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Reviewed financial results for the year ended 30 June 2015, income distribution declaration and changes to director
Emira Property Fund Limited
(Incorporated in the Republic of South Africa)
Registration number: 2014/130842/06
Share code: emi ISIN: zae000203063
(“Emira” or “the Fund” or “the Company”)
Tax number: 9995/739/15/9
(Approved as a REIT by the JSE)
Reviewed financial results for the year ended 30 June 2015, income
distribution declaration and changes to Directorate
Growth in distributions +9,0%
Distribution per PI 134,27c
Distributable income growth of 14% to R685,5m
Net asset value growth per PI of 15,9 % to 1 751c
Commentary
The board of directors of Strategic Real Estate Managers (Pty) Ltd
(“STREM”) is pleased to announce a distribution of 134,27 cents per Emira
participatory interest (“PI”) for the 12 months to 30 June 2015. This is
an increase of 9,0% on the previous comparable period and in line with
expectations after the six month period to 31 December 2014.
Vacancies and tenant renewals
The core operational performance of the Fund as measured by vacancies and
tenant retention was very pleasing.
Over the past two years vacancies have decreased from 5,6% (June 2013) to
4,5% (June 2014) to 4,0% (June 2015). This represents a decline in overall
vacancies of 16 255m2 since June 2013, which was driven by leasing in the
office sector as well as strategic sales of certain properties. The office
sector vacancy rate of 7,8% remains well below the SAPOA national levels
of 10,6%, while the retail (2,8%) and industrial (1,4%) sectors also reported
vacancies well below national levels as reported by SAPOA and IPD.
Tenant retention by GLA of 76% was notable, given the expiry of certain
large leases within the portfolio, and, in an ongoing effort to secure
growing income for shareholders, a substantial number of leases expiring
in the coming financial year have already been renewed.
Major leases concluded
The five biggest new leases concluded were at 500 Smuts Drive (5 374m2),
Gateway Landing (3 842m2), Universal Industrial Park (3 089m2), Technohub
(2 598m2) and HBP Industrial Units (2 369m2), and the biggest renewals
were at Wonderpark Shopping Centre (13 983m2), Cambridge Park (5 615m2),
Brandwag Shopping Centre (4 191m2) and Iustitia Building (3 249m2) — all
on long-term leases to high quality tenants such as Pick n Pay and Itec
Distribution.
Acquisition of Integri-T Portfolio
With effect from 1 July 2014, the Fund acquired 100% of the share capital
of the following companies incorporated in South Africa, known as the
Integri-T Portfolio, for a total enterprise value of R836,9m, and an
initial yield of 9,4%.
* Adamass Investments (Pty) Ltd
* Aquarella Investments 272 (Pty) Ltd
* Libra Investments 5 (Pty) Ltd
* Lowmer Investments (Pty) Ltd
* Monagon Properties (Pty) Ltd
* Omnicron Investments 005 (Pty) Ltd
* Rapidough Properties 509 (Pty) Ltd
These subsidiaries, collectively owning a diversified portfolio of two
retail properties, three office buildings and three industrial properties
with a weighted average lease expiry profile to high quality tenants of in
excess of five years, contributed a profit of R78,3m for the period from
the date of acquisition to 30 June 2015, in line with expectations.
Details of the assets and liabilities acquired are as follows:
Rm
Investment properties 836,9
Borrowings (386,3)
Net current liabilities (2,3)
Fair value of acquired interest in net assets 448,3
Total purchase consideration 448,3
Other property acquisitions
In addition to the Integri-T Portfolio mentioned above, a 60% undivided
share in Ben Fleur Shopping Centre, in Emalahleni(Witbank), was purchased
for R66,5m at a yield of 9,4% and transferred in October 2014.
Disposals
The strategy to dispose of non-core buildings continued during the period
under review. The following eight properties totalling R361,5m, were sold
and transferred out of Emira during the 12 months to June 2015: Kya Sands
(Corner Precision and Staal Streets), Harrogate Park, Woodmead Office Park
(50% undivided share), Executive City, 122 Pybus Road, Braamfontein
Centre, Atlantis and WorldWear Fashion Mall. These eight properties were
sold at a forward yield of 7,1% and at a 20,0% premium to book value.
A further four buildings with a total disposal value of R319,0m
representing a forward yield of 6,9% and a premium to book value of 40,0%,
were sold at June 2015, but have not yet been transferred.
