Wrap Text
2016 Reviewed Preliminary Condensed Consolidated Financial Results for the year ended 31 March 2016
INVESTEC AUSTRALIA PROPERTY FUND
Registered in Australia in terms of ASIC (ARSN 162 067 736)
Registered in terms of the Collective Investment Schemes Control
Act No. 45 of 2003
Share code: IAP
ISIN: AU60INL00018
2016
REVIEWED PRELIMINARY
CONDENSED CONSOLIDATED
FINANCIAL RESULTS
for the year ended
31 March 2016
Highlights
Full year distribution in ZAR of
98.(34 cpu pre WHT)
GROWTH OF 29.3%*
3.(8x)
GROWTH SINCE LISTING
Portfolio now
AUD494mn
29%
GEARING
AUD92mn of
acquisition capacity
5.5%
GROWTH IN NET ASSET
VALUE PER UNIT
Strong revaluation uplift
100%
OCCUPANCY
Supported by high
quality tenants
9.17(cpu pre WHT)
FULL YEAR DISTRIBUTION
IN AUD
Growth of 12.1%
6.(1 years)
LONG WALE
56% of leases expiring
after five years
3.(83% all in funding rate)
HISTORICALLY LOW
FUNDING RATES
86% hedged for 9.2 years
AUD127(mn**)
ACQUISITIONS
CONCLUDED
Quality enhancing acquisitions
67.(8%***)
TOTAL RETURN IN ZAR OF
Since listing
OPERATIONAL KPIS
Number of properties
2016 2015
19 16
Property portfolio
2016 2015
AUD494mn AUD342mn
Gross lettable area
2016 2015
169 535m(2) 108 657m(2)
Weighted average lease expiry
(by income)
2016 2015
6.1 years 6.4 years
Weighted average escalations
2016 2015
3.3% 3.4%
Occupancy rate
2016 2015
100% 98.5%
Units in issue
2016 2015
312 541 376 246 581 298
FINANCIAL KPIS
Distribution per unit pre WHT
2016 2015
9.17 8.18
Distribution per unit post WHT
2016 2015
8.92 7.88
Cost to income ratio
2016 2015
1.6% 1.5%
Gearing
2016 2015
29%(*) 23%
Funding costs
2016 2015
3.83% 4.15%
Weighted average debt expiry
2016 2015
4.1 years 4.8 years
Weighted average swap expiry
2016 2015
9.2 years 5.5 years
Hedged position
2016 2015
86% 100%
Consolidated statement of profit or loss and other comprehensive income
Reviewed Audited
year ended year ended
AUD'000 Notes 31 March 2016 31 March 2015
Revenue, excluding straight-line rental revenue adjustment 37 663 22 180
Straight-line rental revenue adjustment 1 630 2 040
Revenue 39 293 24 220
Property expenses (5 185) (2 867)
Net property income 34 108 21 353
Fair value adjustments – investment property 2 20 488 2 051
Other operating expenses (4 663) (2 500)
Operating profit 49 933 20 904
Finance costs (6 908) (4 803)
Finance income 79 195
Profit on sale of investment property 116 –
Other income 264 46
Total comprehensive income and profit 43 484 16 342
Number of units
Units in issue at the end of the year 312 541 246 581
Weighted average number of units in issue 254 437 184 962
Basic and diluted earnings per unit (cents) 17.09 8.84
Consolidated statement of financial position
Reviewed Audited
AUD'000 Notes 31 March 2016 31 March 2015
Assets
Non-current assets 493 850 342 130
Investment property 493 850 342 130
Current assets 3 073 3 609
Cash and cash equivalents 1 108 2 361
Trade and other receivables 1 965 1 248
Total assets 496 923 345 739
Equity and liabilities
Unitholders' interest 332 487 248 704
Contributed equity 310 136 246 496
Retained earnings 22 351 2 208
Total unitholders' interest 332 487 248 704
Non-current liabilities 143 098 82 085
Long-term borrowings 141 671 78 752
Trade and other payables 477 433
Financial instruments held at fair value 6 950 2 900
Current liabilities 21 338 14 950
Trade and other payables 6 870 4 724
Distributions payable 14 468 10 226
Total liabilities 164 436 97 035
Total equity and liabilities 496 923 345 739
Units in issue 312 541 246 581
Net asset value per unit (cents) 106.38 100.86
Condensed consolidated statement of cash flows
Reviewed Audited
year ended year ended
AUD'000 31 March 2016 31 March 2015
Cash generated from operations 29 259 18 832
Finance income received 344 195
Finance costs paid (4 975) (1 856)
Distribution paid to unitholders (19 100) (14 533)
Net cash inflow from operating activities 5 528 2 638
Net cash outflow used in investing activities (129 443) (183 675)
Net cash inflow from financing activities 122 662 177 028
Net increase in cash and cash equivalents (1 253) (4 009)
Cash and cash equivalents at the beginning of the year 2 361 6 370
Cash and cash equivalents at the end of the year 1 108 2 361
Condensed consolidated statement of changes in equity
Total
Contributed Retained unitholders'
AUD'000 equity earnings interest
Balance at 1 April 2014 131 025 1 033 132 058
Profit for the year – 16 342 16 342
Total comprehensive income – 16 342 16 342
