Wrap Text
Financial results Reviewed preliminary condensed consolidated
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
Financial results
Reviewed preliminary
condensed consolidated
Investec Australia
Property Fund
Highlights
Full year distribution growth
6.2% 9.74 cpu pre WHT
6.0x Up
Growth since listing with
Portfolio now
AUD779mn
9.1% Up
Growth in
net asset value
per unit
4.6 years
Long WALE
underpinned by contractual
escalations
Valuable platform comprising
24 properties supported by
strong underlying
property fundamentals
and an established
track record of
delivering on strategic
objectives
AUD264mn*
Quality enhancing acquisitions
concluded during the year
3.71%**
All in funding rate reduced by 12 bps
year on year
3.2%
Base net property income growth
32%
Gearing providing AUD85mn of
acquisition capacity
99%**
Hedged for 7.7 years
Balance sheet well positioned for
growth
* Includes transaction costs.
** Includes AUD50.0mn of forward starting swaps to commence in October 2017.
Key performance indicators
31 March 2017 31 March 2016
Financial KPIs
Distribution per unit pre WHT 9.74 9.17
Distribution per unit post WHT 9.24 8.92
Cost to income ratio 3.6% 1.6%
Gearing 32%** 29%
Funding costs 3.71%* 3.83%
Weighted average debt expiry 3.7 years 4.1 years
Weighted average swap expiry 7.7 years* 9.2 years
Hedged position 99%* 86%
Operational KPIs
Number of properties 24 19
Property portfolio AUD779mn AUD494mn
Gross lettable area 230 864m(2) 169 535m(2)
Weighted average lease expiry (by revenue) 4.6 years 6.1 years
Weighted average escalations 3.4% 3.3%
Occupancy rate (by revenue) 94.6% 100%
Units in issue 435 587 842 312 541 376
* Includes AUD50.0mn of forward starting swaps to commence in October 2017.
** Gearing post the distribution in June 2017 will be approximately 33.5%.
Consolidated statement of comprehensive income
Reviewed Audited
year ended year ended
AUD'000 Note 31 March 2017 31 March 2016
Revenue, excluding straight-line rental revenue adjustment 51 705 37 663
Straight-line rental revenue adjustment 2 793 1 630
Revenue 54 498 39 293
Property expenses (8 408) (5 185)
Net property income 46 090 34 108
Fair value adjustments – investment property 2 11 419 20 488
Other operating expenses (4 319) (4 663)
Operating profit 53 190 49 933
Finance costs (4 874) (6 908)
Finance income 106 79
Profit on sale of investment property – 116
Other income 320 264
Total comprehensive income attributable to equity holders 48 742 43 484
Units in issue at the end of the period 435 588 312 541
Weighted average number of units in issue for the period 323 342 254 437
Basic and diluted earnings per unit (cents) 15.07 17.09
Condensed consolidated statement of financial position
Reviewed Audited
AUD'000 Notes 31 March 2017 31 March 2016
Assets
Non-current assets 780 626 493 850
Investment property 779 350 493 850
Financial assets held at fair value 6 1 276 –
Current assets 5 906 3 073
Cash and cash equivalents 4 116 1 108
Trade and other receivables 1 790 1 965
Total assets 786 532 496 923
Equity and liabilities
Unitholders' interest 505 668 332 487
Contributed equity 466 879 310 136
Retained earnings 38 789 22 351
Total unitholders' interest 505 668 332 487
Non-current liabilities 255 876 143 098
Long-term borrowings 248 005 141 671
Trade and other payables 7 871 477
Financial liabilities held at fair value 6 – 950
Current liabilities 24 988 21 338
Trade and other payables 3 532 6 870
Distributions payable 21 456 14 468
Total equity and liabilities 786 532 496 923
Units in issue 435 588 312 541
Net asset value per unit (cents) 116.09 106.38
Consolidated statement of cash flows
Reviewed Audited
year ended year ended
AUD'000 31 March 2017 31 March 2016
Cash flows from operating activities
Rental income received 51 529 38 367
Property expenses (6 834) (5 524)
Fund expenses (4 319) (3 603)
Security deposits received – 20
Cash generated from operations 40 376 29 260
Finance income received 106 344
Finance costs paid (6 589) (4 975)
Distribution paid to unitholders (29 977) (19 100)
Net cash inflow from operating activities 3 916 5 529
Cash flows from investing activities
Investment properly acquired (268 453) (133 139)
Proceeds on sale of investment property – 3 696
