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SA CORPORATE REAL ESTATE LIMITED - Preliminary summarised audited consolidated financial results for the year ended 31 December 2015

Release Date: 29/02/2016 13:24
Code(s): SAC     PDF:  
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SA Corporate Real Estate Limited
("SA Corporate" or "the Group")
Incorporated in the Republic of South Africa
Share Code: SAC; ISIN Code: ZAE000203238
(Registration number 2015/015578/06)


PRELIMINARY SUMMARISED AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015 Distribution growth - Full year 10.8% higher than 2014 - 2nd half 2015 10.5% higher than 2nd half 2014 Capital structure - 87.2% of debt fixed
- R1,3bn of equity raised amounting to the issue of 289.9m shares Portfolio activity - Acquisitions of R1,3bn - Like for like portfolio value up 11.5% Property performance - NPI growth of 15.4%
- Vacancy as % of traditional portfolio GLA improved to 2.3% - Traditional portfolio tenant retention at 89.9% INTRODUCTION
SA Corporate Real Estate Limited is a JSE-listed Real Estate Investment Trust ('REIT') which owns a diversified portfolio of industrial, retail, commercial and residential buildings located primarily in the major metropolitan areas of South Africa with a secondary node in Zambia.
REVIEW OF FINANCIAL RESULTS AND PORTFOLIO PERFORMANCE Distribution Growth
SA Corporate delivered growth in distributions per share for the year ended December 2015 of 10.8% and for the six months July to December 2015 of 10.5%. This amounts to a full year distribution of 39.57 cents per share ('cps') (Dec 2014: 35.70 cps) and a second half distribution of 19.91 cps (2014: 18.02 cps). Total acquisitions of R2.7bn at a 9.6% yield over the last 2 years impacted positively on this result. This was further supported by standing portfolio net property income ('NPI') growth of 6.3%. Portfolio Performance
The total NPI increased by 15.4%, with the standing portfolio and the R2.7bn acquisitions over the last two years contributing 5.8% and 10.9% respectively, less 1.3% due to disposals. The industrial NPI growth (7.1%) is attributable to standing portfolio growth of 6.9%, reduced vacancies (1.5%), strong retentions (93% of 18% by GLA expiry), positive reversions of 2.3% and escalations of 8.1%. The retail portfolio NPI growth of 7.7% was underpinned by further reductions in vacancies (1.3%), improved recoveries, strong retentions (85%) and positive reversions (6.5%).
The NPI in respect of the AFHCO portfolio increased by 242.2%. This is mainly due to 2015 being the first full year of inclusion of AFHCO. Acquisitions of R640.9m at a weighted average yield of 10.6%, further contributed to the growth. Portfolio vacancies reduced by 0.8% at year end and rental escalations of between 9% and 10% further contributed to a pleasing AFHCO performance.
The standing portfolio expense ratio reduced from 33.5% to 32.9% due to bad debt recoveries, reduced maintenance costs especially with re-developments in the retail portfolio and reductions in letting costs. Property expenses increased by 12.9% as a result of the acquisition of the AFHCO portfolio. Finance Costs
Net interest expense increased by 41.9%. This increase arose from accretive acquisitions of R1.3bn. Group and Other Expenses
Group expenses decreased by 18.0% mainly attributable to a R3.5m refund from SARS in respect of the VAT attribution objection and savings in the service fees relative to actual costs for the period January to April, pre the internalisation of management 1 May 2014. Antecedent Distribution
The Group successfully raised R1.2bn of equity by issuing 263,141,110 shares via a rights issue at a discounted price of 457cps cum dividend. This resulted in an antecedent distribution of R52,4m.
