Wrap Text
Condensed unaudited consolidated interim financial results for the six months ended 30 June 2016
SA Corporate Real Estate Limited
(“SA Corporate” or “the Company” or “the Group”)
Incorporated in the Republic of South Africa
Share Code: SAC; ISIN Code: ZAE000203238
(Registration number 2015/015578/06)
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2016
Interim distribution growth
- 9.1% higher than June 2015
- 7.7% higher than December 2015
Capital structure
- Premium to NAV of 15.5%
- Effective debt 96.9% fixed at 8.2%
Portfolio activity
- Committed developments of R988,3m
- Acquisitions and contracted acquisitions of R868,0m
Property performance
- NPI growth of 12.6%
- Standing NPI growth of 8.0%
- Afhco portfolio vacancy as % of GLA reduced to 4.6%
- Retail positive rental reversions of 6.9%
INTRODUCTION
SA Corporate Real Estate Limited is a JSE-listed Real Estate Investment
Trust (“REIT”) which owns a diversified portfolio of industrial, retail,
commercial and residential buildings located primarily in the major
metropolitan areas of South Africa with a secondary node in Zambia.
REVIEW OF FINANCIAL RESULTS AND PORTFOLIO PERFORMANCE
Distribution Growth
SA Corporate delivered growth in distributions per share for the six
months to June 2016 of 9.1%. This amounts to a distribution of 21.44 cps
(June 2015: 19.66 cps). This is in line with the market guidance provided
at the full year 2015 results.
The Group's distribution increased by 23.2%. The results were positively
impacted by contributions arising from the traditional retail portfolio
with redevelopments coming on stream, acquisitions in the Afhco portfolio
and the Zambian Joint Venture (“JV”).
Portfolio Performance
Total net property income (“NPI”) increased by 12.6%, with the standing
portfolio contributing 57.1% and acquisitions contributing 41.3% of this
increase. The total standing portfolio NPI increased by 8.6% and 7.1% if
the developments are excluded.
Retail NPI growth of 17.5% was underpinned by strong tenant retentions of
82.4%, solid weighted average lease escalations of 7.7%, positive renewal
reversions of 6.9% and acquisitions contributing 3.3%. The turnaround of
SA Corporate’s retail portfolio is evidenced by the Company being awarded
on 25 August 2016 the MSCI award for its retail portfolio outperforming
all other retail portfolios in the MSCI database over the 3 years
annualised until December 2015. SA Corporate’s retail portfolio total
return was 18.6 % against a benchmark of 14.8 % giving a relative
outperformance of 3.3%.
Industrial NPI growth of 6.1% resulted from 8.1% escalations and flat
reversions off-set by increased vacancies in a challenging industrial
market as administered costs increase substantially and tenant's
affordability thresholds are tested. Although vacancies have increased,
these remain well below the national benchmark.
Afhco continues to deliver satisfying results with residential escalations
above 8%, retail escalations above 9% and a 10.7% reversion attained in
respect of retail expiries.
The Zambian JV contributed R31,8m (8.0%) for the 6 months to June 2016
having been acquired in the second half of 2015 and is largely tracking
the acquisition model.
The expense ratio increased marginally by 0.2%. This is attributable to
increased expenses in the Afhco portfolio where the expense ratio
increased by 1.3%, as we position the brand and introduce efficient and
robust systems, while the traditional portfolio ratio reduced by 0.4%.
Net Funding Costs
Net funding cost remained relatively unchanged largely due to acquisitions
partly funded by proceeds on disposals as we recycled capital at
attractive net yields, increased interest income arising from favourable
swap positions and capitalised interest in respect of developments.
Group and Other Expenses
Group expenses increased by 20.6% for the 6 months to June 2016. This
arose as a result of increased staffing requirements as the business
expands.