Transaction with unitholders in their capacity as unitholders
Issue of ordinary units 120 462 – 120 462
Distributions paid/payable to ordinary unitholders (4 991) (15 167) (20 158)
Balance at 31 March 2015 246 496 2 208 248 704
Profit for the year – 43 484 43 484
Total comprehensive income – 43 484 43 484
Transaction with unitholders in their capacity as unitholders
Issue of ordinary units 65 960 – 65 960
Distributions paid/payable to ordinary unitholders (2 320) (23 341) (25 661)
Balance at 31 March 2016 310 136 22 351 332 487
Condensed segmental information
AUD'000 Office Industrial Total
Statement of profit or loss and other comprehensive income 2016
Revenue from external customers, excluding straight-line
rental revenue adjustment 25 235 12 428 37 663
Straight-line rental revenue adjustment 745 885 1 630
Property expenses (3 647) (1 538) (5 185)
Segment results 22 333 11 775 34 108
Transaction costs, capital expenditure and straight-line revenue adjustment (10 073) (4 669) (14 742)
Investment property revaluation 32 500 2 730 35 230
Total segment results 44 760 9 836 54 596
Statement of financial position extracts at 31 March 2016
Investment property balance at 1 April 2015 247 000 95 130 342 130
Acquisitions 60 039 67 081 127 120
Disposals – (3 580) (3 580)
Capital expenditure 6 039 7 6 046
Straight-line rental revenue receivable 745 885 1 630
Fair value adjustments 22 427 (1 923) 20 504
Investment property balance at 31 March 2016 336 250 157 600 493 850
AUD'000 Office Industrial Total
Statement of profit or loss and other comprehensive income 2015
Revenue from external customers, excluding straight-line
rental revenue adjustment 16 179 6 001 22 180
Straight-line rental revenue adjustment 1 493 547 2 040
Property expenses (2 228) (639) (2 867)
Segment results 15 444 5 909 21 353
Transaction costs, capital expenditure and straight-line revenue adjustment (9 213) (2 411) (11 624)
Investment property revaluation 11 526 2 150 13 676
Total segment results 17 756 5 648 23 404
Statement of financial position extracts at 31 March 2015
Investment property balance at 1 April 2014 105 254 49 110 154 364
Acquisitions 137 941 45 734 183 675
Straight-line rental revenue receivable 1 493 547 2 040
Fair value adjustments 2 312 (261) 2 051
Investment property balance at 31 March 2015 247 000 95 130 342 130
Notes to the reviewed preliminary condensed consolidated financial results
Reviewed Audited
year ended year ended
AUD'000 Notes 31 March 2016 31 March 2015
1. DISTRIBUTION RECONCILIATION
Profit and total comprehensive income for the year 43 484 16 342
Less: Straight-line rental revenue adjustment (1 630) (2 040)
Add back: Fair value adjustments – investment property (20 488) (2 051)
Add back: Fair value adjustments – derivatives 1 975 2 917
Antecedent distribution a 2 320 4 991
Total distributable earnings 25 661 20 159
Less: Interim distribution paid (11 193) (9 932)
Final distribution pre-withholding tax 14 468 10 227
Withholding tax receivable/(payable) from/to the Australian Taxation Office 52 (460)
Final distribution post withholding tax 14 520 9 767
Number of units
Units in issue at the end of the period 312 541 246 581
Weighted average number of units in issue for the period 254 437 184 962
Cents
Final distribution per unit (cents) (pre-withholding tax) 4.63 4.15
Interim distribution per unit (cents) (pre-withholding tax) 4.54 4.03
Total distribution per unit (cents) (pre-withholding tax) a 9.17 8.18
Final distribution per unit (cents) (post withholding tax) 4.65 3.96
Interim distribution per unit (cents) (post withholding tax) 4.27 3.92
Total distribution per unit (cents) (post withholding tax) a 8.92 7.88
Basic and diluted earnings per unit for the year 17.09 8.84
Headline earnings per unit for the year 8.99 7.73
(a) The full year distribution includes the antecedent distribution associated with the DRIP relating to the H1 distribution and subsequent
rights offer which was completed in February 2016. This amounts to AUD2.3mn. As the antecedent distribution is not subject to
withholding tax in Australia, the effective rate of withholding tax on the distribution has been reduced for the year. The effective rate
of withholding tax on the distribution has also been reduced by the cost related to locking in lower, longer dated interest rates on the
Fund's debt. The normalised distribution per unit post withholding tax for the year excluding these one off deductions would have
been approximately 8.62 cents per unit.
