Wrap Text
Reviewed Financial Results for the ending 31st March 2014
INVESTEC AUSTRALIA PROPERTY FUND
Incorporated and registered in Australia in terms of ASIC (ARSN 162 067 736)
Registered in terms of the Collective Investment Schemes Control Act No. 45 of 2003
Share code: IAP
ISIN: AU60INL00018
("IAPF" or "the Fund")
Results 2014
2014 Reviewed preliminary condensed consolidated financial results for the period from 12 December 2012 to 31 March 2014
Highlights
Listing on JSE Main Board
on 23 October 2013 - first
inward listed Australian
REIT on the JSE
Maiden distribution of
3.42 c
Exceeds PLS forecast
Total return since listing in ZAR
of 26% outperforming
Australian and
South African peers*
Quality core portfolio
supported by sound
property fundamentals
9 properties,
AUD 154mn
GLA 54,249m2
WALE
7.3 years
with 59% of leases
expiring after 5 years
Low Vacancy
0.5%**
Announced acquisitions of
AUD 46.8 mn***
deploying 67% of
listing capital
Low gearing
14%
providing headroom
for growth
Favourable interest rate environment
all in fixed cost of
funding 4.69%
Accretive acquisition
pipeline
Well placed to deliver
on the Funds objective of
delivering long term
capital and income
growth to unitholders
* assumes exchange rate of R9,76 / AUD1
at 31 March 2014 - constant currency
total return of 22%
** after taking into account the income
support arrangements over 0.5% of the
GLA, the vacancy is 0%
*** includes 186 Reed Street, Greenway
acquisition announced on 15 May 2014
and the Eight Mile Plains property
completed on 14 March 2014
Note: all amounts are in Australian dollars
unless otherwise stated
Consolidated statement of profit or loss and comprehensive income
for the period from 12 December 2012 to 31 March 2014
AUD'000 Note 2014
Revenue, excluding straight-line rental revenue adjustment 10 129
Straight-line rental revenue adjustment 1 051
Revenue 11 180
Property expenses (1 498)
Net property income 9 682
Fair value adjustments - investment property (18)
Other operating expenses (941)
Operating profit 8 723
Finance costs (1 388)
Finance income 152
Other income 6
Profit for the period 7 493
Number of units
Units in issue at the end of the period 134 685
Weighted average number of units in issue for the period 57 214
Cents
Final distribution for the period from 18 October 2013 to 31 March 2014
1 3.42
(pre-withholding tax)
Final distribution for the period from 18 October 2013 to 31 March 2014
1 3.20
(post-withholding tax)
Earnings per unit for the period 2 13.10
Consolidated statement of financial position
as at 31 March 2014
AUD'000 Note 2014
ASSETS
Non-current assets 154 381
Investment property 154 364
Financial instruments held at fair value 3 17
Current assets 6 657
Trade and other receivables 287
Cash and cash equivalents 6 370
Total assets 161 038
EQUITY AND LIABILITIES
Contributed equity 131 025
Retained earnings 1 033
Total unitholders' interest 132 058
Non-current liabilities 22 185
Borrowings 22 185
Current liabilities 6 795
Trade and other payables 2 193
Distributions payable 4 602
Total equity and liabilities 161 038
Net asset value per unit (AUD) 0.98
Consolidated statement of cash flows
for the period from 12 December 2012 to 31 March 2014
AUD'000 2014
Cash flows from operating activities
Cash generated from operations 9 543
Finance income received 135
Finance costs paid (1 329)
Distribution to unitholders (1 858)
Net cash flow from operating activities 6 491
Cash flows from investing activities
Investment property acquired (153 331)
Net cash flow used in investing activities (153 331)
Cash flows from financing activities
Loans raised 48 918
Repayment of loans (26 733)
Proceeds of unit issue 131 025
Net cash flow from financing activities 153 210
Net increase in cash and cash equivalents 6 370
Cash and cash equivalents at the beginning of the period -
Cash and cash equivalents at the end of the period 6 370
Consolidated statement of changes in equity
for the period from 12 December 2012 to 31 March 2014
AUD'000 2014
At the beginning of the period -