The breakdown of distributable earnings is set out below:
6 months 6 months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
DISTRIBUTABLE EARNINGS (R000) Unaudited Unaudited Audited
Rent (excluding straight line rental
adjustment) 639,413 584,926 1,202,536
Net property expenses (47,369) (59,200) (142,463)
Property expenses (290,177) (255,524) (558,143)
Recovery of property expenses 242,808 196,324 415,680
Net property income 592,044 525,726 1,060,073
Investment in joint ventures 31,767 - 9,207
Taxation on distributable earnings (1,352) - 489
Net funding cost (109,715) (109,221) (231,146)
Interest income 22,696 11,970 23,897
Interest expense (132,411) (121,191) (255,043)
Group expenses (22,252) (18,456) (37,562)
Antecedent distribution - - 52,392
Distributable earnings 490,492 398,049 853,453
Shares in issue (000) 2,287,304 2,024,162 2,287,304
Weighted number of shares in issue
(000) 2,287,304 2,021,500 2,033,656
Distribution (cents per share) 21.44 19.66 39.57
Interim 21.44 19.66 19.66
Final - - 19.91
PROPERTY VALUATIONS
The value of the Group's independently valued property portfolio increased
by R678.8m to R13,1bn as at June 2016 (December 2015: R12,4bn). This
excludes the Zambian portfolio of R880,8m, that has been equity accounted.
The like for like portfolio held for the full 6 months to June 2016
increased by R587,0m (4.8%) from December 2015, whilst the standing
portfolio representing properties held for 24 months, excluding properties
under development, increased by R282,9m (3.2%) from December 2015.
The capitalisation and discount rates in the Group's like for like
portfolio at 30 June 2016 were calculated on a weighted average basis:
Sector Capitalisation Discount rate (%) Growth in like for
rate (%) like portfolio (%)
30.06.2016 31.12.2015 30.06.2016 31.12.2015 30.06.2016
Industrial 8.8 8.9 14.3 14.4 2.1
Retail 8.6 8.6 14.1 14.1 7.2
Commercial 8.7 8.7 14.2 14.2 2.7
Afhco 10.0 10.1 * * 6.7
Portfolio total 8.9 9.0 14.2 14.2 4.8
* Afhco properties are not valued on a discount rate basis, due to the
short term nature of residential leases.
The NAV per share (446 cps) increased by 2.3% (December 2015: 436 cps) of
which an increase of 3.3% is attributable to property valuations. This is
partially off-set by the change in the swap curve contributing a 0.9%
decrease in the NAV per share growth.
PROPERTY PORTFOLIO
The portfolio comprised 177 properties (December 2015: 178 and June 2015:
169) which excludes the 3 Zambian properties held as a 50% investment in a
JV. The sectoral and geographic spread by value as at 30 June 2016 are set
out below:
Sectoral Spread
Retail
R5,6bn
366,631 m2
26 properties
43%
Industrial
R4,4bn
741,387 m2
88 properties
34%
Commercial
R1,1bn
72,116 m2
16 properties
8%
Afhco
R2,0bn
168,672 m2
47 properties
15%
Geographic Spread
Gauteng
R7,6bn
782,110 m2
111 properties
58%
KwaZulu-Natal
R4,5bn
423,940 m2
51 properties
34%
Western Cape
R0,7bn
71,496 m2
10 properties
5%
Other
R0,3bn
71,260 m2
5 properties
3%
Committed Developments:
Properties Cost Commence- Forecast Yield Sector Region
(Rm) ment date completion forecast
date 1st 12
months
(%)
East Point, Boksburg 457,0 05/2014 07/2016 9.0 Retail Gauteng
Umlazi Mega City,
Umlazi 1 278,0 11/2014 06/2017 9.3 Retail KwaZulu-
Natal
Hayfields Mall,
Pietermaritzburg 37,0 06/2016 03/2017 9.0 Retail KwaZulu-
Natal
Comaro Crossing,
Oakdene 60,0 03/2015 07/2016 8.0 Retail Gauteng
Midway Mews, Halfway
Gardens 33,0 06/2016 06/2017 8.0 Retail Gauteng
11/2015 to 09/2016 to
Afhco pipeline 123,3 01/2016 12/2017 11.9 Afhco Gauteng
Total 988,3 9.3
1 75% Undivided share of development cost
Acquisitions:
Properties Cost Acquisition Yield Sector Region
