Wrap Text
Audited Financial Results for the Year Ended 30 June 2014
GROWTHPOINT PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
A Real Estate Investment Trust, listed on the JSE
Share code: GRT ISIN: ZAE000179420
SUMMARY OF AUDITED RESULTS
FOR THE YEAR ENDED 30 JUNE 2014
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
30 June 30 June
2014 2013
Note Rm Rm
Revenue, excluding straight-line lease income adjustment 6 412 5 773
Straight-line lease income adjustment 193 9
Revenue 6 605 5 782
Property expenses (1 384) (1 237)
Net property income 5 221 4 545
Other operating expenses and income (267) (236)
Operating profit 4 954 4 309
Fair value adjustments 1 2 396 (816)
Equity-accounted investment profit 2 91 326
Finance costs (1 748) (1 782)
Non-cash charges (78) (102)
Capital items (23) (25)
Finance and other investment income 2 545 566
Profit before debenture interest 6 137 2 476
Debenture interest 2 – (2 725)
Profit/(loss) before taxation 6 137 (249)
Taxation (160) (460)
Normal taxation (including withholding tax on GOZ distribution) (28) (19)
Capital gains taxation (CGT) – (2)
Deferred taxation (132) (439)
Profit/(loss) after taxation 5 977 (709)
Profit/(loss) attributable to:
Equity holders 5 579 (1 006)
Non-controlling interest (NCI) 398 297
Other Comprehensive Income:
Items that are or may be reclassified to Profit or Loss - translation of
foreign operations 888 498
Items that are or may be reclassified to Profit or Loss - fair value of listed
investments (46) –
Total Comprehensive Income 6 819 (211)
Attributable to:
Equity holders 6 110 (665)
Non-controlling interest 709 454
Calculation of distributable earnings
Operating profit 4 954 4 309
Less: Straight-line lease income adjustment (193) (9)
Finance costs (1 748) (1 782)
Finance income 545 566
Cash adjustment on business acquisitions (accounted for in Statement
of Changes in Equity) 110 –
Dividends received on treasury shares (accounted for in Statement of
Changes in Equity) 25 –
Distribution received on listed investments 165 –
Interest received exceeding distributable income – V&A Waterfront – (55)
Distributable income from GOZ retained (including NCI) (40) (35)
Non-controlling interest's share of distribution from GOZ
(excluding fair value adjustments) (295) (228)
Realised foreign exchange gain/(loss) 2 (19)
Taxation (excluding deferred tax and CGT) (28) (19)
Distributable earnings 3 497 2 728
Total distribution 7 3 497 2 728
Taxable dividend (declared on 26 August 2014) 2 1 892 –
Taxable dividend (declared on 3 March 2014) 7 1 605 –
Debenture interest on linked units – 2 725
Ordinary dividend on linked units – 3
Shares Linked units
Total shares/linked units in issue at the end of the year (excluding treasury
shares) 2 252 501 622 1 891 558 328
Weighted number of shares/linked units in issue 1 996 917 123 1 891 558 328
Cents Cents
Distribution per share/linked unit 161,3 149,0
Six months ended 31 December 78,5 72,7
Six months ended 30 June 82,8 76,3
Basic profit per share/(loss) per linked unit 3 279,38 (53,18)
Diluted profit per share/(loss) per linked unit 277,53 (53,18)
Headline earnings per share/linked unit 4 154,24 138,67
Diluted headline earnings per share/linked unit 153,22 138,67
STATEMENT OF FINANCIAL POSITION
30 June 30 June
2014 2013
Note Rm Rm
ASSETS
Non-current assets 81 573 61 120
Fair value of investment property for accounting purposes 67 627 51 908
Straight-line lease income adjustment 2 021 1 778
Fair value of long-term property assets 69 648 53 686
Equity-accounted investments 5 5 722 5 444
Listed investments 4 457 –
Intangible assets 1 258 1 354
Equipment 10 8
Long-term loans granted 466 624
Derivative assets 12 4
Current assets 1 671 3 034
Investment property reclassified as held for sale 265 545
Trade and other receivables 1 031 577
Cash and cash equivalents 375 1 912
Total assets 83 244 64 154
EQUITY AND LIABILITIES
Shareholders' interest 49 895 208
Share capital 6 29 436 95
Treasury shares (682) –
Foreign currency translation reserve 1 506 962
Non-distributable reserve 6 17 743 (849)
Retained earnings 2 1 892 –
Debentures 6 – 36 537
Shareholders'/Linked unitholders' interest 49 895 36 745
Non-controlling interest 4 180 2 485
Total equity/unitholders' interest 54 075 39 230
Non-current liabilities 23 016 20 160
Non-current financial liabilities 21 591 18 805
Other long-term employee benefits – 101
Deferred tax liability 1 425 1 254
Current liabilities 6 153 4 764
Trade and other payables 1 426 1 196
Current portion of non-current financial liabilities 4 543 2 000
Taxation payable 13 5
Linked unitholders for distribution 2 171 1 563
Total equity and liabilities 83 244 64 154
Cents Cents
Net asset value per share/linked unit 2 215 1 943
Tangible net asset value per share/linked unit which excludes
intangible assets and deferred tax 2 223 1 937
STATEMENT OF CASH FLOWS
30 June 30 June
2014 2013
Rm Rm
Cash generated from operations 4 760 3 903
Finance income 274 524
Finance costs (1 732) (1 795)
Taxation paid (20) (16)
Capital items (51) (25)
Distribution to shareholders/unitholders (3 265) (2 757)
Net cash outflow from operating activities (34) (166)
Net cash outflow from investing activities (14 348) (1 550)
Net cash inflow from financing activities 12 837 3 228
Net (decrease)/increase in cash and cash equivalents (1 545) 1 512
Translation effects on cash and cash equivalents of foreign operation 8 5