Net cash outflow used in investing activities (268 453) (129 443)
Cash flows from financing activities
Borrowings raised 112 143 129 476
Payment of loans (6 000) (66 557)
Proceeds from issue of units 162 580 64 466
Payment of termination of hedging – (3 925)
Payment of transaction costs related to the issue of units (1 178) (799)
Net cash inflow from financing activities 267 545 122 661
Net increase/(decrease) in cash and cash equivalents 3 008 (1 253)
Cash and cash equivalents at the beginning of the year 1 108 2 361
Cash and cash equivalents at the end of the year 4 116 1 108
Condensed consolidated statement of changes in equity
Total
Contributed Retained unitholder's
AUD'000 equity earnings interest
Balance at 1 April 2015 246 496 2 208 248 704
Total comprehensive income attributable to equity holders – 43 484 43 484
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
Total comprehensive income attributable to equity holders – 48 742 48 742
Issue of ordinary units 152 082 – 152 082
Distributions paid/payable to ordinary unitholders 4 660 (32 304) (27 644)
Balance at 31 March 2017 466 879 38 789 505 668
Condensed segmental information
For the year ended 31 March 2017
AUD'000 Office Industrial Total
Statement of comprehensive income extract
Revenue from external customers, excluding straight-line rental revenue
adjustment 36 979 14 726 51 705
Straight-line rental revenue adjustment 1 866 927 2 793
Property expenses (6 690) (1 718) (8 408)
Net property income 32 156 13 934 46 090
Transaction costs, capital expenditure and straight-line rental revenue
adjustment (22 792) (2 034) (24 826)
Investment property revaluation 30 645 5 600 36 245
Total segment results 40 009 17 500 57 509
Statement of financial position extracts
Investment property balance 1 April 2016 336 250 157 600 493 850
Acquisitions 244 243 20 097 264 340
Capital expenditure 6 939 9 6 948
Straight-line rental revenue receivable 1 866 927 2 794
Fair value adjustments 7 853 3 566 11 419
Investment property at 31 March 2017 597 151 182 199 779 350
For the year ended 31 March 2016
AUD'000 Office Industrial Total
Statement of comprehensive income extract
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)
Net property income 22 333 11 775 34 108
Transaction costs, capital expenditure and straight-line rental revenue
adjustment (10 073) (4 668) (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
Investment property balance 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 at 31 March 2016 336 250 157 600 493 850
Notes to the reviewed preliminary condensed consolidated
financial results
Reviewed Audited
year ended year ended
AUD'000 Note 31 March 2017 31 March 2016
1. Distribution reconciliation
Total comprehensive income attributable to equity holders 48 742 43 484
Less: Straight-line rental revenue adjustment (2 793) (1 630)
Less: Fair value adjustments – investment property (11 419) (20 488)
Add back: Fair value adjustments – derivatives (2 226) 1 975
Antecedent distribution 4 660 2 320
Total distributable earnings 36 964 25 661
Less: Interim distribution paid (15 509) (11 193)
Final distribution pre-withholding tax 21 455 14 468
Withholding tax (payable)/receivable to/from the Australian
Taxation Office (1 386) 52
Final distribution post-withholding tax 20 069 14 520
Number of units
Units in issue at the end of the year 435 588 312 541
Weighted average number of units in issue for the year 323 342 254 437
Cents
Final distribution per unit (pre-withholding tax) 4.93 4.63
Interim distribution per unit (pre-withholding tax) 4.81 4.54
Total distribution per unit (pre-withholding tax) a 9.74 9.17
Final distribution per unit (post-withholding tax) 4.60 4.65
Interim distribution per unit (post-withholding tax) 4.64 4.27
Total distribution per unit (post-withholding tax) a 9.24 8.92
Basic and diluted earnings per unit 15.07 17.09
Basic and diluted headline earnings per unit for the year 11.54 8.99
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 2017. This amounts to AUD4.6mn. 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 normalised distribution per unit post-withholding tax for the year would have been approximately 9.10 cents per unit
without the benefit of this tax treatment.