The breakdown of distributable earnings is set out below:
Year ended Year ended DISTRIBUTABLE EARNINGS (R000) 31.12.2015 31.12.2014 Rent (excluding straight line rental
adjustment) 1,202,536 1,034,231 Net property expenses (142,463) (115,689) Property expenses (558,143) (494,474) Recovery of property expenses 415,680 378,785
Net property income 1,060,073 918,542
Investment in joint venture 9,207 - Taxation on distributable earnings 489 -
Net funding cost (231,146) (162,795) Interest income 23,897 30,478 Interest expense (255,043) (193,273)
Group expenses (37,562) (45,793)
Antecedent distribution 52,392 -
Distributable earnings 853,453 709,954
Shares in issue (000) 2,287,304 1,997,395 Weighted number of shares in issue (000) 2,033,656 1,988,341
Distribution (cents per share) 39.57 35.70
Interim 19.66 17.68 Final 19.91 18.02 PROPERTY VALUATIONS
The value of the Group's independently valued property portfolio increased by R1,7bn (16.1%) to R12.4bn. The increase is as a result of the R640.9m (6%) acquisitions of the inner city residential and retail properties and an upward revision in the like for like portfolio held for the full 12 months to 31 December 2015, of R1.2bn (11.5%), due to retail assets under development.
The capitalisation and discount rates in the Group's standing portfolio at 31 December 2015 were calculated on a weighted basis:
Sector Capitalisation Discount rate (%) Growth in standing rate (%) portfolio (%) 31.12.2015 31.12.2014 31.12.2015 31.12.2014 31.12.2015
Industrial 9.4 8.9 14.4 14.4 5.3 Retail 8.5 8.7 14.2 14.2 18.7 Commercial 8.9 8.7 14.2 14.2 0.5 AFHCO 10.2 # * * 20.2 Total 9.3 8.8 14.3 14.3 11.5
* AFHCO properties are not valued on a discount rate basis, due to the short term nature of residential leases.
# The AFHCO portfolio was not part of the standing portfolio at December 2014 as it was acquired in 2014.
While capitalisation and discount rates have largely remained unchanged over the year, current changes in the SA economy are likely to negatively impact the investment market and hence capitalisation and discount rates. The extent to which the market reacts to these changes and the long-term impacts are uncertain and volatile. Indications are that this is likely to result in adjustments in capitalisation and discount rates in the June 2016 valuation. PORTFOLIO INVESTMENT ACTIVITY
The portfolio comprised 178 properties (December 2014: 166), which excludes the value of the Zambian properties of R938.5m, that has been equity accounted. The sectoral and geographic weightings by value as at 31 December 2015 are set out below: Sectoral Spread Retail R5,0bn 353,010m2 26 properties 41% Industrial R4,5bn 783,492m2 91 properties 36% AFHCO R1,8bn 170,060m2 44 properties 14% Commercial R1,1bn 80,578m2 17 properties 9% Geographic Spread Gauteng R6,9bn 792,377m2 109 properties 56% KwaZulu-Natal R4,4bn 445,568m2 53 properties 35% Western Cape R0,7bn 77,944m2 11 properties 6% South Africa: Other R0,4bn 71,251m2 5 properties 3% Committed Developments:
Properties Cost Commence- Forecast Yield Sector Region (Rm) ment date completion forecast
date 1st 12
months
(%)
East Point, Boksburg 433,1 05/2014 07/2016 9.6 Retail Gauteng AFHCO pipeline as 03/2015 03/2016
part of original to to
acquisition 4 266,7 05/2016 01/2017 11.0 AFHCO Gauteng Umlazi Mega City, Umlazi 1
Development of 263,7 11/2014 06/2017 9.3 Retail KwaZulu- bulk acquired Natal Bluff Shopping
Centre, Bluff 65,3 01/2015 01/2016 9.7 Retail KwaZulu- Natal Comaro Crossing,