Refurbishments and extensions
The major upgrade and extension of Wonderpark Shopping Centre, where the
centre was enlarged from 63 000m2 to 90 000m2 at a cost of R551,3m to
accommodate extensions for existing national tenants and the introduction
of new anchor tenants was completed in October 2014.
Also completed during the period was the Gateway Landing industrial
development for a cost of R57,4m which reached practical completion in
October 2014, with all space fully let or committed to by August 2015.
Projects to modernise, extend and renovate 19 buildings totalling
approximately R186,4m are currently underway, the most significant of
which is the upgrade and refurbishment to Kramerville Corner with a total
expenditure of R57,8m. The number of projects underway reflects a
continuing strategy to renew and upgrade the portfolio, which
significantly contributed to the good performance over the last few years.
Gearing
The Fund has been active in the debt funding markets, and, notwithstanding
a slight tightening in the markets during the year, Emira was successful
in accessing funding at competitive rates.
Funding activities during the first six months of the financial year under
review included:
Amount All-in-rate
Date (Rm) (%)
15 Aug 2014 Drawdown of Nedbank 3-year facility 270 7,74
18 Aug 2014 Drawdown of Standard Bank 4-year facility 200 7,70
12 Sep 2014 Repayment of 12-month commercial paper 230 6,54
12 Sep 2014 Issue of 2-year domestic medium term
notes 270 7,43
15 Sep 2014 Drawdown of RMB 3-year 8th term loan 200 7,83
10 Oct 2014 Drawdown of RMB 3-year 8th term loan 66 7,83
6 Nov 2014 Repayment of 12-month commercial paper 450 6,72
6 Nov 2014 Issue of 12-month commercial paper 250 7,03
6 Nov 2014 Issue of 2-year domestic medium term
notes 100 7,43
6 Nov 2014 Issue of 3-year domestic medium term
notes 100 7,73
19 Nov 2014 Repayment of 12-month commercial paper 100 6,78
19 Nov 2014 Issue of 6-month fixed rate commercial
paper 50 7,12
Funding activities during the second six months of the financial year
under review included:
Amount All-in-rate
Date (Rm) (%)
2 Feb 2015 Refinance of Nedbank 3-year Synthesis
Loan 200 7,50
19 Feb 2015 Repayment of 12-month commercial paper 400 6,85
23 Feb 2015 Issue of 3-month commercial paper 68 6,55
23 Feb 2015 Issue of 6-month commercial paper 175 7,15
23 Feb 2015 Issue of 12-month commercial paper 137 7,29
31 Mar 2015 Drawdown of RMB 3-year 8th term loan 18,5 7,80
19 May 2015 Repayment of 6-month commercial paper 50 7,12
27 May 2015 Repayment of 3-month commercial paper 68 6,55
Total debt as at 30 June 2015 was R4,51bn with a weighted average duration
to expiry of 1,8 years. The average duration of the debt has decreased
slightly because of the effluxion of time, however active steps are
underway to extend this with new longer dated facilities being entered
into as well as the successful refinancing of the secured DMTN note
into 3- and 5-year notes.
The overall level of debt will be reduced by the proceeds from the sale of
Brandwag Shopping Centre (R250m), but offset by the distribution payment
(R355m) in September and the acquisition of the Mitchells Plain Shopping
Centre (R75m) and phase 1 of the planned for Summit Place acquisition
(R86m).
Fixed interest rate hedges in place for a total R3,82bn at 30 June 2015,
amounted to 84,6% of the Fund’s total debt balance and the hedging
percentage is expected to be maintained at or around this level. Following
the acquisition of Mitchells Plain Shopping Centre and the development
acquisition of Summit Place, additional interest rate hedges are expected
to be acquired in order to keep the Fund at or around the current level of
hedging. The interest rate swap expiries range from 1,0 to 9,5 years with
the weighted average duration being 3,6 years as at 30 June 2015. Interest
rate swaps were restructured during the year costing R36,6m.
The LTV ratio at 30 June 2015 has decreased to 33,1% (from 35,4% at
December 2014) and is expected to stay around this level or reduce
marginally for the remainder of 2015.
After the receipt of the Brandwag property disposal proceeds, unutilised
facilities will be approximately R540m.
A R250m two-year secured facility with ABSA is being finalised as well as
a new unsecured back-up facility with Nedbank of R200m which will both add
to the liquidity facilities that Emira will have at its disposal.
