To view the PDF file, sign up for a MySharenet subscription.

EMIRA PROPERTY FUND - Reviewed results for the year ended 30 June 2014 and income distribution and directorate changes

Release Date: 13/08/2014 13:40
Code(s): EMI     PDF:  
Wrap Text
Reviewed results for the year ended 30 June 2014 and income distribution and directorate changes

Emira Property Fund
(A property fund created under the Emira Property Scheme, registered 
in terms of the Collective Investment Schemes Control Act No. 45 of
2002)
Share code: emi ISIN: zae000050712 (“Emira” or “the Fund”) Tax 
number: 0047/321/15/3
(Approved as a REIT by the JSE)

Reviewed financial results
For the year ended 30 June 2014 and income distribution declaration 
and changes to Directorate

Growth in distributions +7,5%
Distributable income growth of 5,5% to R601,1m
Distribution per PI 123,18c
Net asset value growth per PI of 9,2% to 1 447c

Commentary
The board of directors of Strategic Real Estate Managers (Pty) Ltd
(“STREM”) is pleased to announce a distribution of 123,18 cents per 
Emira participatory interest (PI) for the 12 months to 30 June 2014. 
This is an increase of 7,5% on the previous comparable period and a 
further improvement on the 6,5% growth in distributions per PI 
reported for the six months to 31 December 2013.

Vacancies and tenant renewals
Over the past two financial years vacancies improved from 10,2%
(June 12) to 5,6% (June 13) to 4,5% (June 14). All sectors are well 
below SAPOA and national levels. This represents a substantial 
decline in vacancies of 67 575m2, which was driven by leasing in the
office and industrial sectors, and is the lowest vacancies have been 
since 2005.

Tenant retention by GLA improved from an already impressive 78% to
80%.

Major leases concluded
A total of 33 leases over 2 000m2 were concluded during the financial 
year, comprising 150 000m2 with a lease value of R508m. The average 
weighted lease period of these leases is four years. The three biggest 
new leases concluded were at Epping Warehouse (6 267m2), Cochrane Avenue 
(5 870m2) and 7 Naivasha Road (4 673m2), and three biggest renewals at 
Epping Warehouse (14 156m2), Defy (10 199m2) and Taylor Blinds (7 794m2) 
— all to high quality tenants.

Acquisitions and developments
Subsequent to the previous financial year end, the Fund took
transfer of three buildings in the Highgrove Office Park, Centurion, 
for R24,6m, taking the Fund’s exposure in this A-Grade office park
to R157,9m.

Acquisitions during the period comprised: (i) a vacant stand in the 
Gateway Landing Industrial Park for R12,4m on which a modern 
industrial facility of 9 371m2 is being developed at a total cost of
R57,4m with the initial yield on the development, assuming fully let, 
estimated at 10%, transfer taking place in January 2014, (ii) an 
industrial building of 7 533m2 leased to Lithotec (a division of Bidvest) 
in Airport Industria, Cape Town for R34,5m at a yield of 9,2%, transfer 
of which took place in February 2014, (iii) with effect from 1 June
2014, Emira acquired a prestigious office development, Menlyn
Corporate Park, situated in Menlyn, Pretoria for R614m. The 25 767m2
P-grade development is fully let and is expected to yield 8,6% in
the first year. This brings total acquisition during the period to 
R705m at a forward yield of 8,7%.

Disposals
The strategy to dispose of non-core buildings continued during the 
period under review. Four properties totalling R119,0m, which had 
been sold but not yet transferred at 30 June 2013 — Georgian Place,
261 Surrey Avenue, Fleetway House and Montana Value Centre — were 
transferred out of Emira during the period. A further two buildings, 
Lynnridge Mall and Olivedale Office Park were transferred in 2014, 
bringing the total value of sales to R313,1m with a forward yield of
8,1%.

Seven buildings with a total value of R188,0m and a forward yield of
7,6% were sold at June 2014, but had not yet been transferred.

The proceeds of these disposals are to be used to partially fund the 
acquisitions and developments mentioned above.

Refurbishments and extensions
Several projects totalling approximately R614,8m are underway, the 
most significant of which is a major upgrade and extension to 
Wonderpark Shopping Centre, where the centre is being enlarged at a
cost of R551,8m at an initial yield in excess of 8%, from 63 000m2 
to 90 000 m2 to accommodate extensions for existing national tenants 
including Game, Woolworths, Jet and Edgars and the introduction of new 
anchor tenants, Checkers, Dis-Chem, HiFi Corp, PQ Clothing, Cotton 
On and The Hub, among others.

Repurchases of participatory interests (PIs)
The board previously approved the implementation of a PI repurchase
programme which was confirmed by PI holders at the AGM in November
2013. In terms of the programme a portion of the proceeds from the 
sale of properties can be used to repurchase PIs in the open market.
 