Oakdene 2 53,7 03/2015 08/2016 8.0 Retail Gauteng Stellenbosch Square,
Stellenbosch 3 25,1 11/2014 03/2016 11.1 Retail Western 9.8 Cape Total 1 107,6 9.9 1 75% Undivided share of development cost 2 Yield excluding defensive capex of R14m is 11.0% 3 50% Undivided share of development cost
4 Cost includes bulk cost incurred with original acquisition on 1 July 2014 Acquisitions:
Properties Cost Acquisition Yield Sector Region (Rm) date forecast 1st
12 months
(%) Morulat Property Investments 4 Portfolio, New
Doornfontein 243,6 01/2015 10.6 AFHCO Gauteng Atkinson House,
Johannesburg CBD 1 92,3 03/2015 10.3 AFHCO Gauteng Sambro House,
Marshalltown 44,0 03/2015 10.2 AFHCO Gauteng Inner City Retail Portfolio,
Johannesburg CBD 261,0 10/2015 10.8 AFHCO Gauteng Indirect investment
in property portfolio 11/2015 Rest of
in Lusaka and Ndola 2 693,7 to 12/2015 8.7 Africa Zambia Total 1 334,6 9.6 1 Forms part of original AFHCO deal
2 50% of net equity in investment in joint venture - yield determined in US Dollars Contracted Acquisitions:
Properties Cost Acquisition Yield Sector Region (Rm) date forecast 1st
12 months
(%) Morning Glen Shopping
Centre, Sandton 293,0 02/2016 9.7 Retail Gauteng Jeppe Street Post
Office 88,2 06/2016 * AFHCO Gauteng Inner City Retail Portfolio, Johannesburg
CBD (Remainder) 20,1 04/2016 10.8 AFHCO Gauteng Total 401,3 9.8
* Property acquired to redevelop to 14,000m2 of retail and 44,000m2 of residential (approximately 850 apartments) and the redevelopment viability is in the process of being finalised. Disposals:
Properties Transfer Gross Carrying Exit yield date selling value at on sale price latest price (%) (Rm) valuation
date (Rm) 110 Zastron Road,
Bloemfontein 01/2015 6,9 6,9 6.8 Stellenbosch Square,
Stellenbosch 1 02/2015 40,0 46,3 7.8 36 Wierda Road West,
Wierda Valley 02/2015 39,0 39,0 7.5 3 Remblok Street,
Strydom Park 03/2015 10,7 10,4 8.3 The Boulevard, Melville 04/2015 31,2 31,2 7.4 Middelburg Pick n Pay,
Middelburg 09/2015 24,0 25,3 8.3 293 Hebbard Road,
Robertville 12/2015 23,5 23,5 5.5 Total 175,3 182,6 7.4 1 50% Undivided share Contracted and unconditional disposals:
Properties Expected Gross Carrying Exit yield transfer date selling value on sale price (Rm) price (%) (Rm)
Checkers Somerset West 1 02/2016 75,0 75,0 7.1 8 Paul Smit Street,
Anderbolt 1 02/2016 50,0 50,0 8.8 83 Heidelburg Ave, City
Deep 2 03/2016 36,0 36,0 7.4 4 School Road, Pinetown 2 03/2016 25,5 25,5 5.3 Total 186,5 186,5 7.4 1 Transferred in February 2016 2 Contracted and unconditional 3 50% Undivided share VACANCIES AND LEASE EXPIRIES
Vacancies in terms of rentable area and rental income were as follows:
Sector Vacancy as % of GLA* Vacancy as % of rental income 31.12.2015 31.12.2014 31.12.2015 31.12.2014 Traditional portfolio:
Industrial 0.3 1.4 0.3 1.2 Retail 4.5 5.9 2.8 3.4 Commercial 11.1 12.7 8.0 7.8 Traditional portfolio
total: 2.3 3.7 2.4 3.1 AFHCO portfolio:
Residential 5.6 7.9 6.6 8.9 Retail / Commercial 4.8 1.8 3.7 2.3 AFHCO portfolio total: 5.3 6.1 5.5 6.3 Rest of Africa portfolio:
Retail 2.2 - 1.4 - Commercial 4.6 - 2.6 - Rest of Africa
portfolio total: 2.7 - 1.7 - * GLA=Gross Lettable Area
The current year saw overall vacancies in respect of the traditional portfolio reducing to 2.3% (2014: 3.7%) and 2.4% (2014: 3.1%) by GLA and rental income respectively.
The AFHCO portfolio vacancies trended lower to 5.3% (2014: 6.1%) and 5.5% (2014: 6.3%) by GLA and rental income respectively, this as measures to mitigate the trend of spiking residential vacancies over the holiday season were successful.