The R500m secured DMTN note expiring on 19 August 2015 was successfully
extended into 3- and 5-year notes.
Growthpoint Australia Limited (GOZ)
At 30 June 2015, GOZ’s unit price was AUD3,14 resulting in Emira’s
investment of 27 225 813 units, comprising 4,9% of the total units in
issue, being valued at R796,9m compared to a cost price of R372,0m.
Results
The acquisitions, as well as the contractual escalations on the bulk of
the portfolio, plus significant leasing progress made during the period
and stringent cost control has resulted in the Fund achieving a meaningful
increase in distributable income during the period.
Excluding the straight-line adjustments in respect of future rental
escalations, revenue rose by 16,4% 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 3,1% over the previous comparable period,
mainly due to stringent cost control, a reduction in leasing expenses
(because of higher occupancies) as well as lower maintenance costs from
historically higher levels.
Management and administration expenses increased by 17,5% and 17,1%
respectively, driven by increased staffing costs as well as greater
collection commissions paid arising from the new acquisitions.
Depreciation is no longer taken into account for distribution purposes.
This resulted in the distribution being R9,1m higher (1,8 cents per PI)
than it would have been if this change had not taken place.
Income from the Fund’s listed investment in Australia increased by 7,2%
due to an increase in the distribution per unit received from GOZ and the
depreciation of the rand against the Australian dollar.
Net finance costs increased by 56% as a result of the increased
utilisation of debt facilities to fund the acquisitions and new developments
of the Fund.
Net asset value increased by 15,9% from 1 511 cents per PI at 30 June
2014, to 1 751 cents per PI at 30 June 2015, following the acquisition of
properties, the revaluation of investment properties, the increased value
of the stake in GOZ, as well as the reduction in the liability for the
income distribution at the reporting period date.
Distribution statement
Year ended Year ended
30 Jun 30 Jun %
R’000 2015 2014 change
Operating lease rental income and
tenant recoveries excluding straight-
lining of leases 1 686 670 1 448 914 16,4
Property expenses excluding amortised
upfront lease costs (580 756) (563 473) 3,1
Net property income 1 105 914 885 441 24,9
Income from listed investment 47 388 44 225 7,2
Management expenses
Reimbursement to STREM (32 865) (27 980) 17,5
Administration expenses (49 514) (42 282) 17,1
Depreciation (217) (11 581) (98,1)
Net finance costs (385 190) (246 712) 56,1
Finance costs (396 023) (260 074) 52,3
Interest paid and amortised borrowing
costs (401 133) (276 019) 45,3
Interest capitalised to the cost of
developments 5 110 15 945 (68,0)
Finance income 10 833 13 362 (18,9)
Distribution payable to participatory
interest holders 685 516 601 111 14,0
No. of units in issue 510 550 084 483 881 040 5,5
Distribution per participatory interest
(cents) 134,27 123,18 9,0
Disposals
In accordance with the strategy of the Fund, certain properties that are
underperforming or pose undue risk to the Fund are earmarked and disposed
of.
Properties transferred out of Emira during the 12 months to June 2015
GLA
Property Sector Location (m2)
Executive City Industrial Kya Sands, Randburg 4 558
Woodmead Office Park (50%) Office Woodmead, Johannesburg 8 162
Kya Sands (Cnr Precision &
Staal Streets) (Siliconics) Industrial Kya Sands, Randburg 1 452
Harrogate Park Office Hatfield, Pretoria 1 711
122 Pybus Road Office Sandton,Johannesburg 5 399
Braamfontein Centre Office Braamfontein,
Johannesburg 21 310
Atlantis Industrial Atlantis,
Cape Town 2 900
WorldWear Fashion Mall Retail Fairlands,
Johannesburg 14 172
59 664
Valuation Sale Exit Effective
Jun 2014 price yield date
Property (Rm) (Rm) (%)
Executive City 11,2 11,2 10,8 Jul 2014
Woodmead Office Park (50%) 60,4 60,0 5,1 Jul 2014
Kya Sands (Cnr Precision & Staal