During the period, the Fund purchased 13 418 843 PIs at a total cost 
of R182,8m, an average cost of R13,61 per PI. Excluding the
dividends paid out on these PIs, the clean price was R13,02 cents,
proving to be both earnings and NAV enhancing for PI holders. The 
Fund will continue to repurchase PIs at prices considered beneficial 
to PI holders.

Gearing
Emira continued to take advantage of the lower rates of funding
available in the debt capital markets.

Debt funding activities totalling almost R3,7bn during the year
comprised:

Date                                     Amount   All-in-rate
                                            (Rm)           (%)
22 August 2013    Repayment of 3-month
                  commercial paper          400          5,30
22 August 2013    Issue of 6-month 
                  commercial paper          399          5,80
22 August 2013    Issue of 3-month 
                  commercial paper          100          5,30
13 September 2013 Issue of 12-month 
                  commercial paper          230          5,90
7 November 2013   Roll over of 12-month
                  commercial paper          450          5,90
20 November 2013  Repayment of 3-month
                  commercial paper          100          5,30
20 November 2013  Issue of 12-month 
                  commercial paper          100          5,90
20 February 2014  Repayment of 6-month
                  commercial paper          399          5,80
20 February 2014  Issue of 12-month 
                  commercial paper          400          6,40
30 May 2014       Issue of 4-year domestic
                  medium term notes         300          7,40

A new R500m, three year loan facility was granted by RMB in March
2014, at Jibar plus 170 basis points. At 30 June 2014, R100m had been 
drawn down.

In order to partly fund the acquisition of Menlyn Corporate Park, a 
new three year loan of R314m, was concluded with Nedbank, at a rate 
of Jibar plus 163 basis points, in June 2014.

During the year, the following swap contracts totalling R1,23bn
were entered into with RMB. At 30 June 2014 87,1% of the Fund’s debt 
had been hedged.

                            Amount                             Rate
Date                           (Rm)             Expiry date      (%)
18 December 2013             83,3m              1 July 2017    6,96
18 December 2013             83,3m           1 October 2017    7,14
18 December 2013             83,3m           1 January 2018    7,26
13 March 2014                55,0m            12 March 2017    7,68
13 March 2014                60,0m            12 March 2017    7,69
26 March 2014                50,0m            25 March 2017    7,58
26 March 2014               150,0m            25 March 2018    7,80
9 April 2014                100,0m         31 December 2016    7,30
9 April 2014                100,0m         31 December 2018    7,84
14 May 2014                 155,0m              1 July 2016    6,97
14 May 2014                 310,0m              1 July 2017    7,25

Growthpoint Australia Limited (GOZ)
Emira participated in the rights issue held by GOZ in December 2013, 
taking up an additional 2 441 777 units at AUD 2,45 per unit at a 
cost of R 56,9m. At June 2014, GOZ’s unit price as quoted on the ASX 
was AUD2,45 resulting in Emira’s investment of 27 225 813 units, 
amounting to 5,0% of the units in issue, being valued at R666,0m 
compared to a cost of R372,0m.

Results
Contractual escalations on the bulk of the portfolio, significant 
leasing progress made during the period and stringent cost control, 
which includes savings from the property management tender, has 
resulted in the Fund achieving a substantial increase in distributable 
income during the period.

Excluding the straight-lining adjustments in respect of future
rental escalations, revenue rose by 7,0% over the comparable period.
This was positively impacted by the leasing of vacant space, 
acquisitions and organic growth from the existing portfolio and 
increased recoveries of municipal expenses, offset by disposals. 

Property expenses increased by 11,3% over the previous comparable 
period, mainly due to increases in municipal costs, leasing expenses
— which are expensed in the first year of the lease — and 
refurbishment costs. Excluding these items, the balance of property 
expenses increased by 2,5%.

Income from the Fund’s listed investment in Australia increased by
21,7% due to an increase in the distribution per unit received from 
GOZ, the depreciation of the rand against the Australian dollar and 
increased units being held as a result of the Fund following its 
rights in respect of a rights issue held in December 2013. Excluding 
income received in respect of the rights issue, the increase
amounted to 15,4%.

Net finance costs increased by 4,1% as a result of the increase in
interest rates, the income received from the PI buybacks and
utilisation of debt facilities for new developments and acquisitions.

Following the revaluation of investment properties and the revaluation 
of the investment in GOZ, net asset value increased by 9,2% from 1 325 
cents per PI at 30 June 2013, to 1 447 cents per PI at 30 June 2014.