The lease expiry profile and vacancies (by GLA) are set out below:
Sector Vacancy (%) Expiring (%)
Monthly 2016 2017 2018 2019 Thereafter Traditional portfolio:
Industrial 0.3 2.4 17.2 30.2 19.8 5.4 24.7 Retail 4.5 10.4 17.7 14.2 21.3 9.8 22.1 Commercial 11.1 10.4 25.5 13.0 9.9 8.9 21.2 Traditional portfolio
total: 2.3 5.2 18.0 24.4 19.4 6.9 23.8 AFHCO portfolio:
Retail / Commercial 4.8 8.4 23.7 14.6 12.4 6.7 29.4 Residential 1 5.6 50.8 42.7 0.9 1 Calculated on number of units Rest of Africa portfolio:
Retail 2.2 - 20.5 3.9 8.9 27.5 37.0 Commercial 4.6 - 14.8 11.2 14.4 45.5 9.5 2.7 - 19.1 5.6 10.2 31.7 30.7 TENANT RETENTION AND RENTAL REVERSION
The table below reflects the Group's tenant retention ratio and rental reversion per sector for a rolling 12 month period ending December 2015:
Sector Expiries Retention Retention Rental (m2) (m2) (%) reversion (%) Traditional portfolio:
Industrial 144,587 134,272 92.9 2.3 Retail 74,233 62,793 84.6 6.5 Commercial 19,520 17,259 88.4 (7.3) Total 238,341 214,324 89.9 3.1 AFHCO portfolio:
Retail / commercial 7,891 5,532 70.1 11.2
With 20% of the traditional portfolio expiring in 2015, the Group successfully retained 89.9% of its tenants at a weighted average reversion of 3.1% despite challenging economic conditions.
Of the 4.6% expiries relating to the AFHCO retail/commercial portfolio expiring we managed to retain 70.1% at a reversion of 12.1%. BORROWINGS
The debt profile is detailed below as at 31 December 2015:
Facility Maturity date Value (Rm) Interest Rate (%)
Term 01.11.2016 350 7.98 Term 01.01.2017 500 8.18 Term 15.12.2017 1,152 8.41 Term 13.08.2018 200 8.33 Term 30.09.2018 270 8.30 Term 30.09.2018 30 8.30 Term revolver * 01.11.2018 - 8.38 Term revolver # 31.12.2018 - 8.08 Term 15.12.2019 848 8.71 Term 01.11.2020 421 3.59 Term 15.04.2024 73 6.88 Total /weighted average 3,844 7.84
*= R200m revolving credit facility undrawn #= R300m revolving credit facility undrawn
Continuing with its net acquisitive phase of investment, the Group's effective loan to value ('LTV') peaked at 36% before reducing to 28.9% (December 2014: 29.1%), following a successful capital raise. The weighted average cost of debt, in respect of the effective debt excluding fixes, was 7.4%, (December 2014: 7.7%) at a weighted average margin of 1.6% (December 2014: 1.7%) and a weighted average tenor of 2.7 years (December 2014: 3.4 years).
At 31 December 2015, 87.0% of the debt drawn was fixed via interest rate hedges, at a weighted average rate and margin of 6.9% and 0.78% respectively and a weighted average tenor of 3.1 years. Total debt fixed amounts to 87.2% inclusive of fixed rate debt. The weighted average cost of debt inclusive of fixes, depicted above, amounts to 8.4%. This is up 0.57% from December 2014, due to increase in funding and funding tenors. STRATEGY AND PROSPECTS
During the year the Group completed its conversion to a corporate REIT setting the foundation for its strategy to deliver sustainable distribution growth to be achieved by:
- Building AFHCO to become a dominant trusted residential rental brand of choice in South Africa providing quality and affordable accommodation in high demand nodes. - Capitalising on inner city retail opportunities by growing exposure in high traffic precincts informed by market research and building relationships with retailers with strong trading performance in these markets. - Optimising the retail portfolio through redevelopments and improvements to tenant mix to ensure our shopping centres dominate and/or provide a differentiated offer to the catchment markets they serve. - Enhancing the resilience of the industrial portfolio by focusing on tenant retention and undertaking improvements that support the operational needs of our tenants. - Generating growth from a phased development pipeline ensuring that investment returns are realised by managing both the cost and quantum of capital when funded on balance sheet or through appropriate risk and reward sharing mechanisms when partnering with developers. - Recycling capital from low growth, poor quality to high growth, high quality assets. - Monitoring market trends to identify appropriate timing to progress the Group's sub Saharan investment strategy when property pricing reflects attractive returns. - Enhancing returns through effective use of debt and equity to optimise capital structure and manage interest rate risk and liquidity in volatile market conditions. - Facilitating that the business positively impacts the environment and ensures cost containment through green initiatives.
