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CPL
CPL
CPL - Capital Property Fund - Audited Results And Income Distribution
Declaration For The Year Ended 31 December 2007
Capital Property Fund
("Capital" or "the Fund" or "the Group")
Share code: CPL
ISIN: ZAE000001731
(A portfolio in Capital Property Trust Scheme, a Collective Investment Scheme in
Property established in terms of the Collective Investment Schemes Control Act,
No 45 of 2002 managed by Property Fund Managers Limited ("PFM"))
(Incorporated in the Republic of South Africa)
(Registration No. 1980/009531/06)
AUDITED RESULTS AND INCOME DISTRIBUTION DECLARATION FOR THE YEAR ENDED 31
DECEMBER 2007
BALANCE SHEET
GROUP GROUP
AUDITED AUDITED
31 Dec 31 Dec
2007 2006
R`000 R`000
ASSETS
Non-current assets 3 211 420 2 124 165
Investment property 3 009 277 2 082 627
Straight-lining of rental income 46 020 23 395
adjustment
Investment property under development 31 981 18 143
Investment in associate company 124 142 -
Current assets 45 440 175 579
Investment property held for sale 30 463 154 346
Straight-lining of rental income 287 3 569
adjustment
Trade and other receivables 14 476 17 504
Cash and cash equivalents 214 160
Total assets 3 256 860 2 299 744
EQUITY AND LIABILITIES
Capital of Fund 2 826 755 1 743 089
Trust capital 1 382 567 909 060
Non-distributable reserves 1 444 188 805 723
Retained earnings - 28 306
Total liabilities 430 105 556 655
Non-current liabilities 252 053 255 680
Interest-bearing borrowings 196 491 212 686
Deferred tax 55 562 42 994
Current liabilities 178 052 300 975
Trade and other payables 46 978 206 824
Unitholders for distribution 109 803 76 315
Income tax payable 2 279 1 188
Bank overdraft 18 992 16 648
Total equity and liabilities 3 256 860 2 299 744
INCOME STATEMENT
GROUP GROUP
AUDITED AUDITED
31 Dec 31 Dec
2007 2006
R`000 R`000
Net rental and related income 242 260 172 497
Recoveries and contractual rental income 299 773 235 192
Straight-lining of rental income 18 000 3 463
adjustment
Rental income 317 773 238 655
Property operating expenses (75 513) (66 158)
Profit on disposal of investment property 42 784 4 496
Fair value gains on investment property 528 688 404 912
Fair value gain on investment property 546 688 408 375
Fair value adjustment resulting from (18 000) (3 463)
straight-lining of rental income
adjustment
Administrative expenses (15 961) (12 587)
Profit before net finance costs 797 771 569 318
Net finance income/(costs) 1 851 (12 342)
Finance income
Fair value adjustment on interest rate 4 907 -
swaps
Interest received - 1 218
Interest on units issued cum 14 114 2 818
distribution
Finance costs
Interest on borrowings (17 170) (14 649)
Fair value adjustment on interest rate - (1 729)
swaps
Share of profit of equity-accounted 1 147 -
investment
Profit before income tax 800 769 556 976
Income tax expense (14 847) (19 775)
Profit for the year attributable to 785 922 537 201
equity holders
Basic earnings per unit (cents)* 159,69 136,92
Headline earnings per unit (cents)* 46,59 37,61
*The Fund does not have any dilutionary instruments in issue.
ABRIDGED STATEMENT OF CASH FLOW
GROUP GROUP
AUDITED AUDITED
31 Dec 31 Dec
2007 2006
R`000 R`000
Net cash (outflow)/inflow from operating (119 611) 191 353
activities
Cash outflow from investing activities (370 618) (411 725)
Cash inflow from financing activities 487 939 213 472
Decrease in cash and cash equivalents (2 290) (6 900)
Cash and cash equivalents at beginning of (16 488) (9 588)
year
Cash and cash equivalents at end of year (18 778) (16 488)
Cash and cash equivalents consist of:
Overdraft (18 992) (16 648)
Current accounts 214 160
PROFIT DISTRIBUTIONS
Amount available for distribution per 41,89 37,15
unit (cents)
Distribution per unit (cents) 41,89 37,15
- Interim 20,10 18,13
- Final 21,79 19,02
The final distribution of 21,79 cents, being number 49 for
Capital Property Fund, has been declared in respect of the income
distribution period 1 July 2007 to 31 December 2007.