2. FAIR VALUE ADJUSTMENT OF INVESTMENT PROPERTY
The Fund's policy is to value investment properties at each reporting period, with independent valuations performed on a rotational
basis to ensure each property is valued at least every 24 months by an independent external valuer (in compliance with the Fund's
debt facility). Where directors' valuations are performed, the valuation methods include using the discounted cash flow model and the
capitalisation model.
Revaluations were performed at year-end with reference to independent external valuations and director valuations. Independent
external valuations were obtained at the time of acquisition for all of the Fund's acquisitions during the year.
The property portfolio recorded a net AUD27.6mn (7.7%) uplift in value and 10.1% on the base portfolio. This was offset by the write
off of AUD7.1mn of transaction costs associated with acquisitions made during the year.
Reviewed Audited
year ended year ended
AUD'000 31 March 2016 31 March 2015
Gross investment property fair value adjustment 22 118 4 091
Less: Straight-line rental revenue adjustment (1 630) (2 040)
Total fair value adjustment – investment property 20 488 2 051
Fair value adjustment on interest rate swap (1 975) (2 917)
Net fair value adjustments 18 513 (866)
3. HEADLINE EARNINGS RECONCILIATION
Total comprehensive income and profit for the year 43 484 16 342
Less: Fair value adjustments – investment property (20 488) (2 051)
Less: Profit on sale of investment property (116)
Headline earnings 22 880 14 291
Headline earnings per unit (cents) 8.99 7.73
4. WORKING CAPITAL MANAGEMENT
The Fund utilises its monthly cash flows to pay down its debt facility and manage finance costs. The current undrawn facility limit is
AUD9.5mn and the Fund has the ability to draw on this unconditionally. The Fund will utilise undrawn capacity under the debt facility
together with cash available at the time the distribution is payable in order to pay the final distribution in June 2016.
5. RELATED PARTY TRANSACTIONS
The Fund entered into the following related party transactions during the year with the Investec Group and its subsidiaries:
Transaction with related parties (AUD'000) 31 March 2016 31 March 2015
Payments to Investec Group and its subsidiaries:
Investec Property Management Pty Limited
Asset management fee 2 720 1 583
Property management fee* 662 320
Leasing fee – 41
Investec Bank Limited
Sponsor fee 10 10
Capital raising fees and listing costs 781 888
Investec Bank Plc
Interest on swaps 15 –
Receipts from Investec Group and its subsidiaries:
Investec Australia Limited
Payments to the Fund under income support arrangements** 408 1 161
* Investec Property Management Pty Limited (IPMPL) has been contracted to perform property management services. IPMPL has
sub-contracted certain of these services to third party property managers who receive a fee from IPMPL to perform these services.
** The two tenancies that were the subject of these income support arrangements have now been leased to third parties.
6. FINANCIAL INSTRUMENTS
Financial instruments held at fair value consist of interest rate swaps, which are classified as level 2. These are valued using valuation
models which use market observable inputs such as quoted interest rates. No other financial instruments are carried at fair value.
Commentary
INTRODUCTION
Investec Australia Property Fund, ("Fund") is the first inward-listed Australian REIT on the JSE. It is an income-producing fund
that operates in a stable and developed market. The Fund currently comprises 19 properties with a total gross lettable area (GLA)
of 169 535m2 and a portfolio value of AUD493.9mn.
The Fund aims to maximise sustainable returns to unitholders by investing in quality office, industrial and retail properties in Australia, giving
unitholders exposure to the Australian real estate market.
FINANCIAL RESULTS
The board of directors of Investec Property Limited (IPL), the responsible entity of the Fund is pleased to announce an increase of 11.6%
in the H2 pre withholding tax distribution to 4.63 cents per unit (2015: 4.15 cpu) bringing the total distribution for the year to 9.17 cents per
unit pre withholding tax (2015: 8.18 cpu). This represents very strong growth for the full year of 12.1% in AUD, which is above the guidance
given to the market. During the reporting period the Rand depreciated significantly against the Australian dollar, and as a result of this the
increase in the total distribution for the year in ZAR is 29.3% pre withholding tax*. The fund has delivered a total return in the reporting period
in ZAR of 34.9%**. On listing of the Fund the long-term depreciation of the Rand against the Australian dollar was identified as a key element
of the investment case for unitholders to invest in the Fund. These latest results support the case for investing is good quality real estate in a
developed market where income returns are derived in a hard currency providing a Rand hedge for investors.
The Fund is also reporting an increase of 17.4% in the H2 post withholding tax distribution to 4.65 cents per unit (2015: 3.96 cpu). This brings
the total post withholding tax distribution for the year to 8.92 cents per unit (2015: 7.88 cpu), representing growth for the full year of 13.2% in
AUD post withholding tax. The ZAR growth in the post withholding tax distribution is 30.7%*.