Profit for the year 7 493
Total comprehensive income 7 493
Transaction with unitholders in their capacity as unitholders:
Issue of ordinary units 131 025
Distributions paid/payable to unitholders (6 460)
Balance at the end of the period 132 058
Notes to the reviewed preliminary condensed consolidated financial results
for the period from 12 December 2012 to 31 March 2014
AUD'000 2014
1. Distribution reconciliation
Profit for the period 7 493
Less: Straight-lin rental revenue adjustment (1 051)
Less: Fair value adjustments - investment property 18
Distributable earnings 6 460
Add: Pre listing distribution (1 858)
Final distribution for the period from 18 October 2013 to 31 March 2014
(pre-withholding tax) 4 602
Withholding tax to be paid to the Australian Taxation Office (290)
Final distribution for the period from 18 October 2013 to 31 March 2014
(post-withholding tax) 4 312
2. Headline earnings reconciliation
Profit for the period 7 493
Add: Fair value adjustments - investment property 18
Headline earnings 7 511
Headline earnings per unit for the period (cents) 13.13
3. Financial Instruments
Financial instruments held at fair value consist of interest rate swaps, which are classified as
level 2. These are valued using valuation models which use market observable inputs such
as quoted interest rates. No other financial instruments are carried at fair value.
Condensed segmental information
for the period from 12 December 2012 to 31 March 2014
AUD'000 Office Industrial Total
Statement of comprehensive income extracts
Revenue, excluding straight-line rental revenue adjustment 4 208 5 921 10 129
Straight-line revenue adjustment 311 740 1 051
Property expenses (824) (674) (1 498)
Segment results 3 695 5 987 9 682
Net investment property revaluation (480) 462 (18)
Total segment results 3 215 6 449 9 664
Other operating expenses (941)
Finance costs (1 388)
Finance income 152
Other income 6
Profit for the period 7 493
Statement of financial position extracts
Investment property opening balance - - -
Net additions, acquisitions and disposals 105 423 47 908 153 331
Straight-line rental revenue receivable 311 740 1 051
Fair value adjustment (excluding straight-lining) (480) 462 (18)
Fair value of investment property 105 254 49 110 154 364
Commentary
Introduction
Investec Australia Property Fund ("the Fund") listed on the JSE on 23 October 2013, as the first inward listed Australian
real estate investment trust. The Fund offers investors exposure to the direct Australian property market, as well as
providing exposure to the Australian dollar.
The Fund currently comprises nine properties in Australia with a total gross lettable area ("GLA") of 54,249m2
independently valued at AUD 154mn.
The fund as at 31 March 2014 had an AUD equivalent market capitalisation of AUD 162mn and has delivered unitholders
a total ZAR return of 26% since listing, out performing its peers in South Africa and Australia.
The objective of the Fund is to grow and diversify its asset base and to optimise capital and income returns over time
for unitholders by investing in high quality commercial real estate assets (office, industrial and retail) that posses the
following qualities
- positioned in well located commercial precincts in Australia and New Zealand
- medium to long term lease profiles
- limited or no short term capex requirements
- contractual rental growth
- strong tenant covenants
Financial Results
The board of directors of Investec Property Limited ("IPL") is pleased to announce the Fund's maiden distribution
since listing of 3.42 cents per unit pre withholding tax and 3.20 cents per unit post withholding tax, which equates to
an annualised distribution yield of 7.6% pre withholding tax and 7.1% post withholding tax. These results exceed the
distributions disclosed in the Pre-Listing Statement dated 25 September 2013 ("PLS").
This performance is underpinned by the strength of the portfolio's property fundamentals, cost containment and the
Fund's efficient capital and interest rate management.
