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CANCELLATION OF S364878 Unaudited Financial Results for the Interim Period Ended 30 September 2015
ACCELERATE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration No 2005/015057/06)
JSE code: APF ISIN code: ZAE000185815
(REIT status approved)
("Accelerate" or "the company")
UNAUDITED FINANCIAL RESULTS FOR THE INTERIM PERIOD ENDED 30 SEPTEMBER 2015
INFORMATION PROVIDED
The introductory preamble aims to inform investors regarding the noteworthy changes in the fund from 1 April 2015 to 30 September 2015 and thus predominantly
refers to 31 March 2015 for comparative purposes. In the financial review however 30 September 2014 comparative information is provided as required by
financial reporting standards.
INTRODUCTION AND HISTORY
Accelerate listed on 12 December 2013 with 51 properties at a total portfolio value of R5.5 billion and a share price of R 4.88. Accelerate was formed for
the purpose of investing in direct real estate for income generation and capital growth. Accelerate is classified as a Real Estate Investment Trust (REIT) in
the Retail REIT sector of the JSE Limited (JSE).
To date Accelerate's portfolio has grown by 38% to a portfolio value of R 7.6 billion, with a closing share price at 30 September 2015 of R 6.45. For the
interim period ending 30 September 2015 Accelerate achieved a year on year distribution growth of 10.93% growing the dividend per share from 23.994 cents per
share to 26.617 cents per share.
Accelerate's management have demonstrated the ability to identify, negotiate and conclude attractive property acquisitions, sell non-core properties
profitably and extract maximum value out of its existing centres by reducing vacancies and optimising tenant mix.
Accelerate is well positioned to create shareholder value by being a participant in the major development in the Fourways area. Acquisitions under
consideration by Accelerate are in line with Accelerate's long term strategy of acquiring high quality properties backed by long term leases with reputable
tenants. Accelerate is a retail biased fund.
OPERATING ENVIRONMENT
The global and local economic outlook suggests that the demand side in the property market remains weak as South Africa is still feeling the effects of slow
economic growth. The impact of the interest rate hike in 2014 and then the subsequent hike in June 2015 has increased pressure on consumers to service debt
and all indications are that there may be further interest rate increases. We have also seen an almost 10% decline in unsecured credit granted year on year
in Q2 of 2015, this coupled with increasing inflation rates, will result in greater pressure on consumer spending. These factors will also place retail
rentals under pressure requiring a greater focus by landlords on tenant mix and strategic letting.
In the office market we have seen the gap between A and B grade office space continue to grow with A grade office space being occupied by stronger tenants
with longer term leases showing a much greater resilience to downward pressure on rentals than the B grade space. In the office space the fund is focused on
acquiring high quality A or P grade office space backed by long term leases with robust tenants, as evidenced by the KPMG acquisition.
The listed property sector continues to offer investors a stable cash flow and consistent capital returns and remains a very attractive alternative to other
fixed income investments options. Accelerate's total return on equity for the 12 months ended 30 September 2015 is 22.17%.
OPERATIONAL REVIEW
Accelerate has remained focused on maximising rental income and tenant recoveries, reduction of vacancies, effectively managing costs and enhancing the
quality of Accelerate's property portfolio and return to investors through the considered and measured approach to the acquisition of high quality properties
backed by strong tenants and favourable long term leases.
On the leasing side Accelerate has made some significant strides forward from 1 April 2015 to 30 September 2015. Vacancies have been reduced from 8.81% to
6.69% , the weighted average lease period has improved from 2.87 years to 4.56 years, lease escalations on a portfolio basis still remain strong at 8.53%
with the Accelerate retail portfolio being especially resilient to downward pressure on rentals experienced in the market.
Accelerate's portfolio value has increased from R 6.77 billion at 31 March 2015 to R 7.65 billion at 30 September 2015 largely due to the acquisition of a
portfolio of 6 office properties leased to KPMG Inc. and KPMG Services limited ("the KPMG acquisition"). These properties were acquired through the purchase
of the entire issued ordinary share capital of Parktown Crescent Properties Proprietary Limited ("PCP") and 30% of the issued ordinary share capital of
Wanooka Properties Proprietary Limited ("Wanooka"), representing the remaining shares in Wanooka not already owned by PCP from current and retired KPMG
partners. The portfolio yields a total net rental of R64 500 000 per year through a 15 year triple net lease with KPMG escalating at 8% per annum for the
first twelve years of the lease. The acquisition was fully debt funded at a weighted average cost of funding of 3-month JIBAR plus 164 basis points however
the debt has subsequently been reduced by R 275 million.