(Rm) date forecast 1st
12 months
(%)
Morning Glen Shopping
Centre, Sandton 293,5 03/2016 9.6 Retail Gauteng
Normandie Court,
Johannesburg CBD 23,0 01/2016 11.0 Residential Gauteng
& Retail
Cambridge House,
Johannesburg CBD 20,2 02/2016 10.0 Retail Gauteng
Total 336,7 9.7
Contracted and Unconditional Acquisitions:
Properties Cost Acquisition Yield Sector Region
(Rm) date forecast 1st
12 months
(%)
Jeppe Street Post
Office, Johannesburg
CBD 88,2 10/2016 * Residential Gauteng
& Retail
Platinum Place, New
Doornfontein 83,6 01/2017 9.9 Residential Gauteng
Jabulani, Soweto 70,2 09/2016 10.9 Residential Gauteng
81 Rissik,
Johannesburg CBD 75,5 07/2016 10.7 Residential Gauteng
Monis, Johannesburg
CBD 62,8 10/2016 10.1 Residential Gauteng
& Retail
Hartmann and Keppler,
Doornfontein 6,7 08/2016 * Residential Gauteng
& Retail
Rosewood and Beachwood,
Randfontein 1 30,0 10/2016 11.0 Residential Gauteng
Total 417,0 10.5
* Property acquired for redevelopment
1 R4,2m in respect of land for development
Contracted and Conditional Acquisitions:
Property Cost Acquisition Yield Sector Region
(Rm) date forecast 1st
12 months
(%)
Greatermans,
Johannesburg CBD 114,3 11/2016 10.4 Residential Gauteng
& Retail
Disposals:
Properties Transfer Gross Carrying Exit Region
date selling value at yield
price latest on sale
(Rm) valuation price (%)
date (Rm)
Checkers, Somerset West 02/2016 75,0 75,0 7.1 Western
Cape
11 Columbine Place, Red
Hill 05/2016 55,0 53,6 7.8 KwaZulu-
Natal
8 Paul Smit Street,
Anderbolt 02/2016 50,0 50,0 8.8 Gauteng
4 School Road, Pinetown 03/2016 25,5 25,5 5.3 KwaZulu-
Natal
83 Heidelburg Road,
City Deep 06/2016 36,0 36,0 7.5 Gauteng
50 Mangosuthu Highway,
Umlazi 1 05/2016 12,2 11,6 8.9 KwaZulu-
Natal
Total 253,7 251,7 7.6
1 25% Undivided share
Contracted and Unconditional Disposals:
Properties Expected Gross Carrying Exit Region
transfer selling value at yield
date price 30 June on sale
(Rm) 2016 price (%)
(Rm)
199 North Ridge Road,
Durban 08/2016 38,4 38,4 6.2 KwaZulu-
Natal
Lebombo Road, Garsfontein
(portion) 08/2016 12,0 12,0 6.2 Gauteng
Total 50,4 50,4 6.2
VACANCIES AND LEASE EXPIRIES
Vacancies in terms of rentable area and rental income were as follows:
Sector Vacancy as % of GLA* Vacancy as % of rental income
30.06.2016 31.12.2015 30.06.2015 30.06.2016 n31.12.2015 30.06.2015
Traditional
Portfolio:
Industrial 2.6 0.3 0.7 1.6 0.3 0.6
Retail 4.5 4.5 5.5 2.8 2.8 3.5
Commercial 8.6 11.1 12.7 5.9 8.0 8.4
Traditional
Portfolio total 3.6 2.3 3.0 2.7 2.4 2.9
Afhco Portfolio:
Retail /
Commercial 3.3 4.8 3.0 3.4 3.7 3.3
Residential 5.2 5.6 3.5 5.4 6.6 4.2
Afhco Portfolio
total 4.6 5.3 3.4 4.7 5.5 4.0
Rest of Africa
Portfolio:
Retail 5.5 2.2 - 4.4 1.4 -
Commercial 4.7 4.6 - 2.3 2.6 -
Rest of Africa
Portfolio total 5.3 2.7 - 3.9 1.7 -
* GLA=Gross lettable area
During the current period, vacancies by rental reduced to 2.7% (2015:
2.9%) with a marginal increase in vacancy by GLA of 0.6%. This movement
relates mainly to the increase in industrial vacancies by GLA from 0.7% in
June 2015 to 2.6% with a 59.2% retention. Certain of this space has
subsequently been let with the vacancy reducing to 1.8% by GLA. SA
Corporate's industrial vacancies remain below the sector average of 3.4%.
Commercial vacancies have reduced from 12.7% to 8.6% and 8.4% to 5.9% by
GLA and rental income respectively, arising from our strategy of divesting
in B and C grade office buildings.
The Afhco portfolio vacancies by rental trended higher to 4.7% (2015:
4.0%) and by GLA to 4.6% (2015: 3.4%). This is attributable to new
developments coming on stream in the second quarter of 2016, with standing
portfolio vacancies reducing to 2.8% from 3.2%.