In executing the above strategy and given progress to date the Board is confident that the Group is well placed to achieve distribution growth of approximately 9% for the next six months.
As at As at SUMMARISED CONSOLIDATED STATEMENT 31.12.2015 31.12.2014 OF FINANCIAL POSITION (R000) Audited Audited Assets
Non-current assets 12,920,112 10,621,038 Investment property 11,631,267 10,291,993 Letting commissions and tenant installations 75,706 63,430 Investment in joint ventures 850,068 - Property, plant and equipment 5,501 1,427 Intangible assets 76,897 71,800 Interest rate swap derivatives 117,668 21,204 Rental receivable - straight line adjustment 159,370 169,468 Other financial assets 1,619 1,019 Deferred taxation 2,016 697
Current assets 660,506 554,939 Trade and other receivables 246,492 183,025 Other financial assets 33,816 24,429 Rental receivable - straight line adjustment 47,233 41,871 Interest rate swap derivatives 9,048 4,042 Taxation receivable 443 321 Inventory 52 27 Loan to developer 13,073 - Cash and cash equivalents 310,349 301,224 Non-current assets held for sale 556,036 164,372 Properties classified as held for disposal 553,700 163,000 Letting commissions and tenant installations 2,336 1,372
Total assets 14,136,654 11,340,349 Share capital and reserves and liabilities
Share capital and reserves 9,980,915 7,603,215
Non-current liabilities 3,486,022 3,106,491 Interest bearing borrowings - Local 3,420,503 3,100,650 Interest bearing borrowings - Foreign 65,519 - Interest rate swap derivatives - 5,841
Current liabilities 669,717 630,643 Trade and other payables 292,301 253,560 Loan from developer 13,020 - Interest bearing borrowings - Local 350,000 - Interest bearing borrowings - Foreign 8,595 - Distributions payable - 359,910 Rental payable - straight line adjustment 49 - Interest rate swap derivatives 5,744 16,684 Taxation payable - 480 Bank overdraft 8 9
Total shareholders' funds and liabilities 14,136,654 11,340,349
NAV cps 436 381
The net asset value ('NAV') per share has increased by 14.4%. The current year NAV is reflected cum distribution against the prior year ex distribution NAV to comply with IFRS requirements. Had the 2014 NAV been shown cum distribution the NAV would have been 399 cps resulting in an 9.3% increase in the NAV.
