SA CORPORATE REAL ESTATE LIMITED - Condensed unaudited consolidated interim financial results for the six months ended 30 June 2018

Release Date: 04/09/2018 17:10
Code(s): SAC
 
Wrap Text
Condensed unaudited consolidated interim financial results for the six months ended 30 June 2018

SA Corporate Real Estate Limited 
(“SA Corporate” or “the Group”) 
Incorporated in the Republic of South Africa
Share Code: SAC; ISIN Code: ZAE000203238 
(Registration number 2015/015578/06)

CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS 
FOR THE SIX MONTHS ENDED 30 JUNE 2018

Interim distribution
- 3.1% lower than H1 2017

Capital structure
- Discount to NAV of 16.9%
- Effective fixed debt of 74.1%
- LTV of 33.1%

Portfolio activity
- Completed and committed developments of R1 408,4m
- Acquisitions and contracted and unconditional acquisitions of R1 472,0m

Property performance
- Total like-for-like NPI growth of 2.4%
- Afhco like-for-like NPI growth of 4.1%
- Traditional portfolio vacancy by GLA of 2.2%

INTRODUCTION

SA Corporate Real Estate Limited is a JSE-listed Real Estate Investment Trust (“REIT”) which owns a diversified portfolio of industrial, retail, commercial, 

storage 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

SA Corporate's distribution per share decreased for the six months to June by 3.1% compared to the same period in the prior year. This amounts to a distribution

of 21.70 cps (June 2017: 22.38 cps). The decline in distribution arose from non-recurring income and base effects in the prior year and additional re-financing 

costs excluding which distribution growth per share would have been circa 2%. The latter reflects challenging trading conditions negatively impacting rental reversions.

Portfolio Performance

Total net property income (“NPI”), excluding the non-controlling interest, increased by 7.8%, with the like-for-like increasing by 2.4%.

The Afhco portfolio responded positively to proactive initiatives instituted in 2017 with NPI increasing by 43.3% supported by a greater contribution from acquisitions 

and developments. The like-for-like growth of 4.1% was underpinned by reduced residential vacancies by GLA from 8.9% to 5.6% (excluding the units in tenanting up phases 

in respect of the joint initiative with Calgro M3).

Retail NPI growth of 3.7%, excluding the impact of disposals, was the result of tenant retentions of 86.2%, weighted average lease escalations of 7.6% and positive reversions 

of 2.6%. The retail like-for-like NPI grew by 3.8% amid challenging market conditions. There continues to be focus on green initiatives to reduce the impact of increased municipal costs.

Industrial like-for-like portfolio growth of 2.3% was supported by weighted average rental escalations of 7.9%, tenant retentions of 70.8% and a 0.4% reduction in vacancies by GLA. 

The performance of this sector was adversely impacted by negative reversions of 3.1%.      

Income from the Zambian Joint Ventures (“JV’s”) amounted to R29,7m (June 2017: R30,7m) for the 6 months to June 2018. The Zambian JV’s current year income before guarantees 

increased by 9.5% and after the impact of guarantees 3.4% over the same period in US Dollar. This amounts to a 3.2% reduction in ZAR relative to June 2017 as the Rand strengthened against 

the US Dollar.
 
Net Finance Cost

Net funding cost increased by 24.5% arising from an increase in debt of R945,5m as a result of increased investment activity at a weighted average marginal rate of 1.95% above the 3-month Jibar. 

The R1,2bn of debt that expired in December 2017 was refinanced at a rate 45bps higher than the expiring marginal rate further increasing the funding cost.

DISTRIBUTION STATEMENT

                                        6 months     6 months          Year
                                           ended        ended         ended
                                      30.06.2018   30.06.2017    31.12.2017
DISTRIBUTABLE EARNINGS (R000)          Unaudited    Unaudited       Audited

Rent (excluding straight line rental 
adjustment)                              834,188      724,983     1,509,933
Net property expenses                   (98,186)     (51,028)     (138,909)
 Property expenses                      (390,293)    (324,333)     (711,433)
 Recovery of property expenses           292,107      273,305       572,524

Net property income attributable to 
non-controlling interest                  (9,591)           -          (508)

Net property income                      726,411      673,955     1,370,516

Investment in joint ventures              29,736       30,728        58,960
Taxation on distributable earnings             -         (260)         (260)
Dividends from investments in listed 
shares                                     6,900          370        23,783

Net finance cost                        (190,755)    (153,246)     (308,443)
 Interest income                          47,125       35,604        78,263
 Interest expense                       (247,780)    (188,850)     (386,706)
 Interest attributable to 
 non-controlling interest                  9,900            -             -

Distribution related expenses            (23,254)     (21,197)      (45,506)
Distribution related income                    -       10,669        11,631
Antecedent distribution                        -            -        26,029

Distributable earnings                   549,038      541,019     1,136,710

 Interim                                 549,038      541,019       566,355
 Final                                         -            -       570,355