Streets) (Siliconics) 5,1 5,1 14,1 Sep 2014
Harrogate Park 17,5 17,5 11,6 Nov 2014
122 Pybus Road 36,0 76,0 1,9 Jan 2015
Braamfontein Centre 128,0 150,0 8,0 Apr 2015
Atlantis 6,9 6,9 10,3 Jun 2015
WorldWear Fashion Mall 37,0 34,8 9,3 Jun 2015
302,1 361,5 7,1
Properties sold but not yet transferred out of Emira at June 2015
GLA
Property Sector Location (m2)
Brandwag Shopping Centre and
Kosmos Woonstelle Retail Bloemfontein CBD 12 328
1289 Heuwel Avenue Retail Centurion, Pretoria 2 049
500 Smuts Drive (Oracle House) Office Midrand, Gauteng 5 201
Tokai Shopping Centre Retail Ferndale, Johannesburg 2 603
22 181
Valuation Sale Effective/
Jun 2014 price anticipated
(Rm) (Rm) effective date
Property
Brandwag Shopping Centre and Kosmos
Woonstelle 159,0 250,0 Sep 2015
1289 Heuwel Avenue 10,0 10,0 Oct 2015
500 Smuts Drive (Oracle House) 43,5 43,5 Mar 2016
Tokai Shopping Centre 15,4 16,0 Mar 2016
227,9 319,5
Vacancies
Number of GLA Vacancy
buildings Jun 2014 Jun 2014
Jun 2014 (m2) (m2)
Office 63 435 299 38 420
Retail 34 352 969 9 558
Industrial 44 348 393 3 510
Total 141 1 136 661 51 488
Number of GLA
buildings Jun 2015
% Jun 2015 (m2)
Office 8,8 62 395 492
Retail 2,7 37 408 275
Industrial 1,0 46 373 292
Total 4,5 145 1 177 059
Vacancy
Jun 2015
(m2) %
Office 30 968 7,8
Retail 11 237 2,8
Industrial 5 284 1,4
Total 47 489 4,0
Valuations
Total portfolio movement
Jun 2014 Jun 2015
Sector (R’000) R/m2 (R’000)
Office 5 381 621 12 363 5 660 604
Retail 3 669 868 10 397 5 139 666
Industrial 1 707 515 4 901 1 940 823
10 759 004 12 741 093
Difference Difference
R/m2 (%) (R’000)
Sector
Office 14 313 5,2 278 983
Retail 12 589 40,1 1 469 798
Industrial 5 199 13,7 233 308
18,4 1 982 089
Debt
Emira has a moderate level of gearing, with interest bearing debt to total
property assets at 33,1% as at 30 June 2015. 84,6% of the overall debt has
been fixed for periods from 1,0 to 9,5 years with a weighted average
duration of 3,6 years (June 2014: 4,6 years).
Weighted Weighted
average average Amount % of
rate % term (Rm) debt
Debt — Swap 8,95 3,6 years 3 818,5 84,6
Debt — Floating 7,54 <12 months 697,1 15,4
Total 8,74 4 515,6 100,0
Less: Costs capitalised not yet
amortised (5,2)
Per statement of financial position 4 510,4
Issue of participatory interests (PIs)
During the period, the Fund raised a total of R376,5m to partly fund the
purchases of the Integri-T and Ben Fleur portfolios by issuing the
following PIs:
17 July 2014 22 222 222 PIs at R13,95
22 October 2014 4 446 822 PIs at R14,95
Change in distribution policy — depreciation
Historically, Emira provided for depreciation in respect of certain fixed
assets, in line with tax allowances. As previously disclosed to investors,
from FY15, Emira no longer includes the depreciation charge in its
distributable income, bringing it in line with the rest of the listed
property sector.
Change in recognition of liability for income distribution
In order to comply with best practice of the SA REIT Association and to be
comparable to its peers, Emira no longer recognises the liability, as at
the reporting period date, for the income distribution amount to be
distributed after the reporting period date. Comparative figures have been
restated. The effect of this change has been to increase the equity value
of Emira by R355,4m for FY15 and R309,1m for FY14, and to reduce the
liabilities for distribution by the same amounts.
Directorate
As previously announced, Peter Thurling retired as Chief Financial Officer
of the Fund with effect from 31 December 2014 and Geoff Jennett, CA (SA),
was appointed as his replacement.
Furthermore, the Chief Executive Officer, James Templeton, gave notice of
his intention to leave Emira at the end of August 2015 in order to pursue
personal interests.
As was announced on 4 August 2015, Geoff Jennett has been appointed as Mr
Templeton’s successor as Chief Executive Officer with effect from 1
September 2015. The search for a replacement Chief Financial Officer is
underway.
