SYCOM PROPERTY FUND - Unaudited interim financial results for the six month period ended 31 December 2015 and dividend declaration

Release Date: 02/03/2016 09:00
Code(s): SYC
 
Wrap Text
Unaudited interim financial results for the six month period ended 31 December 2015 and dividend
declaration

Sycom Property Fund ("Sycom")
A Collective Investment Scheme in Property registered in terms of the Collective Investment Schemes Control Act, No. 45 of 2002
and managed by Sycom Property Fund Managers Limited (“SPFM”) (Registration number 1986/002756/06)
JSE Share code: SYC
ISIN: ZAE000019303
(Approved as a REIT by the JSE)

Unaudited interim financial results for the six month period ended 31 December 2015 and dividend
declaration announcement

The directors of SPFM, the management company of Sycom, submit their report on the results of Sycom for the six months ended
31 December 2015.

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the six months ended 31 December 2015

                                                                        Unaudited six   Unaudited six   
                                                                             months to       months to   
                                                                           31 Dec 2015    30 Sept 2014   
                                                                               (R'000)         (R'000)   
Revenue                                                                        356,005         368,716   
Contractual rental revenue and recoveries                                      369,734         371,838   
Straight-lining of rental revenue adjustment                                  (13,729)         (3,122)   
Direct property operating expenses                                            (70,403)        (70,694)   
Selling costs on investment properties held for sale                                 -         (1,086)   
Dividend from listed investment                                                 10,663          10,145   
Fair value changes on investment property and listed investment                104,485           (422)   
Fair value gain on investment properties                                        33,626           3,122   
Fair value gain/(loss) on listed investment                                     70,859         (3,544)   
Administrative expenses                                                       (24,763)        (24,940)   
Profit before net finance costs                                                375,987         281,719   
Net finance costs                                                             (66,690)        (89,827)   
Interest income                                                                  9,476          11,187   
Interest expense                                                             (106,725)       (104,172)   
Fair value gain on derivative financial instruments                             30,559           3,158   
Profit before taxation                                                         309,297         191,892   
Taxation                                                                             -               -   
Profit for the period                                                          309,297         191,892   

Other comprehensive income for the  period                                                               
Net change in fair value of cash flow hedges *                                       -        (18,630)   
Other comprehensive income for the  period                                           -        (18,630)   
Total comprehensive income for the  period                                     309,297         173,262   

Basic and diluted earnings per unit - cents **                                  154.55           95.88   

* The fair value movement on the cash flow hedges through other comprehensive income may be reclassified to profit and loss.
** Sycom Property Fund has no dilutionary instruments in place.

Condensed Consolidated Statement of Financial Position                                       
as at 31 December 2015                                                                       
                                                                           Unaudited at   Unaudited at   
                                                                            31 Dec 2015   30 Sept 2014   
ASSETS                                                                          (R'000)        (R'000)   
Property assets                                                               8,608,065      8,215,123   
Investment properties and related  receivables                                8,608,065      7,540,366   
Investment properties                                                         8,418,737      7,321,371   
Non-current straight-lining lease receivable                                    167,297        188,479   
Current straight-lining lease receivable                                         22,031         30,516   
Investment properties held for sale and related receivables                           -        674,757   
Investment properties held for sale                                                   -        666,654   
Straight-lining lease receivable                                                      -          8,103   
Other non-current assets                                                        493,879        441,709   
Listed investment (in Stenham European Shopping Centre Fund)                    449,903        407,674   
Derivative financial instruments                                                 43,976         34,035   
Current assets                                                                  379,245        404,832   
Rental and other receivables                                                    117,935        112,418   
Derivative financial instruments                                                    301              -   
Dividends receivable                                                                  -         10,145   
Cash and cash equivalents                                                       261,009        282,269   
Total assets                                                                  9,481,189      9,061,664   

UNITHOLDERS' FUNDS AND LIABILITIES                                                                     
Unitholders' funds                                                            6,241,300      5,756,778   
Unitholders' capital                                                          1,947,048      1,947,048   
Non-distributable reserves                                                    4,294,252      3,809,730   
Non-current liabilities                                                       2,903,795      2,905,722   
Borrowings                                                                    2,903,795      2,903,795   
Derivative financial instruments                                                      -          1,927   
Current liabilities                                                             336,094        399,164   
Trade and other payables                                                        148,113        155,473   
Derivative financial instruments                                                      -         50,327   
Unitholders for distribution                                                    187,981        193,364   
Total unitholders' funds and liabilities                                      9,481,189      9,061,664   