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. In aggregate,
revaluations contributed AUD36.2mn to the value of the portfolio which was offset by the write-off of transaction costs associated
with acquisitions made during the year.
Fair value hierarchy – Investment property
For all investment property that is measured at fair value, the current use of the property is considered the highest and best use.
Properties are valued under the income capitalisation method and discounted cash flow method ("DCF").
Under the income capitalisation method a property's fair value is estimated based on the normalised net operating income
generated by the property, which is divided by the capitalisation rate.
Under the DCF method a property's fair value is estimated using explicit assumptions about the benefits and liabilities of ownership
over the asset's life including an exit or terminal value. This involves the projection of a series of cash flows and to this an
appropriate, market-derived discount rate is applied to establish the present value of the income stream.
For the year ended Measured at fair value Total gain or
31 March 2017 (loss) in the
period in the
AUD'000 Level 1 Level 2 Level 3 profit or loss
Investment property
Office – – 597 151 7 853
Industrial – – 182 199 3 566
Total non-financial assets measured
at fair value – – 779 350 11 419
For the year ended Measured at fair value Total gain or
31 March 2016 (loss) in the
period in the
AUD'000 Level 1 Level 2 Level 3 profit or loss
Investment property
Office – – 336 250 22 427
Industrial – – 157 600 (1 923)
Total non-financial assets measured
at fair value – – 493 850 20 504
a. Details of changes in valuation techniques
There have been no significant changes in valuation techniques during the year under review.
b. Significant transfers between Level 1, Level 2 and Level 3
There have been no transfers between hierarchy levels.
All gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value
hierarchy are attributable to changes in unrealised gains or losses relating to investment property held at the end of the reporting
period.
Reviewed Audited
year ended year ended
AUD'000 31 March 2017 31 March 2016
Gross investment property fair value adjustment 14 212 22 118
Less: Straight-line rental revenue adjustment (2 793) (1 630)
Total fair value adjustment – investment property 11 419 20 488
Fair value adjustment on interest rate swap 2 226 (1 975)
Net fair value adjustments 13 645 18 513
Reviewed Audited
year ended year ended
31 March 2017 31 March 2016
3. Headline earnings reconciliation
Profit and total comprehensive income for the year 48 742 43 484
Less: Fair value adjustments – investment property (11 419) (20 488)
Less: Profit on sale of investment property – (116)
Basic and diluted headline earnings 37 323 22 880
Basic and diluted headline earnings per unit (cents) 11.54 8.99
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 AUD24.7mn 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 2017.
The Fund has utilised available debt in conjunction with the equity raised to fund the acquisitions during the year.
The increase in revenue year on year is the result of contractual escalations, and leasing and acquisition activity.
5. Related party transactions
The Fund entered into the following related party transactions during the year with the Investec Group and its subsidiaries:
31 March 2017 31 March 2016
Transactions with related parties AUD'000 AUD'000
Payments to Investec Group and its subsidiaries:
Investec Property Management Proprietary Limited
Asset management fee 3 690 2 720
Property management fee* 1 087 662
Investec Bank Limited
Sponsor fee 25 10
Capital raising fees and listing costs 287 540
Investec Property Fund Limited
Capital raising fees 731 241
Investec Bank Plc
Interest on swaps 863 15
Receipts from Investec Group and its subsidiaries:
Investec Australia Limited
Payments to the Fund under income support arrangements – 408
* Investec Property Management Proprietary 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.
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.
The fair value of long term borrowings approximates the carrying value.
Commentary
Introduction
Investec Australia Property Fund ("Fund") is the first inward-listed Australian REIT on the JSE Limited ("JSE"). The Fund has built a valuable
platform comprising 24 properties with a total gross lettable area of 230 864m(2) and a portfolio value of AUD779.4mn.