Cash and cash equivalents at beginning of the year 1 912 395
Cash and cash equivalents at end of the year 375 1 912
STATEMENT OF CHANGES IN EQUITY
Foreign
currency Non- Non-
translation distributable Retained controlling
Share Treasury reserve reserve earnings Shareholders' interest Total
capital shares (FCTR) (NDR) (RE) interest (NCI) equity
Notes Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 30 June 2012 87 – 621 185 – 893 2 181 3 074
Shares issued 8 – – – – 8 – 8
Total comprehensive income – (loss)/profit after taxation – – – – (1 006) (1 006) 297 (709)
Total comprehensive income – other comprehensive income – – 323 – – 323 175 498
Transfer amortisation net of deferred taxation to NDR – – – (71) 71 – – –
Rights issue and acquisition – GOZ – – 18 – (25) (7) 60 53
Transfer to NDR reserves with NCI – – – (25) 25 – – –
Transfer fair value adjustment on GOZ to NDR – – – (938) 938 – – –
Dividends declared – NCI – – – – – – (228) (228)
Dividends declared 2 – – – – (3) (3) – (3)
Balance at 30 June 2013 95 – 962 (849) – 208 2 485 2 693
Total comprehensive income – profit after taxation – – – – 5 579 5 579 398 5 977
Total comprehensive income – other comprehensive income – – 577 (46) – 531 311 842
Transactions with owners recognised directly in equity
Conversion of debentures to ordinary share capital and NDR 6 20 257 – – 16 280 – 36 537 – 36 537
Shares issued 9 084 – – – – 9 084 – 9 084
Cash adjustment on business acquisitions – – – – 110 110 – 110
Acquisition of treasury shares – (728) – – – (728) – (728)
Dividends received on treasury shares 7 – – – – 25 25 – 25
Transfer non-distributable items to NDR – – – 2 217 (2 217) – – –
Share-based payment transactions – 46 – 88 – 134 – 134
Rights issue and acquisitions – GOZ – – (33) – 53 20 1 281 1 301
Transfer to NDR reserves with NCI – – – 53 (53) – – –
Dividends declared – NCI – – – – – – (295) (295)
Dividends declared 7 – – – – (1 605) (1 605) – (1 605)
Balance at 30 June 2014 29 436 (682) 1 506 17 743 1 892 49 895 4 180 54 075
SEGMENTAL ANALYSIS
South Africa
Other
Total as V&A joint
Retail Office Industrial Australia reported Waterfront ventures Total
Rm Rm Rm Rm Rm Rm Rm Rm
Statement of Profit
or Loss and Other
Comprehensive
Income extracts –
30 June 2014
Revenue, excluding
straight-line lease
income adjustment 1 645 2 076 1 074 1 617 6 412 485 10 6 907
Property expenses (459) (494) (235) (196) (1 384) (129) (2) (1 515)
Segment results 1 186 1 582 839 1 421 5 028 356 8 5 392
Fair value
adjustment:
Investment property 866 847 565 187 2 465 122 – 2 587
Investment property
– non-controlling
interest – – – 101 101 – – 101
Total fair value
adjustment on total
investment property 866 847 565 288 2 566 122 – 2 688
South Other
South Total as V&A joint
Africa Australia reported Waterfront ventures Total
Rm Rm Rm Rm Rm Rm
Further extracts of Statement of Profit or
Loss and Other Comprehensive Income
Other operating expenses and income (182) (85) (267) (16) – (283)
Finance costs (1 281) (467) (1 748) (18) (4) (1 770)
Finance income 540 5 545 4 – 549
South Africa
Other
Total as V&A joint
Retail Office Industrial Australia reported Waterfront ventures Total
Rm Rm Rm Rm Rm Rm Rm Rm
Statement of
Financial Position
extracts at 30 June
2014
Investment property
Opening balance
1 July 2013 14 915 16 211 8 042 15 063 54 231 5 549 – 59 780
Acquisition - Tiber 90 4 942 347 – 5 379 – 315 5 694
Acquisition - Abseq – 1 343 – – 1 343 – – 1 343
Acquisition - Other 1 284 205 3 452 3 942 – – 3 942
Developments and
capital expenditure 270 543 234 416 1 463 276 – 1 739
Disposals (386) (158) (107) – (651) – – (651)
Foreign exchange gain – – – 1 640 1 640 – – 1 640
Fair value adjustments 866 847 565 288 2 566 122 – 2 688
Fair value of total
property assets –
30 June 2014 15 756 24 012 9 286 20 859 69 913 5 947 315 76 175
Fair value of long-term
property assets 15 597 23 942 9 250 20 859 69 648 5 947 315 75 910
Investment property
reclassified as held for
sale 159 70 36 – 265 – – 265
Other
South Total as V&A joint
Africa Australia reported Waterfront ventures Total
Rm Rm Rm Rm Rm Rm
Further extracts of Statement of
Financial Position
Listed investments 4 457 – 4 457 – – 4 457
Intangible assets 1 258 – 1 258 – – 1 258
Trade and other receivables 874 157 1 031 32 5 1 068
Cash and cash equivalents 163 212 375 97 13 485
Trade and other payables (1 161) (265) (1 426) (81) (5) (1 512)
Financial liabilities (17 239) (8 895) (26 134) (196) (131) (26 461)
Nominal value – interest-bearing liabilities (16 368) (8 677) (25 045) (196) (131) (25 372)
Fair value adjustments (871) (149) (1 020) – – (1 020)
Foreign translation differences – (69) (69) – – (69)
South Africa
Total as V&A
Retail Office Industrial Australia reported Waterfront Total
Rm Rm Rm Rm Rm Rm Rm
Statement of Profit or Loss and
Other Comprehensive Income
extracts – 30 June 2013
Revenue, excluding straight-line
lease income adjustment 1 576 1 776 1 002 1 419 5 773 447 6 220
Property expenses (439) (423) (216) (159) (1 237) (119) (1 356)
Segment results 1 137 1 353 786 1 260 4 536 328 4 864
Fair value adjustment:
Investment property 1 740 1 297 616 73 3 726 372 4 098
Investment property –
non-controlling interest – – – 39 39 – 39
Total fair value adjustment on
total investment property 1 740 1 297 616 112 3 765 372 4 137
South Total as V&A
Africa Australia reported Waterfront Total
Rm Rm Rm Rm Rm
Further extracts of Statement of Profit or Loss and