Distribution statement

                                     Year ended  Year ended
                                        30 June     30 June       %
R’000                                      2014        2013  change
Operating lease rental income and 
tenant recoveries excluding
straight-lining of leases             1 448 914   1 353 853     7,0
Property expenses excluding
amortised upfront lease costs          (563 474)   (506 371)   11,3
Net property income                     885 440     847 482     4,5
Income from listed investment            44 225      36 332    21,7
Management expenses
Reimbursement to STREM                  (27 980)    (20 779)   34,7
Administration expenses                 (42 282)    (44 227)   (4,4) 
Depreciation                            (11 581)    (12 006)   (3,5) 
Net finance costs                      (246 711)   (236 946)    4,1
Finance costs                          (260 074)   (245 000)    6,2
Interest paid and amortised
borrowing costs                        (276 019)   (247 036)   11,7
Interest capitalised to the cost of
developments                             15 945       2 036     
Investment income                        13 363       8 054    65,9
Distribution payable to
participatory interest holders          601 111     569 856     5,5
No of units in issue                483 881 040 497 299 883    (2,7) 
Distribution per participatory
interest (cents)                         123,18      114,59     7,5

Disposals
In accordance with the strategy of the Fund, certain properties that
are underperforming or pose excessive risk to the Fund are earmarked 
and disposed of.

Properties transferred out of Emira during the 12 months to June 2014

Property                     Sector    Location              GLA (m2)               
Georgian Place 
(Sectional title units)      Office    Kelvin, Gauteng         9 485
261 Surrey Avenue            Office    Ferndale, Gauteng       1 752
Fleetway House               Office    Cape Town, CBD          7 090
Montana Value Centre         Retail    Montana, Gauteng        9 717
Lynnridge Mall               Retail    Pretoria, Gauteng      20 022
Olivedale Office Park        Office    Randburg, Gauteng       3 222
                                                              51 288

Properties transferred out of Emira during the 12 months to June 2014

                        Valuation   Sale   Exit  
                        June 2013  price  yield  Effective
Property                      (Rm)   (Rm)    (%) date
Georgian Place                                   August, October 
(Sectional title units)      32,4   29,1    5,1  and November 2013
261 Surrey Avenue             6,4    7,2    8,4  September 2013
Fleetway House               33,4   32,7    3,3  October 2013
Montana Value Centre         39,2   50,0    7,0  October 2013
Lynnridge Mall              175,0  175,0    9,5  March 2014
Olivedale Office Park        15,3   19,1   10,3  June 2014
                            301,7  313,1    8,1

Properties sold but not yet transferred out of Emira at June 2014

Property                     Sector      Location      GLA (m2)           
Woodmead Office Park         Office      Woodmead,       8 162
(50% undivided share)                    Johannesburg    
Executive City               Industrial  Kya Sands,      4 558
                                         Randburg        
Kya Sands (Cnr Precision     Industrial  Kya Sands,      1 452
and Staal Street)                        Randburg
(Siliconics)                        
Harrogate Park               Office      Hatfield,       1 711
                                         Pretoria     
Tokai Shopping Centre        Retail      Ferndale,       2 603
                                         Johannesburg
WorldWear Fashion Mall       Retail      Fairlands,     14 172
                                         Johannesburg
500 Smuts Drive              Office      Midrand, 
                                         Gauteng         5 201
                                                        37 859

Properties sold but not yet transferred out of Emira at June 2014
                                                       Effective/
                                    Valuation    Sale  anticipated
                                    June 2013   price  effective
Property                                  (Rm)    (Rm) date
Woodmead Office Park 
(50% undivided share)                    60,2    60,0  July 2014
Executive City                           11,3    11,2  July 2014
Kya Sands (Cnr Precision and Staal
Street) (Siliconics)                      5,3     5,0  August 2014
Harrogate Park                           15,3    17,5  August 2014
Tokai Shopping Centre                    15,0    16,0  September 2014
WorldWear Fashion Mall                   37,0    34,8  December 2014*
500 Smuts Drive                          46,0    43,5  December 2014
                                        190,1   188,0

* An effective possession date of 15 April 2013 has been agreed with 
the purchaser.

Vacancies

                           Number of          GLA      Vacancy
                           Buildings    June 2013    June 2013    
                           June 2013          (m2)         (m2)    %
Office                            69      431 859       46 200  10,7
Retail                            37      363 391       10 157   2,8
Industrial                        42      338 568        7 387   2,2
Total                            148    1 133 818       63 744   5,6

                           Number of          GLA
                           Buildings    June 2014      Vacancy
                           June 2014          (m2)   June 2014     %
Office                            63      435 299       38 420   8,8
Retail                            35      352 969        9 558   2,7
Industrial                        43      348 393        3 510   1,0
Total                            141    1 136 661       51 488   4,5

Valuations
One-third of Emira’s portfolio is valued by independent valuers at 
the end of every financial year, with the balance being valued by the 
directors.

Total portfolio movement
Sector                    June 2013               June 2014
                             (R’000)     R/m2       (R’000)   R/m2
Office                    4 557 146    10 552    5 381 621  12 363
Retail                    3 312 760     9 116    3 669 868  10 397
Industrial                1 530 500     4 521    1 707 515   4 901
                          9 400 406              10 759 004

Sector                                     Difference     Difference
                                                   (%)        (R’000) 
Office                                           18,1        824 475
Retail                                           10,8        357 108
Industrial                                       11,6        177 015
                                                 14,5      1 358 598

Investment properties increased by R1358,6m made up of capital
expenditure including capitalised interest of R1190,0m, less 
disposals of R313,1m, depreciation of R11,6m and a net upward 
revision in property values of R493,3m.