Shares in issue (000)                  2,530,689    2,417,482     2,530,689

Weighted number of shares in 
issue (000)                            2,530,689    2,417,482     2,473,310

Distribution (cps)                         21.70        22.38         44.92
 Interim                                   21.70        22.38         22.38
 Final                                         -            -         22.54

PROPERTY VALUATIONS

The Group's independently valued property portfolio increased by R0,7bn (4.0%) to R17,5bn as at June 2018 (December 2017: R16,8bn). This excludes our share of the Zambian portfolio of 

R978,0m, converted at the closing rate of R13.81 (December 2017: R12.36), that has been equity accounted but includes the net investment of R448,5m in respect of acquisitions, developments, 

capex and disposals. The like-for-like portfolio held for the full 6 months to June 2018 increased by R202,7m (1.9%) from December 2017.

The capitalisation and discount rates in the Group's like-for-like portfolio at 30 June 2018 calculated on a weighted average basis were:

Sector             Capitalisation     Discount rate (%)  Growth in like-for
                         rate (%)                       -like portfolio (%)
            30.06.2018 31.12.2017 30.06.2018 31.12.2017          30.06.2018

Industrial         9.3        9.3       15.3       15.3                 0.7
Retail             8.7        8.7       14.7       14.7                 3.7
Commercial         9.0        9.0       15.0       15.0                 0.0
Afhco             10.3       10.3          *          *                 2.1
Weighted average   9.3        9.3       15.0       15.1                 1.9

* Afhco properties are not valued on a discounted cash flow basis, but on the basis of capitalisation of the net income earnings, due to the short term nature of residential leases.

The NAV per share (526 cps) increased by 2.4% (December 2017: 514 cps). The increase is attributable to property valuations, the revaluation of the investment in the JV’s and the swap 

revaluation of 2.0%, 0.8% and 0.3%, respectively. Further, the increase of 2.4% is reduced by the foreign adjustments of 0.5% and the incremental dividend of 0.2%.

PROPERTY PORTFOLIO

The portfolio comprised 199 properties (December 2017: 196 and June 2017: 188) which excludes the 3 Zambian properties held as a 50% investment in the JV’s. The sectoral and geographic 

spread by value as at 30 June 2018 are set out below. 

Sectoral Spread

Retail
R7,3bn
360,605 m2
26 properties
43%

Industrial
R4,8bn
733,992 m2
85 properties
28%

Commercial
R1,0bn
58,327 m2    
12 properties
6%

Afhco 
R3,7bn
356,405 m2    
62 properties
22%

Storage 
R0,1bn
23,423 m2    
14 properties
1%

Geographic Spread

Gauteng 
R10,5bn
961,026 m2
136 properties
62%

KwaZulu-Natal 
R5,2bn
409,676 m2
49 properties
31%

Western Cape 
R0,7bn
72,501 m2
9 properties
4%

Other 
R0,5bn
89,549 m2
5 properties
3%

The above excludes:
1. Development bulk across the Traditional, Afhco and Storage portfolios measuring 183,525m2 comprising 12 properties and valued at R0,4bn.
2. Listed investments of R168,9m.
3. Zambian investment in JV’s valued at R978,0m.
4. Excluding non-controlling interest.

Redevelopment Completed:

Property                    Total Completion    Yield      Sector    Region
                      development       date forecast 
                         cost(Rm)              1st 12 
                                               months 
                                                  (%)

Cullinan Jewel Shopping      14,5    01/2018      9.0      Retail   Gauteng
Centre, Pretoria
Total                        14,5                 9.0

Committed Redevelopments:

Properties                  Total   Forecast    Yield      Sector    Region
                      development completion forecast 
                         cost(Rm)       date   1st 12 
                                               months 
                                                  (%)

57 Sarel Baard Crescent,    391,0    10/2018    7.9 1  Industrial   Gauteng
Centurion
North Park Mall             141,7    03/2019   10.0       Retail/   Gauteng
Residential, Pretoria                                 Residential
252 Montrose Avenue,         92,0    04/2019   10.5   Residential   Gauteng
Randburg
Kempton Park Shoprite,       70,9    07/2019   10.5       Retail/   Gauteng
Kempton Park                                          Residential
Cnr Old Pretoria and        140,0    12/2019   10.5 2 Residential   Gauteng
Alexandra Roads, Midrand
Afhco pipeline 3            558,3    04/2019   10.8       Retail/   Gauteng
                                    -12/2019          Residential
Total                     1 393,9               9.9
Spent to 30 June 2018       271,9
Total unspent             1 122,0

1 Yield of 7.9% based on the pre-development valuation using market rental, which is a negative 40% reversion on the closing rental of 

a prior initial 5 year lease renewed for a further 7 year period.

2 Development cost net of proceeds from sale of units.
3 In addition to the above, Afhco's development bulk represents a pipeline of R0,5bn in the next 4 years.