The fund refinanced R 300 million of debt maturing in December 2015 and R152 million of debt maturing in September 2017 through the debt capital markets
extending the funds weighted average loan term to 3.99 years at 30 September 2015. As a result of the KPMG acquisition the debt of the fund has increased to
R 2,99 billion at 30 September 2015 from R 2.39 billion at 31 March 2015. In addition the fund took out R 300 million of swaps increasing the SWAP nominal
value to R 2.3 billion. The funds weighted average cost of debt remains low compared to the market at 7.88%.
Below is a summary of Accelerate's key indicators at 30 September 2015 compared to 31 March 2015:
Indicator APF property portfolio (total) Retail Specialised retail Office Industrial
30-Sept-15 31-Mar-15 30-Sept-15 31-Mar-15 30-Sept-15 31-Mar-15 30-Sept-15 31-Mar-15 30-Sept-15 31-Mar-15
Number of properties 57 52 30 30 3 3 20 15 4 4
Asset value (R'000) 7 649 784 6 766 284 5 276 572 5 276 572 296 290 296 290 1 795 314 911 814 281 608 281 608
Debt nominal value (R'000) 2 992 264 2 383 764
SWAP nominal value (R'000) 2 300 000 2 000 000
Loan to value % 39.12% 35.23%
Percentage of debt hedged % 76.86% 83.90%
Weighted average loan term (years) 3.9 2.9
Weighted average SWAP term (years) 3.23 2.36
Total GLA (m2) 488 040 467 208 294 152 294 152 17 375 17 375 118 657 97 825 57 856 57 856
GLA as % of portfolio 100,00% 100,00% 60,27% 62,96% 3,56% 3,72% 24,31% 20,94% 11,85% 12,38%
Vacancy GLA (m2) 32 636 41 149 18 760 29 685 - - 13 875 11 464 - -
Gross Vacancy % (the net of structural vacancy figure is 5.46%) 6.69% 8,81% 6.43% 10,09% - - 11,14% 11,72% - -
Contractual Lease escalations % 8.53% 8.46% 8.84% 8.58% 8.09% 8.06% 7.79% 7.78% 9.10% 8.93%
Net cost to income ratio % 17.93% 13.44%
Weighted average lease period (years) 4,56 2,87 3,1 2,9 4 4,26 9,4 3,05 1,8 1,93
THE FOURWAYS DEVELOPMENT
We are pleased to report that the Fourways development has commenced during the reporting period. Approximately 90 000 m2 of retail space will be added to
the existing Fourways Mall with a projected date of completion of March 2018. The development is being undertaken by a related party to Accelerate. As such
Accelerate does not hold any development risk. Upon completion of the development it is estimated that the new development will contribute approximately 60%
of the revenue of the combined letting enterprise. Accelerate has committed at the date of completion of the development to acquire the equalising portion of
the development so as to ensure that Accelerate receives 50% of the rental stream of the completed development. Accelerate will acquire this equalising
portion at a yield of 8%.
PROSPECTS AND INVESTMENT PIPELINE
On 20 August 2015 Accelerate entered into a purchase agreement with Old Mutual Life Assurance Company (South Africa) Limited ("OMLACSA") to acquire floors 9
to 19 of the prominent 5 star green rated Portside building in Cape Town for a total purchase consideration of R 840 million. This transaction is in progress
and is expected to be finalised early in the New Year. For further information on the acquisition please refer to the announcement released on the Stock
Exchange News Service a ("SENS") on 24 August 2015.
The six properties detailed in the announcement released on SENS on 20 November 2014 relating to the Noor transaction are in the process of being transferred
to the fund. Several of the properties are situated in Charles Crescent, one of Accelerate's strategic nodes. This transaction is yield enhancing and also
holds a long term strategic development goal for Accelerate. The total purchase consideration for these properties is R 468 million and will be settled
partly in cash and partly through the issuance of shares to the vendor on transfer. The blended yield of the properties acquired is 9%.
Accelerate remains focused and committed to enhancing the quality of its property portfolio and improving yields to investors by growing the fund in a well
thought out and considered manner always keeping returns to investors front of mind.
FINANCIAL REVIEW
We are pleased to report a profit after taxation of R211 million and a distributable profit of R 192 million. The variation between profit before taxation
and distributable profit is as a result of a fair value adjustment relating to a mark to market movement of R1.8 million on financial instruments and a
straight lining adjustment of R38 million and an antecedent distribution for shares issued during the period of R17 million. Our distribution per share for
the period of 26.617 (30 September 2014: 23.994) cents per share shows a growth of 10.93% on the distribution per share for the interim period ended 30
September 2014. Refer to the distribution analysis for more detail as well as comparatives.