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND
DISTRIBUTABLE INCOME
GROUP GROUP
AUDITED AUDITED
31 Dec 31 Dec
2007 2006
R`000 R`000
Basic earnings 785 922 537 201
Adjusted for: (556 625) (389 633)
- fair value gain on investment property (528 688) (404 912)
- profit on disposal of investment (42 784) (4 496)
property
- income tax effect 14 847 19 775
Headline earnings 229 297 147 568
Reconciliation of profit for the year to
amount available for distribution
Profit for the year 785 922 537 201
Transfer to non-distributable reserves (556 625) (389 633)
Straight-lining of rental income (18 000) (3 463)
adjustment
Fair value (gain)/loss on interest rate (4 907) 1 729
swaps
Distributable income 206 390 145 834
Distributions declared 206 390 145 834
Interim 96 587 69 519
Final 109 803 76 315
STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Non-
distri-
Trust butable Retained
capital reserve earnings Total
GROUP - AUDITED R`000 R`000 R`000 R`000
Balance at 31 December 832 737 422 315 24 843 1 279
2005 895
Profit for the year 537 201 537 201
Issue of units
17 785 714 units on 27 71 827 71 827
December 2006
Transfer to non-
distributable ?reserves
Fair value adjustment to (1 729) 1 729 -
interest rate swap
Property revaluations 385 137 (385 -
137)
Transfer to Trust capital 4 496 (4 496) -
Distribution (145 (145
834) 834)
Balance at 31 December 909 060 805 723 28 306 1 743
2006 089
Profit for the year 785 922 785 922
Issue of units
15 678 887 units on 4 71 026 71 026
April 2007
3 580 628 units on 13 16 220 16 220
April 2007
8 347 461 units on 30 38 570 38 570
April 2007
51 690 052 units on 15 259 878 259 878
June 2007
23 269 230 units on 27 118 440 118 440
September 2007
Transfer to non-
distributable reserves
Transfer of prior year 28 306 (28 306) -
straight-line adjustments
Transfer of prior periods (30 627) 30 627 -
profit and loss on
disposal of investment
property
Fair value adjustment to 4 907 (4 907) -
interest rate swap
Property revaluations 531 841 (531 -
841)
Profit on disposal of 42 784 (42 784) -
investment property
Distribution (206 (206
390) 390)
Balance at 31 December 1 382 1 444 - 2 826
2007 567 188 755
SEGMENTAL INFORMATION
AUDITED Retail Commercia Industria Corporat Total
l l e
R`000 R`000 R`000 R`000 R`000
Segmental
revenue -
rental income
2007 58 731 127 078 131 964 - 317 773
2006 86 218 77 505 74 932 - 238 655
Profit for the
period
2007 132 589 314 944 369 028 (30 639) 785 922
2006 173 919 219 232 189 341 (45 291) 537 201
CAPITAL COMMITMENTS
GROUP GROUP
2007 2006
R`000 R`000
Authorised and contracted 3 058 134 920
Authorised and not yet contracted 82 209 1 300
COMMENTARY
The directors of Property Fund Managers Limited, the management company of
Capital, announce the audited consolidated results of the Fund for the year
ended 31 December 2007.
1 PREPARATION AND ACCOUNTING POLICIES
The summarised consolidated audited financial statements have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS) and the presentation and disclosure
requirements of IAS 34, the requirements of the Companies Act of South Africa
(Act 61 of 1973) and the Collective Investment Schemes Control Act. KPMG Inc.
has audited the financial information set out in this report. Their unqualified
audit report is available for inspection at the Fund`s registered office.
2 TOTAL DISTRIBUTION
Distributions for the twelve months ended 31 December 2007 amounted to 41,89
cents per unit (2006: 37,15 cents). This was divided between the interim
distribution of 20,10 cents for the six months ended 30 June 2007, (2006: 18,13
cents) and the final distribution of 21,79 cents for the six months ended 31
December 2007 (2006: 19,02 cents). The total distribution represents growth of
12,76% over the distribution for the year ended 31 December 2006.