The Fund has delivered a total return in ZAR since listing of 67.8%**. This is driven by stability of income as a result of strong tenant covenants,
as well as appreciation in the unit price due to both the underlying performance of the property portfolio and the effect of the devaluation of
the Rand against the Australian dollar.
The strong financial result is the outcome of the successful implementation of the Fund's strategy outlined at listing and reaffirmed in subsequent
reporting periods, namely:
- acquiring accretive quality real estate, backed by solid property fundamentals (see the section below entitled "Acquisitions" for details of the
Fund's acquisitions during the period);
- achieving capital growth across a sectorally diversified portfolio (see the section below entitled "Asset growth" for details of the capital uplift
derived through revaluations during the period);
- diversifying the Fund's asset base (see the section below entitled "Asset diversification" for details of the Fund's geographic diversification);
- active capital and risk management (see the section below entitled "Capital and risk management" for details of the Fund's equity raising and debt
management activities during the period); and
- maximising property performance through pro-active asset management, property management and leasing (see the section below entitled
"Leasing activity" for details of the Fund's leasing activity during the period.
* Based on a spot rate of 11.1255 for the H2 distribution. The AUD distribution amount will be converted to ZAR at the forward rate to 13 June 2016 to be
entered into on Friday, 27 May 2016.
** Post WHT based on a spot rate of 11.1255 for the H2 distribution and the share price at 31 March 2016 of 13.81.
PROPERTIES
The Fund currently has a portfolio of 19 quality office and industrial properties. All of the properties are well located and generate stable income
for unitholders, evidenced by a long dated WALE of 6.1 years with 56% of leases expiring after five years. The portfolio currently has 100%
occupancy, strong tenant covenants and attractive average rental escalations of approximately 3.3% per annum.
Book % of Total % of Cap
value portfolio area portfolio rate
City State (AUD) by value (m2) by area %
INDUSTRIAL PORTFOLIO
PROPERTY
47 Sawmill Circuit, Hume Canberra ACT 10 400 000 2.1 5 535 3.3 7.25
57 Sawmill Circuit, Hume Canberra ACT 9 100 000 1.8 7 079 4.2 7.75
24 Sawmill Circuit, Hume Canberra ACT 9 400 000 1.9 6 300 3.7 7.75
44 Sawmill Circuit, Hume Canberra ACT 9 500 000 1.9 4 639 2.7 8.75
2 – 8 Mirage Road, Direk Adelaide SA 9 800 000 2.0 6 783 4.0 8.00
30 – 48 Kellar Street, Berrinba Brisbane QLD 8 450 000 1.7 4 102 2.4 7.50
165 Newton Road, Wetherill Park Sydney NSW 19 400 000 3.9 12 529 7.4 7.00
24 Spit Island Close, Newcastle Newcastle NSW 8 350 000 1.7 5 258 3.1 8.00
67 Calarco Drive, Derrimut Melbourne VIC 8 950 000 1.8 7 150 4.2 7.00
Industrial assets acquired during the year
66 Glendenning Road, Glendenning Sydney NSW 20 100 000 4.1 16 461 9.7 7.50
85 Radius Drive, Larapinta Brisbane QLD 18 150 000 3.7 10 088 6.0 7.25
54 Miguel Road, Bibra Lake Perth WA 26 000 000 5.3 22 358 13.2 8.00
OFFICE PORTFOLIO
449 Punt Road, Cremorne Melbourne VIC 41 700 000 8.4 6 384 3.8 7.00
35 – 49 Elizabeth Street, Richmond Melbourne VIC 72 000 000 14.6 11 916 7.0 7.25
Building 20, 2404 Logan Road,
Eight Mile Plains Brisbane QLD 20 400 000 4.1 3 571 2.1 8.00
186 Reed Street, Greenway Canberra ACT 27 400 000 5.5 5 407 3.2 7.50
757 Ann Street, Fortitude Valley Brisbane QLD 75 000 000 15.2 9 455 5.6 7.25
21 – 23 Solent Circuit, Baulkham Hills Sydney NSW 43 000 000 8.7 10 815 6.4 8.75
Office assets acquired during the year
266 King Street, Newcastle Newcastle NSW 56 750 000 11.6 13 705 8.1 8.38
Total at 31 March 2016 493 850 000 169 535 7.65
ACQUISITIONS
During the year the Fund completed AUD127.1mn of property acquisitions*, contributing to the increase in the portfolio value to AUD493.9mn.
This represents growth of 3.8x since listing in October 2013.
The Fund has been able to acquire quality properties at appropriate prices notwithstanding that the Australian market for institutional-grade
office and industrial property remains extremely competitive. The Fund's ability to transact in a timely manner by utilising undrawn capacity
under its debt facilities has given the Fund a competitive advantage, with certainty of completion a key consideration for vendors of assets.
In addition, the Fund's ability to access off-market opportunities, or structure acquisitions in an innovative way, has contributed to the Fund's
level of acquisition activity during the year.