Whilst the results presented in this report cover the 15 month period from 12 December 2012 (being the date the Fund
was established) to 31 March 2014, the period relevant to unitholders is from the listing date to 31 March 2014. For the
period prior to this, 12 December 2012 to the date of the listing, a pre listing distribution of AUD 1.86mn was paid to
Investec Bank (Australia) Limited ("IBAL"), which was the sole unitholder in the Fund prior to listing.
Properties
The Fund is anchored by a core portfolio of 9 quality well located properties. The strength of the property fundamentals
are evidenced by a long dated WALE of 7.3 years with 59% of leases expiring after 5 years, vacancies of 0.5%, strong
tenant covenants and attractive rental escalations of approximately 3.5%.
Property porfolio
% of % of Cap
Book value portfolio Total area portfolio rate
Sector (AUD) by value (m2) by area %
Industrial portfolio
48 Hawkins Crescent, Ipswich QLD Industrial 3 560 000 2.3 2 045 3.8 8.0
47 Sawmill Circuit, Hume ACT Industrial 9 600 000 6.2 5 535 10.2 7.5
57 Sawmill Circuit, Hume ACT Industrial 8 750 000 5.7 7 079 13.0 8.0
24 Sawmill Circuit, Hume ACT Industrial 9 000 000 5.8 6 300 11.6 8.0
44 Sawmill Circuit, Hume ACT Industrial 9 100 000 5.9 4 639 8.5 9.0
2 - 8 Mirage Rd, Direk SA Industrial 9 100 000 5.9 6 783 12.5 9.0
Office portfolio
449 Punt Road, Cremorne VIC Office 29 800 000 19.3 6 383 11.8 8.8
35 - 49 Elizabeth Street, Richmond VIC Office 54 500 000 35.3 11 917 22.0 8.5
Building 20, 2404 Logan Road
Eight Mile Plans QLD Office 20 954 000 13.6 3 568 6.6 8.3
Total 154 364 000 54 249
Geographic spread
The fund has a well diversified geographic spread and will continue to invest in properties that are well located in major
metropolitan cities and established commercial precincts.
Sectorial spread
The fund's sectoral exposure to date is mixed between office and industrial. The fund will consider investments in retail,
however no opportunities to date have met the investment profile of the fund.
Tenant profile
The Fund has a high profile tenant base with 80% of the portfolio comprising of A Grade Tenants. The Fund also has 58% of the
portfolio represented by single tenant users, with the remaining 42% of multi tenanted buildings only being occupied by a total of
8 tenants.
Vacancy levels
At 31 March 2014, the property portfolio had 0.5% vacancy (after taking into account the income support arrangements over 0.5%
of the GLA, there is no vacancy).
Lease expiry profile by sector
The lease expiry profile reflects the quality and sustainability of the Funds net property income
Cost to income ratio
The Funds low gross cost to income ratio of 14.8% has been achieved by:
- effective cost containment;
- large percentage of triple net leases; and
- the large percentage of single tenant buildings or multi tenant buildings with less than 5 tenants.
Acquisitions
The capital raised on listing provided the Fund with debt capacity to acquire approximately AUD 70mn of properties before it
reached the mid range of its desired gearing ratio of 35%. The Fund has to date completed 2 acquisitions totaling AUD 46.8mn,
resulting in the deployment of approximately 70% of its acquisition debt capacity (including costs). The acquisition of the Greenway
property referred to below was completed and announced on 15 May 2014 and is reported as a subsequent event.
Effective WALE
Property name Geography date Sector Value GLA m2 Yield* (GLA)
14 March
Eight Mile Plains QLD 2014 Office 20 954 000 3 568 7.74% 6.2
Subsequent to 31 March 2014
15 May
Greenway ACT 2014 Office 25 805 000 5 403 7.40% 9
*After transaction costs
The acquisitions complement the existing property portfolio and contribute to the strength of the existing property fundamentals.
The Eight Mile Plains Property was an off market transaction sourced through Investec's network, illustrating the funds ability to
secure quality properties in a highly competitive environment.