3 PORTFOLIO COMMENTARY
Introduction
The past three financial years were dominated by aggressive asset management to
reduce the risk profile of the property portfolio and to improve the long-term
growth prospects of the Fund. Active asset management of the property portfolio
will continue to ensure that the properties remain suitable to the strategy of
the Fund in an ever-changing environment and keep the growth profile of the Fund
intact.
To further enhance growth and by utilising property development skills available
within the group, management is also evaluating new industrial developments as
higher yields can be achieved on new developments.
Capital has taken transfer of the majority of the Fedbond property portfolio
purchased in 2006. Three properties, Parkmore Mews, 709 Richards Drive Midrand
and 99 Tsessebe Crescent contained warranties which have not been complied with.
Capital has not taken transfer of the properties and is unlikely to do so in the
foreseeable future.
The total value of Capital`s property portfolio at year-end was R3,1 billion, an
increase of R836 million over the 2006 value.
Sectoral breakdown
At the end of December 2007, the sectoral spread of the portfolio by rental was
Eastern Cape 3,5%, Gauteng 61,7%, Kwazulu-Natal 7,4%, Limpopo 3,7% and Western
Cape 23,7%. The sectoral spread based on valuation was Industrial 43,6%,
Commercial 41% and Retail 15,4%.
Vacancies at 31 December 2007
Vacant space in the portfolio at the end of 2007 equated to 1,7% of the total
rental. The bulk of the vacancy relates to Houer Road, which was purchased
vacant prior to year end, with the purpose of redevelopment.
Property acquisitions and initiatives in 2007
A total of 20 properties were purchased during the financial year, comprising A
grade industrial and commercial properties. The new purchases are all situated
in nodes sought after by corporate tenants and have solid growth prospects going
forward.
Capital acquired the following properties in 2007:
Price Dec 2007
Name R`000 Valuatio Location GLA
n
Nokia Siemens Network 121 000 121 600 Centurion 11 700
Leeuwkop Road 98 657 110 445 Sunninghill 8 558
Albert Amon Road 50 519 57 400 Meadowdale 7 386
City Deep Hi-Tech 46 000 54 525 City Deep 18 125
33 Angus Crescent 43 514 47 100 Longmeadow 7 503
Platinum Road 40 068 44 675 Longmeadow 7 985
86 Tsessebe Crescent 27 661 31 400 Corporate 6 362
Park
Cnr Director and Megawatt 29 278 30 700 Spartan 5 216
Road
Cavora Road 28 700 28 800 Jet Park 9 799
Citrus Street 24 193 27 300 Laser Park 6 833
Burry Koen 25 376 25 800 Jet Park 10 028
Ayshire Avenue 21 604 24 800 Longmeadow 4 912
Cranberry Street 18 856 22 400 Laser Park 5 379
Milkyway Road 19 359 19 850 Crown 3 865
45 Angus Crescent 16 471 19 000 Longmeadow 4 064
Koornhof Road 16 511 17 200 Meadowdale 3 027
Houer Road 14 300 15 500 City Deep 5 584
Megawatt Road 14 243 15 000 Spartan 2 710
McCarthy Isando 12 497 13 300 Isando 4 320
Director Road 8 600 9 000 Spartan 1 600
677 407 735 595 134
956
The N1 Business Park industrial joint venture development consisting of 38
hectares of prime industrial land, in which Capital has a 20% interest, is
continuing. The installation and construction of services, roads, the park
entrance and the boundary fence is complete. The first building of 7 905 m2 has
been completed and leased on a 12-year lease to BPB Gypsum, part of the St
Gobain Group. The second building is in the process of being completed and it is
anticipated that a lease will be concluded soon. A lease on a third building of
2 100 m2, yet to be constructed, has been concluded and let for ten years to
Elanco.
In addition to the investments in fixed property, Capital invested an amount of
R123 million in New Europe Property Investments PLC, a property fund listed on
AIM, the alternate market of the London Stock Exchange. The investment is
anticipated to yield 7% in Euros for the 2008 financial year.
Property sales in 2007
In total, 18 properties were disposed of during the course of 2007, of which 16
transferred for a combined value of R273,9 million as part of the disposal by
Capital of non-strategic properties. The net profit on disposal which amounted
to R42,8 million has been transferred to non-distributable reserves.