The Zambian JV vacancies increased 2.6% and 2.2% by GLA and rental income
respectively. This is largely due to certain tenants vacating, unwilling
to have their leases converted from Zambian Kwacha to US Dollars.
The lease expiry profile and vacancies (by GLA) are set out below:
Sector Vacancy (%) Expiries (%)
Monthly 2016 2 2017 2018 2019 Thereafter
Traditional Portfolio:
Industrial 2.6 0.1 10.7 31.7 22.7 8.0 24.2
Retail 4.5 6.9 14.3 14.0 20.0 10.7 29.6
Commercial 8.6 3.3 13.0 18.9 12.6 10.5 33.1
Traditional Portfolio
total 3.6 2.3 11.9 25.5 21.1 9.0 26.6
Afhco Portfolio:
Retail / Commercial 3.3 1.7 14.6 14.5 14.2 7.7 44.0
Residential 1 5.2 48.8 20.3 25.7 - - -
Rest of Africa
Portfolio:
Retail 5.5 - 3.6 1.0 2.6 41.9 45.4
Commercial 4.7 - 15.1 11.5 14.8 46.5 7.4
Rest of Africa
Portfolio total 5.3 - 6.2 3.4 5.3 42.9 36.9
1 Calculated on number of units
2 Calculated on July to December 2016
TENANT RETENTION AND RENTAL REVERSIONS
The table below reflects the Group's retention ratio and rental reversions
per sector for a rolling 6 month period ending June 2016:
Sector Expiries Retention Retention Rental
(m2) (m2) (%) reversion (%)
Traditional Portfolio:
Industrial 75,806 44,894 59.2 0.1
Retail 37,366 30,791 82.4 6.9
Commercial 5,259 4,656 88.5 (7.0)
Traditional Portfolio
total 118,431 80,341 67.8 2.9
Afhco Portfolio:
Retail / Commercial 8,179 5,134 62.8 10.7
With 10.0% of the traditional portfolio expiring in the first half of
2016, the Group successfully retained 67.8% of its tenants at a weighted
average reversion of 2.9%.
Of the 14.1% expiries in the first half of 2016 relating to the Afhco
retail/commercial portfolio 62.8% were retained with a positive reversion
of 10.7%.
Despite trying economic conditions, reversions were positive to flat,
except for commercial reversions, which were negative, reflective of the
poor performance of the sector in which SA Corporate continues to have an
underweight holding.
BORROWINGS
The debt profile as at 30 June 2016 is detailed below:
Type Maturity date Value (Rm) Interest Rate (%)
Fixed 01.11.2016 500 8.30
Fixed 15.12.2017 1,152 8.68
Fixed 13.08.2018 200 8.87
Fixed 30.09.2018 270 8.83
Fixed 30.09.2018 30 8.83
Term revolver 1 01.11.2018 - 8.55
Fixed 01.01.2019 500 8.70
Term revolver 2 24.03.2019 125 8.62
Fixed 15.12.2019 848 8.98
Fixed 3 01.11.2020 398 3.59
Fixed 15.04.2024 70 6.88
Total/weighted average 4,093 8.19
1 R300m revolving credit facility undrawn
2 R200m revolving credit facility partly drawn
3 US Dollar denominated loan
The loan to value (“LTV”) ratio reduced from 30.2% in June 2015 to 28.9%
in December 2015 following the equity raise and increased marginally to
29.3% as at 30 June 2016. For the 12 month period 1 July 2015 to 30 June
2016, net investments in direct property and property shares and committed
developments of R1,6bn were funded by increased debt of R689,0m, disposal
proceeds of R301,2m and capital raised of R638,8m.
The weighted average cost of debt, in respect of the effective debt
excluding fixes, was 8.2% (December 2015: 7.4%) at a weighted average
margin of 1.6% (December 2015: 1.6%) and a weighted average tenor of 2.4
years (December 2015: 2.7 years). This tenor includes a short term bridge
facility expiring November 2016, without which the weighted average tenor
would be 2.9 years.
At 30 June 2016, 96.9% of the debt drawn was fixed via interest rate
hedges, at a weighted average rate and margin of 6.6% and -0.002%
respectively and a weighted average tenor of 3.1 years. The weighted
average margin has increased by 0.3% from December 2015, due to higher
funding costs and longer funding tenors.