Net asset value per unit - cents                                                  3,119          2,876   

Condensed Consolidated Statement of Changes in Unitholders' Funds
for the six months ended 31 December 2015

                                            Unitholders'   Non-distributable                                   
                                                 Capital            reserves   Retained earnings       Total   
                                                 (R'000)             (R'000)             (R'000)     (R'000)   
Balance at 31 March 2014                       1,947,048           3,829,832                   -   5,776,880   
Total comprehensive income for the period                                                                      
Profit for the period                                  -                   -             191,892     191,892   
Other comprehensive income for the period              -            (18,630)                   -    (18,630)   
Transfer to non-distributable reserve                  -             (1,472)               1,472           -   
Unitholders' distribution                              -                   -           (193,364)   (193,364)   
Balance at 30 September 2014                   1,947,048           3,809,730                   -   5,756,778   
Total comprehensive income for the period                                                                      
Profit for the period                                  -                   -             647,081     647,081   
Transfer to non-distributable reserve                  -             363,207           (363,207)           -   
Unitholders' distribution                              -                   -           (283,874)   (283,874)   
Balance at 30 June 2015                        1,947,048           4,172,937                   -   6,119,985   
Total comprehensive income for the period                                                                      
Profit for the period                                  -                   -             309,297     309,297   
Transfer to non-distributable reserve                  -             121,315           (121,315)           -   
Unitholders' distribution                              -                   -           (187,982)   (187,982)   
Balance at 31 December 2015                    1,947,048           4,294,252                   -   6,241,300   

Condensed Consolidated Statement of Cash Flows                                                            
for the six month period ended 31 December  2015                                                          
                                                                           Unaudited six  Unaudited six   
                                                                               months to      months to   
                                                                             31 Dec 2015   30 Sept 2014   
                                                                                (R'000)        (R'000)   
Cash flows from operating  activities                                                                     
Profit before taxation                                                           309,297        191,892   
Adjusted for:                                                                                             
Interest income                                                                  (9,476)       (11,187)   
Interest expense                                                                 106,725        104,172   
Foreign exchange loss                                                                  -             67   
Dividend from listed investment                                                 (10,663)       (10,145)   
Straight-lining of rental revenue adjustment                                      13,729          3,122   
Fair value gain on investment properties                                        (33,626)        (3,122)   
Fair value gain on derivative financial instruments                             (30,559)        (3,158)   
Fair value (gain)/loss on listed investment                                     (70,859)          3,544   
Selling costs on investment properties held for  sale                                  -          1,086   
Change in working capital                                                         22,555        (2,060)   
Decrease/(increase) in receivables (excluding interest accruals)                   1,662       (33,233)   
Increase in payables (excluding interest and capital expenditure accruals)        20,893         31,173   
Cash generated from operations                                                   297,123        274,211   
Dividend received                                                                 10,663          8,285   
Distributions paid                                                              (85,784)      (190,450)   
Interest paid                                                                  (114,260)      (101,147)   
Interest received                                                                  9,836         12,187   
Net cash inflow from operating  activities                                       117,578          3,086   

Cash flows from investing  activities                                                                     
Subsequent expenditure on investment  properties                               (178,936)       (16,808)   
Subsequent expenditure on investment properties held for sale                          -        (6,200)   
Selling costs on disposal of investment  properties                                    -        (1,086)   
Net cash outflow from investing activities                                     (178,936)       (24,094)   

Cash flows from financing  activities                                                  -              -   

Net decrease in cash and cash  equivalents                                      (61,358)       (21,008)   
Cash and cash equivalents at the beginning of the period                         322,367        303,304   
Effect of exchange rate fluctuations on cash  held                                     -           (27)   
Cash and cash equivalents at the end of the period                               261,009        282,269   

NOTES
                                                                                                                               
1. Basis of Preparation                                                                                     

These interim financial results for the six months ended 31 December 2015 are prepared in accordance with the JSE Limited Listings Requirements
for interim reports and the requirements of the Collective Investments Schemes Control Act. The Listings Requirements require interim reports to
be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS) and 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 and key estimates and assumptions used in the preparation of these interim financial results are in terms
of IFRS and are consistent with those applied in the previous consolidated annual financial statements for the year ended 30 June 2015. Unitholders
attention is drawn to the fact that Sycom changed its year end from 31 March to 30 June with effect from the financial year ended 30 June 2015. For
this reason, the current interim period reported on is the 6 months ended 31 December 2015, while the comparative period is the 6 months ended 
30 September 2014.