Accelerate's annualised yield at 30 September 2015 (based on a closing share price at 30 September 2014 of R 5.70) is 9.1%. Accelerate has maintained its
local blue-chip tenants and has been approached by international retail brands, which is encouraging for revenue streams.
Other than the acquisitions as discussed under the operational review section of this announcement there were no material changes in the company's property
and tenant profiles.
Accelerate earned a gross rental income of R417.4 million for the period (30 September 2014: R335.7 million).
Income and expenses were well managed and this combined with the effect of fixing debt interest rates on 76.8% of Accelerates debt, had a positive effect on
profitability, which would otherwise have been detrimentally affected by the interest rate increase.
The company's major expenses were largely recovered in terms of its leases and consisted of:
utility charges of R89.5 million (30 September 2014: R69.1 million);
security of R12.3 million (30 September 2014: R11.5 million); and
cleaning costs of R5.4 million (30 September 2014: R4.8 million).
The company spent R7.9million (30 September 2014:R7.8 million) on the repair and maintenance of its properties. The net property expenses of R 40.6 million
(2014: R 23.6 million) including tenant installations of R 10 million, in conjunction with R 20.8 million in other operating costs (30 September 2014: R14.4
million), resulted in Accelerate reporting an 17.93% cost-to-income ratio (30 September 2014: 14.6%) .
30 September 30 September
Consolidated statement of financial position 2015(R'000) 2014(R'000)
ASSETS
Non-current assets 7 847 118 6 256 341
Investment property 7 777 631 6 151 810
Derivative financial instruments 69 293 104 426
Equipment 194 105
Current assets 341 707 284 413
Current tax receivable 9 284 -
Trade and other receivables * 226 687 156 620
Cash and cash equivalents 105 736 127 793
Investment property held for sale
Fair value of investment property assets - -
Total assets 8 188 825 6 540 754
EQUITY AND LIABILITIES
Shareholders' interest 5 086 400 3 988 654
Share capital 3 844 466 3 279 923
Other reserves 17 558 163
Retained earnings 1 224 376 708 568
Total equity 5 086 400 3 988 654
Non-current liabilities 2 854 997 2 440 286
Long-term borrowings 2 808 761 2 394 050
Contingent liability on conditional purchase costs 46 236 46 236
Current liabilities 247 428 111 814
Trade and other payables 57 682 106 768
Short-term portion of long-term borrowings 183 500 253
Taxation payable (VAT) 6 246 4 793
Total equity and liabilities 8 188 825 6 540 754
*Included in the receivables at 30 September 2015 is an amount of R 78 206 183 which is a deposit paid to the transferring attorneys for properties being
acquired through the "Noor" transaction. These properties are in the process of being transferred to Accelerate.
30 September 30 September
Consolidated statement of comprehensive income 2015(R'000) 2014(R'000)
Revenue, excl straight-line rental revenue adjustment 417 496 335 796
Straight-line rental revenue adjustment 38 249 9 107
Revenue 455 745 344 903
Property expenses (115 045) (98 842)
Net property income 340 700 246 061
Other operating expenses (20 880) (14 493)
Operating profit 319 820 231 568
Fair value adjustments (1 860) (27 283)
Other income 833 1 138
Profit on disposal of asset - 12 104
Finance income 6 652 5 261
Profit before long-term debt interest and taxation 325 445 222 788
Long-term debt interest (113 801) (87 304)
Profit before taxation 211 644 135 484
Taxation -
Profit after taxation attributable to equity holders 211 644 135 484
EARNINGS PER SHARE
Basic earnings per share (cents) 29.74 21.17
Diluted earnings per share (cents) 29.41 20.74
DISTRIBUTABLE EARNINGS
Profit after taxation attributable to equity holders 211 644 135 484
Less: straight-line rental revenue adjustment (38 249) (9 107)
Less: fair value adjustments 1 860 27 283
Add: Antecedent distribution 12 885
Add: Antecedent distribution (Shares issued after 30 September 2015) 4 220
Less: profit on sale of property - (12 104)
Distributable earnings 192 360 141 555
Distribution per share (cents) 26.617 23.994
Other Share Retained Total