STRATEGY AND PROSPECTS
During the past three and a half years, SA Corporate has transformed its
property portfolio into one that is both defensive and generates strong
distribution growth. The Company has identified three primary strategic
themes to ensure this is sustainable, being:
- Building Afhco to become a dominant trusted residential rental brand of
choice in South Africa providing quality and affordable accommodation in
high demand nodes.
- Unlocking and creating value in the retail portfolio by repositioning
currently owned and acquired shopping centres to dominate and/or
differentiate their catchment areas through developments and improved
tenant mix.
- Enhancing the quality and resilience of the industrial portfolio through
focussed tenant retention, undertaking tenant-driven improvements and
recycling capital.
In the first half of 2016, considerable progress has been made on
strategic initiatives to support these three themes and include:
- Establishing partnerships with residential developers to complement
Afhco's residential rental development pipeline that will result in a
residential rental portfolio of appropriate scale. Formulating an Afhco
brand and marketing plan to ensure the market penetration required for
Afhco's growing portfolio. Investing in the platform to manage the growing
portfolio by increasing Afhco's property management resources and
introducing improved IT systems.
- Substantial completion of the R457m upgrade to East Point shopping
centre and progressing a further four retail redevelopment projects
greater than R400m. Formulating rejuvenation plans for two existing retail
properties that have growth potential and one property that has recently
been acquired. Appointing a Retail Leasing and Developments Asset Manager
to augment the retail property asset management team.
- Commencing the 42 250 m2 redevelopment of the distribution centre leased
to a blue chip logistics tenant, whilst divesting from industrial
properties that do not meet the industrial portfolio's quality standards.
The Board's view of future prospects is that, having made progress with
the strategic initiatives described above, distribution growth of circa 9%
for the full 2016 year can be attained.
As at As at As at
CONDENSED CONSOLIDATED STATEMENT 30.06.2016 30.06.2015 31.12.2015
OF FINANCIAL POSITION (R000) Unaudited Unaudited Audited
Assets
Non-current assets 13,989,025 11,369,728 12,920,112
Investment property 12,782,819 10,995,322 11,631,267
Letting commissions and tenant
installations 52,899 57,938 75,706
Investment in joint ventures 824,193 - 850,068
Property, plant and equipment 5,991 2,741 5,501
Intangible assets 76,897 82,972 76,897
Interest rate swap derivatives 50,457 59,955 117,668
Rental receivable - straight line
adjustment 192,430 169,281 159,370
Other financial assets 2,675 1,519 1,619
Deferred taxation 664 - 2,016
Current assets 571,334 477,012 660,506
Trade and other receivables 278,748 209,304 246,492
Other financial assets 38,594 39,581 33,816
Rental receivable - straight line
adjustment 44,751 45,974 47,233
Interest rate swap derivatives 12,268 3,044 9,048
Taxation receivable 1,336 538 443
Inventory 52 34 52
Loan to developer 11,703 - 13,073
Cash and cash equivalents 183,882 22,248 310,349
Loan to SA Corporate Real Estate
Limited - 156,289 -
Non-current assets held for sale 50,410 60,709 556,036
Properties classified as held for
disposal 50,400 60,275 553,700
Letting commissions and tenant
installations 10 434 2,336
Total assets 14,610,769 11,907,449 14,136,654
Share capital, reserves and liabilities
Share capital and reserves 10,206,276 7,842,293 9,980,915
Non-current liabilities 3,601,859 3,094,576 3,486,022
Interest bearing borrowings - Local 3,522,676 3,094,576 3,420,503
Interest bearing borrowings - Foreign 61,192 - 65,519
Interest rate swap derivatives 17,991 - -
Current liabilities 802,634 970,580 669,717
Trade and other payables 277,292 250,177 292,301
Loan from developer - - 13,020
Interest bearing borrowings - Local 500,000 309,915 350,000
Interest bearing borrowings - Foreign 8,595 - 8,595
Distributions payable - 398,049 -
Rental payable - straight line
adjustment 22 - 49
Interest rate swap derivatives 16,725 11,959 5,744
Taxation payable - 480 -