The interim results have been prepared under the supervision of the group's financial director, Craig Kotze, CA(SA).

2. Reconciliation of profit for the period to headline earnings and distributable earnings: 
                                  
                                                                           Unaudited six   Unaudited six   
                                                                                months to       months to   
                                                                              31 Dec 2015    30 Sept 2014   
                                                                                  (R'000)         (R'000)   
Profit for the period                                                             309,297         191,892   
Fair value adjustment to investment properties                                   (33,626)         (3,122)   
Headline earnings                                                                 275,671         188,770   
Selling costs on investment properties held for  sale                                   -           1,086   
Straight-lining rental income accrual                                              13,729           3,122   
Gain on derivative financial instruments                                         (30,559)         (3,158)   
Fair value adjustment to listed investment                                       (70,859)           3,544   
Prepaid distribution                                                                    -               -   
Distributable earnings                                                            187,982         193,364

                                                                                    cents           cents   
Earnings per unit:                                                                                       
Basic and diluted earnings* per unit                                               154.55           95.88   
Headline and diluted headline earnings* per unit                                   137.74           94.32   
Distribution per unit                                                               93.93           96.62   

* Sycom does not have any dilutionary instruments in place.                                                 

Number of units in issue ('000)                                                   200,132         200,132   
Number of weighted average units in issue ('000)                                  200,132         200,132   


3. Condensed Segmental  Results                                                     
for the six month period ended 31 December  2015                                     
Segmental earnings:                                                                  
                                                                            Retail    Offices      Total   
                                                                           (R'000)    (R'000)    (R'000)   
Segment contractual rental revenue and recoveries                          154,921    214,813    369,734   
Straight-lining of rental revenue adjustment                                 (943)   (12,786)   (13,729)   
Dividend income                                                             10,663          -     10,663   
Total revenue                                                              164,641    202,027    366,668   
Operating expenditure                                                     (30,855)   (39,548)   (70,403)   
Net finance income                                                             320        966      1,286   
Segmental net operating income                                             134,106    163,445    297,551   
Fair value adjustments                                                      71,802     32,683    104,485   
South Africa                                                                   943     32,683     33,626   
International                                                               70,859          -     70,859   
Segmental earnings                                                         205,908    196,128    402,036   

Reconciliation of segmental results to profit for the period in the statement of profit or loss and other comprehensive income

                                                                     Allocated   Unallocated      Total   
                                                                       (R'000)       (R'000)    (R'000)   
Contractual rental revenue and recoveries                              369,734             -    369,734   
Straight-lining of rental revenue adjustment                          (13,729)             -   (13,729)   
Dividend income                                                         10,663             -     10,663   
Total revenue                                                          366,668             -    366,668   
Operating expenditure                                                 (70,403)      (24,763)   (95,166)   
Net finance cost                                                         1,286      (98,535)   (97,249)   
Net operating income                                                   297,551     (123,298)    174,253   
Fair value gain on investment properties                                33,626             -     33,626   
Fair value gain on listed investment                                    70,859             -     70,859   
Fair value gain on derivative financial instruments                          -        30,559     30,559   
Profit before taxation                                                 402,036      (92,739)    309,297   
Taxation                                                                     -             -          -   
Profit for the period                                                  402,036      (92,739)    309,297   
                 
                                                                         Retail     Offices       Total   
                                                                        (R'000)     (R'000)     (R'000)   
Investment Property Assets                                            3,960,273   4,647,792   8,608,065   
Segmental Liabilities                                                  (29,491)    (72,306)   (101,797)   
               
                                              
for the six months ended 30 September  2014                                               
Segmental earnings:                                                                       
                                                                         Retail     Offices      Total   
                                                                        (R'000)     (R'000)    (R'000)   
Segment contractual rental revenue and recoveries                       159,379     212,459    371,838   
Straight-lining of rental revenue adjustment                                602     (3,724)    (3,122)   
Dividend income                                                          10,145           -     10,145   
Total revenue                                                           170,126     208,735    378,861   
Operating expenditure                                                  (32,164)    (38,530)   (70,694)   
Selling costs on investment properties held for  sale                     (965)       (121)    (1,086)   
Net finance income                                                          429       1,363      1,792   
Segmental net operating income                                          137,426     171,447    308,873   
Fair value adjustments                                                  (4,146)       3,724     (422)   
South Africa                                                              (602)       3,724      3,122   
International                                                           (3,544)           -    (3,544)   
Segmental earnings                                                      133,280     175,171    308,451   