The acquisitions have been funded with debt from the Fund's existing Westpac facility, the details of which are included below.
The acquisitions are accretive to the Fund due to the current positive spread of property yields over the cost of debt, which is
primarily due to the current favourable interest rate environment in Australia.
The Fund has an attractive pipeline of acquisition opportunities which are expected to be earnings accretive and will compliment
the profile of the existing property portfolio.
Fair value adjustment 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 18 months by an independent external valuer (in compliance with the Fund's debt
facility). Where directors' valuations are performed, the valuation methods include using the discounted cash flow model and the
capitalisation model.
Independent external valuations were obtained for all of the Fund's investment properties in February and March 2014. The Fund
recorded a gross valuation uplift across the portfolio of 0.7%.
Capital funding
On 23 October 2013 the Fund raised capital by way of a private placing of 112 685 000 units at AUD 1.00 each. The private
placing was significantly over subscribed.
The proceeds of the private placing were used to acquire the Punt Road Property and the Elizabeth Street Property (which both
transferred on 25 October 2013) and to repay the debt on the balance sheet prior to the listing and private placing.
Prior to the private placing the Fund was wholly owned by IBAL and had 22 000 000 units in issue.
The Fund now has 134 685 000 units in issue, which were issued at AUD 1.00 per unit.
The Fund has secured a debt facility with Westpac Banking Corporation - one of Australia's largest banks. At period end the facility
had a limit of AUD 26 8mn which can be increased to AUD 125mn subject to financier approval and other conditions being met.
The facility is for a 3 year term from April 2014 and the Fund will hedge at least 75% of its interest rate exposure. The Fund recently
secured a 20 basis point decrease in pricing which is set out below:
Amount
At 31 March 2014 Expiry Rate AUD'000
Facility
Westpac Apri - 17 BBSW + 150 bps 125 000
Total facilities 125 000
Drawn down at 31 March 2014 22 290
Available facilities (subject to financier approval) 102,710
The Fund's gearing ratio remained low at 14.4% at period end and increased to 26.8% subsequent to post year end on the
completion of the Greenway property acquisition. The gearing remains below the stated range in the PLS of 30% to 40%, providing
headroom to pursue further acquisitions.
The Fund has hedged 100% of its current interest rate exposure at a base rate of 3.19% for 3 years. The all in cost of funding at
period end was 4.69%.
Related party transactions
IPL is the responsible entity of the Fund. Investec Property Management Pty Limited ("IPML") is the manager of the Fund. Both IPL
and IPML are wholly owned subsidiaries of IBAL.
On 11 April 2014 the sale of IBAL's Professional Finance, Asset Finance and Leasing businesses and deposit book was
announced. The transaction will be structured as a sale of IBAL. Prior to the sale all of the non-sale assets (including IPL and
IPML) will be transferred out of IBAL to another wholly owned Investec Group entity. Investec will continue its property business in
Australia. The IBAL support arrangements will be transferred to an Australian Investec Group entity. This entity will be capitalised
by Investec Bank Plc to the extent necessary to fulfil the needs of all ongoing businesses and to honour all commitments, including
the income support arrangements. As such, the transaction will have no impact on the Fund, IPL or IPML.
The Fund entered into the following significant related party transactions during the period with the Investec Group, IBAL and its
subsidiaries:
31 March 2014
Transaction with related parties AUD'000
Payments to Investec Group, IBAL and its subsidiaries:
Investec Property Management Pty Limited
Asset management fee 439
Property management fee 161
Investec Bank Limited
Capital raising fees and listing costs 2 160
Receipts from Investec Group, IBAL and its subsidiaries:
Investec Bank (Australia) Limited
Payments to the Fund under income support arrangements 834
Australian REIT Structure
The Fund allows for the tax efficient flow-through of net income to unitholders. The Fund is an uncapped and open-
ended fund and existing and future unitholders will hold a participatory interest in the Fund, which entitles unitholders to
a pro rata share of the underlying income generated by the Fund and a pro rata beneficial interest in the assets of the
Fund. The Fund is registered as a Managed Investment Scheme in Australia. The Fund is governed and operated by
IPL and managed by IPML.