Other Comprehensive Income
Other operating expenses (175) (61) (236) (13) (249)
Finance costs (1 272) (510) (1 782) (4) (1 786)
Finance income 561 5 566 2 568
South Africa
Total as V&A
Retail Office Industrial Australia reported Waterfront Total
Rm Rm Rm Rm Rm Rm Rm
Statement of Financial Position
extracts at 30 June 2013
Investment property
Opening balance 1 July 2012 13 145 14 592 7 251 13 118 48 106 4 950 53 056
Acquisitions 13 435 44 748 1 240 – 1 240
Developments and capital
expenditure 197 432 275 681 1 585 227 1 812
Disposals (180) (545) (144) (688) (1 557) – (1 557)
Foreign exchange gain – – – 1 092 1 092 – 1 092
Fair value adjustments 1 740 1 297 616 112 3 765 372 4 137
Fair value of total property assets
– 30 June 2013 14 915 16 211 8 042 15 063 54 231 5 549 59 780
Fair value of long-term property
assets 14 565 16 086 7 972 15 063 53 686 5 549 59 235
Investment property reclassified
as held for sale 350 125 70 – 545 – 545
South Total as V&A
Africa Australia reported Waterfront Total
Rm Rm Rm Rm Rm
Further extracts of Statement of Financial Position
Intangible assets 1 354 – 1 354 – 1 354
Trade and other receivables 540 37 577 66 643
Cash and cash equivalents 1 827 85 1 912 90 2 002
Trade and other payables (1 021) (175) (1 196) (200) (1 396)
Financial liabilities (13 388) (7 417) (20 805) (194) (20 999)
Nominal value – interest-bearing liabilities (12 468) (7 103) (19 571) (194) (19 765)
Fair value adjustments (920) (264) (1 184) – (1 184)
Foreign translation differences – (50) (50) – (50)
NOTES
30 June 30 June
2014 2013
Rm Rm
Note 1: Fair value adjustments 2 396 (816)
Gross investment property fair value adjustment 2 566 3 765
Less: Straight-line lease income adjustment (193) (9)
Net investment property revaluation 2 373 3 756
Borrowings and derivatives – gain 53 401
Long-term loans granted – (loss)/gain (45) 8
Other payables – realised profit 15 –
Debentures* – (4 981)
* After the conversion of debentures to equity, fair value adjustments are transferred to the NDR
(Note 6).
Note 2: Declaration of dividend after reporting date
In line with IAS 10, Events after the Reporting Period, the declaration of the dividend occurred after the end of the reporting
period resulting in a non-adjusting event that is not recognised in the financial statements. In prior periods, the distribution
consisted mainly of debenture interest which accrued on a daily basis, as well as a dividend. The R171 million of Linked
unitholders for distribution in the Statement of Financial Position (FY14) relates to the NCI's portion of the GOZ distribution.
Note 3: Basic and diluted profit/(loss) per share/linked unit
The directors are of the view that the disclosure of earnings per share, while obligatory in terms of IAS 33, Earnings per Share,
and the JSE Limited Listings Requirements, is not meaningful to investors as the basic profit includes fair value adjustments,
as well as other non-distributable items.
Basic and diluted profit per share/(loss) per linked unit are not comparable year-on-year, due to the change to an all-equity
capital structure, in order to align the capital structure with the capital structures of international REITs.
The calculation of distributable earnings and the distribution per share/linked unit is more meaningful.
Note 4: Headline earnings per share/linked unit
In terms of Circular 2/2013, issued by SAICA, the fair value adjustment on investment property is added back in the
calculation of headline earnings per share. The Circular does not make provision for the fair value adjustment on non-
current financial liabilities, accounting adjustments required to account for lease income on a straight-line basis, as well as
other non-cash accounting adjustments that do not affect distributable earnings, to be added back.
30 June 30 June
2014 2013
Rm Rm
Basic profit/(loss) is reconciled to headline earnings as follows:
Profit/(loss) after taxation – attributable to equity holders 5 579 (1 006)
Bargain purchase (28) –
Add back: Net fair value adjustment – investment property (2 471) (4 077)
Fair value adjustment, net of straight-line lease income adjustment (2 272) (3 717)
Fair value adjustment (V&A Waterfront, included in equity-accounted investments) (98) (321)
NCI portion of fair value adjustment (101) (39)
Headline earnings/(loss) attributable to shareholders 3 080 (5 083)
Add back: Net fair value adjustment – debentures – 4 981
Add back: Debenture interest paid – 2 725
Headline earnings attributable to shareholders/linked unitholders 3 080 2 623
Note 5: Equity-accounted investments
V&A Waterfront Other Total
Initial investment in equity 156 187 343
Share in equity-accounted results – prior years 288 – 288
Share in equity-accounted results – current year 130 (39) 91
Equity-accounted investments 574 148 722
Debenture holding in joint venture 5 000 – 5 000
5 574 148 5 722
Note 6: Conversion to an all-equity capital structure
Share capital NDR Debentures
Opening balance – 1 July 2013 95 (849) 36 537
Real Estate Investment Trust (REIT) conversion 20 257 16 280 (36 537)
Other transactions in Statement of Changes in Equity 9 084 2 312 –
Closing balance – 30 June 2014 29 436 17 743 –
Note 7: Dividends on treasury shares
The interim dividend of R1 605 million included dividends on treasury shares of R25 million. The net interim dividend paid
by Growthpoint for accounting purposes was R1 580 million.