Year ended Year ended SUMMARISED CONSOLIDATED STATEMENT 31.12.2015 31.12.2014 OF COMPREHENSIVE INCOME (R000) Note Audited Audited
Revenue 1,614,549 1,408,879
Income 1,638,446 1,439,357 Rent 1,202,536 1,034,231 Straight line rental adjustment (3,667) (4,137) Recovery of property expenses 415,680 378,785 Interest income 23,897 30,478
Expenses (884,313) (761,610) Accounting and secretarial fees - (1,843) Audit fees (3,063) (2,183) Administrative fees (55,010) (56,308) Interest rate swap derivatives restructure
costs (11,838) - Depreciation (1,186) (688) Interest expense (255,043) (193,273) Property expenses (530,575) (467,657) Property administration fees (27,568) (26,817) Service fees - (12,841) Straight line rental adjustment (30) -
Operating income 754,133 677,747 Capital loss on disposal of investment
properties (16,178) (3,634) Foreign exchange adjustments (44,275) - Gain on acquisition of subsidiary and
joint ventures 4 30,079 102,000 Internalisation fee - (185,000) Loss on disposal of property, plant and
equipment - (29) Profit from joint venture 47,564 - Revaluation of investment properties 538,479 401,547 - Revaluations 534,812 397,410 - Straight line rental adjustment 3,667 4,137 Revaluation of interest rate swap derivatives 103,791 (25,329)
Profit before taxation 1,413,593 967,302
Taxation credit/(charge) 46 (122)
Profit after taxation 1,413,639 967,180 Other comprehensive income, net of taxation Items that may be reclassified to profit or loss Foreign exchange adjustments on investment in
joint ventures 87,861 -
Total comprehensive income 1,501,500 967,180
Earnings and diluted earnings per share* 69.51 48.64 * Calculated on weighted average number of units
Year ended Year ended SUMMARISED CONSOLIDATED STATEMENT OF 31.12.2015 31.12.2014 CHANGES IN EQUITY (R000) Audited Audited Share capital and reserves at the beginning of
the year 7,603,215 7,280,242
Total comprehensive income for the year 1,501,500 967,180
17,301,905 units issued - 65,747 26,767,491 units issued 115,176 - 263,141,110 shares issued 1 125,727 - 3,883,009 shares repurchased (19,046) - Antecedent distribution 52,392 - Distribution attributable to shareholders (398,049) (709,954)
Share capital and reserves at the end of the year 9,980,915 7,603,215
Year ended Year ended SUMMARISED CONSOLIDATED STATEMENT 31.12.2015 31.12.2014 OF CASH FLOWS (R000) Audited Audited
Operating profit before working capital changes 989,752 683,145 Working capital changes (66,222) 8,524 Cash generated from operations 923,530 691,669 Operating activities changes (1,023,634) (850,747) Net cash flows from operating activities (100,104) (159,078) Net cash flows from investing activities (1,607,235) (783,072) Net cash flows from financing activities 1,716,465 931,845 Net increase / (decrease) in cash 9,126 (10,305)
Cash and cash equivalents at beginning of year 301,215 311,520
Cash and cash equivalents at end of year 310,341 301,215
NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
The summarised audited consolidated financial statements have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports applicable to summarised financial statements. 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. The accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the previous consolidated financial statements. This report and the consolidated financial statements were compiled under the supervision of AM Basson CA(SA), the financial director and have been audited. The auditors, Deloitte & Touche, have issued their unmodified opinion on the Group's consolidated financial statements for the year ended 31 December 2015. A copy of their audit report and the financial statements are available for inspection at the Group's registered address. The audit was conducted in accordance with International Standards on Auditing. These preliminary summarised consolidated financial statements have been derived from the consolidated financial statements and are consistent, in all material respects, with the group consolidated financial statements. This preliminary report has been audited by Deloitte & Touche and an unmodified audit opinion has been issued. The auditor's report does not necessarily report on all of the information contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement, they should obtain a copy of that report together with the accompanying financial information from SA Corporate's registered address.
Any reference to future financial performance included in this announcement, as well as related information which is not based on IFRS, has not been reviewed or reported on by the Group's auditors.