Reserves Capital Income Equity
Consolidated Statement of changes in equity (R'000) (R'000) (R'000) (R'000)
Balance at 1 April 2013 (12) (12)
Total Comprehensive income attributable to equity holders - 552 811 552 811
Issue of shares 3 117 914 - 3 117 914
Retained earnings on listing - 101 248 101 248
Total contributions by and distributions to owners of company recognised directly in equity 3 117 914 101 248 3 219 162
Balance at 1 April 2014 3 117 914 654 047 3 771 961
Total Comprehensive income attributable to equity holders - 741 049 741 049
Issue of shares - 304 809 - 304 809
Distribution paid - - (220 899) (220 899)
Other reserves 3 023 - - 3 023
Distribution reserve 4 200 - - 4 200
Total contributions by and distributions to owners of company recognised directly in equity
304 809 (220 889) 91 133
Balance at 31 March 2015 7 223 3 422 723 1 174 197 4 604 143
Total Comprehensive income attributable to equity holders
211 644 211 644
Issue of shares 421 743 421 743
Distribution paid (161 465) (161 465)
Other reserves 1 650 1 650
Distribution reserve 8 685 8 685
Total contributions by and distributions to owners of company recognised directly in equity 17 558 3 844 466 1 224 376 5 086 400
Balance at 30 September 2015 17 558 3 844 466 1 224 376 5 086 400
Consolidated Statement of cash flows
30 September 30 September
2015(R'000) 2014 (R'000)
Cash flows from operating activities
Cash generated from operations 234 329 203 430
Finance income 6 652 5 261
Tax paid (3 023) (7 509)
Net cash from operating activities 237 958 201 182
Cash flows from investing activities
- (16)
Purchase of property, plant and equipment
Purchase of investment property/Capitalised cost (935 945) (45 606)
Contingent purchase - (162 009)
Prepayment of properties being acquired (78 206) -
Proceeds from disposal of investment property 28 420 77 114
Net cash from investing activities (985 731) (130 517)
Cash flows from financing activities
Proceeds on share issue 395 206 162 009
New long-term borrowings 1 183 500 41 890
Settled long-term borrowings (575 000) (36 400)
Finance costs (113 801) (87 304)
Short term insurance - 253
Distributions paid (131 237) (80 963)
Dividend reinvestments 36 024
Net cash from financing activities 794 692 (515)
Total Cash movement for the period 46 919 70 150
Cash at the beginning of the period 58 817 57 643
Total cash at end of the period 105 736 127 793
30 September 30 September
2015(R'000) 2014 (R'000)
Distribution Analysis
DISTRIBUTABLE EARNINGS
Profit after taxation attributable to equity holders 211 644 135 484
Less: straight-line rental revenue adjustment (38 249) (9 107)
Add: fair value adjustments 1 860 27 283
Add: Antecedent distribution 12 885
Add: Antecedent distribution (shares issued after 30 September 2015) 4 220
Less: profit on sale of property - (12 104)
Distributable earnings 192 360 141 555
Shares qualifying for distribution
Number of shares at year end 758 455 048 638 916 916
Less: Bulk ceded shares to Accelerate* (51 070 184) (51 070 184)
Add: Shares issued after 30 September 2015 15 313 935
Shares issued in deferred revenue agreement - 29 890 954
Shares ceded by vendor on deferred revenue agreement* - (27 768 697)
Shares qualifying for distribution 722 698 799 589 968 989
Distribution per share (cents) 26.61692 23.99368
*Note: Fourways Precinct has contractually agreed to cede the distribution relating to 51 070 184 shares held by it in respect of vacant land acquired by
Accelerate at listing. Distributions will only commence on these shares after the earlier of five years from listing on the JSE or practical completion of
any development on the bulk.
For the period ended 30 September 2014 Fouways Precinct ceded the distribution on 27 768 696 shares in accordance with the Deferred Revenue Agreement as
these shares were issued to Fourways Precinct shortly before 30 September 2014. These shares will receive a full distribution going forward.
30 September 30 September
2015 2014
Earnings per share R'000 R'000
Basic earnings per share (EPS) amounts are calculated by dividing profit
for the year attributable to ordinary equity holders of Accelerate by the
weighted average number of ordinary shares outstanding during the year.