Bank overdraft - - 8
Total share capital, reserves and
liabilities 14,610,769 11,907,449 14,136,654
NAV per share (cents) 446 387 436
6 months 6 months Year
ended ended ended
CONDENSED CONSOLIDATED STATEMENT 30.06.2016 30.06.2015 31.12.2015
OF COMPREHENSIVE INCOME (R000) Unaudited Unaudited Audited
Revenue 908,481 781,894 1,614,549
Income 931,177 793,864 1,638,446
Rent 639,413 584,926 1,202,536
Straight line rental adjustment 26,260 644 (3,667)
Recovery of property expenses 242,808 196,324 415,680
Interest income 22,696 11,970 23,897
Expenses (449,985) (411,791) (884,313)
Accounting and secretarial fees - (31) -
Audit fees (1,800) (1,441) (3,063)
Administrative fees (24,793) (21,276) (55,010)
Interest rate swap derivatives
restructure costs - (11,838) (11,838)
Depreciation (830) (490) (1,186)
Interest expense (132,411) (121,191) (255,043)
Property expenses (258,921) (242,006) (530,575)
Property administration fees (31,256) (13,518) (27,568)
Straight line rental adjustment 26 - (30)
Operating income 481,192 382,073 754,133
Capital gain / (loss) on disposal
of investment properties 681 (8,151) (16,178)
Foreign exchange adjustments 22,885 - (44,275)
Gain on acquisition of subsidiaries
and joint ventures - - 30,079
Profit from joint ventures 22,250 - 47,564
Revaluation of investment properties 303,268 107 916 538,479
- Revaluations 329,528 108,560 534,812
- Straight line rental adjustment (26,260) (644) 3,667
Revaluation of interest rate swap
derivatives (92,963) 33,859 103,791
Profit before taxation 737,313 515,697 1,413,593
Taxation (charge) / credit (1,352) 6,254 46
Profit after taxation 735,961 521,951 1,413,639
Other comprehensive income, net of
taxation - - -
Items that may be reclassified to
profit or loss
Foreign exchange adjustments on
investment in joint ventures (48,125) - 87,861
Total comprehensive income 687,836 521,951 1,501,500
Earnings and diluted earnings per share* 32.18 25.82 69.51
* Calculated on weighted average number of shares
6 months 6 months Year
ended ended ended
CONDENSED CONSOLIDATED STATEMENT OF 30.06.2016 30.06.2015 31.12.2015
CHANGES IN EQUITY (R000) Unaudited Unaudited Audited
Share capital and reserves at the
beginning of the period 9,980,915 7,603,215 7,603,215
Total comprehensive income for the
period 687,836 521,951 1,501,500
26,767,491 units issued - 115,176 115,176
263,141,110 shares issued - - 1,125,727
3,883,009 shares repurchased - - (19,046)
1,400,568 shares repurchased (7,089) - -
Antecedent distribution - - 52,392
Distribution attributable to
shareholders (455,386) (398,049) (398,049)
Share capital and reserves at the end
of the period 10,206,276 7,842,293 9,980,915
6 months 6 months Year
ended ended ended
CONDENSED CONSOLIDATED STATEMENT 30.06.2016 30.06.2015 31.12.2015
OF CASH FLOWS (R000) Unaudited Unaudited Audited
Operating profit before working
capital changes 600,040 497,271 989,752
Working capital changes (54,402) 34,106 (66,222)
Cash generated from operations 545,638 531,377 923,530
Operating activities changes (594,302) (480,433) (1,023,634)
Net cash flows from operating
activities (48,664) 50,944 (100,104)
Net cash flows from investing
activities (305,522) (734,468) (1,607,235)
Net cash flows from financing
activities 277,727 404,557 1,716,465
Net (decrease) / increase in cash
and cash equivalents (126,459) (278,967) 9,126
Cash and cash equivalents at the
beginning of period 310,341 301,215 301,215
Cash and cash equivalents at the
end of period 183,882 22,248 310,341
NOTES
The condensed consolidated interim financial statements are prepared in
accordance with the JSE Limited Listings Requirements, International
Financial Reporting Standards, IAS 34 Interim Financial Reporting, the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by Financial Reporting
Standards Council and the requirements of the Companies Act of South
Africa. The accounting policies applied in the preparation of these
interim financial statements are in terms of International Financial
Reporting Standards and are consistent with those applied in the previous
annual financial statements. The results and prospects have been compiled
under the supervision of AM Basson CA(SA), the financial director, but
have not been audited or reviewed by the Group's auditors, Deloitte &
Touche.
