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SA CORPORATE REAL ESTATE LIMITED - CANCELLATION OF S368826 Preliminary summarised audited consolidated financial results for the year ended 31 December 2015

Release Date: 01/03/2016 13:00
Code(s): SAC     PDF:  
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CANCELLATION OF S368826 Preliminary summarised audited consolidated financial results for the year ended 31 December 2015

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



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