The Fund aims to maximise income and capital returns to unitholders by investing in quality office, industrial and retail properties in Australia,
giving unitholders exposure to the Australian real estate market. The Fund is now of a scale and quality that would be very difficult to replicat
given the continued flow of offshore capital into Australia and the current levels of direct asset pricing.
Since listing in October 2013, the Fund has grown the property portfolio by over six times, despite the competitive nature of the Australian market
where there is significant domestic and offshore capital chasing a limited number of opportunities. In addition, the Fund has delivered consistent
distribution and net asset value growth, achieving a total return since listing of 74.6% in ZAR.
The Fund's adjusted strategy outlined in the 2016 full year results to acquire properties with manageable risk, such as vacancy and/or capital
expenditure requirements, has allowed the Fund to extract additional value for unitholders through enhancing yield and achieving capital
uplift. Management believes the case for investing remains attractive for South African investors given the Fund's current equity yield of 7.5% which is
underpinned by Australia's favourable macroeconomic conditions, property yield spread over historically low funding costs locked in and income returns
in a hard currency.
The Fund has had the benefit of utilising its gearing capacity to complete accretive acquisition and is now entering into a more normalised growth environment
for the developed market in which it operates. The Fund’s future growth will be supported by contracted rental escalations, maintaining an appropriate level
of gearing and seeking to enhance yield through active asset management.
Market commentary
Despite global economic and political vulnerabilities, Australia continues to show resilience by delivering its 26th year of consecutive economic growth.
New South Wales and Victoria remain the best performing economies in Australia. Both New South Wales and Victoria exceeded national GDP
growth of 2.4% with growth of 3.5% and 3.3% respectively, supported by year-on-year population growth above the national average of
1.5%. New South Wales and Victoria now represent 58% of the Fund's portfolio by revenue.
Inflation has been running below the RBA's preferred band of 2 to 3%. Bond yields spiked in late 2016, with the 10-year government bond
yield rising about 100bps between August 2016 and December 2016 to 2.8% off the back of stronger commodity prices and forecast higher
inflation. However, bond yields have subsequently tracked down to 2.6%, albeit with the bond/property yield spread remaining relatively wide
in historic terms. While the latest inflation data indicates consumer price growth trending up, the RBA has forecast it to remain in a 1.5 to
2.5% band through 2017 to 2018. This should result in interest rates and bond yields remaining 'lower for longer' and continuing strong
demand for Australian real estate from both local and offshore capital.
The Australian property sector remains a beneficiary of the portfolio tilt towards real assets within the Asia Pacific region. In recent times
there has been a particular bias towards office assets in New South Wales and Victoria, with Brisbane also showing signs of recovery given
its relative value to those other markets. Offshore investors accounted for 42% of total office transactions in 2016, cementing Australia's
reputation as one of the most transparent real estate markets in the world. Furthermore, cross-border investors have retained a degree
of risk aversion in their investment activities and the volatility of returns in Australia is lower – through the cycle – than other mature office
markets. According to CBRE's global outlook for 2017, the highest growth in office rents globally over the next three years is expected to
be Melbourne, with an average of 8% per annum, closely followed by Sydney with an average of 7.5% per annum. It is also
expected that Brisbane will start to see rental growth following eight successive quarters of net positive absorption, while the Perth office
market remains challenging.
Financial results
The board of directors of Investec Property Limited ("IPL"), the Responsible Entity of the Fund is pleased to announce a final distribution of
4.93 cents per unit ("cpu") pre-withholding tax ("WHT") and 4.60 cpu post WHT (2016: 4.63 cpu pre WHT and 4.65 cpu post WHT). This
brings the total distribution for the year to 9.74 cpu pre WHT and 9.24 cpu post WHT (2016: 9.17 cpu pre WHT and 8.92 cpu post WHT)
and represents growth for the full year of 6.2% pre WHT which is in line with guidance given to the market.