Acquisitions:

Properties                  Cost   Acquisi-    Yield      Sector     Region
                            (Rm)       tion forecast 
                                       date   1st 12 
                                              months 
                                                 (%)

Northgate Heights Phase 1E,  6,2    01/2018     10.0 Residential    Gauteng
Northgate
Calgro M3 Developments      45,9    02/2018     10.0 Residential    Gauteng
- Fleurhof 31, Randburg 1
Calgro M3 Developments      10,7    02/2018     10.0 Residential    Western
- Scottsdene Erf 3833                                                  Cape
Buildings 5 & 6, 
Scottsdene 1
Calgro M3 Developments      71,7    02/2018     10.0 Residential    Gauteng
- South Hills Blocks 1, 3,         -05/2018
5, 10-13 & 15, South 
Hills 1
The Oaks, Ermelo           105,0    03/2018     10.7      Retail Mpumalanga
Calgro M3 Developments       6,9    04/2018     10.0 Residential    Western
- Scottsdene Erf 3837                                                  Cape
Building 11, Scottsdene 1
Northgate Heights Phase      6,8    04/2018     11.0 Residential    Gauteng
2A - B, Northgate                  -05/2018
Calgro M3 Developments      17,0    04/2018     10.0 Residential    Gauteng
- Jabulani Lifestyle               -05/2018
Phases 1 & 2, Soweto 1
African City Mall Final     32,9    04/2018     11.6      Retail    Gauteng
phase, Johannesburg CBD            -06/2018
Total                      303,1                10.4

1 Represents 51% ownership in the joint initiative.

Contracted and Unconditional Acquisitions:

Properties                  Cost   Acquisi-    Yield      Sector     Region
                            (Rm)       tion forecast 
                                      date^   1st 12 
                                              months 
                                                 (%)

Northgate Heights Phase 2C,  3,4  07/2018 1     11.0 Residential    Gauteng
Northgate
Calgro M3 Developments      16,5  07/2018 1     10.0 Residential    Gauteng
- South Hills Block 8, 
South Hills 3
Calgro M3 Developments      14,1  07/2018 1     10.0 Residential    Gauteng
- Jabulani Lifestyle Phase 
3, Soweto 3
Calgro M3 Developments      13,8  08/2018 1     10.0 Residential    Gauteng
- South Hills Block 9, 
South Hills 3
Calgro M3 Developments -    13,3  08/2018 1     10.0 Residential    Gauteng
Jabulani Lifestyle Phases 
4-5, Soweto 3
Calgro M3 Developments -    30,3  08/2018 1     10.0 Residential    Gauteng
South Hills Blocks 6-7 & 
14, South Hills 3
Calgro M3 Developments -     8,9  09/2018       10.0 Residential    Gauteng
Jabulani Lifestyle Phase 
6, Soweto 3
Long Street Precinct bulk   12,2  09/2018          # Residential    Gauteng
(Parcels 5-7), Jeppestown
Northgate Heights Phases    11,4  09/2018       11.0 Residential    Gauteng
2D - H, Northgate                -01/2019
Calgro M3 Developments -    37,7  09/2018       10.0 Residential    Gauteng
South Hills Blocks 2, 4 &        -10/2019
16, South Hills 3
M&T Development - Etude    165,3  10/2018       10.0 Residential    Gauteng
Phases 4-6, Midrand              -12/2018
Calgro M3 Developments     228,1  10/2018       10.7 Residential    Western
- Belhar 3                       -11/2019                              Cape
M&T Development -          285,9  02/2019        9.5 Residential    Gauteng
Founders Hill 2                  -06/2020
Calgro M3 Developments -   116,4  08/2019       10.0 Residential    Gauteng
Fleurhof 37, Randburg 3
M&T Development - Menlyn   211,6  06/2021       10.0 Residential    Gauteng
East End Development 2,4
Total                    1 168,9                10.0

^ Acquisition date represents the expected effective date of the transaction.
# Land/Bulk acquired for development.
1 Transferred during July and August 2018.
2 Represents 60% ownership in the joint initiative.
3 Represents 51% ownership in the joint initiative.
4 SA Corporate has also secured an option to participate in phases 2 & 3 of the development, with an estimated value of R793m and R529m respectively (based on 2020 pricing).

Disposals:

Properties                  Transfer    Gross     Exit      Sector   Region
                                date  selling    yield 
                                        price  on sale 
                                         (Rm)    price 
                                                   (%)

Atterbury Décor, Pretoria    01/2018     86,8      8.5      Retail  Gauteng
Rhodesdene Shopping Centre,  03/2018     52,0      8.8      Retail Northern
Kimberley                                                              Cape
22 Voortrekker Road,         05/2018     78,5      8.8  Commercial  Western
Vredenburg                                                             Cape
Lebombo Road, Garsfontein    06/2018     12,0      6.2  Commercial  Gauteng
(Portion)
21 Pomona Road, Pomona       06/2018     18,3      8.0  Industrial  Gauteng
Total                                   247,6      8.5

Contracted Disposals:

Properties                  Expected    Gross     Exit      Sector   Region
                            transfer  selling    yield 
                                date    price  on sale 
                                         (Rm)    price 
                                                   (%)