The acquisitions made during the year comprise a mix of high quality office and industrial properties which are well located and have strong
tenant covenants. The properties were acquired at a blended yield of 8.0% and contributed to the overall quality of the Fund's portfolio.
During the year the Fund has evolved its acquisition strategy by assuming certain manageable risks, typically by acquiring properties with some
level of vacancy. These properties deliver an acceptable running yield with the potential to create upside through active asset management.
For example, the property at 21 – 23 Solent Circuit, Baulkham Hills NSW was acquired on an initial yield of 7.7% with 15% vacancy. The vacant
space was leased up within nine months and the property now delivers the Fund a yield of 9.5%. A similar opportunity exists at the property
recently acquired at 266 King Street, Newcastle NSW and the Fund will be actively pursuing new leases in respect of the vacant space to
deliver yield outperformance at this property. As the Fund is now starting to achieve scale, the opportunity exists to allocate a manageable
proportion of the Fund's capital to value-add opportunities to support the yield deliverable to investors.
* Including transaction costs.
Reflecting the competitive nature of the market in Australia, yields continued to tighten across all market segments during the year driving up
prices, particularly for prime-grade assets. Notwithstanding this, the Fund has managed to acquire properties that demonstrate a compelling
value proposition for the Fund:
Acquisition Purchase price Valuation*
Property date (AUD) (AUD) Comments
66 Glendenning Road, April 2015 19 170 000 20 100 000 Located in one of Sydney's most established industrial
Glendenning NSW precincts with low vacancy rates and limited transaction
activity. Value uplift which has already materialised in the
latest valuation.
85 Radius Drive, August 2015 18 150 000 18 150 000 A near new industrial facility located in the preeminent
Larapinta QLD industrial precinct south of the Brisbane CBD. In the long
term will benefit from the quality of surrounding facilities and
tenants.
54 Miguel Road, October 2015 26 000 000 26 000 000 Located in one of Perth's most established industrial
Bibra Lake WA precincts and off the radar for most institutional buyers.
As a result, the property was acquired for a very attractive
initial yield with the benefit of a 12-year lease to an ASX-
listed company not reliant on the resources sector.
266 King Street, February 2016 56 750 000 56 750 000 One of the best A-grade office buildings in the Newcastle
Newcastle NSW CBD, having recently undergone a significant capital
upgrade and tenanted by blue chip tenants. The opportunity
exists to realise value uplift through leasing of vacant space
in the building.
* As at 31 March 2016.
ASSET GROWTH
The Fund recorded strong asset growth during the year, primarily as a result of the acquisitions described above. These acquisitions were
largely funded through utilising capacity under the Fund's debt facilities, resulting in gearing stabilising around 30%. The Fund also raised
additional equity to assist with the acquisition of the property at 266 King Street, Newcastle NSW (see the section below entitled "Capital and
risk management"). The capital raised has created additional capacity of AUD92.1mn to pursue acquisition opportunities, which would result
in gearing increasing to 40%.
Asset growth was also supported by the revaluation of properties at year-end. The Fund's policy is to value properties at each reporting period,
with independent valuations performed on a rotational basis to ensure each property is valued at least every 24 months by an independent
external valuer (in compliance with the Fund's debt facility). For the period ended 31 March 2016, the Fund obtained external valuations for
eight properties resulting in an increase in value of 13.2% across these properties:
Book value at Valuation at
30 September 2016 31 March 2016
Property (AUD) (AUD) Movement
30 – 48 Kellar Street, Berrinba QLD 8 200 000 8 450 000 3.0%
165 Newton Road, Wetherill Park NSW 18 500 000 19 400 000 4.9%
24 Spit Island Close, Newcastle NSW 8 350 000 8 350 000 0.0%
67 Calarco Drive, Derrimut VIC 8 100 000 8 950 000 10.5%
449 Punt Road, Cremorne VIC 34 000 000 41 700 000 22.6%
35 – 49 Elizabeth Street, Richmond VIC 61 000 000 72 000 000 18.0%
757 Ann Street, Fortitude Valley QLD 67 500 000 75 000 000 11.1%
21 – 23 Solent Circuit, Baulkham Hills NSW 39 000 000 43 000 000 10.3%
The uplift recorded in these valuations is a result of a well executed buying strategy, strong underlying performance of the properties (through
contractual escalations) and positive leasing activity (in particular at 757 Ann Street, Fortitude Valley QLD and 21 – 23 Solent Circuit,
Baulkham Hills NSW) as well as the effect of yield compression evident across the various sectors.
The balance of the Fund's properties were valued based on directors' valuations. Across the whole portfolio the value uplift year on year was
7.7%. The value uplift on the base portfolio year on year was 10.1%. This has contributed to NAV growth of 8.4% year on year and 17.8%
since listing, pre transaction costs. The NAV growth post transaction costs (largely stamp duty of approximately 5.5% of transaction value) is
diluted to 5.5% for the last 12 months, due to the extent the Fund's acquisition activity during the period.