Reconciliation of basic/diluted earnings to headline earnings
Total profit after tax 211 644 135 484
Fair value adjustment excluding straight-lining 1 860 27 283
Applicable taxation - -
Headline profit attributable to shareholders 213 504 162 767
Basic earnings per share (cents) 29.74 21.17
Diluted earnings per share (cents) 29.41 20.74
Headline earnings per share (cents) 30.00 25.43
Diluted headline earnings per share (cents) 29.67 24.91
Shares in issue at the end of the period 758 455 048 668 807 870
Weighted average number of shares in issue 711 635 168 639 981 525
shares in issue
Dilutionary Instruments
Shares subject to the deferred acquisition costs 7 168 341 9 474 548
Shares subject to the conditional share plan 724 492 3 889 706
Weighted average number of dilutionary instruments 7 892 833 13 364 254
Total diluted weighted average number of shares in issue 719 528 001 653 345 779
CONDENSED SEGMENTAL ANALYSIS
The individual properties are aggregated into segments with similar economic characteristics such as nature of the property and the occupier market it
serves. Management considers that this is best achieved by aggregating properties into office, industrial, retail and specialised retail segments.
Consequently, the company is considered to have four reportable operating segments, as follows:
Office segment: acquires, develops and leases offices;
Industrial segment: acquires, develops and leases warehouses and factories;
Retail segment: acquires, develops and leases shopping malls, community centres as well as retail centres; and
Specialised retail segment: acquires, develops and leases specialised buildings not within the previous segments.
There are no sales between segments.
Period ended 30 September 2014 (6 months)
R000's Office Industrial Retail Specialised Total
Statement of comprehensive income
Revenue, excluding straight-line rental revenue adjustment 54 277 8 534 262 585 10 400 335 796
Straight-line rental adjustment 2 143 (34) 6 269 730 9 107
Property expenses (16 658) (2 164) (77 409) (2 610) (98 842)
Segment operating profit 39 762 6 335 191 445 8 519 246 061
Profit on sale of building - - 12 104 - 12 104
Segment profit 39 762 6 335 203 549 8 519 258 165
Other operating expenses (14 493)
Other income 1 138
Fair value gain on financial instrument (27 283)
Finance income 5 261
Long term debt interest (87 304)
Profit before tax 135 484
Period ended 30 September 2015 (6 months)
R'000s Office Industrial Retail Specialised Total
Statement of comprehensive income
Revenue, excluding straight-line rental revenue adjustment 115 334 20 691 271 619 9 852 417 496
Straight-line rental adjustment 21 737 468 14 696 1 348 38 249
Property expenses (18 354) (3 936) (91 695) (1 060) (115 045)
Segment operating profit 118 717 17 223 194 620 10 140 340 700
Other operating expenses (20 880)
Other income 833
Fair value gain on financial instrument (1 860)
Finance income 6 652
Long term debt interest (113 801)
Profit before tax 211 644
Period ended 30 September 2014 (6 months)
R'000 Office Industrial Retail Specialised Total
Statement of financial position extracts at 30 September 2014
Assets
Investment property balance 1 April 2014 796 154 111 718 4 971 877 267 450 6 147 200
Acquisitions - - - - -
Development 23 080 - 22 526 - 45 606
Disposals - - (66 560) - (66 560)
Straight-line rental revenue adjustment 4 280 259 19 127 1 898 25 564
Fair value adjustments - - - - -
Segment assets at 30 September 2014 822 697 111 977 4 928 660 267 450 6 151 810
Other assets not managed on a segmental basis
Derivative financial instruments 104 426
Equipment 105
Current Assets (incl cash) 284 413
Total Assets 6 540 754
Period ended 30 September 2015 (6 months)
R'000 Office Industrial Retail Specialised Total
Statement of financial position extracts at 30 September 2015
Assets
Investment property balance 1 April 2015 921 328 282 874 5 326 403 301 252 6 831 857
Conditional purchase price
Acquisitions/Capital expenditure 850 000 - - - 850 000
Capital expenditure 62 376 - 23 569 - 85 945
Disposals/ classified as held for sale (28 420) - - - (28 420)
Investment property held for sale - - - - -
Straight-line rental revenue adjustment 21 737 468 14 696 1 348 38 249
Segment assets at 30 September 2015 1 827 021 283 342 5 364 668 302 600 7 777 631
Other assets not managed on a segmental basis
Derivative financial instruments 69 293
Equipment 194
Current Assets 341 707
Total Assets 8 188 825
NOTES TO THE FINANCIAL STATEMENTS
CORPORATE INFORMATION
The unaudited interim results of Accelerate for the six month period ended 30 September 2015 were authorised for issue in accordance with a resolution of the
directors passed on 16 November 2015. Accelerate is a public company incorporated and domiciled in South Africa whose shares are publicly traded on the JSE.