9/15 Lanner Road, New      07/2018 1     36,0    7.9    Industrial KwaZulu-
Germany #                                                             Natal
6 Cedarfield Close,        09/2018       57,0   12.1 2  Industrial KwaZulu-
Springfield Park #                                                    Natal
28 Durham Street,          09/2018       86,5    8.8    Commercial  Eastern
Mthatha #                                                              Cape
1/5 Stockville Road,       09/2018       53,6    7.7    Industrial KwaZulu-
Westmead #                                                            Natal
Hotel at Cullinan Jewel    09/2018        2,7    9.0        Retail  Gauteng
Shopping Centre, Pretoria
11 Coconut Grove,          09/2018        2,4    7.6    Industrial KwaZulu-
Shakashead #                                                          Natal
1 Marconi Street, Montague 09/2018       45,0    8.2    Industrial  Western
Gardens                                                                Cape
24 Westmead Road,          09/2018       26,0    6.7    Industrial KwaZulu-
Westmead #                                                            Natal
40 Electron Avenue,        10/2018       59,7    9.0    Industrial  Gauteng
Isando #
Table Bay Industrial Park, 10/2018      118,4    8.3    Industrial  Western
Paarden Eiland #                                                       Cape
14/24 Mahoganyfield Way,   11/2018       36,0    8.0    Industrial KwaZulu-
Springfield Park                                                      Natal
The Mall, Vanderbijl       12/2018       13,6   10.0 3       Afhco  Gauteng
Park #                                                      Retail
Total                                   536,9    8.7

# Contracted and unconditional.
1 Transferred.
2 Exit yield in year 2 is 6.8% due to a negative reversion.
3 Exit yield based on head lease rental.

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
          30.06.2018 30.12.2017 30.06.2017 30.06.2018 30.12.2017 30.06.2017

Traditional 
Portfolio:
Industrial     1.2          1.5        1.6        0.9        1.0        1.1
Retail         3.5          3.1        3.9        3.4        3.0        3.2
Commercial     5.7          6.4        6.7        5.5        6.0        5.5
Traditional 
Portfolio 
total          2.2          2.3        2.6        2.6        2.4        2.5
Storage 
Portfolio:
Storage       13.4         16.5          -       20.8       22.9          -
Afhco 
Portfolio:
Residential 1  9.4          7.3        8.9       12.1        9.2        8.3
Retail / 
Commercial 2   4.5          2.1        1.4        2.6        1.7        2.8
Rest of Africa 
Portfolio:
Retail         2.9          2.7        5.5        1.7        1.7        3.3
Commercial     8.6 3       10.7        4.7        6.3        8.0        3.4
Rest of Africa 
Portfolio 
total          4.1          4.3        5.3        2.7        3.0        3.3

* GLA=Gross lettable area
1 Vacancy calculated on number of units and includes 376 units vacant in the tenanting up phase of the joint initiative with Calgro M3. Excluding the latter, the vacancy would be 5.6%.
2 1.5% of the 4.5% GLA vacancy is low yielding basement and upper level space.
3 Vacancy reduced to 0.0% with tenanting of 4,730m2 to a tier 1 bank from 1 August 2018.

The lease expiry profile and vacancies (by GLA) are set out below:

Sector          Vacancy (%)                    Expiries (%)
                                Monthly   2018  2019  2020  2021 Thereafter

Traditional Portfolio:
Industrial              1.2         3.3   13.2  18.4  13.3  21.3       29.3
Retail                  3.5        10.8    6.6  14.1  17.4  14.2       33.4
Commercial              5.7         9.9    7.5  18.3  20.5  30.0        8.1
Traditional Portfolio 
total                   2.2         6.0   10.9  17.1  14.9  19.7       29.2
Afhco Portfolio:
Residential             9.4        46.9   21.9  21.8     -     -          -
Retail / Commercial     4.5         7.2    6.7  14.2  20.5  17.9       29.0
Rest of Africa 
Portfolio:
Retail                  2.9           -    1.5  33.0  13.1  18.5       31.0
Commercial              8.6           -    4.0  52.6  17.7  10.8        6.3
Rest of Africa 
Portfolio total         4.1           -    2.0  36.9  14.0  16.9       26.1

The expiry profile of the Storage sector is not disclosed due to the short term nature of the leases.

TENANT RETENTION, RENTAL REVERSIONS AND ESCALATIONS

The table below reflects the Group's retention ratio, rental reversions and escalations per sector for a rolling 6 month period ending June 2018:

Sector                  Expiries Retention Retention     Rental Escalations 
                            (m2)      (m2)       (%) reversions         (%)
                                                            (%)

Traditional Portfolio:
Industrial                81,724    57,850      70.8       (3.1)        7.9
Retail                    34,536    29,761      86.2        2.6         7.6
Commercial                 3,756     3,212      85.5       (8.5)        7.9
Traditional Portfolio 
total                    120,016    90,823      75.7       (0.2)        7.8
Afhco Portfolio:
Retail / Commercial        2,977     1,907      64.1        7.9         8.9

No retentions and reversions have been disclosed for the Residential and Storage sectors due to the short term nature of their leases.