Debt
Emira has a moderate level of gearing with debt to total assets at
30 June 2014 equating to 34,0%. As at 30 June 2014, 87,1% of the 
Fund’s debt had been fixed for periods of between 2 and 10 years, 
with a weighted average length of 4 years and 7 months.

                         Weighted         Weighted    Amount    % of
                   average rate %     average term       (Rm)   debt
Debt — Swap                   9,1 4 years 7 months   3 446,6    87,1
Debt — Floating               7,2                      510,9    12,9
Total                         8,8                    3 957,5   100,0
Less: Costs capitalised
not yet amortised                                       (3,7)
Per balance sheet                                    3 953,8

Directorate
With effect from 12 August 2014, Nocawe Makiwane has indicated that 
she can no longer be considered an independent director and 
accordingly has resigned as a member of the Audit and Risk  
Committees. She  will remain on the STREM board as a non-executive 
director. Gerhard van Zyl has been appointed to these committees in 
her place.

Peter Thurling, the Chief Financial Officer, has indicated that he 
wishes to retire with effect from 31 December 2014. A replacement is 
currently being sought.

REIT status
Emira was awarded REIT status by the JSE, with effect from 1 July 2013.

Change in distribution policy – depreciation
Since inception Emira has provided for depreciation, in respect of 
certain fixed assets, in line with tax allowances. This has resulted 
in its distributable income being lower than its peers on a comparable 
basis.

In order to align Emira with other listed property funds, from FY15, 
Emira will no longer include a depreciation charge in its 
distributable income. This will result in an increase in future 
distributions payable, of approximately R12m.

Prospects
The benefit of the improved occupancies in FY14 and the forecast
containment of property expenses in the coming financial year are 
expected to result in a further healthy improvement in distribution 
growth per PI in the 12 months to June 2015. The benefit of the 
distribution policy change regarding depreciation will further enhance 
distribution growth.

The forecast information contained in this paragraph has not been
reviewed by Emira’s auditors.

Subsequent to year-end
The acquisition of a portfolio of eight properties for R830m has been 
conditionally concluded, pending Competition Commission approval, 
which is expected mid-August 2014. This portfolio comprising two 
retail properties, three office buildings and three industrial 
properties has been acquired at a forward yield of 9,4% with effect 
from 1 July 2014.

The weighted average lease length is in excess of five years, with an 
average escalation of 8,4%, let to high quality tenants such as 
Massmart, Intercare, Auditor-General and Cipla-Medpro.

Funding for the acquisition will be through a combination of debt
and equity, for which an accelerated bookbuild of R310m was
concluded on 17 July 2014. The transaction is expected to be earnings 
neutral in the first year and enhancing thereafter.

In addition, Emira has purchased a 60% undivided share in Ben Fleur 
Boulevard, an 8 500m2 convenience centre situated in Emalahleni 
(Witbank), for R66m at an expected yield of 9,4%.

Income distribution declaration
Notice is hereby given that a final cash distribution of 63,87 cents 
(2013: 58,90 cents) per participatory interest has been declared, 
payable to participatory interest holders on 15 September 2014. 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 on deposit. Please refer to the
Statement of Comprehensive Income for further details. The number of PIs 
in issue as at the date of declaration is 506 103 262.

In accordance with Emira’s status as a REIT, PI holders are advised 
that the distribution meets the requirements of a “qualifying 
distribution” for the purposes of section 25BB of the Income Tax Act, 
No. 58 of 1962 (“Income Tax Act”). Accordingly, qualifying 
distributions received by local tax residents must be included in the 
gross income of such participatory interest holders (as a non-exempt 
dividend in terms of section 10(1) (k) (aa) of the Income Tax Act), 
with the effect that the qualifying distribution is taxable as income 
in the hands of the PI holder. These qualifying distributions are, 
however, exempt from dividend withholding tax in the hands of South 
African tax resident participatory interest holders, provided that
the South African resident participatory interest holders have
provided the following forms to their Central Securities Depository 
Participant (“CSDP”) or broker, as the case may be, in respect of 
uncertificated PIs, or the Transfer Secretaries, in respect of 
certificated PIs:

a) a declaration that the distribution is exempt from dividends tax;
and
b) a written undertaking to inform the CSDP, broker or the Transfer 
Secretaries, as the case may be, should the circumstances affecting 
the exemption change or the beneficial owner cease to be the 
beneficial owner, both in the form prescribed by the Commissioner for 
the South African Revenue Service. Participatory interest holders are 
advised to contact their CSDP, broker or the Transfer Secretaries, as 
the case may be, to arrange for the abovementioned documents to be 
submitted prior to payment of the distribution, if such documents
have not already been submitted.