The total dividend of R 3 497 million includes dividends on treasuary shares of R52 million. The net total dividend paid and
payable is therefore R3 445 million for accounting purposes.
HIGHLIGHTS
* 8.3% * R7,0 billion * 14.0%
distribution growth to 161,3 cents per share acquisition of two property portfolios increase in NAV to 2215 cents per share
* REIT * R2,6 billion * R4,5 billion
successful conversion development pipeline investment in Acucap and Sycom
CONVERSION TO REIT
The implications of the conversion to a REIT on financial reporting are summarised below:
Before conversion After conversion
Status Property Loan Stock Company (PLS) Real Estate Investment Trust (REIT)
Applicable date Up to 30 June 2013, incl. distribution paid From 1 July 2013, first REIT distribution paid
September 2013 March 2014
Capital structure 10 debentures, linked to 1 share Ordinary shares with no par value
Distribution Debenture interest and dividend: Dividend
1 000 to 1
Declaration of distribution Statement of Profit or Loss and Other Statement of Changes in Equity: Interim
Comprehensive Income: Debenture and prior period dividends
Interest
Statement of Changes in Equity: Dividend
Statement of Financial Position: Liability Final dividend declared 26 August 2014:
for interest and dividend Event after reporting period
Deductibility of distribution for Debenture interest – deductible (S24J Dividend – deductible (S25BB of the Income
tax by Growthpoint of Income Tax Act) Tax Act)
Dividend – not deductible
Fair value adjustments on assets Transfer to debentures Transfer to non-distributable reserve
and liabilities
Capital gains tax Applicable Not applicable
COMMENTARY
INTRODUCTION
Growthpoint is the largest South African listed REIT with a quality portfolio of 434 directly owned properties in South Africa
valued at R49,1 billion, as well as three equity-accounted investments, with our 50% share of properties valued at R6,3
billion of which the V&A Waterfront is by far the largest. In addition, Growthpoint has a 64.0% interest in Growthpoint
Properties Australia (GOZ) which owns 51 properties in Australia valued at R20,9 billion. Listed investments with a value
of R4,5 billion relate to a 34.9% investment in Acucap Properties Ltd (Acucap) and a 23.2% investment in Sycom Property
Fund (Sycom).
The company's objective is to grow and nurture a diversified portfolio of quality investment properties, providing
accommodation to a wide spectrum of users and delivering sustainable income distributions and capital appreciation
to investors, while optimising effective financial structures. Effectively, net property income received by the property
portfolios of South Africa (RSA) and GOZ, including interest received, the distributable income received from the equity-
accounted and listed investments, less operating costs, interest on debt and normal taxation, is distributed to shareholders
bi-annually. Growthpoint's distributions are based on sustainable income generated from rentals. The company does not
distribute capital profits.
Growthpoint is included in the JSE ALSI Top 40 Companies Index, with a market capitalisation of R56,5 billion at 30 June
2014 (FY14). Over the last year, on average, more than 72,1 million shares traded per month (FY13: 77,9 million). The
monthly average value traded was R1,8 billion (FY13: R2,0 billion). This makes Growthpoint the most liquid and tradable
way to own commercial property in South Africa.
Excluding the equity-accounted investments, the South African portfolio represents 70.2% of the property portfolio by
value and 81.4% by gross lettable area (GLA), and is well diversified in the three major sectors of commercial property,
being retail, office and industrial. The bulk of the value of the South African properties is situated in strong economic nodes
within the major metropolitan areas.
GROWTH IN DISTRIBUTIONS
Growthpoint delivered growth in distributions per share for FY14 of 8.3%. This growth exceeds the guidance given to the
market in the FY13 results of around 7.2%.
The business acquisitions of Abseq Properties (Pty) Ltd (Abseq) and the Tiber Group of Companies (Tiber), as well as the
listed investments in Acucap and Sycom had a positive impact on the results for the year.
The increase in distributions was further enhanced by the investment in GOZ, where a weaker Rand against the Australian
Dollar (AUD) was in Growthpoint's favour and distribution per unit from GOZ grew by 13.5% in Rand terms on a like-for-like
basis. For FY14, Growthpoint entered into foreign exchange contracts to hedge the distributions received at an average rate
of R9.57:AUD1, compared to R8.65:AUD1 for FY13.
BASIS OF PREPARATION
The summarised consolidated financial statements are prepared in accordance with the JSE Listings Requirements
for preliminary reports and the requirements of the Companies Act of South Africa. 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), the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and
to also, as a minimum, contain the information required by IAS 34, Interim Financial Reporting. Except for the new standards
adopted as set out below, all accounting policies applied in the preparation of these summarised consolidated financial
statements are in terms of IFRS and are consistent with those applied in the previous consolidated financial statements.
Growthpoint adopted the following new standards:
- IFRS 10 Consolidated Financial Statements
- IFRS 11 Joint Arrangements
- IFRS 13 Fair Value Measurement
- Annual Improvements to IFRS 2009 – 2011
There was no material impact on the financial statements identified based on management's assessment of these standards.
Whilst this report is itself not audited, the consolidated financial statements, from which the summary consolidated
financial statements were derived, were audited by KPMG Inc., who expressed an unmodified opinion thereon. That audit
report does not necessarily report on all the information contained in this report.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor's engagement
and, more specifically, the nature of the information that has been audited, they should obtain a copy of the auditor's report
together with the accompanying audited consolidated financial statements, both of which are available for inspection at
the company's registered office. The directors of Growthpoint Properties Limited take full responsibility for the preparation
of this report and that the selected financial information has been correctly extracted from the underlying consolidated
financial statements.
Mr G Völkel (CA(SA)), Growthpoint's Financial Director, was responsible for supervising the preparation of these summarised
consolidated financial statements.