Reconciliation of segmental results to profit for the period in the statement of profit or loss and other comprehensive income

                                                                    Allocated   Unallocated      Total   
                                                                      (R'000)       (R'000)    (R'000)   
Contractual rental revenue and recoveries                             371,838             -    371,838   
Straight-lining of rental revenue adjustment                          (3,122)             -    (3,122)   
Dividend income                                                        10,145             -     10,145   
Total revenue                                                         378,861             -    378,861   
Operating expenditure                                                (70,694)      (24,940)   (95,634)   
Selling costs on investment properties held for  sale                 (1,086)             -    (1,086)   
Net finance cost                                                        1,792      (94,777)   (92,985)   
Net operating income                                                  308,873     (119,717)    189,156   
Fair value gain on investment properties                                3,122             -      3,122   
Fair value loss on listed investment                                  (3,544)             -    (3,544)   
Fair value gain on derivative financial instruments                         -         3,158      3,158   
Profit before taxation                                                308,451     (116,559)    191,892   
Taxation                                                                    -             -          -   
Profit for the year                                                   308,451     (116,559)    191,892   
                                                                                        
                                                                       Retail      Offices       Total   
                                                                      (R'000)      (R'000)     (R'000)   
Investment Property Assets                                          3,641,753    4,573,370   8,215,123   
Segmental Liabilities                                                (30,742)     (63,402)   (94,144)   

4. Fair value of financial instruments recognised in the Statement of Financial Position

The fair values of all financial instruments with the exception of the interest rate swaps and the investment in Stenham are substantially the same as
the carrying amounts reflected on the Statement of Financial Position. The group measures fair values using the following hierarchy that reflects the
significance of the inputs used in making the measurements:

- Level 1: Quoted prices (unadjusted) in an active market for an identical instrument.
- Level 2: Valuation techniques based on observable inputs, either directly (ie: as prices) or indirectly (ie: derived from prices). This category
includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments
in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from
market data.
- Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes
inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category also includes
instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.

If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair
value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire
measurement.

As the group does not hold financial instruments that are traded in active markets, fair values are not based on quoted market prices or dealer price
quotations. As such, the group determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash
flow models and comparison to similar instruments for which market observable prices exist. Assumptions and inputs used in valuation techniques
include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign
currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to
arrive at a fair value determination that reflects the price of the financial instrument at the reporting date, that would have been determined by market
participants acting at arm's length.

The group uses widely recognised valuation models and techniques for determining the fair value of common and more simple financial instruments,
like the interest rate swaps that use only observable market data and require little management judgement and estimation. Observable prices and
model inputs are usually available in the market for listed debt and equity securities, exchange traded derivatives and simple over the counter
derivatives like interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgement and
estimation and also reduces the uncertainty associated with determination of fair values.

The table below analyses financial instruments carried at fair value, by valuation method.

                                              Level 1    Level 2   Level 3      Total   
                                              (R'000)    (R'000)   (R'000)    (R'000)   
31 December 2015                                                                        
Financial assets                                    -     44,277   449,903    494,180   
Listed investment                                   -          -   449,903    449,903   
Interest rate swaps                                 -     44,277         -     44,277   

30 September 2014                                                                       
Financial assets                                    -     34,035   407,674    441,709   
Listed investment                                   -          -   407,674    407,674   
Interest rate swaps                                 -     34,035         -     34,035   
Financial liabilities                                                                   
Cross currency and interest rate swaps              -   (52,254)         -   (52,254)   

A reconciliation of the opening balances to the closing balances for the level 3 valuations is disclosed as follows:

                                                         Unaudited at   Unaudited at   
                                                           31 Dec 2015   30 Sept 2014   
                                                               (R'000)        (R'000)   
Balance as at beginning of period                              379,044        409,224   
Scrip shares acquired                                                -          1,994   
Revaluation of investment recognised in profit or loss          70,859        (3,544)   
Carrying value at end of period                                449,903        407,674   

Level 2 fair values - Interest rate swaps
The following table shows the valuation techniques used in measuring level 2 fair values:

Type                                                                Valuation technique                        Significant unobservable inputs
Interest rate swaps                                     Fair valued monthly by Nedbank Capital           Not applicable - observable inputs are used in
                                                        using mark to market mid market values.          the valuation
                                                        This involves, inter alia, discounting the
                                                        future cash flows using the curves at the
                                                        reporting date and the credit risk inherent in
                                                        the contract

Cross currency swap*                                    Fair valued bi-annually by Nedbank Capital       Not applicable - observable inputs are used in
                                                        using mark to market valuation                   the valuation
                                                        methodology. This involves, inter alia,
                                                        calculating the present value of the future
                                                        cross currency swap cash flows

* The cross currency swap agreement ended and was settled in November 2014

Level 3 fair value - Investment in Stenham European Shopping Centre Fund ("Stenham")
The investment in Stenham is an investment in a closed fund without an actively traded price. The significant underlying asset per the statement of
financial position of Stenham is the investment property balance, which is valued using a discounted cash flow model (refer valuation technique
below). Sycom's valuation in Stenham is based on the net asset value of the investment as per the most recent publically available financial
information, translated at the period end ruling exchange rate.