Furthermore, the responsibilities of Ulana van Biljon, an executive
director of Emira, have been formalised to include the role of Chief
Operating Officer with effect from 1 September 2015.
Conversion to a corporate REIT
Emira Property Fund Scheme was successfully converted to a corporate REIT
— Emira Property Fund Limited — with effect from 1 July 2015. The
management company (STREM) became a wholly owned subsidiary. The necessary
transfers from the old Emira Property Fund Scheme to the new Emira
Property Fund Limited are well underway.
Prospects
The benefit of improved occupancies, together with the property
acquisitions and ongoing tight cost control, should result in real growth
in core distributions per share.
Together with the impact of the change in policy regarding lease
commissions detailed below, shareholders can expect a similar healthy
improvement in dividends for the 12 months to June 2016.
The forecast financial information has not been reviewed or reported on by
the auditors.
Future change in policy regarding lease commissions
In order to align itself with the rest of the industry and comply with
best practice, Emira is amending its lease commission policy so as to
amortise the lease commission cost incurred over the life of the lease
rather than being expensed upfront on the date the lease commenced. This
change will only be effective for the financial year ending June 2016 and
is expected to contribute positively to the expected growth in dividends
in the coming financial year.
Subsequent to year-end
An acquisition for an amount of R76m, being a 50% undivided share in the
Mitchells Plain Shopping Centre in the Western Cape, at an initial yield
of 9,3% was made and is expected to transfer at the end of August 2015.
In addition an agreement has been reached for Emira to take up a 50%
undivided share in five buildings comprising the Summit Place development
in Menlyn, Pretoria, for an amount of R403m and at an average yield of 8%.
Two completed office buildings are expected to be transferred in October
2015 and the balance comprising office and retail space will be developed
by Emira and its partners with final completion in January 2017. The
Summit Place development comprises P-grade offices and retail premises
with a weighted average lease expiry profile of in excess of seven years
in a much sought after node in Pretoria.
Furthermore, we advise shareholders that we are in dispute regarding the
lease obligations of Worley Parsons, a major tenant in Corobay Corner on
a lease until February 2022. We have received senior counsel advice on
the matter and are confident of our position, but at the same time we
have begun settlement discussions with them.
Income distribution declaration
Notice is hereby given that a final gross cash distribution of 69,62 cents
(2014: 63,87 cents) per PI has been declared, payable to the registered
shareholders of Emira Property Fund Limited on 14 September 2015. The issued
share capital at the declaration date is 510 550 084 listed ordinary shares.
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.
In accordance with Emira’s status as a REIT, shareholders 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
shareholders (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 shareholder. These qualifying
distributions are, however, exempt from dividend withholding tax in the
hands of South African tax resident shareholders, 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 shares, or
the Transfer Secretaries, in respect of certificated shares:
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. Shareholders 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 shareholders 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 shareholder.
Assuming dividend withholding tax will be withheld at a rate of 15%, the
net amount due to non-resident shareholders will be 59,1770 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 the uncertificated shares, or the Transfer Secretaries, in
respect of certificated shares:
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 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, if applicable.
Local tax resident shareholders as well as non-resident shareholders 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, 4 September 2015
Emira shares to trade ex distribution Monday, 7 September 2015
Record date Friday, 11 September 2015
Payment date Monday, 14 September 2015
Share certificates may not be dematerialised or rematerialised between
Monday, 7 September 2015 and Friday, 11 September 2015, both days
inclusive.
By order of the STREM and Emira Property Fund Limited Board
Martin Harris Ben van der Ross James Templeton
Company Secretary Chairman Chief Executive Officer
Bryanston, 19 August 2015
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, and are in compliance with the Listings Requirements of the JSE
Limited. The 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 2014.