ACQUISITION OF ABSEQ AND TIBER PORTFOLIOS
Growthpoint acquired the entire issued share capital of Abseq from Equity Estates (Pty) Ltd. As part of the transaction, the
property administration business was also acquired. The acquisition presented an opportunity to acquire a sizable portfolio
of quality office properties in locations which are potentially strategic and complement Growthpoint's existing portfolio,
specifically increasing Growthpoint's exposure to the Woodmead office node. Revenue of R77 million was earned since
the effective date (R210 million for Abseq's financial year that commenced 1 April 2013) and profit after tax amounted to
R94 million since the effective date (R144 million for Abseq's financial year that commenced 1 April 2013).
Furthermore, Growthpoint acquired the entire issued share capital of Tiber Property Group (Pty) Ltd (TPG), certain
immovable properties and letting enterprise businesses, shares in joint ventures and share block companies, a property
asset that is currently under development, and undeveloped bulk associated with certain immovable properties from Tiber.
As part of the transaction, Growthpoint, through its wholly-owned subsidiary Growthpoint Management Services (Pty)
Ltd (GMS), entered into an agreement with the executive management team of Tiber Projects (Pty) Ltd (Tiber Projects)
to procure certain services for a period of three years, and an agreement to acquire the asset and property management
business of Tiber Projects. The property portfolio owned by the Tiber Group is predominantly P and A-grade office properties
located in the northern suburbs of Johannesburg. Revenue for the group, excluding the joint ventures, of R187 million
was earned since the effective date (R420 million for Tiber's financial year that commenced 1 July 2013) and profit after
tax amounted to R100 million since the effective date (R641 million for Tiber's financial year). The joint ventures earned
revenue of R10 million since acquisition (R59 million for the financial year) and the loss after tax amounted to R39 million
since acquisition (a profit before tax of R58 million for the financial year).
The distributions received and accrued to the sellers amounting to R110 million, relating to the accounting period before
the sellers obtained Growthpoint shares, were reimbursed to Growthpoint per the acquisition agreements. This amount is
included in distributable earnings.
Tiber equity-
accounted
Abseq Tiber* investments Total
Effective date 1 Jan 2014 1 Mar 2014 1 Mar 2014
Number of properties (100%) 13 27 – 40
Number of properties (50% owned Abseq, 50%
owned Tiber) 4 4 – 4
Number of properties (50% owned) – 5 2 7
Fair value of properties (R'million) 1 343 5 379 315 7 037
Net working capital (R'million) (32) (135) 6 (161)
External debt (R'million) (923) (1 273) (134) (2 330)
Net asset value (R'million) 388 3 971 187 4 546
Funded by (360) (3 971) (187) (4 518)
Issue of share capital (R'million) (369) (1 971) (98) (2 438)
Debt/cash utilised (R'million) – (2 000) (89) (2 089)
Refunded by cash (R'million) 9 – – 9
Bargain purchase (R'million) (28) – – (28)
GLA of portfolios (m²) 82 818 275 750 13 982 372 550
Office 82 818 236 113 13 982 332 913
Retail – 4 335 – 4 335
Industrial – 35 302 – 35 302
Vacancy at 30 June 2014 (%) 8.7 7.3 – 7.3
Office 8.7 7.1 – 7.2
Industrial – 9.4 – 9.4
*This includes the stand alone properties acquired, as well as the 50% of the share block companies
ACQUISITION OF INTERESTS IN ACUCAP AND SYCOM
Growthpoint concluded agreements with various institutional unitholders of Acucap and Sycom to acquire 64 million
Acucap linked units at a switch ratio of 1.9 Growthpoint ordinary shares for each Acucap linked unit, and 63 million Sycom
participatory units at a switch ratio of 1.102 Growthpoint ordinary shares for each Sycom participatory unit acquired. This
represented a 34.9% interest in Acucap and a 31.5% interest in Sycom. These investments provide Growthpoint with
indirect exposure to Acucap and Sycom's combined R18,4 billion retail and office portfolios. In June 2014, Acucap made
an offer to Sycom unitholders to exchange their Sycom units at a switch ratio of 1 Sycom unit for every 0.58 Acucap units.
Growthpoint exchanged 17,0 million Sycom units for 9,9 million Acucap units, resulting in a 34.9% interest in Acucap and
a 23.2% interest in Sycom.
On 30 June 2014, Growthpoint received distributions amounting to R165 million from these listed investments and these
have been included in distributable earnings.
These listed investments have been accounted for in terms of IAS 39, Financial Instruments: Recognition and Measurement,
as available for sale investments and are reflected at fair value in the Statement of Financial Position.
GROWTHPOINT PROPERTIES AUSTRALIA (GOZ)
The investment in GOZ has been accounted for in terms of IAS 21, The Effects of Changes in Foreign Exchange Rates.
The consolidated Statement of Financial Position includes 100% of the assets and liabilities of GOZ, converted at the
closing exchange rate at FY14 of R9.96:AUD1 (FY13: R9.03:AUD1). The consolidated Statement of Profit or Loss and Other
Comprehensive Income also includes 100% of the revenue and expenses of GOZ, which was translated at an average
exchange rate of R9.53:AUD1 (FY13: R9.07:AUD1) for FY14. The resulting foreign currency translation difference is
recognised in Other Comprehensive Income. A non-controlling interest was raised for the 36.0% (FY13: 34.2%) not owned
by Growthpoint.
Growthpoint increased its investment in GOZ from R3,4 billion at FY13 to R5,3 billion at FY14. R1,4 billion of the
investment was due to Rights Issues in December 2013 and June 2014 respectively, and the balance of R449 million related
to Distribution Re-investment Plans (DRIPs), where Growthpoint elected not to receive the distributions in August 2013
and February 2014, but to reinvest the amounts into GOZ.
A deferred tax liability of R1,0 billion is included in the Statement of Financial Position. This relates to the capital gains
tax that will be payable in Australia if Growthpoint sells its investment in GOZ. Included in normal tax in the Statement
of Profit or Loss and Other Comprehensive Income, is R24 million that relates to withholding tax paid on the distributions
received from GOZ.