BORROWINGS

The debt profile as at 30 June 2018 is detailed below:

Facility                  Maturity date     Value (Rm)    Interest Rate (%)

Fixed                      5 13.08.2018            200                 8.92
Fixed                      5 13.08.2018            270                 8.87
Fixed                      5 13.08.2018             30                 8.87
Term revolver 1              29.12.2018            255                 8.78
Term revolver 2              24.03.2019              -                 8.73
Term revolver 3              01.11.2019              -                 8.85
Fixed                        15.12.2019            848                 9.04
Fixed                        03.01.2020            500                 8.97
Fixed                        13.06.2020            950                 9.02
Fixed 4                      01.11.2020            373                 3.59
Fixed                        11.12.2020            500                 9.06
Fixed                        11.12.2021            500                 9.19
Fixed                        13.12.2021            550                 9.09
Fixed                        11.12.2022          1,000                 9.25
Amortising                   15.04.2024            102                 6.88
Total/weighted average                           6,078                 8.69

1 R750m revolving credit facility partly drawn
2 R200m revolving credit facility undrawn 
3 R300m revolving credit facility undrawn 
4 $27m US Dollar denominated loan
5 Subsequent to the reporting period, the maturity date was extended to 13 November 2018.

The loan to value (“LTV”) has increased from 32.4% at 31 December 2017 to 33.1% as at 30 June 2018.

The weighted average cost of debt, excluding and including the cross currency swaps, was 8.69% and 8.46%, respectively. The weighted average swap margin was 0.25% and a weighted 

average debt margin is 1.70%.

The weighted average tenor of loans including the cross currency swaps is 2.2 years. This includes debt expiring in 2018, without which the tenor would be 2.6 years.
  
STRATEGY AND PROSPECTS

With pedestrian South African economic growth prospects, SA Corporate will be focusing on the following activities to ensure sustainable distribution growth into the future:

- Consolidating a quality industrial property portfolio. The Company will continue to dispose of those properties that do not meet investment criteria whilst investing in 

existing properties providing superior logistics space to tenants with covenant strength.

- Divesting from its remaining commercial properties given the continued weak prospects for this sector.

- Concentrating the Company's retail property portfolio on food services and convenience to be defensive against the rising competition to “bricks and mortar” retail emanating from e-commerce.

- Establishing a quality residential rental portfolio to offer investors diversification to other South African property sectors.

The Company has experienced more challenging trading conditions than those forecast at the beginning of 2018. In particular these have included an almost doubling of the ground rentals 

payable to Transnet in respect of leasehold properties in Maydon Wharf, renewal of historic long leases to blue chip logistics tenants with greater negative reversions than expected, 

downscaling by a large national retail tenant, reduced retail turnover rental and greater than forecast municipal charges in the Johannesburg residential portfolio. Based on the 

aforementioned the Board's view is that the distribution growth forecast for the second half of 2018 will not be realised and a similar negative decline in distribution growth can be 

anticipated in the second half of 2018 as has been the case in the first half of the financial year.

                                           As at        As at         As at
CONDENSED CONSOLIDATED STATEMENT      30.06.2018   30.06.2017    31.12.2017  
OF FINANCIAL POSITION (R000)           Unaudited    Unaudited       Audited

Assets

 Non-current assets                   18,718,734   16,324,376    17,340,262
 Investment property                  16,712,130   15,074,677    15,712,340
 Letting commissions and tenant 
 installations                            44,188       51,941        48,187
 Investment in joint ventures            978,012      830,403       847,033
 Property, plant and equipment            15,408       10,148        16,703
 Intangible assets                        81,904       81,904        81,904
 Swap derivatives                        278,252       14,017       138,849
 Rental receivable - straight line 
 adjustment                              252,985      219,862       191,348
 Listed shares                           168,920            -       170,260
 Other financial assets                   61,679       41,424         2,611
 Loans to developers                     125,132            -       131,027
 Deferred taxation                           124            -             -

 Current assets                        1,041,980    1,241,201     1,160,363
 Trade and other receivables             423,940      428,762       351,250
 Other financial assets                  109,969       11,795       215,795
 Swap derivatives                         26,821        5,394        12,609
 Rental receivable - straight line 
 adjustment                               40,495       47,603        40,509
 Loans to developers                     271,887      589,056       263,894
 Taxation receivable                       1,055          837           852
 Cash and cash equivalents               167,813      157,754       275,454

 Non-current assets held for sale        537,116      283,340       890,271
 Properties classified as held for 
 disposal                                535,221      282,400       888,736
 Letting commissions and tenant 
 installations                             1,895          940         1,535