In terms of IFRS 10, and in line with the annual financial statements for
the year ended 30 June 2014, 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 Geoff Jennett CA (SA),
the Chief Financial Officer. These condensed consolidated preliminary
financial statements for the year ended 30 June 2015 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 2015
Reviewed Audited
(as restated)
R’000 30 Jun 2015 30 Jun 2014
Assets
Non-current assets 13 235 078 11 259 150
Investment properties 12 090 944 10 371 073
Allowance for future rental escalations 286 762 162 190
Unamortised upfront lease costs 44 387 45 413
Fair value of investment properties 12 422 093 10 578 676
Listed property investment 796 930 665 992
Derivative financial instruments 16 055 14 482
Current assets 286 986 199 523
Accounts receivable and prepayments 220 903 148 048
Derivative financial instruments 12 872 6 172
Cash and cash equivalents 53 211 45 303
Investment properties held for sale 319 000 180 328
Total assets 13 841 064 11 639 001
Equity and liabilities
Participatory interest holders' capital and
reserves 8 941 007 7 312 840
Non-current liabilities 3 463 985 2 617 964
Interest-bearing debt 3 448 396 2 573 916
Derivative financial instruments 15 589 44 048
Current liabilities 1 436 072 1 708 197
Short-term portion of interest-bearing debt 1 061 965 1 379 864
Accounts payable 362 070 313 316
Derivative financial instruments 11 252 15 017
Taxation 785 —
Total equity and liabilities 13 841 064 11 639 001
Net asset value per PI (cents) 1 751,3 1 511,3
Condensed statement of changes in equity for the year ended 30 June 2015
Revaluation
Participatory and other Retained
R’000 interest reserves earnings
Balance at 30 June 2013 3 618 255 2 976 706 (1 287)
Participatory interests
repurchased (182 821)
Total comprehensive income for the
year 1 195 343
Distribution to participatory
interest holders — March 2014 (292 056)
Transfer to fair value reserve 596 494 (596 494)
Balance at 30 June 2014 (as
restated) 3 435 434 3 573 200 305 506
Participatory interests issued 360 075
Total comprehensive income/(loss)
for the year 1 911 179
Distribution to participatory
interest holders — September 2014 (309 055)
Distribution to participatory
interest holders — March 2015 (330 070)
Transfer to fair value reserve 1 235 555 (1 235 555)
Balance at 30 June 2015 3 795 509 4 808 755 342 005
Non-
controlling
R’000 interest Total
Balance at 30 June 2013 (3 512) 6 590 162
Participatory interests repurchased (182 821)
Total comprehensive income for the year 2 212 1 197 555
Distribution to participatory interest holders —
March 2014 (292 056)
Transfer to fair value reserve —
Balance at 30 June 2014 (as restated) (1 300) 7 312 840
Participatory interests issued 360 075
Total comprehensive income/(loss) for the year (3 962) 1 907 217
Distribution to participatory interest holders —
September 2014 (309 055)
Distribution to participatory interest holders —
March 2015 (330 070)
Transfer to fair value reserve —
Balance at 30 June 2015 (5 262) 8 941 007
Condensed consolidated statement of comprehensive income
Reviewed Audited
year ended year ended
R’000 30 Jun 2015 30 Jun 2014
Revenue 1 811 968 1 476 358
Operating lease rental income and tenant
recoveries 1 686 670 1 448 914
Allowance for future rental escalations 125 298 27 444
Income from listed property investment 47 388 44 225
Property expenses (581 752) (559 216)
Acquisition costs — (2 262)
Fee paid on cancellation of interest-rate
swap agreements (36 641) —
Administration expenses (86 341) (68 178)
Depreciation (9 324) (11 637)
Operating profit 1 145 298 879 290
Net fair value adjustments 1 113 841 529 891
Net fair value gain on investment properties 983 226 461 603
Change in fair value as a result of straight-
lining lease rentals (125 298) (27 444)
Change in fair value as a result of
amortising upfront lease costs 996 (4 257)
Change in fair value as a result of property
appreciation in value 1 107 528 493 304
Revaluation of share appreciation rights
scheme derivative financial instrument 6 350 (3 682)
Impairment charge (6 673) —
Unrealised gain on fair valuation of listed
property investment 130 938 71 970
Profit before finance costs 2 259 139 1 409 181
Net finance costs (351 137) (226 849)
Finance income 10 833 13 546
Interest received 10 833 13 546
Finance costs (361 970) (240 395)
Interest paid and amortised borrowing costs (401 133) (276 019)
Interest capitalised to the cost of
developments 5 110 15 945
Unrealised surplus on interest-rate swaps 34 053 19 679
