBAR + 155 bp 250
Nedbank term debt facility (2) October 2018 JIBAR + 170 bp 250
DMTN Programme N/A Various 3 000
Total facilities 4 000
Drawn down at 30 September 2013 450
Drawn down post-30 September 2013 to fund acquisitions 480
Available facilities 3 070
(1) At 30 September 2013, all bank facilities were undrawn.
(2) Nedbank and Standard Bank facilities were concluded on 3 October 2013 and include a R50 million revolving facility in
each facility.
Debt maturity profile
SEE RELEASE FOR GRAPH
REIT legislation
On 1 April 2013, National Treasury introduced South African REIT regulations. The Fund applied to and received from the
JSE, REIT status with effect from 1 April 2013, being the first day of its financial year ending 31 March 2014.
Share and debenture capital
The authorised share capital is one billion ordinary shares of 1 cent each at 30 September 2013. On 16 August 2013,
shareholders and debenture holders approved the conversion of the Fund's linked-unit structure to that of an all-equity
capital structure. To achieve this, each linked unit was replaced with a delinked ordinary share with the fair value of
debentures capitalised to stated capital and the Fund's ordinary par value shares converted to ordinary no par value shares.
The financial statements at 30 September 2013 reflect this conversion. As set out in the Finalisation Announcement released
on SENS on 7 November 2013, the conversion will be effected on 25 November 2013.
Shareholders
Investec Limited, Stanlib and S Giuricich Holdings Proprietary Limited are the only shareholders holding in excess of 5% of
the Fund's total issued shares at 30 September 2013, holding 50.01%, 7.68% and 5.36% thereof, respectively.
Numbers of shares in issue 317 220 000
Number of shareholders 2 934
Prospects
The Board expects underlying property performance in the second half of the year to be in line with that of the first half and
maintains its previous guidance of 7% to 8% growth in distributions for the full 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 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
21 November 2013
Basis of accounting
The reviewed interim condensed financial information for the six months ended 30 September 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 period ended 30 September 2013 are consistent with
those adopted in the financial statements for the year ended 31 March 2013. These reviewed interim 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 but will be exempt from Capital Gains Tax under the new REIT legislation. Deferred taxation on the revaluation of
investment property no longer applies for the aforementioned reason.
These interim condensed financial statements for the period ended 30 September 2013 have been reviewed by the external
auditor, Ernst & Young Inc. on which an unmodified review conclusion was expressed. A copy of their review report is
available for inspection at the company's registered office.
Distribution
Notice is hereby given of an interim gross dividend declaration number 5 of 50.4613 cents per share (after applying
the Dividend Withholding Tax of 15% would provide a net dividend of 42.89211 cents per share) for the six months ended
30 September 2013, payable to holders of shares as recorded in the books of the company at the close of business on
Friday, 13 December 2013. No Secondary Tax on Companies credits were utilised in the net dividend determination, to those
shareholders who are not exempt from Dividend Withholding Tax.
The salient dates relating to the distribution are as follows:
Last day to trade in order to participate in the distribution Friday, 06 December 2013
Shares to trade ex distribution Monday, 09 December 2013
Record date Friday, 13 December 2013
Distribution posted/paid to certificated shareholders Tuesday, 17 December 2013
Accounts credited by CSDP or broker to dematerialised shareholders Tuesday, 17 December 2013
Shares may not be dematerialised between Monday, 09 December 2013 and Friday, 13 December 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 shares in issue: 317 220 000
Tax number: 9332719161
By order of the Board
Investec Bank Limited
Company Secretary
21 November 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: ZAE000180915
(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 Proprietary Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
Sponsor
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196
For a copy of the Fund's results, refer to the website:
www.investecpropertyfund.com
Date: 21/11/2013 08:55:00 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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