Unitholders
Investec Property Fund Limited and Investec Bank Limited are the only unitholders holding in excess of 5% of the Fund's
total issued units, holding 18.56% and 16.33% respectively.
Number of units in issue 134 685 000
Number of unitholders 2 076
Changes to the board
David Gonski resigned from the board of IPL effective 31 March 2014.
Prospects
The Fund is well positioned to continue with the execution of its strategy outlined to investors on its listing on the JSE. The
existing property portfolio consists of well located properties, 99.5% let (before taking into account the income support
arrangements over the remaining 0.5% of the GLA) with income underpinned by strong tenant covenants, with a WALE
of 7.3 years and embedded contractual escalations. The underlying property portfolio is expected to perform in line with
forecasts provided in the PLS and the forecasts provided in relation to the recent completed and announced acquisitions.
The strength of the underlying property portfolio allows management to focus on its pipeline of prospective acquisitions,
which consist of both on and off market opportunities which in the current favourable interest rate environment can be
funded at attractive pricing. The Fund's balance sheet is well capitalised to take advantage of these opportunities.
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.
The auditor's review report does not report on all of the information contained in this announcement. Any reference to future
financial information included in this announcement has not been reviewed or reported on by the Fund independent auditors.
On behalf of the board of Investec Property Limited as responsible entity for the Investec Australia Property Fund
Richard Longes Graeme Katz
Chairman Chief Executive Officer
22 May 2014
Basis of accounting
The preliminary condensed consolidated financial statements are prepared in accordance with the requirements of the
JSE Limited Listings Requirements for preliminary reports. The Listings Requirements require preliminary reports to be
prepared in accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and to also, as a
minimum, contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the reviewed preliminary condensed consolidated financial results
for the period from 12 December 2012 to 31 March 2014 are in terms of IFRS and are consistent with those adopted in
the PLS.
Review conclusion
These preliminary condensed consolidated financial results for the period from 12 December 2012 to 31 March 2014 have
been reviewed by KPMG, who expressed an unmodified review conclusion. A copy of the auditor's review report is available
for inspection at IPL's registered office together with the financial statements identified in the auditor's report.
Distribution
Notice is hereby given of a final distribution declaration number 1 of:
- 3.42 cents per unit pre withholding tax
- 3.20 cents per unit post withholding tax
for the period from 18 October 2013 to 31 March 2014, payable to holders of the units as recorded in the register of
unitholders of the Fund at the close of business on Friday, 13 June 2014. Withholding tax of 0.22 cents per unit will be
withheld from the distribution paid to non-Australian unitholders and will be paid to the Australian Taxation Office.
The distribution amount declared from net rental income will be converted from AUD to ZAR at the spot rate on Thursday, 29 May 2014
and which will be announced on SENS Friday, 30 May 2014. The distributionwill be paid to unitholders in ZAR.
The salient dates relating to the distribution are as follows:
Last day to trade in order to participate in the distribution Friday, 6 June 2014
Units to trade ex distribution Monday, 9 June 2014
Distribution amount transferred to South Africa and converted from AUD to ZAR at the spot rate Thursday, 12 June 2014
Record date Friday, 13 June 2014
Distribution posted/paid to certificated unitholders Tuesday, 17 June 2014
Accounts credited by CSDP or broker to dematerialised unitholders Tuesday, 17 June 2014
Units may not be dematerialised or rematerialised between Monday, 9 June and Friday, 13 June 2014, 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.
The distributions, net of withholding tax, received by South African institutional and individual investors will constitute income
and will be subject to income tax in South Africa at the investors' marginal tax rate. Individual investors will be able to claim a
rebate against the withholding tax paid in Australia. Non-tax paying institutional investors will not be taxed and will therefore
not be entitled to claim a rebate. The effective withholding tax rate on the distribution is 6.3%.