Qualifying distributions received by non-resident participatory
interest holders will not be taxable as income and instead will be 
treated as ordinary dividends but which are exempt in terms of the 
usual dividend exemptions per section 10(1) (k) of the Income Tax 
Act. It should be noted that until 31 December 2013 qualifying 
distributions received by non-residents were not subject to dividend 
withholding tax. From 1 January 2014, any qualifying distribution 
received by a non-resident from a REIT will be subject to dividend 
withholding tax at 15%, unless the rate is reduced in terms of any 
applicable agreement for the avoidance of double taxation (“DTA”) 
between South Africa and the country of residence of the PI holder. 
Assuming dividend withholding tax will be withheld at a rate of 15%, 
the net amount due to non-resident participatory interest holders 
will be 54,2895 cents per participatory interest. A reduced dividend 
withholding tax rate in terms of the applicable DTA, may only be 
relied on if the non-resident PI holder has provided the following 
forms to their CSDP or broker, as the case may be, in respect of the 
uncertificated PIs, or the Transfer Secretaries, in respect of 
certificated PIs:

a) a declaration that the dividend is subject to a reduced rate as a 
result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the Transfer
Secretaries, as the case may be, should the circumstances affecting 
the reduced rate change or the beneficial owner cease to be the 
beneficial owner, both in the form prescribed by the Commissioner for 
the South African Revenue Service. Non-resident PI holders are 
advised to contact their CSDP, broker or the Transfer Secretaries, as 
the case may be, to arrange for the abovementioned documents to be 
submitted prior to payment of the distribution if such documents have 
not already been submitted, if applicable.

Local tax resident participatory interest holders as well as non- 
resident participatory interest holders are encouraged to consult 
their professional advisors should they be in any doubt as to the 
appropriate action to take.

Last day to trade cum distribution      Friday, 5 September 2014
Participatory interests trade ex
distribution                            Monday, 8 September 2014
Record date                             Friday, 12 September 2014
Payment date                            Monday, 15 September 2014

PI certificates may not be dematerialised or rematerialised between 
Monday, 8 September 2014 and Friday, 12 September 2014, both days 
inclusive.

By order of the STREM Board
Martin Harris         Ben van der Ross     James Templeton
Company Secretary     Chairman             Chief Executive Officer

Bryanston
13 August 2014

Basis of preparation and accounting policies
The condensed consolidated preliminary financial statements of Emira 
Property Fund (“Emira” or “the Fund”) have been prepared in 
accordance with International Financial Reporting Standards (“IFRS”) 
including IAS 34 Interim Financial Reporting, and are in compliance 
with the Listings Requirements of the JSE Limited. Except for the
new standards adopted as set out below, all accounting policies used
in the preparation of these financial statements are consistent with 
those used in the annual financial statements for the year ended 
30 June 2013. Emira adopted the following new standards:

IFRS 10 — Consolidated Financial Statements
IFRS 11 — Joint Arrangements
IFRS 12 — Disclosure of Interest in Other Entities
IFRS 13 — Fair Value Measurement
Amendment of IFRS 7 — Disclosures — Offsetting Financial Assets and
Financial Liabilities
Amendments to IAS 32 — Financial Instrument Presentation

Except for additional disclosure required in terms of IFRS 13, there 
was no other material impact on the condensed financial statements. 
In terms of IFRS 10, and in line with the annual financial
statements for the year ended 30 June 2013, Emira continues to
consolidate the financial statements of Strategic Real Estate Managers 
(Pty) Ltd (STREM) due to the existence of substantive potential 
voting rights.

This report was compiled under the supervision of Peter Thurling CA 
(SA), the Chief Financial Officer.

These condensed consolidated preliminary financial statements for
the year ended 30 June 2014 have been reviewed by 
PricewaterhouseCoopers Inc., who expressed an unmodified review 
conclusion. A copy of the auditor’s review report is available for 
inspection at the company’s registered office together with the 
financial statements identified in the auditor’s report. The 
distribution statement was not reviewed.

Condensed consolidated statement of financial position at 30 June
2014
                                             Reviewed        Audited
R’000                                    30 June 2014   30 June 2013
Assets
Non-current assets                         11 259 150      9 366 817
Investment properties                      10 371 073      8 640 590
Allowance for future rental
escalations                                   162 190        130 605
Unamortised upfront lease costs                45 413         39 306
Fair value of investment properties        10 578 676      8 810 501
Listed property investment                    665 992        537 102
Derivative financial instruments               14 482         19 214
Current assets                                199 523        158 004
Accounts receivable and prepayments           148 048        131 162
Derivative financial instruments                6 172          4 204
Cash and cash equivalents                      45 303         22 638
Investment properties held for sale           180 328        589 905
Total assets                               11 639 001     10 114 726
Equity and liabilities
Participatory interest holders'
capital and reserves                        7 003 785      6 590 162
Non-current liabilities                     2 617 964      1 440 682
Interest-bearing debt                       2 573 916      1 362 722
Derivative financial instruments               44 048         62 737
Deferred taxation                                   —         15 223
Current liabilities                         2 017 252      2 083 882
Short-term portion of interest-
bearing debt                                1 379 864      1 510 000
Accounts payable                              313 316        262 043
Derivative financial instruments               15 017         18 929
Distribution payable to
participatory interest holders                309 055        292 910
Total equity and liabilities               11 639 001     10 114 726