V&A WATERFRONT AND OTHER EQUITY-ACCOUNTED INVESTMENTS
The investments in the V&A Waterfront and the two other joint ventures, have been accounted for in terms of IAS 11,
Joint Arrangements. The equity accounting method was used, whereby the Group's share of the Profit or Loss and Other
Comprehensive Income of these investments were accounted for.
Included in the FY14 finance income, is R332 million of distributable income from the V&A Waterfront, compared to
distributable income for FY13 of R312 million. Post the acquisition of Tiber, R4 million was received from Tiber's equity-
accounted investments.
The investment in the V&A Waterfront and the other joint ventures, has been accounted for in the Statement of Financial
Position as the fair value of Growthpoint's 50% interest in the net asset value amounting to R5,6 billion (FY13: R5,4 billion)
for the V&A Waterfront and R148 million for the other joint ventures. Non-distributable adjustments, amounting to
R91 million relate mainly to fair value adjustments on investment property and deferred tax (FY13: R326 million).
NET PROPERTY INCOME
The increase in revenue (11.1%) for the FY14, compared to FY13 was due to the acquisitions of Abseq and Tiber, as well as the
revenue from GOZ (13.9%), resulting from property acquisitions made and a favourable increase in the average exchange
rate applied. Disposals amounting to R869 million were made in the RSA portfolio in FY13 and impacted negatively on
revenue growth in the current period.
The ratio of property expenses to revenue for the Group has increased slightly from 21.4% to 21.6% at FY14. For RSA the
ratio remained stable at 24.8%.
FAIR VALUE ADJUSTMENTS
The revaluation of properties resulted in an upward revision of R2,4 billion (3.5%) to R69,9 billion for investment property
(including investment properties reclassified as held for sale). This was mainly due to an increase in future contractual
rental. Interest-bearing borrowings and derivatives were fair valued using the swap curve at FY14, resulting in a decrease of
R203 million (0.8%) in the overall liability. In addition, a loss of R150 million was realised on the settlement of an interest
rate swap by GOZ.
These fair value adjustments, together with the other non-distributable items such as capital items, non-cash charges,
deferred taxation and the net effect of the non-controlling interest's portion of the non-distributable items were transferred
to the non-distributable reserve.
FINANCE COSTS
Finance costs decreased by 1.9% to R1 748 million (FY13: R1 782 million) as a result of the capital raising in May 2013,
where R1,1 billion was utilised to settle debt. The weighted average interest rate for RSA borrowings was 9.4% (FY13: 9.7%).
The weighted average maturity of debt remained at 3.5 years (FY13: 3.5 years). Finance costs for GOZ decreased marginally
from R510 million in FY13 to R467 million in FY14. The additional equity raised by GOZ was used for the acquisition of
properties and to settle debt, resulting in the decrease. The interest cover ratio, whereby the income from the equity-
accounted investments is included in the operating profit, increased from 2.9 at FY13 to 3.3 at FY14.
FINANCE INCOME
Finance income decreased by 3.7% to R545 million (FY13: R566 million).
ACQUISITIONS AND COMMITMENTS
Apart from the acquisitions of the Abseq and Tiber portfolios, Growthpoint acquired eight portions of land, one industrial
property and one office property in the RSA portfolio, amounting to R490 million during the year. Development and capital
expenditure for RSA amounting to R1,0 billion (FY13: R904 million) relates to various projects undertaken during the period,
of which the Discovery Head Office (owned 55%) and Walmer Park Shopping Centre accounted for R106 million and
R70 million respectively.
GOZ acquired an office property in New South Wales for R2,5 billion (AUD255 million), and six industrial properties in
Victoria for a total purchase price of R913 million (AUD98 million). The development and capital expenditure of R416
million (AUD43 million) relates mainly to an industrial development, 27-49 Lenore Lane in New South Wales, that was
completed during the year.
Growthpoint RSA has commitments outstanding in respect of developments amounting to R2,1 billion (FY13: R303 million)
of which the Discovery Head Office (55% share) for R1,4 billion is the largest. Further commitments in respect of property
acquisitions amount to R47 million (FY13: R99 million) and R225 million for the acquisition of 50% of two properties,
where the other 50% is owned by Zenprop Property Holdings (Pty) Ltd (Zenprop). Refer to commentary on events after
the reporting period.
Development and capital expenditure at the V&A Waterfront amounted to R276 million (FY13: R227 million) for the year.
Growthpoint's share of the V&A Waterfront's commitments outstanding at FY14 amounted to R496 million (FY13: R226
million), which relates to the residential developments, the museum development of the grain silo and a car park.
DISPOSALS AND HELD FOR SALE ASSETS
Growthpoint RSA disposed of 14 properties in the current year (FY13: 23) for R651 million (FY13: R869 million) with a
collective R132 million (FY13: R292 million) profit on cost achieved.
At 30 June 2014, eight RSA properties (FY13: nine) valued at R265 million (FY13: R545 million) were classified as held for
sale assets.
SHARE BUY-BACK TRANSACTION
In October 2013, Growthpoint's BEE transaction with Phatsima Properties Ltd was refinanced. The settlement of the loan
amounted to R157 million. As part of the refinancing, the Growthpoint Staff Incentive Scheme Trust and GMS repurchased
16,5 million of the shares for R355 million. The shares acquired will be used as a hedge against options granted to employees
in terms of current and future share incentive schemes.
In March 2014, Growthpoint entered into agreements with Unipalm Investment Holdings Ltd (Unipalm) and Desert Wind
Properties 84 (Pty) Ltd (Desert Wind). Unipalm and Desert Wind are both beneficiaries of the AMU Trust (AMU). Quickleap
Investments 429 (Pty) Ltd (100% owned by AMU) owns 100 million Growthpoint shares. In terms of the agreements,
Unipalm and Desert Wind agreed to sell 17,0 million Growthpoint shares to GMS for R365 million. Following the transaction,
Unipalm and Desert Wind don't own any Growthpoint shares and AMU owns 80,2 million shares.