LEASING ACTIVITY
At 31 March 2016, the property portfolio is 100% occupied. The increase in occupancy during the year is the result of the successful leasing
of the vacancy at 21 – 23 Solent Circuit, Baulkham Hills NSW, where the yield has increased from 7.7% on acquisition to 9.5%. In addition,
the Fund has extended the term for two office levels at 757 Ann Street, Fortitude Valley QLD which now have an expiry date in October 2024.
The Fund's lease expiry profile at year-end remains very strong with a weighted average lease expiry of 6.1 years (2015 6.4 years) by income
and 56% of leases expiring after five years. The lease expiry profile reflects the quality and sustainability of the Fund's net property income.
ASSET DIVERSIFICATION
During the year the Fund was able to acquire two properties in NSW, increasing its exposure to Australia's best performing economy from 26%
to 35% by GLA, from 19% to 25% by income and from 19% to 30% by value. More than half of the Fund's income is now derived from NSW
and Victoria which are Australia's two largest economies with little reliance on the resources sector.
During the year the Fund also made its first acquisition in Western Australia. The Fund is naturally cautious of Western Australia's reliance on
the resources sector, however, the property represented good value for the Fund at an acquisition yield of almost 8%. The property is well
located in one of Perth's most established industrial precincts and is leased for 12 years to an ASX-listed company with no direct exposure to
the resources sector.
GEOGRAPHIC SPREAD
GLA (%)
17% ACT
35% NSW
16% QLD
4% SA
13% WA
15% VIC
ASSET VALUE (%)
13% ACT
30% NSW
25% QLD
2% SA
5% WA
25% VIC
REVENUE (%)
17% ACT
25% NSW
26% QLD
3% SA
3% WA
26% VIC
CAPITAL AND RISK MANAGEMENT
On listing, in two subsequent fully subscribed rights offers and through the DRIP relating to the H1 distribution, the Fund has raised AUD310.1mn of
equity capital. During the 12 months to 31 March 2016, the Fund deployed all of the AUD67.0mn remaining capacity from the October 2014 rights
offer and will be looking to deploy the additional capacity created by the February 2016 rights offer into quality and value enhancing acquisitions.
The Fund's balance sheet remains well positioned for growth with gearing currently at 29%. At the Fund's target gearing ratio of up to 40% this gives
the Fund up to AUD92.1mn in debt capacity to continue to aggressively pursue attractive acquisition opportunities.
The Fund's current all in historically low cost of funding is 3.83% hedged to 86% for 9.2 years (prior year 4.15%, 100% hedged) resulting in
a spread between the Fund's funding costs and headline property yield in excess of 400 basis points.The Fund continually reviews its fixed
borrowing costs and has taken advantage of falling interest rates in Australia by locking in lower, longer dated forward rates during the year.
The Fund now has a long dated debt and swap maturity profile of 4.1 years (2015 4.8 years) and 9.2 years (2015 5.6 years) respectively and
a 32bps lower all-in cost of funding.
AUSTRALIAN REIT STRUCTURE
The Fund allows for the tax efficient flow-through of net income to unitholders. The Fund is an uncapped and open-ended fund and existing
and future unitholders will hold a participatory interest in the Fund, which entitles unitholders to a pro rata share of the underlying income
generated by the Fund and a pro rata beneficial interest in the assets of the Fund. The Fund is registered as a Managed Investment Scheme
in Australia. The Fund is governed and operated by IPL and managed by IPMPL.
UNIT CAPITAL
The following units were issued during the year:
Number of units AUD'mn
Opening units in issue 246 581 298 246.5
DRIP in September 2015 6 393 331 6.8
Rights offer in February 2016 59 566 747 56.8
Closing units in issue 312 541 376 310.1
UNITHOLDERS
Investec Property Fund Limited and Investec Bank Limited are the only unitholders holding in excess of 5% of the Fund's total
issued units, holding 12.32% and 16.53% respectively.
Number of units in issue 312 541 376
Number of unitholders 3 949
CHANGES TO THE BOARD
There have been no changes to the board of IPL during the period.
PROSPECTS
The FY 2016 results reflect the positive outcome of the successful execution of the Fund's strategy to date. The Fund is well positioned to
continue with the execution of its strategy to deliver long-term sustainable income and capital growth through the acquisition and efficient
management of quality properties and conservative capital and risk management.
The board of IPL is therefore pleased to communicate expected distribution growth in FY 2017 of between 6% and 8% pre withholding tax.
This guidance assumes partial deployment at the lower end and full deployment at the upper end of gearing capacity during FY2017 into
similar yielding assets. The Fund currently has AUD92.1mn of gearing capacity up to 40% gearing to deploy into new acquisitions.