The investment property is valued by Jones Lang LaSalle, who are independent and qualified in accordance with the Appraisal and Valuation Manual
published by the Royal Institution of Chartered Surveyors (RICS). The valuation is prepared in accordance with the RICS Valuation - Professional
Standards published by the Royal Institute of Chartered Surveyors as well as the International Valuation Standards (IVS) on the basis of market
value. Based on discussions with the valuers, the Directors have reduced the value of the property in order to incorporate a provision for selling
costs, a shorter lease expiry profile for the property and negative rental reversions on certain lease renewals.

                                                                                             Significant             Inter-relationship between key
                                                                                            unobservable              unobservable inputs and fair
                                 Valuation technique                                           inputs                     value measurements
The market value of the investment property is assessed using the discounted                                  The fair value would increase/(decrease)
cash flow (DCF) calculation method. The valuation takes into account the agreed                               based on:
rent for the signed leases, the market rent for currently vacant space and               a) Financial         (1) increases/(decreases) in the net operating
estimated rents for re-letting of the space after lease term expiry. In all instances,   information used to  income,
the valuers calculated the DCF for a 10-year period and assumed a capitalised            calculate rental     (2) (decreases)/increases in the yield used to
value based on a stabilised rental income thereafter. After the DCF period of 10         growth forecasts     calculate the terminal value indication
years, the valuers calculate a stabilised rental income. The capitalised value takes     b) Net initial yield (3) (decreases)/increases in the discount rate
this stabilised rental income and subtracts the stabilised expenses, resulting in the    (6.27%)              used to calculate the gross capital value
stabilised net operating income. This result is capitalised into perpetuity applying     c) Discount rate
an equivalent (growth implicit) yield and produces the terminal value indication.        (6.70%)
The resulting value is then discounted to the valuation date using the discount          d) Terminal
rate from term years 1-10. Discounting the remaining cash flows for years 1 to 10        capitalisation rate
and the terminal value for year 11 to the valuation date (i.e. the net present value)    (6.40%)
produces the gross capital value. After deductions for purchaser’s costs, the            e) Non recoverable
market value is obtained.                                                                expenses
                                                                                         f) Market lease
                                                                                         assumptions for
                                                                                         contract expiry/
                                                                                         vacant space

Sensitivity analysis for Level 3 fair value - Investment in Stenham

Price risk sensitivity analysis
The price risk sensitivity analysis has been determined based on Sycom's shareholding percentage and the Euro value per share of the investment as
per the most recent publically available financial information and assumes a fixed exchange rate in order to isolate price sensitivity. If the price per
share of the investment were to increase/decrease by 1% and all other variables were held constant, profit for the period ended 31 December 2015
would have decreased/increased by R 4 499 029 (2014: R 4 077 146) and closing equity would have increased/decreased by the same amount. As
this surplus/deficit movement arises on a fair value measurement, it would be transferred from retained earnings to the non-distributable reserve and
consequently would have no impact on distributable earnings.

5. Related Party Transactions

Identity of the related parties with whom significant transactions have occurred (Group only)

Entity                                                                        Relationship

Acucap Properties Limited                                                     Sycom is a subsidiary of Acucap Properties Limited
Growthpoint Properties Limited                                                The ultimate parent of Acucap Properties Limited and Sycom
                                                                              Property Fund
Sycom Property Fund Managers Limited                                          The management company of Sycom and a wholly owned
                                                                              subsidiary of Growthpoint Properties Limited
Acucap Management Services Proprietary Limited                                The entity is a wholly owned subsidiary of Acucap Properties
                                                                              Limited
FC Property Management Company Proprietary Limited                            The entity is jointly controlled by Sycom Property Fund Managers
                                                                              Limited and Ellerine Bros Proprietary Limited.