ARREARS
Total RSA arrears at FY14 amounted to R34,7 million (FY13: R29,9 million) with a provision for bad debts of R14,1 million
(FY13: R14,6 million). Total RSA bad debt expenses amounted to R6,6 million (FY13: R10,9 million). Growthpoint's exposure
to the African Bank Ltd Group comprises approximately 0.7% of the total gross rental income of Growthpoint's RSA
portfolio, with no provision raised in this respect.
VACANCY LEVELS
At 30 June 2014, the total m2 of Growthpoint's portfolio and vacancy levels expressed as a percentage of GLA were:
GLA Vacancy
m2 m2 % %
FY14 FY13 FY14 FY13
Retail 907 746 942 501 4.5 3.7
Office 1 460 741 1 151 079 8.0 7.8
Industrial 2 194 459 2 176 887 3.0 3.0
RSA Total 4 562 946 4 270 467 4.9 4.4
V&A Waterfront 195 700 193 873 1.5 0.6
GOZ 1 036 740 886 975 1.5 0.4
Total 5 795 386 5 351 315 4.2 3.6
Vacancies in the retail sector have increased during FY14 mainly due to an increase in office and storage vacancies within
shopping centres which represent 27% (1.2%) of the overall retail vacancy factor. The on-going challenging economic
conditions resulted in the loss of several major tenants in the office sector during the year under review. The vacancies were
further impacted by developments that were not fully let. This is being addressed through various initiatives including the
UNdeposit campaign, which to date has received significant traction.
EQUITY RESTRUCTURED AND EQUITY RAISED
As part of the REIT conversion, Growthpoint converted the linked unit capital structure to an all-equity capital structure,
in order to align the capital structure with the capital structures of international REITs. The restructuring resulted in
an increase in share capital of R20,3 billion and an increase in the non-distributable reserve of R16,3 billion. The non-
distributable reserve mainly relates to cumulative fair value adjustments on investment property that were previously
accounted for as debenture fair value adjustments.
During the year, Growthpoint raised R976 million in September 2013 and R1 047 million in March 2014, through the DRIPs,
where 44,4 million and 48,7 million shares were issued at R22.00 and R21.50 per share respectively. The equity raised from
the DRIPs were utilised to finance Growthpoint's investment activities.
Growthpoint issued 15,9 million shares for the acquisition of Abseq in January 2014 and 93,3 million shares for the
acquisition of Tiber in March 2014. A further 148,9 million shares were issued in April 2014 and 42,3 million shares were
issued in May 2014 for the acquisition of the interests in Acucap and Sycom.
The company has 2,3 billion shares in issue at FY14 and the authorised share capital is 4,0 billion shares. Subsequent to the
reporting period, Growthpoint will issue 3,7 million shares for the purchase consideration of the remaining 50% interest in
Truzen 75 Trust, as well as the remaining 50% share in Erven 99 and 100 Parktown Township Share Block Company (Pty)
Ltd. Refer to the commentary on events after the reporting period.
BORROWINGS
At FY14, the consolidated loan to value ratio (LTV) measured by dividing the nominal value of interest-bearing borrowings
(net of cash) by the fair value of property assets, including investment property held for sale, plus the equity-accounted
investments and the listed investments, was 30.8% (FY13: 29.6%). The additional debt for the Tiber transaction contributed
to the increase.
Growthpoint RSA's available unutilised credit facilities amounted to R3,8 billion at FY14.
CHANGE IN DIRECTORS
Mr JHN (Jan) Strydom retired with effect from 12 November 2013 as a non-executive director of Growthpoint. The Board
thanks Mr Strydom for his ten years of distinguished service and contribution to the Group.
EVENTS AFTER THE REPORTING PERIOD
On 1 September 2014, Growthpoint will acquire the remaining 50% interest in the properties owned by Truzen 75 Trust from
the remaining beneficiaries of the Truzen 75 Trust, as well as remaining shares in Erven 99 and 100 Parktown Township Share
Block Company (Pty) Ltd from Zenprop. The GLA of the acquired share of these office properties amounts to 16 799m2.
Rm
Fair value of properties 388
External debt (176)
Net working capital 13
Net asset value 225
Funded by (225)
Issue of share capital (95)
Debt/cash that will be utilised (130)
In July 2014, Acucap made an offer to Sycom unitholders to exchange their Sycom units at a switch ratio of 1 Sycom
unit for 0.58 Acucap units. Growthpoint exchanged 16,5 million Sycom units for 9,6 million Acucap units, changing their
investment in Acucap to 34.7% and their investment in Sycom to 15.00%.
Growthpoint's shareholders are referred to the joint cautionary announcement published on SENS today, confirming that Growthpoint and
Acucap are in discussions, which, if successfully concluded may have a material effect on the price at which Growthpoint's and Acucap's
securties trade on the JSE.
PROSPECTS
Due to the challenging, low growth domestic macro-economic environment and rising interest rate cycle which is currently
having a negative impact on consumers and the overall retail environment, as well as demand for rental space across the
retail, office and industrial property sectors, the Board of Growthpoint is of the view that the distribution growth rate for
FY15 will be between 7.0% and 7.5% which is in line with the average growth rate achieved over the past five years.
This forecast has been based on the company's budgets for FY15, taking into account that the majority of the company's
income is contractual rental income, as well as the fact that the interest expense in respect of 78.4% of the South African
debt has been fixed as at FY14.
This forecast has not been subject to audit or review by the company's independent external auditors.
FINAL DIVIDEND WITH THE ELECTION TO REINVEST THE CASH DIVIDEND IN RETURN FOR
GROWTHPOINT SHARES
Notice is hereby given of the declaration of the final dividend number 56 of 82,80000 cents per share for the six months
ended 30 June 2014, bringing the total dividend for the year ended 30 June 2014 to 161,30000 cents per share.