Details of property disposals
Book value Net
31 Dec 2006 proceeds
Name R`000 R`000
Kuils River 45 300 56 675
The Ridge 38 000 40 900
Sifon Park 18 400 22 746
Alberton Crossing 16 800 20 153
Arbeid Street 14 500 15 685
Edgars Bellville 14 100 15 327
Vana Road 13 700 17 295
Pick `n Pay Kroonstad 12 250 13 635
Shoprite Westonaria 9 250 10 316
New Road 9 200 11 138
Eastgate Mini Factories 8 200 8 177
139 6th Street 7 700 10 252
9 Grenville 6 600 8 368
Sales House Johannesburg 5 800 11 207
Checkers Standerton 5 698 6 222
66 Silverstone Crescent 5 629 5 815
231 127 273 911
Sales not yet transferred
Somerset West 18 656 20 500
Palm Centre 10 000 10 250
28 656 30 750
Extensions and refurbishments
Capital commenced or completed various construction and refurbishment projects
during 2007. The central air-conditioning system at Long Street, Cape Town is
being upgraded at an estimated cost of R20,4 million. This, as well as the 2006
conversion of office space to parking, has resulted in the property being
virtually fully let. The air-conditioning system at Grand Central Shopping
Centre, Cape Town, was upgraded at a cost of R2,8 million for the Department of
Education. The transformer at Mutsindo Mall, Thohoyandou was upgraded at a cost
of R1,3 million. This provides sufficient additional power to attract national
tenants that appeal to the aspirational market of Thohoyandou.
Summary of financial performance
31 Dec 30 Jun 2007 31 Dec 30 Jun 2006
2007 2006
Distribution per
unit (cents) 21,79 20,10 19,02 18,13
Units in issue 503 801 480 531 928 401 234 383 449 186
158 900
Net asset value 5,61 4,53 4,34 3,34
Gearing ratio* 10,2% 4,0% 15,9% 10,3%
*The gearing ratio is calculated by dividing the total gearing
(interest-bearing borrowings plus current liabilities less
current assets) by non-current assets.
Gearing
Nominal Swap
amount rate
Swap maturity R`000
August 2008 50 000 9,70%
October 2009 50 000 9,22%
October 2010 50 000 9,19%
Hedged borrowings 150 000
Lease expiry profile
Lease expiry (based on contractual rental
income)
Vacant 1,7%
December 2008 18,8%
December 2009 21,8%
December 2010 28,8%
December 2011 6,1%
December 2012 16,4%
Thereafter 6,4%
Total 100%
4 PORTFOLIO VALUATION
The property portfolio, was valued by Peter Parfitt of Quadrant Properties
(Proprietary) Limited, Professional Associated Valuer. Dip. Val MIV (SA)
Registration No: 2712/2.
The portfolio value is R3,1 billion as at 31 December 2007.
5 PROSPECTS
Capital`s growth prospects remain strong with positive rental reversions for
renewals anticipated in the 2008 and 2009 financial years.
Going forward, Capital will continue to partner with developers in the
commercial and industrial sectors in order to gain access to A grade
developments. In addition management is looking to redevelop a number of
existing properties as well as to purchase land in order to undertake industrial
developments.
6 INCOME DISTRIBUTION
Notice is hereby given that a cash distribution of 21,79 cents per unit (the
distribution) has been declared payable to the unitholders recorded in the books
of Capital at the close of business on the record date, 22 February 2008.
Unitholders are advised that the last day to trade "cum" distribution will be 15
February 2008. The units will trade "ex" the distribution as from 18 February
2008. Payment will be made on 25 February 2008. Unit certificates may not be
dematerialised or rematerialised during the period 18 February 2008 to 22
February 2008, both days inclusive.
By order of the Board
Andrew Teixeira Andries de Lange
Managing director Financial director
Johannesburg
31 January 2008
Directors: Willy Ross (chairman)*, Rowland Chute*, Jorge da Costa*, Des de Beer,
Andries de Lange, Protas Phili*, Paul Pretorius, Barry Stuhler#, Andrew Teixeira
(managing), Thsiamo Vilakazi*, Tracey Visser.
* Independent non-executive #Non-independent non-executive
Company secretary: Abraham Bornman
Register office: 4th Floor, Rivonia Village, 3 Mutual Road, Rivonia, 2191 (PO
Box 2555, Rivonia, 2128).
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshall Town,
2107).
Sponsor
Java Capital (Proprietary) Limited
Date: 31/01/2008 17:12:19 Produced by the JSE SENS Department.
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