Profit before income tax credit 1 908 002 1 182 332
Income tax (charge)/credit (785) 15 223
SA normal taxation (785) —
Deferred taxation — 15 223
— Other timing differences including
allowance for future rental escalations — 15 223
Profit for the year 1 907 217 1 197 555
Attributable to Emira equity holders 1 911 179 1 195 343
Attributable to minority interests (3 962) 2 212
1 907 217 1 197 555
Total comprehensive income
Attributable to Emira equity holders 1 911 179 1 195 343
Attributable to minority interests (3 962) 2 212
1 907 217 1 197 555
Reconciliation between earnings and headline earnings and distribution
Reviewed Audited
year ended year ended
R’000 30 Jun 2015 30 Jun 2014
Profit for the year 1 907 217 1 197 555
Adjusted for:
Net fair value gain on revaluation of
investment properties (983 226) (461 603)
Headline earnings 923 991 735 952
Adjusted for:
Allowance for future rental escalations (125 298) (27 444)
Amortised upfront lease costs 996 (4 257)
Unrealised surplus on interest rate swaps (34 053) (19 679)
Revaluation of share appreciation rights
scheme derivative financial instrument (6 350) 3 682
Unrealised gain on listed property investment (130 938) (71 970)
Charge/(credit) in respect of leave pay
provision and share appreciation rights scheme 3 962 (2 212)
Depreciation 9 107 —
Impairment charge 6 673 —
Acquisition costs — 2 262
Fee paid on cancellation of interest-rate swap
agreements 36 641 —
SA normal taxation 785 —
Deferred taxation — other timing differences — (15 223)
Distribution payable to participatory interest
holders 685 516 601 111
Distribution per participatory interest
Interim (cents) 64,65 59,31
Final (cents) 69,62 63,87
Total (cents) 134,27 123,18
Number of participatory interests in issue at
the end of the year 510 550 084 483 881 040
Weighted average number of participatory
interests in issue 508 199 272 490 270 328
Earnings per participatory interest (cents) 375,29 244,26
The calculation of earnings per participatory
interest is based on net profit for the year
of R1 907,2m (2014: R1 197,6m), divided by the
weighted average number of participatory
interests in issue during the year of 508 199 272
(2014: 490 270 328).
Headline earnings per participatory interest
(cents) 181,82 150,11
The calculation of headline earnings per
participatory interest is based on net profit for
the year, adjusted for non-trading items, of
R924,0m(2014: R736,0m), divided by the weighted
average number of participatory interests in issue
during the year of 508 199 272 (2014: 490 270 328).
Diluted headline earnings per participatory
interest (cents) 181,82 150,11
Condensed statement of cash flows
Reviewed Audited
year ended year ended
R’000 30 Jun 2015 30 Jun 2014
Cash generated from operations 1 037 433 892 472
Finance income 10 833 13 546
Interest paid (401 133) (276 019)
Derivative acquired in respect of share
appreciation rights scheme (3 636) (4 929)
Acquisition costs — (2 262)
Fee paid on cancellation of interest-rate swaps (36 641) —
Distribution to participatory interest holders (639 126) (584 966)
Cash flows from operating activities (32 270) 37 842
Acquisition of, and additions to, investment
properties and fixtures and fittings (368 607) (560 065)
Proceeds on sale of investment properties and
fixtures and fittings 326 732 313 079
Acquisition of investment in listed property
fund — (56 920)
Acquisition of subsidiaries, net of cash
acquired (448 279) (281 232)
Cash flows from investing activities (490 154) (585 138)
Participatory interests issued/(repurchased) 360 075 (182 821)
Increase in interest-bearing debt 170 257 752 782
Cash flows from financing activities 530 332 569 961
Net increase in cash and cash equivalents 7 908 22 665
Cash and cash equivalents at the beginning of
the year 45 303 22 638
Cash and cash equivalents at the end of the
year 53 211 45 303
Segmental information
R’000 Office Retail Industrial
2015
Sectoral segments
Revenue 797 210 757 254 257 504
Revenue 759 379 675 734 251 557
Allowance for future rental escalations 37 831 81 520 5 947
Segmental information
Operating profit 524 553 478 831 176 045
Investment properties 5 660 604 5 139 666 1 940 823
Geographical segments
Revenue
— Gauteng 586 365 518 411 173 056
— Western and Eastern Cape 122 560 98 253 51 520
— KwaZulu-Natal 55 813 74 649 32 928
— Free State 32 472 65 941
797 210 757 254 257 504
Investment properties
— Gauteng 4 268 996 3 570 269 1 343 323
— Western and Eastern Cape 850 870 477 120 365 000
— KwaZulu-Natal 369 838 640 977 232 500
— Free State 170 900 451 300
5 660 604 5 139 666 1 940 823