Shareholders will be entitled to elect to reinvest the net Cash Dividend, in return for Growthpoint shares (Share Alternative),
failing which they will receive the net Cash Dividend in respect of all or part of their shareholdings.
Other information:
- issued shares at 26 August 2014: 2 284 908 257 ordinary shares of no par value.
- Income Tax Reference Number of Growthpoint: 9375/077/71/7.
- there are no Secondary Tax on Company (STC) credits available for utilisation against the dividend tax.
In accordance with Growthpoint's status as a Real Estate Investment Trust (REIT) with effect from 1 July 2013, shareholders
are advised that the dividend 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). The dividends on the shares will be deemed to be taxable dividends for
South African tax purposes in terms of section 25BB of the Income Tax Act.
TAX IMPLICATIONS FOR SOUTH AFRICAN RESIDENT SHAREHOLDERS
Dividends received by or accrued to South African tax residents must be included in the gross income of such shareholders
and will not be exempt from the income tax in terms of the exclusion to the general dividend exemption contained in
section 10(1)(k)(i)(aa) of the Income Tax Act, because they are dividends distributed by a REIT. These dividends are however
exempt from dividend withholding tax (Dividend Tax) in the hands of South African resident shareholders provided that the
South African resident shareholders have provided to the Central Securities Depository Participant (CSDP) or broker, as the
case may be, in respect of uncertificated shares, or the company, in respect of certificated shares, a DTD(EX) (Dividend Tax:
Declaration and undertaking to be made by the beneficial owner of a share) form to prove their status as South African
residents.
If resident shareholders have not submitted the abovementioned documentation to confirm their status as South African
residents, they are advised to contact their CSDP or broker, as the case may be, to arrange for the documents to be
submitted prior to the payment of the dividend.
TAX IMPLICATIONS FOR NON-RESIDENT SHAREHOLDERS
Dividends received by non-resident shareholders from a REIT will not be taxable as income and instead will be treated as
ordinary dividends which are exempt from income tax in terms of the general dividend exemption section 10(1)(k) of the
Income Tax Act. It should be noted that up to 31 December 2013, dividends received by non-residents from a REIT were
not subject to Dividend Tax. With effect from 1 January 2014, any dividend received by a non-resident from a REIT will be
subject to Dividend 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 non-resident shareholder. Assuming Dividend
Tax will be withheld at a rate of 15%, the net amount due to non-resident shareholders is 70,38000 cents per share. A
reduced dividend withholding tax rate in terms of the applicable DTA may only be relied on if the non-resident shareholder
has provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated shares, or the
company, in respect of certificated shares:
- a declaration that the dividend is subject to a reduced rate as a result of the application of the DTA; and
- a written undertaking to inform the CSDP broker or the company, as the case may be, should the circumstances affect-ing
the reduced rate change or the beneficial owner cease to be the beneficial owner, both in the form prescribed by the
Commissioner of the South African Revenue Services.
If applicable, non-resident shareholders are advised to contact the CSDP, broker or the company, as the case may be, to
arrange for the abovementioned documents to be submitted prior to payment of the dividend if such documents have not
already been submitted.
Summary of the salient dates relating to the Cash Dividend and Share Alternative are as follows:
2014
Circular and form of election posted to shareholders Friday, 29 August
Announcement of Share Alternative issue price and finalisation information Friday, 5 September
Last day to trade ("LDT") cum dividend Friday, 12 September
Shares to trade ex dividend Monday, 15 September
Listing of maximum possible number of Share Alternative shares commences on the JSE Tuesday, 16 September
Last day to elect to receive the Share Alternative (no late forms of election will be accepted
after 12:00 South African time) Friday, 19 September
Record date Friday, 19 September
Announcement of results of Cash Dividend and Share Alternative released on SENS Monday, 22 September
Cheques posted to certificated shareholders and accounts credited by CSDP or broker to
dematerialised shareholders electing the Cash Alternative, on or about Monday, 22 September
Share certificates posted to certificated shareholders and accounts credited by CSDP or broker
to dematerialised shareholders electing the Share Alternative, on or about Tuesday, 23 September
Announcement of results of Cash Dividend and Share Alternative published in the press Tuesday, 23 September
Adjustment to shares listed, on or about Thursday, 25 September
Notes:
1. Shareholders electing the Share Alternative are alerted to the fact that the new shares will be listed on LDT + 2 and that these
new shares can only be traded on LDT + 2, due to the fact that settlement of the shares will be two days after record date, which
differs from the conventional one day after record date settlement process.
2. Shares may not be dematerialised or rematerialised between Monday, 15 September 2014 and close of trade on Friday,
19 September 2014.
3. The above dates and times are subject to change. Any changes will be released on SENS and published in the press.
4. The Cash Dividend or Share Alternative may have tax implications for resident and non-resident shareholders. Shareholders are
therefore encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take.
By order of the Board
GROWTHPOINT PROPERTIES LIMITED
26 August 2014
DIRECTORS
JF Marais (Chairman), HSP Mashaba (Deputy Chairman), LN Sasse* (Chief Executive Officer), EK de Klerk*, G Völkel*,
MG Diliza, PH Fechter, LA Finlay, JC Hayward, HS Herman, SP Mngconkola, R Moonsamy, NBP Nkabinde, CG Steyn, FJ Visser
* Executive
COMPANY SECRETARY
RA Krabbenhöft
REGISTERED OFFICE TRANSFER SECRETARY
The Place, 1 Sandton Drive, Sandton, 2196 Computershare Investor Services (Pty) Ltd
PO Box 78949, Sandton, 2146 (Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
SPONSOR
Investec Bank Limited
(Registration number 1969/004763/06)
100 Grayston Drive, Sandown, Sandton, 2196
PO Box 785700, Sandton, 2146
27 August 2014
Date: 27/08/2014 10:48:00 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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