This forecast is based on the assumptions that the macro-economic environment will not deteriorate markedly, no tenant failures will occur
and budgeted renewals will be concluded. Budgeted rental income was based on in force leases, contractual escalations and market-
related renewals.
The information and opinions contained above are recorded and expressed in good faith and are based upon sources believed to be reliable.
No representation, warranty, undertaking or guarantee of whatever nature is made or given concerning the accuracy and/or completeness of
such information and/or the correctness of such opinions.
The independent auditor's review report does not report on all of the information contained in this announcement. Any reference to future
financial information included in this announcement has not been reviewed or reported on by the Fund's independent auditors.
On behalf of the board of Investec Property Limited as responsible entity for Investec Australia Property Fund
Richard Longes Graeme Katz
Chairman Chief Executive Officer
19 May 2016
BASIS OF ACCOUNTING
The reviewed preliminary condensed consolidated financial results for the year ended 31 March 2016 have been prepared in accordance with
the recognition and measurement criteria of International Financial Reporting Standards (IFRS), the presentation and disclosure requirements
of IAS 34: Interim Financial Reporting as issued by the International Accounting Standards Board, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council.
The accounting policies applied in the preparation of the reviewed preliminary condensed consolidated financial results for the year ended
31 March 2016 are in terms of IFRS and are consistent with those adopted in the audited financial statements for the period ended
31 March 2015.
REVIEW CONCLUSION
These reviewed preliminary condensed consolidated financial results for the year ended 31 March 2016 have been reviewed by KPMG, who
expressed an unmodified review conclusion. A copy of the auditor's review report is available for inspection at IPL's registered office together
with the financial statements identified in the auditor's report.
The auditor's report does not necessarily report on all of the information contained in these financial results. Unitholders 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 the auditor's review report
together with the accompanying financial information from IPL's registered office.
DISTRIBUTION AND DISTRIBUTION RE-INVESTMENT PLAN
Notice is hereby given of a final distribution declaration number 5 of:
– 4.62923 cents per unit pre withholding tax; and
– 4.64563 cents per unit post withholding tax,
for the six months ended 31 March 2016. Withholding tax of 0.01640 Australian cents per unit will be added to the distribution paid to
non-Australian unitholders as a result of the annualised withholding tax being less than the withholding tax deducted from the interim distribution
paid for the six-month period to 30 September 2015. This is regarded as a foreign distribution for South African unitholders.
Unitholders have been provided with the election to re-invest the South African Rand (Rand) equivalent of the cash distribution of
4.64563 Australian cents per unit (Cash Distribution) in return for units (Re-Investment Alternative Units). Unitholders will be entitled, in
respect of all or part of their unitholding, to elect to receive Re-Investment Alternative Units, failing which they will receive the Cash Distribution,
converted to Rand at the spot exchange rate on the day prior to the finalisation date, which will be paid to those unitholders not electing to
receive the Re-Investment Alternative Units.
The number of Re-Investment Alternative Units to which unitholders are entitled will be determined with reference to the ratio that the post
withholding tax Cash Distribution bears to the ratio price (being the five-day volume weighted average traded price (ex-distribution) of units on
the JSE prior to the finalisation date). The price and exchange rate for conversion of the Cash Distribution to Rand will be announced on the
finalisation date, which will be no later than Friday, 27 May 2016.
Unitholders who have dematerialised their units are required to notify their duly appointed Central Securities Depository Participant (CSDP)
or broker of their election in the manner and time stipulated in the custody agreement governing the relationship between the unitholder and
their CSDP or broker.
In terms of the Listings Requirements of the JSE Limited, the following additional information is disclosed:
- The Cash Distribution portion has been declared from the Fund's reserves.
- As at the date of this announcement, the Fund has 312 541 376 ordinary units of no par value each in issue.
A circular to unitholders in respect of the election being offered to unitholders to receive either the Cash Distribution or the
Re-investment Alternative Units, together with a form of election, will be posted to unitholders today, Thursday, 19 May 2016 and will also be
available from today on the Fund's website at www.investecaustraliapropertyfund.co.za.
TAX IMPLICATIONS
The Fund and its management arrangements are structured to meet the required criteria to be classified as a Managed Investment Trust for
Australian tax purposes. As a Managed Investment Trust, the responsible entity will be required to withhold tax in Australia at a concessional
rate of 15% on distributions to individual and institutional unitholders in South Africa. However, the effect of this tax on the Fund's distribution for
the period from 1 October 2015 to 31 March 2016 has been a return of withholding tax equivalent to 0.01640 Australian cents per unit, through
certain deductions such as depreciation and other deductible expenses incurred in the second half of the financial year. Thus, withholding tax
of 0.01640 Australian cents per unit will be returned to unitholders paid on the distribution for the half year ended 30 September 2015 and will
be claimed back from the Australian Tax Office.