                                                                                        Unaudited      Unaudited   
                                                                                      6 months to    6 months to   
                                                                                      31 Dec 2015   30 Sept 2014   
Significant related party transactions (Group only)                                       (R'000)        (R'000)   
Asset management fees paid to Sycom Property Fund Managers Limited                                                 
in terms of the Trust Deed:                                                                                        
Service charge                                                                             22,554         20,530   
Property management fees                                                                                        
Acucap Management Services Proprietary Limited                                             10,906         10,554   
Sycom Property Fund Managers Limited                                                          268            280   
FC Property Management Company Proprietary Limited                                            945            593   
Letting commissions                                                                                             
Acucap Properties Limited                                                                     705            435   
Acucap Management Services Proprietary Limited                                              6,250         16,437   
Capital development fees                                                                                        
Acucap Properties Limited                                                                   1,287              - 

COMMENTARY 
 
1.   REVIEW OF RESULTS AND OPERATIONS 

      Sycom changed its year end from 31 March to 30 June during the 2015 financial period in order 
      to align with that of Growthpoint Properties Limited (“Growthpoint”). The current interim period 
      on which the Fund is now reporting therefore covers the 6 months ended 31 December 2015, 
      while the comparative period relates to the 6 months ended 30 September 2014. 
     
      The distribution for the 6 months ended 31 December 2015 is 93.93 cents per unit, 2.8% below 
      the distribution for the 6 months ended 30 September 2014. The reduction is largely due to: 
      - an increase in overall vacancy levels from 1.3% at 30 September 2014 to 5.4% at 31 
        December 2015, and 
      - The renewal of a R950 million loan facility in December 2014 at a rate which is 0.75% 
        higher than the expiry rate. 
              
2.   CORPORATE ACTION 

      Sycom unitholders (“Unitholders”) are referred to the joint announcement released by Sycom and 
      Growthpoint on SENS on 8 February 2016.  
       
      The announcement sets out the terms of a proposed transaction whereby:  
      - Growthpoint will acquire all Sycom’s assets and liabilities,  
      - Unitholders will become Growthpoint shareholders, 
      - Sycom’s listing on the JSE will thereafter be terminated, and 
      - Sycom will be wound up in due course.  
       
      A circular containing, inter alia, the details of the transaction and notices of the required 
      Unitholder meetings to approve the transaction, was posted to Unitholders on 12 February 2016 
      and can be downloaded from Sycom’s website www.sycom.co.za.  
       
3.   CHANGE IN DIRECTORATE 

      Messrs EK de Klerk, SA le Roux, RG Pienaar and G Völkel have been appointed to the board of 
      directors of SPFM. Their appointments will be effective from the date of receipt of approval 
      thereof from the Registrar of Collective Investment Schemes.  

      Mr PA Theodosiou’s resignation from the board of directors of SPFM will become effective on 
      the day after Mr Völkel's appointment becomes effective. 

4.   PORTFOLIO INVESTMENT ACTIVITY 
        
      Vaal Mall 
      The 15,000m2 expansion of Vaal Mall commenced in September 2014 at an estimated cost of R439 
      million (Sycom’s 77.86% share being R341 million). The project will result in expanded Woolworths, 
      Truworths, The Foschini Group and Edcon stores and a new 2,400m2 Ster-Kinekor. The majority of 
      stores are expected to be trading by mid-2016, with project completion planned for early 2017. 
      The expansion will include an upgrade of the existing mall.  
       
      Sycom has entered into an agreement to sell a 11.195% undivided share in Vaal Mall to the current 
      co-owner, thereby reducing its share in Vaal Mall from 77.86% to 66.67%. The disposal will be 
      effective on or about 1 April 2016. Unitholders are referred to the announcement released on SENS 
      on 4 December 2015 for further details of the disposal.   
       
      Greenacres 
      Phase 2 of the R296 million redevelopment and extension of Greenacres started in April 2015, and is 
      due for completion in October 2016. The northern extension, forming part of this phase, was launched 
      in December 2015 and included a new entrance and a relocated Ackermans. The common area 
      refurbishment and mall revitalisation is progressing well and completed areas are attracting positive 
      responses from tenants and customers. 
      
     Fourways Crossing            
      The upgrade and minor expansion of Fourways Crossing is progressing well, and will be completed 
      by June 2016. The total capital cost of the project is estimated to be R105 million with Sycom’s 
      share being R52.5 million. 
        
      Paarl Mall  
      The 2,850m2 expansion of Paarl Mall, which added 2,000m2 to the existing Woolworths store, was 
      successfully completed towards the end of 2015. The additional land acquired adjacent to the mall 
      is in the process of being re-zoned, and this will provide the necessary bulk to introduce a large 
      format retailer to the mall. 
 