The registered office is located at Cedar Square Shopping Centre, corner Cedar Road and Willow Avenue. The principal activities of Accelerate are
acquisition, development and leasing of properties. The functional and presentation currency of Accelerate is South African rand thousands. All figures are
rounded off to R'000 except where otherwise stated.
BASIS OF PREPARATION
These interim results are prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), contains the minimum information required by IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the requirements of the
Companies Act, 71 of 2008, as amended and the JSE Listings Requirements.
The accounting policies applied in the preparation of these unaudited interim results are in terms of IFRS and are consistent with those applied in the
previous financial period, except for the new and amended IFRSs that became effective during the 30 September 2015 reporting period. None of which had any
material impact on Accelerate's financial result.
These unaudited interim results have been prepared under the historical cost convention except for investment properties which are measured at fair value.
The fair value of investment properties is determined by directors with reference to market-related information while other financial liabilities are valued
with reference to market-related information and valuations as appropriate. All investment properties are valued by independent external valuers on a 3 year
rolling cycle.
These results were prepared under the supervision of Mr Dimitri Kyriakides (CA)SA in his capacity as Chief Financial Officer.
Contingent purchase consideration
As part of the sale and purchase agreement for properties acquired at the listing of Accelerate, an amount of contingent purchase consideration has been
agreed with the seller in accordance with the conditional deferred payment agreement. In accordance with this agreement, Accelerate will provide the seller
with additional purchase consideration for any lettable vacant space excluded from the purchase consideration which is let within the first three years. This
payment will be settled by Accelerate through the issue of additional shares in Accelerate in future when certain conditions have been met. As at the
acquisition date, the fair value of the contingent purchase consideration was estimated at R209 784 554. During the year ended 31 March 2015 a portion of the
vacant lettable space had been let in accordance with the conditions laid down in the agreement. As a result of this an amount R163 548 205 in shares was
issued in terms of the contingent purchase consideration. The remaining contingent purchase consideration at 31 March 2015 was R46 235 795 and has remained
unchanged from 1 April 2015 to 30 September 2015. This is a level 3 measurement in the fair value measurement hierarchy as at 30 September 2015. The fair
value was determined using a discounted cash-flow analysis using the significant unobservable valuation inputs, as provided below:
Inputs Range
Estimated rental value (ERV) per square metre R45.36 - R133.38
Vacancy assumptions 5% - 10%
Equivalent yield 8.5% - 21.8%
Significant increases/(decreases) in the ERV (per square meter per annum) and rental growth p.a. in isolation would result in a significantly higher/(lower)
fair value measurement. Significant increases/(decreases) in the long-term vacancy rate and discount rate (and exit or yield) in isolation would result in a
significantly lower/(higher) fair value measurement. Generally, a change in the assumption made for the ERV (per square meter per annum) is accompanied by:
A similar change in the rent growth p.a. and discount rate (and exit yield); and/or
An opposite change in the long-term vacancy rate.
A reconciliation of fair value measurement of the contingent purchase consideration liability is provided below:
Period ended Period ended
30 September 30 September
2015 2014
Contingent purchase consideration R'000 R'000
Opening balance 46 236 209 784
Reduction due to vacancies filled - (163 548)
Closing balance 46 236 46 236
The contingent purchase consideration is a mechanism used to shift the risk of vacant space from purchaser (Accelerate) to the vendor. The manner in which
additional shares are issued to Fourways Precinct is unlikely to have a dilutive effect on yield.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES - 30 SEPTEMBER 2014
R'000 Carried at fair Amortised
Financial assets value cost# Total
Derivative financial assets* 104 426 104 426
Trade and other receivables 156 620 156 620
Cash and cash equivalents 127 793 127 793
Total financial assets 104 426 284 413 388 839
Financial liabilities
Long-term interest-bearing borrowings (2 394 050) (2 394 050)
Trade and other payables (111 561) (111 561)
Current portion of long-term debt (253) (253)
Total financial liabilities - (2 505 864) (2 505 864)
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES - 30 SEPTEMBER 2015
R'000 Carried at fair Amortised
Financial assets value cost# Total
Derivative financial assets* 69 293 - 69 293
Trade and other receivables - 235 971 235 971
Cash and cash equivalents - 105 736 105 736
Total financial assets 69 293 341 707 411 000
Financial liabilities
Long-term interest-bearing borrowings - (2 808 761) (2 808 761)
Trade and other payables - (63 928) (63 928)
Current portion of long-term debt - (183 500) (183 500)
Total financial liabilities - (3 056 189) (3 056 189)
* The values of the derivative financial asset shown at fair value are based on inputs other than quoted prices that are observable in the market for the
assets and liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices) - level 2. The value of the swaps is determined as the
discounted value of the future cash flows to be received from the swap assets. For the valuation current JIBAR was used as an indication of future JIBAR.