The Fund's performance is driven by successful implementation of the strategy outlined at listing and subsequently
adjusted to take account of market considerations, namely:
- achieving strong underlying net property income growth of 3.2% from the base portfolio and valuation uplift of 7.0% across the whole portfolio
(see the section below entitled "Properties");
- engaging in active property management to deliver yield-enhancing returns and unlock value uplift (see section below entitled "Leasing
activity"); and
- efficiently managing the balance sheet and interest rates (see the section below entitled "Capital and risk management").
Properties
Strategy
The Fund is committed to providing unitholders with sustainable income coupled with valuation uplift. The Fund has successfully built a
quality portfolio with a proven ability to execute yield-enhancing acquisitions and deliver strong returns supported by a stable underlying
base portfolio.
The Fund's acquisitions during the year are a continuation of the strategy to acquire properties with manageable risk, such as vacancy
and/or capital expenditure requirements. The Fund is actively engaged in campaigns at 324 Queen Street in Brisbane and 20 Rodborough
Road in Sydney to lease up acquired vacancy and is also exploring opportunities at both those properties and 2 Richardson Place in
Sydney to achieve early lease extensions for certain sitting tenants. In addition, the Fund is well advanced in achieving a favourable planning
outcome at 113 Wicks Road in Sydney which will result in a rezoning from commercial to mixed use. The Fund is also currently undertaking
scheduled capital works at both 324 Queen Street in Brisbane and 20 Rodborough Road in Sydney to improve the appeal of those
properties to prospective tenants.
The Fund has also made a conscious decision to increase its exposure to the office sector, particularly in the Sydney suburban office
markets, where rents are significantly cheaper than in the Sydney CBD, North Sydney and Parramatta. Increasingly these markets are
becoming much better served by public transport as the New South Wales state government continues to make significant investment into
key infrastructure. The ability for tenants to be able to connect their workers to cost effective work space is increasingly becoming a major
factor in leasing decisions.
Acquisitions
The Fund is committed to acquiring quality properties with strong underlying property fundamentals whilst also identifying opportunities to
enhance yield and add value through active asset management. During the year the Fund acquired the following properties at an average yield of 7.2%:
Effective Value* GLA Yield WALE
Property name Geography date Sector (AUD'000) (m(2)) (%) (years)
2 Richardson Place,
North Ryde Sydney, NSW 7/03/2017 Office 85 000 15 205 7.0 4.1
20 Rodborough Road,
Frenchs Forest Sydney, NSW 7/03/2017 Office 56 000 12 677 7.0 2.6
24 Rodborough Road,
Frenchs Forest Sydney, NSW 7/03/2017 Industrial 19 000 7 198 9.4 7.1
113 Wicks Road,
Macquarie Park Sydney, NSW 1/7/2016 Office 23 255 6 253 7.0 4.2
324 Queen Street,
Brisbane (50% share) Brisbane, QLD 1/12/2016 Office 66 000 19 864 7.2 3.2
Total 249 255 61 197
* Excludes transaction costs.
Valuation
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). At other times
where directors' valuations are performed, the valuation methods include using the discounted cash flow model and capitalisation model.
For the period ended 31 March 2017, the Fund obtained external valuations for 10 properties. For all other properties, advice letters were
obtained from independent external valuers to support directors' valuations. In aggregate, revaluations contributed AUD36.2mn to the value
of the portfolio, which represents an increase of 7.0%. Valuations typically lag transaction activity by approximately six months, and given
pricing achieved for recent asset sales, there would appear to be capacity for additional value uplift at certain of the Fund’s properties.
A fair value adjustment has been recorded in respect of the properties acquired during the year. This represents the write-off of capital
expenditure and transaction costs associated with acquisitions, which primarily comprises stamp duty.
Net asset value growth was also supported by the revaluation of properties, contributing 14.1% year-on-year pre-transaction costs. The net
asset value growth post-transaction costs (comprising largely of stamp duty of approximately 5.5% of transaction value) is diluted to 9.1%
for the year due to the extent of the Fund's acquisition activity.