5.   BORROWINGS 

      Sycom has an approved total facility of R2.9 billion. At the end of the reporting period, Sycom’s 
      gearing level was 31.5%, with 66.4% of its borrowings being covered by interest rate swap 
      agreements. This will increase to 73.8% of current borrowings once all contracted forward 
      starting interest rate swaps become effective over the next 12 months. 

      Interest rate hedging 

                                                      Notional           Approximate 
                       Maturity    Contracted         Amount      Effective Rate – 
      Start Date          Date          Rate             Rm           31 Dec 2015         
                                     
                                                                       
      31-Mar-14      31-Mar-17        5.790%            200                7.192% 
      17-Mar-14      17-Mar-17        5.785%            200                7.187% 
       9-Apr-14       9-Apr-18        6.095%            100                7.497% 
      30-Sep-14      29-Sep-17        6.045%            200                7.447% 
      30-Sep-14      30-Sep-16        7.180%            500                8.582% 
      31-Mar-15      29-Mar-18        6.305%            300                7.707% 
      30-Sep-15      28-Sep-18        7.650%            300                9.052% 
      31-Mar-16      31-Mar-20        8.150%            100                9.552% 
      31-Mar-16      31-Mar-21        8.340%            100                9.742% 
      Total                                           2,000    

      The weighted average borrowing cost as at 31 December 2015 is 8.02%. 

6.   LEASE EXPIRIES  
       
      The lease expiry profile by rental income is reflected in the table below. The lease with Deloitte 
      at The Woodlands has been extended to 31 March 2020. 

                   Total  Retail   Offices
      Dec-16       31.0%   15.4%     15.6%
      Dec-17        9.1%    4.8%      4.3%
      Dec-18       18.6%    6.8%     11.8%
      Dec-19        9.2%    4.1%      5.1%
      Dec-20       27.8%    9.0%     18.8%
      thereafter    4.3%    3.2%      1.1%
      Total       100.0%   43.3%     56.7%

 
      A lease over office space of approximately 18,800m2 expires at the end of September 2016. This 
      lease will not be renewed, and management is actively seeking replacement tenants for these 
      premises. Apart from this lease, there are no individually significant lease expiries in this profile 
      following the renewal of the Deloitte lease. 

7.   VACANCIES 
 
      The table below provides details of Sycom’s vacancies at December 2015, June 2015 and September 
      2014 expressed by gross lettable area. 

                        Dec-15   June-15   Sept-14   
      Retail vacancy      2.3%       3.1%       1.0%   
      Office vacancy      7.4%       5.8%       1.5%   
      Total vacancy       5.4%       4.7%       1.3%   

      The office market remains under pressure, which has resulted in an increase in vacancies in this 
      sector. Reducing this vacancy level is a key focus of management. The retail vacancy level is 
      largely a result of planned vacancies at Vaal Mall, Greenacres and Fourways Crossing due to the 
      expansion projects referred to above.  
       
8.   EVENTS AFTER THE REPORTING DATE 
       
      Apart from the corporate action referred to in 2 above, there have been no significant events after the 
      reporting date that require disclosure. 

9.   PROSPECTS  

      Should the proposed transaction referred to in 2 above receive the necessary approvals and become 
      unconditional, Sycom will be delisted on or about 19 April 2016 and thereafter will be wound up in due 
      course. 
       
10.  PAYMENT OF DISTRIBUTION 

      Notice is hereby given of the declaration of distribution number 62 in respect of the six months 
      to 31 December 2015. The interim distribution of 93.93 (ninety three point nine three) cents per 
      unit has been approved in respect of the six month period ended 31 December 2015. The last 
      date to trade the units cum distribution is Wednesday, 23 March 2016 and the record date will 
      be Friday, 1 April 2016. The units will start trading ex-distribution from Thursday, 24 March 2016. 
      Distributions will be made to Unitholders on Monday, 4 April 2016. 
      
      For Unitholders subject to dividends withholding tax, the net local dividend amount, after 
      deducting 15% dividend withholding tax is 79.8405 (seventy nine point eight four zero five) cents 
      per unit. 
       
      Sycom’s tax number is 9592332846. 
       
      Unit certificates may not be dematerialised or rematerialised between Wednesday, 23 March 
      2016 and Friday, 1 April 2016 both days inclusive. 
       