1. Reconciliation of profit after tax to headline earnings and to
distributable earnings attributable to Shareholders
6 months 6 months Year
ended ended ended
30.06.2016 30.06.2015 31.12.2015
Unaudited Unaudited Audited
R 000 CPS R 000 CPS R 000 CPS
Profit after taxation
attributable to
shareholders 735,961 32.18* 521,951 25.82* 1,413,639 69.51*
Adjustments for:
Capital (profit) / loss
on disposal of investment
properties (681) 8,151 16,178
Revaluation of investment
properties and joint
ventures (293,751) (107,916) (576,913)
Gain on acquisition of
subsidiaries and joint
ventures - - (30,079)
Headline earnings 441,529 19.30* 422,186 20.88* 822,825 40.46*
Antecedent distribution - - 52,392
Interest rate swap
derivatives restructure
costs - 11,838 11,838
Depreciation 830 490 1,186
Foreign exchange
adjustments (22,885) - 44,269
Taxation - (6,254) 443
Revaluation of interest
rate swap derivatives 92,963 (33,859) (103,791)
Straight line rental
adjustment (26,260) (644) 3,667
Straight line rental
expense adjustment (26) - 30
Non-distributable expenses 4,341 4,292 20,518
Non-distributable expenses
on investment in joint
ventures - - 76
Distributable earnings
attributable to
shareholders 490,492 21.44 398,049 19.66 853,453 39.57
Interim 490,492 21.44 398,049 19.66 398,049 19.66
Final - - - - 455,404 19.91
* calculated on weighted number of shares in issue
2. Primary operational segments (R000)
Business segment Industrial Retail Commercial Afhco Group
Extract from statement
of comprehensive income
Revenue 279,178 420,303 67,170 141,830 908,481
Rental income (excluding
straight line rental
adjustment) 244,644 233,418 52,100 109,251 639,413
Net property expenditure (11,892) 1,407 (8,289) (28,595) (47,369)
Property expenses (65,314) (144,199) (22,254) (58,410) (290,177)
Recovery of property
expenses 53,422 145,606 13,965 29,815 242,808
Net property income 232,752 234,825 43,811 80,656 592,044
Straight line rental
adjustment (18,888) 41,279 1,105 2,764 26,260
Net interest expense - - - - (109,715)
Group expenses - - - - (4,512)
Profit from joint ventures - - - - 31,767
Revaluation of interest
rate swap derivatives - - - - (92,963)
Taxation - - - - (1,352)
Headline earnings 213,864 276,104 44,916 83,420 441,529
Other information
Properties: 4,346,493 5,495,805 1,054,833 1,936,064 12,833,195
Non-current investment
property 4,346,493 5,495,805 1,004,457 1,936,064 12,782,819
At valuation 4,440,500 5,607,200 1,023,400 1,948,900 13,020,000
Straight line rental
adjustment (94,007) (111,395) (18,943) (12,836) (237,181)
Non-current investment
property held for sale - - 50,376 - 50,376
Classified as held for
disposal - - 50,400 - 50,400
Straight line rental
adjustment - - (24) - (24)
Segmental growth
rates (%) Industrial Retail Commercial Resident- Group
ial
& other
Rental income (excluding
straight line rental
adjustment) 1.0 13.8 (9.9) 37.0 9.3
Property expenses 16.6 6.3 (5.1) 44.6 13.6
Recovery of property
expenses 61.8 11.7 5.2 51.9 23.7
Net property income 6.1 17.5 (8.1) 36.8 12.6
3. Interest rate swap derivatives
The interest rate swap derivatives are valued based on the discounted cash
flow method. Future cash flows are estimated based on forward interest
rates (from observable yield curves at the end of the reporting period)
and contract interest rates, discounted at a rate that reflects the credit
risk. This is classified as a level 2 financial asset in terms of the
degree to which the fair value is observable.
4. Events after the reporting period
Save for the joint announcement from SA Corporate and Calgro M3 in respect
of the formation of a JV and the acquisition of its first phase portfolio
of properties as released on SENS today, the directors are not aware of
any significant events between the end of the financial period under
review and the date of signature of these summarised financial statements.