2014
Sectoral segments
Revenue 674 886 571 943 229 529
Revenue 659 359 566 487 223 068
Allowance for future rental escalations 15 527 5 456 6 461
Segmental information
Operating profit 395 603 328 490 145 209
Investment properties 5 381 621 3 669 868 1 707 515
Geographical segments
Revenue
— Gauteng 512 618 358 518 170 515
— Western and Eastern Cape 79 097 56 953 27 414
— KwaZulu-Natal 53 571 91 350 31 600
— Free State 29 600 65 122
674 886 571 943 229 529
Investment properties
— Gauteng 4 274 171 2 359 654 1 255 805
— Western and Eastern Cape 597 200 381 600 233 050
— KwaZulu-Natal 347 050 578 950 218 660
— Free State 163 200 349 664
5 381 621 3 669 868 1 707 515
Administrative
R’000 and corporate Total
2015
Sectoral segments
Revenue 1 811 968
Revenue 1 686 670
Allowance for future rental escalations 125 298
Segmental information
Operating profit (34 131)* 1 145 298
Investment properties 12 741 093
Geographical segments
Revenue
— Gauteng 1 277 832
— Western and Eastern Cape 272 333
— KwaZulu-Natal 163 390
— Free State 98 413
1 811 968
Investment properties
— Gauteng 9 182 588
— Western and Eastern Cape 1 692 990
— KwaZulu-Natal 1 243 315
— Free State 622 200
12 741 093
2014
Sectoral segments
Revenue 1 476 358
Revenue 1 448 914
Allowance for future rental escalations 27 444
Segmental information
Operating profit 9 988** 879 290
Investment properties 10 759 004
Geographical segments
Revenue
— Gauteng 1 041 651
— Western and Eastern Cape 163 464
— KwaZulu-Natal 176 521
— Free State 94 722
1 476 358
Investment properties
— Gauteng 7 889 630
— Western and Eastern Cape 1 211 850
— KwaZulu-Natal 1 144 660
— Free State 512 864
10 759 004
* Includes income from listed property investment of R47,4m less general
Fund expenses of R44,9m and fee paid on cancellation of swap agreements of
R36,6m.
** 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 Total
R’000 2015 2015 2015 2015
Group
Assets
Investments 796 930 796 930
Derivative financial instruments 14 401 14 526 28 927
Total 796 930 14 401 14 526 825 857
Liabilities
Derivative financial instruments 26 841 26 841
Total — 26 841 — 26 841
Net fair value 796 930 (12 440) 14 526 799 016
Level 1 Level 2 Level 3 Total
R’000 2014 2014 2014 2014
Group
Assets
Investments 665 992 665 992
Derivative financial instruments 12 573 8 081 20 654
Total 665 992 12 573 8 081 686 646
Liabilities
Derivative financial instruments 59 065 59 065
Total — 59 065 — 59 065
Net fair value 665 992 (46 492) 8 081 627 581
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 R14,5m are valued using a Black
Scholes option pricing model. The expected volatility of the unit price
used in the model ranged between 20% and 25%, and the risk free discount
rate used between 6% and 8%. A 10% change in the underlying unit price
would impact the valuation by R4,5m.
2. Non-financial assets
The following table reflects the levels within the hierarchy of non-
financial assets measured at fair value at 30 June 2015:
Level 3 Level 3
R’000 2015 2014
Assets
Investment properties 12 422 093 10 578 676
Investment properties held for sale 319 000 180 328
Fair value measurement of investment properties
The fair value of commercial buildings are 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 2015 were:
– The range of the reversionary capitalisation rates applied to the
portfolio are between 8,15% and 16,00% with the weighted average being
10,00% (2014: 10,06%).
– The discount rates applied range between 13,50% and 18,00% with the
weighted average being 14,80% (2014: 14,73%).
– Changes in discount rates and revisionary 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 the investment property by R187,7m (1,47%) and
a 25 basis points decrease will increase the value of the investment
property by R194,3m (1,53%). A 25 basis points decrease in the
capitalisation rate will increase the value of the investment property by
R197,7m (1,55%) and a 25 basis points increase will decrease the value of
the investment property by R187,4m (1,47%).
Fair values are estimated twice a year, whereafter they are reviewed by
the executive directors and approved by the board of directors. On a
rolling basis, one-third of all properties are valued externally every
year.
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**, GM Jennett,
V Mahlangu**, NE Makiwane*, W McCurrie**, MSB Neser**, V Nkonyeni*,
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: 19/08/2015 11:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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