      TAX TREATMENT OF DISTRIBUTION 
      
      The information in this announcement is provided as a general guide to the potential South African tax 
      consequences pertaining to the distribution for Unitholders that are subject to South African tax. The 
      information provided in this announcement is not intended as comprehensive tax advice, nor does it 
      purport to take into account all of the considerations that may be relevant to Unitholders in relation to 
      the distribution. Unitholders should consult their tax advisors for advice on the particular tax 
      consequences applicable to them. 
      In accordance with Sycom’s status as a Real Estate Investment Trust (“REIT”), unitholders are advised 
      that the interim distribution meets the requirements of a “qualifying distribution” for the purposes of 
      section 25BB of the Income Tax Act, No.58 of 1962 (“Income Tax Act”). The distribution will therefore 
      be deemed to be a taxable dividend for South African tax purposes in terms of section 25BB of the 
      Income Tax Act. 
      
      South African resident unitholders 
      
      The distribution received by or accrued to South African tax residents must be included in the gross 
      income of such unitholders and will not be exempt from income tax in terms of the exclusion to the 
      general dividend exemption contained in section 10(1)(k)(i)(aa) of the Income Tax Act, as a result of it 
      being a dividend distributed by a REIT. This distribution is, however, exempt from dividend withholding 
      tax in the hands of South African tax resident unitholders provided that such unitholders have 
      provided to the Central Securities Depository Participant (“CSDP”) or broker, as the case may be, in 
      respect of uncertificated units, or Computershare Investor Services Proprietary Limited 
      (“Computershare”), in respect of certificated units, a DTD(EX) (Dividends Tax: Declaration and 
      undertaking to be made by the beneficial owner of a share) form to prove their status as South African 
      tax residents.  
              
      Non-resident unitholders 
      
      Distributions received by non-resident unitholders from a REIT will not be taxable as income and 
      instead will be treated as ordinary dividends which are exempt from income tax in terms of the 
      general dividend exemption in section 10(1)(k) of the Income Tax Act. With effect from 1 January 
      2014, any dividend received by a non-resident from a REIT is 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 non-resident unitholder. 
      Assuming dividend withholding tax of 15%, the net distribution amount due to non-resident 
      unitholders is 79.8405 cents per unit. A reduced dividend withholding tax rate in terms of the 
      applicable DTA may only be relied on if the non-resident unitholder has provided the following forms
      to their CSDP or broker, as the case may be, in respect of uncertificated units, or Computershare, in 
      respect of certificated units:
      
      -  a declaration that the distribution is subject to a reduced rate as a result of the application of a 
         DTA; and 
      -  a written undertaking to inform its CSDP, broker or Computershare, as the case may be, should 
         the circumstances affecting the reduced rate change or the beneficial owner cease to be the 
         beneficial owner, both in the form prescribed by the Commissioner of the South African 
         Revenue Services. 
       
      Submissions 

      Dematerialised Unitholders 
      Dematerialised Unitholders are advised to contact their CSDP or broker as the case may be, to arrange 
      for the above-mentioned documents to be submitted prior to payment of the distribution, if such 
      documents have not already been submitted. 
       
      Certificated Unitholders 
      Certificated Unitholders, who have not already submitted the above-mentioned documents, may 
      submit these documents to Computershare. 
                                                        
      By post to:                                    By hand to: 
      Computershare Dividends Tax Project            Computershare Dividends Tax 
      PO Box 62212                                   Project 
      Marshalltown                                   70 Marshall Street 
      2107                                           Johannesburg 
                                                      2001  
                                                      
      By email to:                                   By fax to: 
      DividendTax@computershare.co.za                +27 11 688 5266 
                                                      
      Any queries by certificated unitholders regarding the abovementioned submission 
      may be directed to Computershare at +27 11 373 0004   
                                                          
On behalf of the Board 
 
G K EVERINGHAM                                               PA THEODOSIOU 
Chairman                                                    CEO 
Sycom Property Fund Managers Limited                            Sycom Property Fund Managers Limited 
                                                    
2 March 2016 
 
Registered Office:                           Transfer secretaries:                                    
The Place                                   Computershare Investor Services Proprietary Limited 
1 Sandton Drive                              70 Marshall Street                               
Sandton                                     Johannesburg                                            
2196 
 
Sponsor: 
Questco Proprietary Limited 

http://www.sycom.co.za                                    
 
Directors: GK Everingham (Chairman), FM Berkeley, BM Stocks, PA Theodosiou*# (CEO), C Kotze* 
 
Company Secretary: H H-O Steyn 
 
* Executive  
# British 
Date: 02/03/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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