Condensed statement of changes in equity for the year ended 30 June
2014
                                                       Revaluation
                                        Participatory    and other                                       
R’000                                        interest     reserves 
Balance at 30 June 2012                     3 669 396    2 105 118
Participatory interests repurchased           (51 141)
Total comprehensive income/(loss)
for the year
Distribution to participatory
interest holders
Transfer to fair value reserve
(net of deferred taxation)                                   871 588
Balance at 30 June 2013                      3 618 255     2 976 706
Participatory interests repurchased           (182 821)
Total comprehensive income for the year
Distribution to participatory
interest holders
Transfer to fair value reserve
(net of deferred taxation)                                   596 494
Balance at 30 June 2014                      3 435 434     3 573 200

Condensed statement of changes in equity for the year ended 30 June
2014
                                                    Non- 
                                   Retained  controlling
R’000                              earnings     interest      Total
Balance at 30 June 2012              (1 287)       1 994  5 775 221
Participatory interests
repurchased                                                 (51 141)
Total comprehensive income/(loss)
for the year                      1 441 444       (5 506) 1 435 938
Distribution to participatory
interest holders                   (569 856)               (569 856) 
Transfer to fair value reserve
(net of deferred taxation)         (871 588)                      — 
Balance at 30 June 2013              (1 287)      (3 512) 6 590 162
Participatory interests
repurchased                                                (182 821) 
Total comprehensive income for
the year                          1 195 343        2 212  1 197 555
Distribution to participatory
interest holders                   (601 111)               (601 111)
Transfer to fair value reserve
(net of deferred taxation)         (596 494)                      — 
Balance at 30 June 2014              (3 549)      (1 300) 7 003 785

Condensed consolidated statement of comprehensive income

                                              Reviewed      Audited
                                            year ended   year ended
R’000                                     30 June 2014 30 June 2013
Revenue                                      1 476 358    1 342 244
Operating lease rental income and tenant
recoveries                                   1 448 914    1 353 853
Allowance for future rental escalations         27 444      (11 609) 
Income from listed property investment          44 225       36 332
Property expenses                             (559 216)    (500 970)
Acquisition costs                               (2 262)           — 
Fee paid on cancellation of interest-
rate swap agreements                                 —      (28 713)
Administration expenses                        (68 178)     (70 572)
Depreciation                                   (11 637)     (12 052) 
Operating profit                               879 290      766 269
Net fair value adjustments                     529 891      577 023
Net fair value gain on investment
properties                                     461 603      471 542
Change in fair value as a result of
straight-lining lease rentals                  (27 444)      11 609
Change in fair value as a result of
amortising upfront lease costs                  (4 257)      (5 401) 
Change in fair value as a result of
property appreciation in value                 493 304      465 334
Revaluation of share appreciation rights
scheme derivative financial instrument          (3 682)       6 340
Unrealised gain on fair valuation of
listed property investment                      71 970       99 141
Profit before finance costs                  1 409 181    1 343 292
Net finance costs                             (226 849)    (108 104)
Finance income                                  13 546        8 160
Interest received                               13 546        8 160
Finance costs                                 (240 395)    (116 264)
Interest paid and amortised borrowing
costs                                         (276 019)    (247 036)
Interest capitalised to the cost of
developments                                    15 945        2 036
Unrealised surplus on interest-rate
swaps                                           19 679      128 736
Profit before income tax credit              1 182 332    1 235 188
Income tax credit                               15 223      200 750
SA normal taxation                                   —            — 
Deferred taxation                               15 223      200 750
– Revaluation of investment properties               —      205 792
– Other timing differences including
allowance for future rental escalations         15 223       (5 042)
Profit for the year                          1 197 555    1 435 938
Attributable to Emira equity holders         1 195 343    1 441 444
Attributable to minority interests               2 212       (5 506)
                                             1 197 555    1 435 938
Total comprehensive income
Attributable to Emira equity holders         1 195 343    1 441 444
Attributable to minority interests               2 212       (5 506)
                                             1 197 555    1 435 938