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice to shareholders resident South Africa
Notice is hereby given of the declaration of distribution no.3 in respect
of the income distribution period 1 January 2016 to 30 June 2016. The
distribution amounts to 21.44 cps. The source of the distribution
comprises net income from property rentals and interest earned on cash
investments. Please refer to the statement of comprehensive income for
further details. As SA Corporate has REIT status, shareholders are advised
that the 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 distributions on SA Corporate shares
will be deemed to be dividends, for South African tax purposes, in terms
of section 25BB of the Income Tax Act. The distributions received by or
accrued to South African tax residents must be included in the gross
income of such shareholders and are not exempt from income tax (in terms
of the exclusion to the general dividend exemption, contained in paragraph
(aa) of section 10(1)(k)(i) of the Income Tax Act) because they are
dividends distributed by a REIT, with the effect that the distribution is
taxable in the hands of the shareholder.
These distributions are, however, exempt from dividend withholding tax in
the hands of South African tax resident shareholders, provided that the
South African resident shareholders have provided the following forms to
their CSDP or broker, as the case may be, in respect of uncertificated
shares, or the transfer secretaries, in respect of certificated shares: a)
a declaration that the distribution is exempt from dividends tax; and b) a
written undertaking to inform the CSDP, broker or the transfer
secretaries, as the case may be, should the circumstances affecting the
exemption change or the beneficial owner ceases to be the beneficial
owner, both in the form prescribed by the Commissioner for the South
African Revenue Service. SA Corporate shareholders are advised to contact
the CSDP, broker or transfer secretaries, as the case may be, to arrange
for the abovementioned documents to be submitted prior to payment of the
distribution, if such documents have not already been submitted.
Notice to non-resident shareholders
Distributions received by non-resident shareholders will not be taxable as
income and instead will be treated as ordinary dividends which are exempt
from income tax in terms of the general dividend exemption in section
10(1)(k)(i) of the Income Tax Act. It should be noted that until 31
December 2013 distributions received by non-residents from a REIT were not
subject to dividend withholding tax. From 1 January 2014, any distribution
received by a non-resident from a REIT will be subject to dividend
withholding tax at 15%, unless the rate is reduced in terms of any
applicable agreement for the avoidance of double taxation ("DTA") between
South Africa and the country of residence of the shareholder.
Assuming dividend withholding tax will be withheld at a rate of 15%, the
net dividend amount due to non-resident shareholders is 18.2240 cents per
SA Corporate share. A reduced dividend withholding rate, in terms of the
applicable DTA, may only be relied on if the non-resident shareholders has
provided the following forms to the CSDP or broker, as the case may be, in
respect of uncertificated shares, or the transfer secretaries, in respect
of certificated shares: a) a declaration that the dividend is subject to a
reduced rate as a result of the application of a DTA; and b) a written
undertaking to inform the CSDP, broker or the transfer secretaries, as the
case may be, should the circumstances affecting the reduced rate change or
the beneficial owner ceases to be the beneficial owner, both in the form
prescribed by the Commissioner for the South African Revenue Service. Non-
resident shareholders are advised to contact the CSDP, broker or the
transfer secretaries, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the
distribution if such documents have not already been submitted, if
applicable. 2,303,310,765 SA Corporate shares are in issue at the date of
this distribution declaration and SA Corporate's income tax reference
number is 9179743191.
Last date to trade cum distribution Tuesday, 27 September 2016
Shares will trade ex-distribution Wednesday, 28 September 2016
Record date to participate in the distribution Friday, 30 September 2016
Payment of distribution Monday, 3 October 2016
Share certificates may not be dematerialised or re-materialised between
Wednesday, 28 September and Friday, 30 September 2016 both days inclusive.
By order of the Board
SA Corporate Real Estate Limited
Registered office
South Wing, First Floor
Block A
The Forum
North Bank Lane
Century City
7441
Tel 021 529 8410
Registered auditors
Deloitte & Touche
1st Floor
The Square
Cape Quarter
27 Somerset Road
Cape Town
8005
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Ground Floor
70 Marshall Street
Johannesburg
2001
PO Box 61051
Marshalltown
2107
Sponsor
Nedbank Capital
A division of Nedbank Limited
135 Rivonia Road
Sandton
2196
Directors: J Molobela (Chairman), TR Mackey (Managing)*, AM Basson
(Finance)*, RJ Biesman-Simons, GP Dingaan, KJ Forbes, EM Hendricks, MA
Moloto, ES Seedat
* Executive
B Swanepoel
Company Secretary
29 August 2016
Date: 29/08/2016 10:35:00 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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