Geographic spread
During the year, four of the Fund's five acquisitions were in New South Wales thereby increasing the Fund's exposure to Australia's best
performing economy. New South Wales now represents 44% of the portfolio by revenue (2016: 31%).
Sectoral spread
Four of the Fund's five acquisitions during the year were office buildings, resulting in the Fund's exposure to the office sector increasing to
76% of the portfolio by revenue (2016: 68%). The lack of new supply in the office sector has resulted in accelerated rental growth. This trend
is set to continue into the future until supply comes online in 2021.
Leasing activity
At 31 March 2017, the property portfolio is 94.6% occupied by revenue (2016: 100%). The vacancy comprises 2.0% attributable to acquired
vacancy at 324 Queen Street in Brisbane, 0.1% attributable to the expiry of rental guarantees at 266 King Street in Newcastle, 2.5%
attributable to an existing tenant at 35-49 Elizabeth Street in Melbourne being placed in liquidation and 0.8% attributable to an existing
tenant at 21-23 Solent Circuit in Sydney signing a new lease over a reduced area.
During the year, the Fund completed the following leasing transactions:
Replacement leases/renewals
Weighted Weighted Weighted Weighted Weighted
average average average average average
GLA new rental reversion WALE escalation incentive
Office 1 645 $599 (2.0%) 6.0 3.00% 19.4%
Industrial 7 079 $114 2.0% 5.0 4.00% 0.0%
Letting of acquired vacancy
Office 3 484 $368 0.6% 5.1 3.27% 29.3%
Total 12 208 1.1% 5.2 3.66% 11.0%
Notes
(1.)Replacement leases relate to the replacement of vendor leases at 757 Ann Street, Fortitude Valley QLD.
(2.)Renewals relate to the exercise of an option by the tenant at 57 Sawmill Circuit, Hume ACT.
(3.)Letting of acquired vacancy relates to new leases at 266 King Street, Newcastle N&W.
The Fund's lease expiry profile at year end is strong with a weighted average lease expiry of 4.6 years by revenue (2016: 6.1 years) with
42% of leases expiring after five years (2016: 56%). The lease expiry profile reflects the quality and sustainability of the Fund's net property
income. The majority of the Fund’s near term expiry is uncontracted in New South Wales which is showing strong rental growth and should allow the
Fund to achieve positive face rental reversions.
Capital and risk management
During the 12 months to 31 March 2017, the Fund deployed all of the AUD92.1mn remaining capacity from the February 2016 rights offer
and will be looking to deploy the additional capacity created by the February 2017 rights offer into quality and value enhancing acquisitions.
The Fund's established track record of deploying the capacity created from rights offers and DRIPs within a 12-month period whilst
maintaining distribution growth demonstrates the ability to build a portfolio of quality assets with strong underlying property fundamentals
and continues to be an attractive investment case.
The Fund's balance sheet remains well positioned for growth with gearing currently at 32%. At the Fund's target gearing ratio of up to 40%
this gives the Fund up to AUD85.0mn in debt capacity to continue to aggressively pursue attractive acquisition opportunities.
The Fund's current all in cost of funding is 3.71% hedged to 99%* (2016: 3.83% hedged to 86%) resulting in a spread between the Fund's
funding costs and headline property yield approximately 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 debt and
swap maturity profile of 3.7 years (2016: 4.1 years) and 7.7 years (2016: 9.2 years) respectively.
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 312 541 376 310.1
DRIP in relation to Mar - 16 distribution 9 818 121 11.8
DRIP in relation to Sep - 16 distribution 5 223 526 6.8
Rights offer in Feb 17 108 004 819 138.2
Closing units in issue 435 587 842 466.9
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 22.99% and 16.57% respectively.
Number of units in issue 435 587 842
Number of unitholders 4 757
Changes to the board
There have been no changes to the board of IPL during the period.
Prospects
The FY 2017 results reflect the successful execution of the Fund's strategy to date. The Fund is well positioned to
continue 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 FY2018 of between 3% and 4% pre withholding tax.
This guidance assumes partial deployment at the lower end and full deployment at the upper end of gearing capacity during FY2018 into
assets factoring in current market considerations. The Fund currently has AUD85mn of 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 is based on in force leases, contractual escalations and market related
renewals.