1. Reconciliation of profit after tax to headline earnings to distributable earnings attributable to shareholders
Year ended Year ended 31.12.2015 31.12.2014 Audited Audited R 000 CPS R 000 CPS Profit after taxation attributable to
shareholders 1,413,639 69.51* 967,180 48.64* Adjustments for: Capital loss on disposal of investment
properties 16,178 3,634 Revaluation of investment properties
and joint venture (576,913) (401,547) Gain on acquisition of subsidiary/
joint ventures (30,079) (102,000)
Headline earnings 822,825 40.46* 467,267 23.50* Antecedent distribution 52,392 - Interest rate swap derivatives
restructure costs 11,838 -
Depreciation 1,186 688
Foreign exchange loss on capital loan 44,269 -
Internalisation fee - 185,000
Non-distributable expenses 20,518 27,411 Revaluation of interest rate swap
derivatives (103,791) 25,329
Straight line rental adjustment 3,667 4,137
Straight line expense rental adjustment 30 -
Taxation 443 122 Non distributable expenses on
investment in joint ventures 76 - Distributable income attributable to
shareholders 853,453 39.57 709,954 35.70
Interim 398,049 19.66 350,044 17.68 Final 455,404 19.91 359,910 18.02
* Calculated on weighted average number of shares in issue 2. Primary operational segments (R000)
Business segment Industrial Retail Commercial AFHCO Group Extract from statement of comprehensive income
Revenue 565,256 687,870 144,409 217,014 1,614,549 Rental income (excluding straight line rental
adjustment) 492,444 423,459 114,765 171,868 1,202,536 Net property expenditure (47,650) (26,539) (21,646) (46,628) (142,463) Property expenses (128,227) (290,194) (50,154) (89,568) (558,143) Recovery of property
expenses 80,577 263,655 28,508 42,940 415,680
Net property income 444,794 396,920 93,119 125,240 1,060,073 Straight line rental
adjustment (7,765) 756 1,136 2,206 (3,667) Net interest expense - - - - (231,146) Group expenses - - - - (115,402) Profit from joint ventures - - - - 9,130 Revaluation of interest
rate swap derivatives - - - - 103,791 Taxation - - - - 46
Headline earnings 437,029 397,676 94,255 127,446 822,825 Other information
Properties 4,379,606 4,970,084 1,052,838 1,778,098 12,180,626 Non-current investment
property 4,293,339 4,544,321 1,015,509 1,778,098 11,631,267 At valuation 4,406,500 2,786,600 1,033,200 1,462,099 9,688,399 Straight line rental
adjustment (113,161) (65,679) (17,691) (10,072) (206,603) Under development - 1,823,400 - 326,071 2,149,471 Non-current investment
property held for sale 86,267 425,763 37,329 - 549,359 Classified as held for
disposal 86,000 430,200 37,500 - 553 700 Straight line rental
adjustment 267 (4,437) (171) - (4,341) Additions and
acquisitions 32,794 546,281 18,285 437,542 1,034,902 Acquisitions through
business combination - - - 378,433 378,433 Segmental growth
rates (%) Industrial Retail Commercial Resident- Group ial
& other Rental income (excluding straight line rental
adjustment) 7.1 5.3 (3.5) 221.3 16.3 Property expenses 10.4 (1.3) 2.3 154.1 12.9 Recovery of property
expenses 12.5 1.3 0.3 133.9 9.7 Net property income 7.1 7.7 (5.3) 242.2 15.4 3. REIT conversion
During the year the Group converted from a Real Estate Investment Trust ('REIT') Trust to a corporate REIT. Effective 1 July 2015, SA Corporate Real Estate Fund ('the Fund'), disposed of all its assets and liabilities to SA Corporate Real Estate Limited ('the Company'). Unitholders in the Fund became the direct shareholders in the Company. The transaction was therefore treated as a reverse acquisition in terms of IFRS 3. The Group results contain the results of the Fund and its subsidiaries for the period 1 January to 30 June 2015 and the Company and its subsidiaries results for the period 1 July 2015 to 31 December 2015. The comparatives disclosed are those for the Fund in the prior year. 4. Significant transactions
During the year the Group acquired the following joint ventures:
Portion of
ownership
interest Consideration Principal Date of and voting transferred Joint venture activities acquisition rights R000
Ancona Mauritius Limited Holding 01.11.2015 50% 682,411 Premier LM&C Mauritius company Limited of property Graduare Mauritius company Limited earning net rental income
The Companies were acquired to enter the African market and thus further diversify the Group's property portfolio.