# The carrying value of financial assets and liabilities carried at amortised cost is considered to approximate the fair value of those financial assets and
liabilities. There have been no significant changes in valuation techniques or transfers between fair value hierarchy levels.
RELATED-PARTY TRANSACTION
Relationships
M Georgiou and A Costa are directors of both Accelerate Property Fund Ltd and Accelerate Property Management Company (Pty) Ltd, both directors' full
remuneration is paid by Accelerate.
M Georgiou is also an executive director of Fourways Precinct (Pty) Ltd.
Period ended Period ended
30 September 30 September
2015 2014
Related party transactions and balances R'000 R'000
Contingent purchase
Fourways Precinct (Pty) Ltd (46 236) (46 236)
Vacancy guarantee
Fourways Precinct (Pty) Ltd (included in Trade receivables) 4 420 8 884
Interest charged
Interest charged on outstanding amounts owed from Fourways Precinct (Pty) Ltd
1 473 1 680
Accelerate Property Management costs
Fourways Precinct (Pty) Ltd 2 970 1 580
Accelerate Property Management Company (Pty) Ltd 1 203 1 450
FAIR VALUE ADJUSTMENTS
Period ended Period ended
30 September 30 September
2015 2014
Fair value adjustments R'000 R'000
Investment property (Fair value model) - -
Mark to market movement on swap (1 860) (27 283)
(1 860) (27 283)
At 30 September 2015 the property portfolio of Accelerate was not revalued. The movement in the value of the portfolio was either through acquisitions,
disposal or capitalised costs.
CAPITAL COMMITMENTS
In terms of Accelerate's budgeting process, R60.5 million was allocated to Accelerate's planned capital expenditure. As such, Accelerate views this amount as
authorised and not contracted.
SUBSEQUENT EVENTS
Non Adjusting events after period end
At the date of approval of these interim financial statements there were no non adjusting events after period end that the directors of the Accelerate were
aware of.
DIRECTORS' RESPONSIBILITY STATEMENT
The directors of Accelerate assume full responsibility for the preparation of these unaudited results for the interim period ended 30 September 2015.
FINAL DISTRIBUTION WITH AN ELECTION TO REINVEST CASH DISTRIBUTION FOR SHARES
The board of Accelerate has declared an interim cash distribution (number 4) ("Cash Distribution") of 26.61692 cents per ordinary share (2014: 23.99368 cents
per ordinary share) for the period ended 30 September 2015.
Shareholders will be entitled to elect to reinvest the Cash Distribution of 26.61692 cents per share after the deduction of the applicable dividend tax, in
return for shares ("Share Re-investment Alternative"), failing which they will receive the net Cash Distribution in respect of all or part of their
shareholding.
Shareholders who have dematerialised their shares are required to notify their duly appointed Central Securities Depository Participant ("CSDP") or broker of
their election in the manner and time stipulated in the custody agreement governing the relationship between the shareholder and their CSDP or broker.
The source of the distribution comprises net income from property rentals earned from the company's property investments as well as interest earned on excess
cash on deposit. Please refer to the condensed statement of comprehensive income for further details.
A dividend withholding tax of 15% will be applicable on the dividend portion to all shareholders who are not exempt.
The issued share capital at the declaration date is 773 768 983 ordinary shares. The company's income tax reference number is: 9868626145
Tax implications for South African resident shareholders
Accelerate was granted REIT status by the JSE with effect from 12 December 2013 in line with the REIT structure as provided for in the Income Tax Act, No. 58
of 1962, as amended (the Income Tax Act) and section 13 of the JSE Listings Requirements.
The REIT structure is a tax regime that allows a REIT to deduct qualifying distributions paid to investors in determining its taxable income.
The Cash Distribution of 26.61692 cents per ordinary share meets the requirements of a "qualifying distribution" for the purposes of section 25BB of the
Income Tax Act (a qualifying distribution). Accordingly, qualifying distributions received by local tax resident shareholders 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 Accelerate 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 shareholders have provided the following forms to their
CSDP or broker, as the case may be, in respect of uncertificated ordinary shares, or the transfer secretaries, in respect of certificated ordinary shares:
a declaration that the distribution is exempt from dividends tax; and
a written undertaking to inform the CSDP, broker or transfer secretaries, as the case may be, should the circumstances affecting the exemption change or the
beneficial owner ceases 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.