The distribution is not subject to dividend withholding tax in South Africa. The distribution, net of withholding tax, received by South African
institutional and individual unitholders will constitute income and will be subject to income tax in South Africa at the Unitholder's marginal tax
rate. Tax paying unitholders will be able to claim a rebate against the withholding tax paid in Australia. Non-tax paying unitholders will not be
entitled to claim a rebate.
A worked example illustrating the impact for individual and institutional unitholders will be announced as part of the finalisation information on
SENS on the finalisation date.
The above summary of the tax treatment of the foreign distribution does not constitute legal or tax advice and is based on taxation law and
practice at the date of this circular. Unitholders should take their own tax advice as to the consequences of their investment in the Fund and
are encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take.
SALIENT DATES AND TIMES
A summary of the salient dates relating to the cash distributions and election to receive Re-Investment Alternative Units is as follows:
2016
Circular and form of election posted to unitholders Thursday, 19 May
Announcement of Re-Investment Alternative Units issue price and finalisation information (including exchange rate to
convert the Cash Distribution to Rand) ("Finalisation Date") Friday, 27 May
Last day to trade ("LDT") cum distribution Friday, 3 June
Units to trade ex-distribution Monday, 6 June
Listing of maximum possible number of Re-Investment Alternative Units commences on the JSE Wednesday, 8 June
Last day to elect to receive Re-Investment Alternative Units (no late forms of election will be accepted)
at 12:00 (South African time) Friday, 10 June
Record date Friday, 10 June
Announcement of results of Cash Distribution and Re-Investment Alternative Units on SENS Monday, 13 June
Cheques posted to certificated unitholders and accounts credited by CSDP or broker to dematerialised unitholders
electing the Cash Distribution on or about Monday, 13 June
Unit certificates posted to certificated unitholders and accounts credited by CSDP or broker to dematerialised
unitholders electing to receive Re-Investment Alternative Units on or about Wednesday, 15 June
Adjustment to units listed on or about Friday, 17 June
Notes:
1. Unitholders electing to receive Re-Investment Alternative Units are requested to note that the Re-Investment Alternative Units will be listed on LDT + 3 and
these Re-Investment Alternative Units can only be traded on LDT + 3 as the settlement of the Re-Investment Alternative Units will occur three days after record
date, which differs from the conventional one day after record date settlement process.
2. Units may not be dematerialised or rematerialised between commencement of trade on Monday, 6 June 2016 and close of trade on Friday, 10 June 2016.
By order of the board
Investec Property Limited
Company Secretary
19 May 2016
DIRECTORS OF THE RESPONSIBLE ENTITY MANAGER
Richard Longes(#) (Non-executive chairman) Investec Property Management Pty Limited
Stephen Koseff (Non-executive) (ACN 161 587 391)
Graeme Katz (Executive) Level 23, Chifley Tower
Samuel Leon (Non-executive) 2 Chifley Square
Sally Herman(#) (Non-executive) Sydney
Hugh Martin(#) (Non-executive) New South Wales
(#)Independent 2000
Australia
DIRECTORS OF THE MANAGER
Graeme Katz (Executive)
Zach McHerron (Executive) TRANSFER SECRETARIES
Kristie Lenton (Executive) Computershare Investor Services Proprietary Limited
Samuel Leon (Non-executive) 70 Marshall Street
Johannesburg
COMPANY SECRETARY OF THE RESPONSIBLE 2001
ENTITY (PO Box 61051, Marshalltown, 2107)
Paul Lam-Po-Tang (BCom, LLB) Phone: +27 11 370 5159
REGISTERED OFFICE AND POSTAL ADDRESS SPONSOR
OF THE RESPONSIBLE ENTITY AND DATE OF The Corporate Finance division of Investec Bank Limited
ESTABLISHMENT OF THE FUND 2nd Floor
100 Grayston Drive
Sandown
AUSTRALIA Sandton
Level 23, Chifley Tower 2196
2 Chifley Square (PO Box 785700, Sandton, 2146)
Sydney
New South Wales CUSTODIAN
2000 Perpetual Corporate Trust Limited
Australia (ACN 000 341 533)
Level 12, 123 Pitt Street
LOCAL REPRESENTATIVE OFFICE Sydney
2nd Floor New South Wales
100 Grayston Drive 2000
Sandown Australia
Sandton
2196
Established on 12 December 2012 in Sydney, Australia. Registered
as a Managed Investment Scheme with ASIC under the Corporations
Act on 6 February 2013. On 23 August 2013 the Registrar of Collective
Investment Schemes authorised the Fund to solicit investments in the
Fund from members of the public in the Republic of South Africa in
terms of section 65 of the Collective Investment Schemes Control
Act, 45 of 2002, as amended.
RESPONSIBLE ENTITY
Investec Property Limited
(ACN 071 514 246 AFSL 290 909)
Level 23, Chifley Tower
2 Chifley Square
Sydney
New South Wales
2000
Australia
Australia Property Fund
Date: 19/05/2016 07:57:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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