On behalf of the board of Investec Property Limited as responsible entity for Investec Australia Property Fund.
Signature
Richard Longes Graeme Katz
Chairman Chief Executive Officer
17 May 2017
Basis of accounting
The reviewed preliminary condensed consolidated financial results for the year ended 31 March 2017 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 2017 are in terms of IFRS and are consistent with those adopted in the audited financial statements for the period ended
31 March 2016.
Review conclusion
These reviewed preliminary condensed consolidated financial results for the year ended 31 March 2017 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.
Final distribution
Notice is hereby given of a final distribution declaration number 7 of:
- 4.92579 AUD cents per unit pre WHT; and
- 4.59638 AUD cents per unit post WHT,
for the six months ended 31 March 2017. Withholding tax of 0.32941 Australian cents per unit will be withheld from the distribution paid to
non-Australian unitholders. This is regarded as a foreign distribution for South African unitholders.
The salient dates relating to the distribution are as follows:
2017
Last day to trade ("LDT") cum distribution Tuesday, 6 June
Units to trade ex-distribution Wednesday, 7 June
Record date Friday, 9 June
Cheques posted to certificated unitholders and accounts credited by CSDP or broker to
dematerialised unitholders Monday, 12 June
Units may not be dematerialised or rematerialised between commencement of trade on Wednesday, 7 June 2017 and close of trade on Friday, 9 June 2017.
Total distribution rate: 4.92579 cents per unit
Cents per unit
Fund payment 2.19443
Interest income 0.01391
Tax deferred 2.71745
4.92579
This distribution includes a "Fund Payment" amount of 2.19443 cents per unit, pursuant to Subdivision 12-H of Schedule 1 of the Taxation
Administration Act 1953 and relates to the year ending 31 March 2017.
The Fund declares that it is a managed investment trust for the purposes of 12-H of Schedule 1 of the Taxation Administration Act 1953,
in respect of the income year ended 31 March 2017.The proportion of the payment in respect of the year ending 31 March 2017 which is
attributable to a fund payment from a clean building managed investment trust is nil cents per unit.
The above information has been included in the notice solely to assist other entities with Australian withholding tax obligations that may arise
in respect of any amounts distributed to non-Australian residents.
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 2016 to 31 March 2017 has been reduced to 6.13532%, equivalent to 0.32941 Australian cents per unit,
through certain deductions such as depreciation. Thus, withholding tax of 0.32941 Australian cents per unit will be withheld from the
distribution accruing to unitholders and will be paid to the Australian Taxation 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.
By order of the board
Investec Property Limited
Company Secretary
17 May 2017
Company Information
Directors of the Responsible Entity Responsible Entity
Richard Longes(#) (Non-executive chairman) Investec Property Limited
Stephen Koseff (Non-executive) (ACN 071 514 246 AFSL 290 909)
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
2000
(#)Independent Australia
Directors of the Manager Manager
Graeme Katz (Executive) Investec Property Management Proprietary Limited
Zach McHerron (Executive) (ACN 161 587 391)
Kristie Lenton (Executive) Level 23, Chifley Tower
Samuel Leon (Non-executive) 2 Chifley Square
Sydney
Investec Australia Property Fund New South Wales
Registered in Australia in terms of ASIC (ARSN 162 067 736) 2000
Registered in terms of the Collective Investment Schemes Control Australia
Act No. 45 of 2003
Share code: IAP Transfer Secretaries
ISIN: AU60INL00018 Computershare Investor Services Proprietary Limited
Rosebank Towers,
Company Secretary of the 15 Biermann Avenue,
Responsible Entity Rosebank, 2196
Paul Lam-Po-Tang (BCom, LLB) (PO Box 61051, Marshalltown, 2107)
Phone: +27 11 370 5159
Registered office and postal Sponsor
address of the Responsible entity The Corporate Finance division of Investec Bank Limited
and date of establishment of the 2nd Floor
Fund 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.
Date: 17/05/2017 07:30:00 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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