Reconciliation between earnings and headline earnings and 
distribution
                                              Reviewed      Audited
                                            year ended   year ended
R’000                                     30 June 2014 30 June 2013
Profit for the year                          1 197 555    1 435 938
Adjusted for:
Net fair value gain on revaluation of
investment properties                         (461 603)    (471 542) 
Deferred taxation on revaluation of
investment properties                                —     (205 792)
Headline earnings                              735 952      758 604
Adjusted for:
Allowance for future rental escalations        (27 444)      11 609
Amortised upfront lease costs                   (4 257)      (5 401) 
Unrealised surplus on interest rate swaps      (19 679)    (128 736) 
Revaluation of share appreciation rights
scheme derivative
financial instrument                             3 682       (6 340) 
Unrealised gain on listed property
investment                                     (71 970)     (99 141) 
(Credit)/charge in respect of leave pay
provision and share appreciation rights
scheme                                          (2 212)       5 506
Acquisition costs                                2 262            — 
Fee paid on cancellation of interest-rate
swap agreements                                      —       28 713
Deferred taxation - other timing
differences                                    (15 223)       5 042
Distribution payable to participatory
interest holders                               601 111      569 856
Distribution per participatory interest
Interim (cents)                                  59,31        55,69
Final (cents)                                    63,87        58,90
Total (cents)                                   123,18       114,59
Number of participatory interests in
issue at the end of the year               483 881 040  497 299 883
Weighted average number of participatory
interests in issue                         490 270 328  497 949 166
Earnings per participatory interest
(cents)                                         244,26       288,37

The calculation of earnings per participatory interest is based on 
net profit for the year of R1 197,6m (2013: R1 435,9m), divided by 
the weighted average number of participatory interests
in issue during the year of 490 270 328 (2013: 497 949 166).

Headline earnings per participatory
interest (cents)                                 150,11      152,35

The calculation of headline earnings per participatory interest is 
based on net profit for the year, adjusted for non- trading items, of 
R736,0m (2013: R758,6m), divided by the weighted average number of 
participatory interests in issue during the year of 490 270 328 
(2013: 497 949 166).

Acquisition of Menlyn Coroporate Park (Pty) Ltd (“MCP”)
With effect from 1 June 2014, the Fund acquired 100% of the share 
capital of MCP, a company incorporated in South Africa, which owns a 
P-grade office development in Menlyn, Pretoria for R284,2m.

The subsidiary contributed a profit of R2,5m to the Fund for the 
period from the date of acquisition to 30 June 2014. 

Details of the assets and liabilities acquired are as follows:

                                                                  Rm
Development property                                           614,0
Cash and cash equivalents                                        2,9
Borrowings                                                    (328,3) 
Net current liabilities                                         (4,4) 
Fair value of acquired interest in net assets                  284,2
Total purchase consideration                                   284,2

Condensed statement of cash flows

                                             Reviewed        Audited 
                                           year ended     year ended
R’000                                    30 June 2014   30 June 2013
Cash generated from operations                892 472        784 198
Finance income                                 13 546          8 160
Interest paid                                (276 019)      (247 036) 
Taxation paid                                       —           (162) 
Acquisition costs                              (2 262)            — 
Fee paid on cancellation of interest-
rate swaps                                          —        (28 713) 
Distribution to participatory interest
holders                                      (584 966)      (561 788) 
Cash flows from operating activities           42 771        (45 341) 
Acquisition of, and additions to,
investment properties and fixtures and
fittings                                     (560 065)      (252 069) 
Proceeds on sale of investment
properties and fixtures and fittings          313 079        120 700
Acquisition of investment in listed
property fund                                 (56 920)       (19 502) 
Acquisition of subsidiary, net of cash
acquired                                     (281 232)            — 
Cash flows from investing activities         (585 138)      (150 871) 
Participatory interests repurchased          (182 821)       (51 141) 
Increase in interest-bearing debt             752 782        247 803
Derivative acquired in respect of share
appreciation rights scheme                     (4 929)             — 
Cash flows from financing activities          565 032        196 662
Net increase in cash and cash
equivalents                                    22 665            450
Cash and cash equivalents at the
beginning of the year                          22 638         22 188
Cash and cash equivalents at the end of
the year                                       45 303         22 638

Segmental information
R’000                                           Office        Retail
Sectoral segments
Revenue                                        674 886       571 943
Revenue                                        659 359       566 487
Allowance for future rental escalations         15 527         5 456
Segmental information
Operating profit                               395 603       328 490
Investment properties                        5 381 621     3 669 868
Geographical segments
Revenue
— Gauteng                                      512 618       358 518
— Western and Eastern Cape                      79 097        56 953
— KwaZulu-Natal                                 53 571        91 350
— Free State                                    29 600        65 122
                                               674 886       571 943
Investment properties
— Gauteng                                    4 274 171     2 359 654
— Western and Eastern Cape                     597 200       381 600
— KwaZulu-Natal                                347 050       578 950
— Free State                                   163 200       349 664
                                             5 381 621     3 669 868
                      
Segmental information        Industrial  Administrative
R’000                                     and corporate       Total
Sectoral segments
Revenue                         229 529                   1 476 358
Revenue                         223 068                   1 448 914
Allowance for future rental
escalations                       6 461                      27 444
Segmental information
Operating profit                145 209          9 988*     879 290
Investment properties         1 707 515                  10 759 004
Geographical segments
Revenue
— Gauteng                       170 515                   1 041 651
— Western and Eastern Cape       27 414                     163 464
— KwaZulu-Natal                  31 600                     176 521
— Free State                                                 94 722
                                229 529                   1 476 358
Investment properties
— Gauteng                     1 255 805                   7 889 630
— Western and Eastern Cape      233 050                   1 211 850
— KwaZulu-Natal                 218 660                   1 144 660
— Free State                                                512 864
                              1 707 515                  10 759 004

* Includes income from listed property investment of R44,2m less 
general Fund expenses of R31,9m and acquisition costs of R2,3m.