Total assets                          20,297,830   17,848,917    19,390,896

Share capital, reserves and liabilities

 Share capital and reserves           13,313,092   12,350,973    13,008,861

 Non-current liabilities               5,762,235    3,990,988     4,821,772
 Interest bearing borrowings - Local   5,220,951    3,860,009     4,481,806
 Interest bearing borrowings - Foreign    83,634      103,823        93,605
 Swap derivatives                        292,486       19,748       154,554
 Loan from non-controlling shareholder   165,164            -        90,191
 Deferred taxation                             -        7,408         1,616
 
 Current liabilities                   1,222,503    1,506,956     1,560,263
 Trade and other payables                425,124      327,799       349,073
 Interest bearing borrowings - Local     755,314    1,152,000     1,175,357
 Interest bearing borrowings - Foreign    18,481       17,019        17,019
 Swap derivatives                         23,584       10,138        18,474
 Taxation payable                              -            -           340

Total share capital, reserves and 
liabilities                           20,297,830   17,848,917    19,390,896

                                        6 months     6 months          Year
                                           ended        ended         ended
CONDENSED CONSOLIDATED STATEMENT      30.06.2018   30.06.2017    31.12.2017 
OF COMPREHENSIVE INCOME (R000)         Unaudited    Unaudited       Audited

Revenue                                1,170,441    1,043,350     2,113,844

Income                                 1,226,425    1,089,993     2,225,341
 Rent                                    834,188      724,983     1,509,933
 Straight line rental adjustment          44,146       45,062        31,387
 Recovery of property expenses           292,107      273,305       572,524
 Interest income                          47,125       35,604        78,263
 Dividends from investments in listed 
 shares                                    8,859          370        16,138
 Other group income                            -       10,669        17,096

Expenses                                (676,546)    (545,787)   (1,166,172)
 Audit fees                               (1,671)      (1,517)       (3,276)
 Administrative fees                     (33,605)     (29,404)      (60,631)
 Depreciation                             (3,197)      (1,683)       (4,126)
 Interest expense                       (247,780)    (188,850)     (386,706)
 Property expenses                      (341,069)    (287,595)     (628,377)
 Property administration fees            (49,224)     (36,738)      (83,056)

Operating income                         549,879      544,206     1,059,169
 Capital (loss)/profit on disposal of 
 investment properties and property, 
 plant and equipment                      (3,664)       2,058        (8,430)
 Foreign exchange adjustments            (61,351)      17,974        37,176
 Profit from joint ventures               37,290       58,234       121,333
 Revaluation of investment properties 
 and listed shares                       213,905      273,077       372,925
 - Revaluations                          258,051      318,139       404,312
 - Straight line rental adjustment       (44,146)     (45,062)      (31,387)
 Revaluation of swap derivatives          34,202      (41,286)      (52,380)

Profit before taxation                   770,261      854,263     1,529,793

Taxation                                   1,740       (9,166)       (3,656)

Profit after taxation                    772,001      845,097     1,526,137

Other comprehensive income, net of 
taxation                                       -            -             -

Items that may be reclassified to 
profit or loss
Foreign exchange adjustments on 
investment in joint ventures             102,402      (43,141)      (88,018)

Total comprehensive income               874,403      801,956     1,438,119

Profit attributable to:
 Owners of the company                   772,310      845,097     1,525,629
 Non-controlling interest                   (309)           -           508

Profit after taxation                    772,001      845,097     1,526,137

Earnings and diluted earnings per share    30.51        34.96         61.68

                                        6 months     6 months          Year
                                           ended        ended         ended
CONDENSED CONSOLIDATED STATEMENT OF   30.06.2018   30.06.2017    31.12.2017 
CHANGES IN EQUITY (R000)               Unaudited    Unaudited       Audited

Share capital and reserves at the 
beginning of the period               13,008,861   12,070,009    12,070,009

Total comprehensive income for the 
period                                   874,403      801,956     1,438,119
Shares issued                                  -            -       568,569
Treasury shares repurchased               (1,971)     (10,072)      (10,071)
Vesting of treasury shares                     -        8,207             -
Antecedent distribution                        -            -        26,029
Share-based payment reserve                2,155        2,654         4,340
Distribution attributable to 
shareholders                            (570,356)    (521,781)   (1,088,134)

Share capital and reserves at the 
end of the period                     13,313,092   12,350,973    13,008,861

                                        6 months     6 months          Year
                                           ended        ended         ended
CONDENSED CONSOLIDATED STATEMENT      30.06.2018   30.06.2017    31.12.2017 
OF CASH FLOWS (R000)                   Unaudited    Unaudited       Audited