Tax implications for non-resident shareholders
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 22.62438 cents per ordinary share. A reduced dividend withholding tax rate in terms of the
applicable DTA, may only be relied on if the non-resident shareholders have provided the following forms to their CSDP or broker, as the case may be, in
respect of the uncertificated ordinary shares, or the transfer secretaries, in respect of certificated ordinary shares:
a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
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 ceases to be the beneficial owner, both in the form prescribed by the Commissioner for the South African Revenue Service.
Non-resident 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, if applicable.
Summary of the salient dates relating to the Cash Distribution and Share Re-investment Alternative are as follows:
2015
Circular and form of election posted to shareholders Friday, 20 November
Announcement of Share re-investment Alternative issue price and finalisation information Friday,20 November
Last day to trade ("LDT") cum dividend Friday, 4 December
Shares to trade ex-dividend Monday, 7 December
Listing of maximum possible number of Share Re-investment Alternative shares commences on the JSE Wednesday,9 December
Last day to elect to receive the Share Re-investment Alternative (no late forms of election will be accepted) by 12:00 (South African time) Friday, 11 December
Record date Friday, 11 December
Announcement of results of Cash Distribution and Share Re-investment Alternative on SENS Monday, 14 December
Cheques posted to certificated shareholders and accounts credited by CSDP or broker to dematerialised shareholders electing
the Cash Distribution on or about Monday, 14 December
Share certificates posted to certificated shareholders and accounts credited by CSDP or broker to dematerialised shareholders
electing the Share Re-investment Alternative on or about Thursday, 17 December
Adjustment to shares listed on or about Friday, 18 December
Notes:
Shareholders electing the Share Re-investment Alternative are alerted to the fact that the new shares will be listed on LDT + 3 and that these new shares can
only be traded on LDT + 3, due to the fact that settlement of the shares will be three days after record date, which differs from the conventional one day
after record date settlement process.
Share certificates may not be dematerialised or rematerialised between Monday, 7 December 2015 and Friday, 11 December 2015, both days inclusive.
The above dates and times are subject to change. Any changes will be released on SENS and published in the press .
The Cash Dividend or Share Re-investment 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.
There were no changes to directors during the 6 month period ended 30 September 2015.
On behalf of the board
Mr TT Mboweni
(Non-executive chairman)
Mr M Georgiou
(Chief executive officer)
Mr D Kyriakides
(Chief financial officer)
17 November 2015
Corporate information
DIRECTORS
Mr TT Mboweni (non-executive chairman)
Mr A Costa (chief operating officer)
Dr GC Cruywagen (lead independent, non-executive director)
Mr JRP Doidge (independent non-executive director)
Mr TJ Fearnhead (independent non-executive director)
Mr M Georgiou (chief executive officer)
Mr D Kyriakides (financial director)
Ms K Madikizela (independent non-executive director)
Mr JRJ Paterson (executive director)
Prof F Viruly (independent non-executive director)
Registered office and business address
Cedar Square Shopping Centre, Management Office, 1st Floor, Cnr Willow Ave and Cedar Rd,
Fourways, Johannesburg, 2055
Tel: 010 001 0790
Web: www.acceleratepf.co.za
Investor relations
Instinctif Partners: Louise Fortuin
Tel: 011 447 3030
Email: louise.fortuin@instinctif.com
Company secretary
Joanne Matisonn
iThemba Governance and Statutory Solutions Proprietary Limited
Monument Office Park, Block 5, Suite 102, 79 Steenbok Avenue, Monument Park
Tel: 086 111 1010
Email: joanne@ithembaonline.co.za
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107, South Africa
Tel: 011 370 5000
Email: proxy@computershare.co.za
Fax: 011 688 2238
Sponsor
The Standard Bank of South Africa Limited
(Registration number 1962/000738/06)
Baker Street, Rosebank, 2196
PO Box, 61344, Marshalltown, 2107
Auditors
Ernst & Young Incorporated
102 Rivonia Road, Sandton, Johannesburg, 2149
Tel: 011 772 3000
Internal Auditors
LateganMashego Auditors (Pty)Ltd
Registration number 2001/107847/07
Registered address: 11 Boca Walk, Highveld, Centurion, 0157
Email: lindie@lateganmashego.co.za
Tel: 0828987644/0836091159
Attorneys
Glyn Marais Inc.
(Registration number 1990/000849/21)
2nd Floor, The Place
1 Sandton Drive
Sandton
2196
(PO Box 652361, Benmore, 2010)
Date: 19/11/2015 09:42:59 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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