Measurements of fair value
1. Financial instruments
The financial assets and liabilities measured at fair value in the 
statement of financial position are grouped into the fair value
hierarchy as follows:

                                        Level 1   Level 2   Level 3
R’000                                      2014      2014      2014
GROUP 
Assets
Investments                             665 992             665 992
Derivative financial instruments                   20 654    20 654
Total                                   665 992    20 654   686 646
Liabilities
Derivative financial instruments                   59 065    59 065
Total                                         —    59 065    59 065
Net fair value                          665 992   (38 411)  627 581

                                        Level 1   Level 2   Level 3
R’000                                      2013      2013      2013
GROUP 
Assets
Investments                             537 102             537 102
Derivative financial instruments                   23 418    23 418
Total                                   537 102    23 418   560 520
Liabilities
Derivative financial instruments                   81 666    81 666
Total                                         —    81 666    81 666
Net fair value                          537 102   (58 248)  478 854

Measurement of fair value
The methods and valuation techniques used for the purpose of
measuring fair value are unchanged compared to the previous reporting 
period.

Investments
This comprises shares held in a listed property company at fair value 
which is determined by reference to quoted closing prices at the 
reporting date.

Derivative financial instruments
The fair values of the interest rate swap contracts are determined
using discounted cash flow projections, based on estimates of future 
cash flows supported by the terms of the relevant swap agreements and 
external evidence such as the ZAR 0-coupon perfect-fit swap curve.
The call option contracts to the value of R8,1m are valued using a
Black Scholes option pricing model.

2. Non-financial assets
The following table reflects the levels within the hierarchy of non- 
financial assets measured at fair value at 30 June 2014:

                                               Level 3       Level 3
R’000                                             2014          2013
Assets
Investment properties                       10 578 676     8 810 501
Investment properties held for sale            180 328       589 905

Fair value measurement of investment properties
The fair value of commercial buildings is estimated using an income
approach which capitalises the estimated rental income stream, net of 
projected operating costs, using a discount rate derived from market 
yields. The estimated rental stream takes into account current 
occupancy levels, estimates of future vacancy levels, the terms of
in-place leases and expectations of rentals from future leases over 
the remaining economic life of the buildings.

The most significant inputs, all of which are unobservable, are the 
estimated rental value, assumptions regarding vacancy levels, the 
discount rate and the reversionary capitalisation rate. The estimated 
fair value increases if the estimated rental increases, vacancy
levels decline or if discount rates (market yields) and reversionary 
capitalisation rates decline. The overall valuations are sensitive to 
all four assumptions. Management considers the range of reasonable 
possible alternative assumptions is greatest for reversionary 
capitalisation rate rental values and vacancy levels and that there
is also an interrelationship between these inputs. The inputs used in 
the valuations at 30 June 2014 were:

The range of the reversionary capitalisation rates applied to the 
portfolio are between 9,0% and 13,0% with the weighted average being
10,06% (2013: 10,18%).

The discount rates applied range between 13,75% and 16,5% with the 
weighted average being 14,73% (2013: 14,78%).

Changes in discount rates and reversionary capitalisation rates 
attributable to changes in market conditions can have significant 
impact on property valuations. A 25 basis points increase in the 
discount rate will decrease the value of investment property by 
R157,7m (1,5%) and a 25 basis points decrease will increase value 
of investment property by R163,3m (1,5%). A 25 basis points 
decrease in the capitalisation rate will increase value of 
investment property by R155,8m (1,5%) and a 25 basis points increase 
will decrease value of investment property by R148,0m (1,4%).
 
Fair values are estimated twice a year whereafter they are reviewed 
by the executive directors and approved by the board of directors. At 
the year-end one third of the property portfolio is externally valued.

Fair value measurement of investment properties held for sale
The fair value of investment properties held for sale is based on the 
expected sale price.

Fund Manager: Strategic Real Estate Managers (Pty) Ltd
Directors of the Fund Manager: BJ van der Ross (Chairman)*, 
JWA Templeton (Chief Executive Officer), MS Aitken*, BH Kent**, 
V Mahlangu**, NE Makiwane*, W McCurrie*, MSB Neser**, V Nkonyeni*, 
PJ Thurling, U van Biljon, G van Zyl**
*Non-executive Director **Independent Non-executive Director

Registered address: Optimum House, Epsom Downs Office Park, 
13 Sloane Street, Bryanston, 2191
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited) 
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 
70 Marshall Street, Johannesburg, 2001

www.emira.co.za

Date: 13/08/2014 01:40:00 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.

Share This Story