Operating profit before working 
capital changes                          735,650      661,670     1,374,678
Working capital changes                   11,344      (19,032)       17,230
Cash generated from operations           746,994      642,638     1,391,908
Operating activities changes            (791,293)    (700,471)   (1,450,793)
 Interest received                        44,981       35,650        78,415
 Interest paid                          (265,375)    (214,091)     (440,868)
 Taxation paid                              (543)        (249)         (206)
 Distributions paid                     (570,356)    (521,781)   (1,088,134)
Net cash outflows from operating 
activities                               (44,299)     (57,833)      (58,885)
Net cash outflows from investing 
activities                              (407,792)    (524,276)   (1,736,245)
Net cash inflows from financing 
activities                               344,450      548,483     1,879,204
 Increase in borrowings                  271,448      550,348     1,204,486
 Issue of new shares                           -            -       594,598
 Treasury shares repurchased              (1,971)     (10,072)      (10,071)
 Loan from non-controlling shareholder    74,973            -        90,191
 Vesting of treasury shares                    -        8,207             -
Net (decrease)/increase in cash and 
cash equivalents                        (107,641)     (33,626)       84,074
Cash and cash equivalents at the 
beginning of period                      275,454      191,380       191,380

Cash and cash equivalents at the end 
of period                                167,813      157,754       275,454

NOTES

The condensed consolidated interim financial statements are prepared in accordance with the JSE Limited Listings Requirements, 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. In the current year the Group has adopted all of the revised Standards and Interpretations issued that are 

relevant to its operations and effective for accounting periods beginning on or after 1 January 2018. The adoption of these Standards and Interpretations has not resulted in any 

adjustment to the amounts previously reported for the year ended 31 December 2017. The results and prospects have been compiled under the supervision of AM Basson CA(SA), the 

financial director, but have not been audited nor reviewed by the Group's auditors, Deloitte & Touche.

1. Reconciliation of profit after tax to headline earnings and distributable earnings attributable to shareholders

                               6 months        6 months             Year
                                ended            ended              ended
                             30.06.2018       30.06.2017         31.12.2017
                              Unaudited        Unaudited           Audited
                            R 000    cps     R 000    cps      R 000    cps

Profit after taxation 
attributable to 
shareholders              772,310 30.52*   845,097 34.96*  1,525,629 61.68*
Adjustments for:
 Capital loss/(profit) on 
 disposal of investment 
 properties and property, 
 plant and equipment        3,664           (2,058)            8,430
 Revaluation of 
 investment properties 
 and joint ventures      (220,870)        (317,111)         (475 794)

Headline earnings         555,104 21.93*   525,928 21.76*  1,058,265 42.79*
Antecedent distribution         -                -            26,029
Taxation on 
distributable income       (1,740)           8,906             3,396
Depreciation                3,197            1,683             4,126
Foreign exchange 
adjustments                61,833          (17,974)          (37,176)
Dividend from 
investment in listed      
shares not yet declared    (1,959)               -             7,645
Revaluation of listed 
shares                      1,340           13,860            34,540
Non-distributable expenses  9,341           12,010            18,401
Revaluation of swap 
derivatives               (34,202)          41,286            52,380
Straight line rental 
adjustment                (44,146)         (45,062)          (31,387)
Non-distributable 
expenses on investment 
in joint ventures             270              382               491

Distributable earnings 
attributable to 
shareholders              549,038  21.70   541,019  22.38  1,136,710  44.92
 Interim                  549,038  21.70   541,019  22.38    566,355  22.38
 Final                          -      -         -      -    570,355  22.54

* calculated on weighted number of shares in issue and excludes non-controlling interest.

2. Primary operational segments for the 6 months ended 30.06.2018 (R000)

Business       Industrial    Retail   Commer-     Afhco  Storage      Group
segment                                  cial     

Revenue           345,465   470,889    59,660   283,644   10,783  1,170,441

Rental income 
(excluding 
straight line 
rental 
adjustment)       259,211   281,616    47,577   235,033   10,751    834,188
Net property 
expenditure       (15,994)   (3,560)   (9,961)  (62,517)  (6,154)   (98,186)
 Property 
 expenses         (73,214) (176,048)  (24,040) (110,805)  (6,186)  (390,293)
 Recovery of 
 property 
 expenses          57,220   172,488    14,079    48,288       32    292,107

Net property 
income            243,217   278,056    37,616   172,516    4,597    736,002
Straight line 
rental adjustment  29,034    16,785    (1,996)      323        -     44,146
Net interest 
expense                 -         -         -         -        -   (200,655)
Dividends from 
investments in 
listed shares           -         -         -         -        -      8,859
Foreign exchange 
adjustments             -         -         -         -        -    (61,351)
Group expenses          -         -         -         -        -    (38,473)
Profit from 
investments in 
joint ventures          -         -         -         -        -     37,290
Revaluation of 
investment 
properties         37,555   111,983    (1,448)   65,529    1,626    215,245
 Investment 
 properties        66,589   128,768    (3,444)   65,852    1,626    259,391
 Straight line 
 rental 
 adjustment       (29,034)  (16,785)    1,996      (323)       -    (44,146)
Revaluation of 
swap derivatives        -         -         -         -        -     34,202
Revaluation of 
investment in 
listed shares           -         -         -         -        -     (1,340)
Capital loss on 
disposal of 
investment 
properties and 
property, plant 
and equipment           -         -         -         -        -     (3,664)
Taxation                -         -         -         -        -      1,740
Profit after 
taxation          309,806   406,824    34,172   238,368    6,223    772,001
Other 
comprehensive 
income, net of 
taxation                -         -         -         -        -    102,402
Total 
comprehensive 
income            309,806   406,824    34,172   238,368    6,223    874,403
Profit after 
taxation 
attributable to:
 Owners of the 
 company          309,806   406,824    34,172   238,677    6,223    772,310
 Non-controlling 
 interest               -         -         -      (309)       -       (309)
Total profit 
after taxation    309,806   406,824    34,172   238,368    6,223    772,001