The above summary of the tax treatment of the foreign distribution does not constitute legal or tax advice and is based
on taxation law and practice at the date of this announcement. Investors should take their own tax advice as to the
consequences of their investment in the Fund and are encouraged to consult their professional advisors should they be
in any doubt as to the appropriate action to take.
By order of the board
Investec Property Limited
Company Secretary
22 May 2014
Important Disclosures
Investec Property Limited (IPL) AFS licence 290909 is the Responsible Entity for the Investec Australia Property Fund (the Fund) ARSN 162
067 736, an Australian registered managed investment scheme registered in South Africa as a Foreign Collective Investment Scheme (CIS)
and listed on the JSE Limited.
IPL is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). Neither investments in the Fund nor
Investec Property's obligations represent deposits or other liabilities of Investec Bank (Australia) Limited ABN 55 071 292 594 (Investec
Bank) or any Investec Group entity. Investments in the Fund are subject to investment risk, including possible delays in repayment and
loss of income and capital invested. Neither Investec Bank nor any Investec Group entity: (i) guarantee or otherwise provide assurance in
respect of the obligations of Investec Property; (ii) guarantee any particular rate of return or the performance of the Fund; or (iii) guarantee the
repayment of capital from the Fund.
Directors of the Responsible Entity Manager
Richard Longes# (Non-executive chairman) Investec Property Management Pty Limited
Sam Hackner (Non-executive) (ACN 161 587 391)
Graeme Katz (Executive) Level 23, Chifley Tower
Samuel Leon (Non-executive) 2 Chifley Square
Sally Herman# (Non-executive) Sydney
Michael Crawford# (Non-executive) New South Wales
David Gonski# (Non-executive) (resigned 31 March 2014) 2000
# Independent Australia
Directors of the Manager Transfer Secretaries
Graeme Katz (Executive) Computershare Investor Services Proprietary Limited
Zach McHerron (Executive) 70 Marshall Street
Matthew Liston (Executive) Johannesburg
Jason Sandler (Executive) 2001
Samuel Leon (Non-executive) (PO Box 61051, Marshalltown, 2107)
Phone: +27 11 370 5159
Investec Australia Property Fund
Registered in Australia in terms of ASIC (ARSN 162 067 736) Sponsor
Registered in terms of the Collective Investment Schemes The Corporate Finance division of Investec Bank Limited
Control Act No. 45 of 2003 2nd Floor
Share code: IAP 100 Grayston Drive
ISIN: AU60INL00018 Sandown
Sandton
Company Secretary of the Responsible Entity 2196
Paul Lam-Po-Tang (BCom, LLB) (PO Box 785700, Sandton, 2146)
Registered office and postal address of the Responsible Custodian
Entity and date of establishment of the Fund Perpetual Corporate Trust Limited
(ACN 000 341 533)
Australia: Level 12, 123 Pitt Street
Level 23, Chifley Tower Sydney
2 Chifley Square New South Wales
Sydney 2000
New South Wales Australia
2000
Australia Independent Party
FirstRand Bank Limited
Local representative office: Bank City, 3 First Place
2nd Floor 1st Floor, Corner Simmonds and Jeppe Streets
100 Grayston Drive (PO Box 7713, Johannesburg, 2000, South Africa)
Sandown
Sandton
2196
Established on 12 December 2012 in Sydney, Australia.
Registered as a Managed Investment Scheme with ASIC under
the Corporations Act on 6 February 2013. On 23 August 2013
the Registrar of Collective Investment Schemes authorised the
Fund to solicit investments in the Fund from members of the
public in the Republic of South Africa in terms of Section 65 of
the Collective Investment Schemes Control Act, 45 of 2002,
as amended.
Responsible Entity
Investec Property Limited
(ACN 071 514 246 AFSL 290 909)
Level 23, Chifley Tower
2 Chifley Square
Sydney
New South Wales
2000
Australia
Date: 22/05/2014 07:55:00 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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