Assets acquired and liabilities recognised at date of acquisition: R'000 Non-current assets
Investment property 828,832 Property, plant and equipment 1,227 Non-current liability
Borrowings (126,642)
Gain on acquisition of joint venture: R'000
Consideration 682,411 Less fair value of identifiable assets acquired and
liabilities assumed (703,417) Gain on acquisition of joint ventures (21,006) Gain on acquisition of subsidiaries (9,073)
Gain on acquisition of subsidiaries and joint ventures (30,079)
The gain on acquisition of joint ventures arose mainly due to the saving on the acquisition of one of the seller's interest and the acquisition of the property, plant and equipment at no consideration.
This transaction resulted in a profit from joint venture of R47,563,606 with a corresponding foreign exchange translation income of R87,861,066. 5. Interest rate swap derivatives
The interest rate swap derivatives are valued based on the discounted cash flow method. Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk. This is classified as a level 2 financial asset in terms of the degree to which the fair value is observable.
This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34. The full, consolidated financial statements are available on the Group's website, or at the Group's registered offices and upon request. 6. Events after the reporting period
The directors are not aware of any significant events, other than the distribution disclosed below, between the end of the financial year under review and the date of signature of these summarised financial statements. DISTRIBUTION DECLARATION AND IMPORTANT DATES Notice to shareholders resident South Africa
Notice is hereby given of the declaration of distribution no.2 in respect of the income distribution period 1 July 2015 to 31 December 2015. The distribution amounts to 19.91 cps. The source of the distribution comprises net income from property rentals and interest earned on cash investments. Please refer to the statement of comprehensive income for further details. As SA Corporate has REIT status, shareholders are advised that the distributions meet 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 distributions on SA Corporate shares will be deemed to be dividends, for South African tax purposes, in terms of section 25BB of the Income Tax Act. The distributions received by or accrued to South African tax residents must be included in the gross income of such shareholders and are not exempt from income tax (in terms of the exclusion to the general dividend exemption, contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act) because they are dividends distributed by a REIT, with the effect that the distribution is taxable in the hands of the shareholder. These 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 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 ceases to be the beneficial owner, both in the form prescribed by the Commissioner for the South African Revenue Service. SA Corporate shareholders are advised to contact the CSDP, broker or 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. Notice to non-resident shareholders
Distributions received by non-resident shareholders 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 in section 10(1)(k)(i) of the Income Tax Act. It should be noted that until 31 December 2013 distributions received by non-residents from a REIT were not subject to dividend withholding tax. From 1 January 2014, any 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 dividend amount due to non-resident shareholders is 16.9235 cents per SA Corporate share. A reduced dividend withholding rate, in terms of the applicable DTA, may only be relied on if the non-resident shareholders has provided the following forms to the 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 dividend is subject to a reduced rate as a result of the application of a DTA; and b) a written undertaking to inform the 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 the 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. 2,287,303,520 SA Corporate shares are in issue at the date of this distribution declaration and SA Corporate's income tax reference number is 9179743191.
Last date to trade cum distribution Wednesday, 16 March 2016 Shares will trade ex-distribution Thursday, 17 March 2016 Record date to participate in the distribution Thursday, 24 March 2016 Payment of distribution Tuesday, 29 March 2016
Share certificates may not be dematerialised or re-materialised between Thursday, 17 March and Thursday, 24 March 2016 both days inclusive. By order of the Board SA Corporate Real Estate Limited 29 February 2016 Registered office South Wing, First Floor Block A The Forum North Bank Lane Century City 7441 Tel 021 529 8410 Registered auditors Deloitte & Touche 1st Floor The Square Cape Quarter 27 Somerset Road Cape Town 8005 Transfer secretaries Computershare Investor Services (Pty) Ltd Ground Floor 70 Marshall Street Johannesburg 2001 PO Box 61051 Marshalltown 2107 Sponsor Nedbank Capital A division of Nedbank Limited 135 Rivonia Road Sandton 2196
Directors: J Molobela (Chairman), TR Mackey (Managing)*, AM Basson (Finance)*, RJ Biesman-Simons, GP Dingaan, KJ Forbes, EM Hendricks, MA Moloto, ES Seedat * Executive B Swanepoel Company Secretary 29 February 2016
Date: 29/02/2016 01:24:00 Supplied by www.sharenet.co.za 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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