Other          Industrial    Retail   Commer-     Afhco  Storage      Group
information                              cial

Properties 
(excluding 
straight line 
rental 
adjustment):    4,832,171 7,360,575   999,900 4,228,850  119,335 17,540,831
Non-current 
investment 
property        4,292,889 7,209,406   894,489 4,196,011  119,335 16,712,130
 At valuation   4,086,059 6,623,275   858,300 3,864,650  119,335 15,551,619
 Straight line 
 rental 
 adjustment      (105,161) (150,169)  (18,911)  (19,239)       -   (293,480)
 Under 
 development      311,991   736,300    55,100   350,600        -  1,453,991
Non-current 
investment 
property held 
for sale          429,456     1,000    85,426    13,171        -    529,053
 Classified as 
 held for 
 disposal         434,121     1,000    86,500    13,600        -    535,221
 Straight line 
 rental 
 adjustment        (4,665)        -    (1,074)     (429)       -     (6,168)

 Other assets     184,777   359,475    51,999    80,915   12,617  3,056,647
 Total assets   4,907,122 7,569,881 1,031,914 4,290,097  131,952 20,297,830
 Total 
 liabilities       67,096   147,862    25,330   419,103    6,348  6,984,738

Acquisitions and 
improvements       17,585   211,707    15,744   449,469    1,641    696,146

Segmental      Industrial    Retail   Commer-     Afhco Storage1      Group
growth rates                             cial
(%)

Rental income 
(excluding straight 
line rental 
adjustment)           1.9       3.7      (0.6)     55.4      n/a       15.1
Property expenses     7.7      13.4      (1.3)     44.5      n/a       20.3
Recovery of 
property expenses    23.0       4.1      (8.0)      5.4      n/a        6.9
Net property 
income                4.5      (1.4)     (3.1)     43.3      n/a        9.2

Above table reflects the position inclusive of the non-controlling interest.
1 The Storage portfolio has no comparatives as it became operational on 1 July 2017.

3. Fair value measurement

The swap derivatives are valued based on the discounted cash flow method. Future cash flows are estimated based on forward exchange and 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. The investment in listed shares is valued at the quoted market 

price. The investment in JV’s is valued at the ownership of the underlying JV’s net asset value. The fair value of the investment property is determined by an independent registered valuer. 

The fair value of the industrial, retail, commercial and storage portfolio of investment properties, excluding properties subject to unconditional contracted sales, is based on the 

discounted cash flow method. The fair value of the inner-city retail, residential and commercial investment properties is based on the capitalisation of the net income earnings. 

The discounted cash flow method is not appropriate due to the short term nature of the portfolio's leases.

The financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observable. The table below analyses assets that are measured at fair value.

Investments in listed shares        Level 1
Swap derivatives                    Level 2
Investment in JV’s                    Level 3
Investment property                 Level 3

There were no transfers between the levels. 

4. Capital commitments

The Group had capital commitments of R 2 372,2m (December 2017: R2 619,6m).

5. Dividends and events after the reporting period

The Company has declared a distribution of 21.70 cps on 4 September 2018. The directors are not aware of other significant events between the end of the financial period under review and 

the date of this report.

DISTRIBUTION DECLARATION AND IMPORTANT DATES

Notice to shareholders resident South Africa

Notice is hereby given of the declaration of distribution no.7 in respect of the income distribution period 1 January 2018 to 30 June 2018. The distribution amounts to 21.70 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 22 February 2017, any distribution received by a non-resident from a REIT is subject to dividend withholding tax at 20%, 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 20%, the net dividend amount due to non-resident shareholders is 17.3600 cps. 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. 2,530,689,337 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, 2 October 2018
Shares will trade ex-distribution                 Wednesday, 3 October 2018
Record date to participate in the distribution    Friday, 5 October 2018
Payment of distribution                           Monday, 8 October 2018

Share certificates may not be dematerialised or re-materialised between Wednesday, 3 October and Friday, 5 October 2018 both days inclusive.

By order of the Board

DIRECTORATE AND STATUTORY INFORMATION

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
Rosebank Towers 
15 Biermann Avenue
Rosebank
2196

Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
135 Rivonia Road
Sandton
2196

Directors: J Molobela (Chairman), TR Mackey (Managing)*, AM Basson (Finance)*, RJ Biesman-Simons, A Chowan, GP Dingaan, EM Hendricks, MA Moloto, ES Seedat

* Executive

Kilgetty Statutory Services Proprietary Limited
Company Secretary
4 September 2018

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