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SAC
SAC
SAC - SA Corporate Real Estate Fund - Unaudited Interim Results And Distribution
Declaration 30 June 2008
SA CORPORATE REAL ESTATE FUND
Share code: SAC & ISIN code: ZAE000083614
www.sacorp.co.za
UNAUDITED INTERIM RESULTS AND DISTRIBUTION DECLARATION 30 JUNE 2008
Portfolio value now R9 billion
- Premier industrial portfolio
- Net tangible asset value of 385 cents
Excellent occupancy levels
- <3% of lettable space vacant
- Industrial portfolio fully let
Low debt risk
- all debt fixed
- 15% of asset value
14.5 Interim distribution
- 14.5 cents per unit
- Historic yield > 10% on current price
The directors of SA Corporate Real Estate Fund Managers Limited, management
company of SA Corporate Real Estate Fund (SA Corporate), submit their report on
the unaudited results of the SA Corporate group (the Fund) for the six months
ended 30 June 2008.
1. Results and Fund investment performance
Distributable earnings for the six months amount to R306 million (2007: R276
million). The distribution of 14.50 cents per unit for the 6 months under review
is in line with management`s expectations for the period. The industrial
component of the property portfolio has continued to perform well in a firm
industrial property market, underpinned by low vacancies and good demand for
modern, well located facilities. Similarly the office portfolio, although small
in the context of the total portfolio, has performed satisfactorily. The retail
portfolio, however, is under pressure in challenging conditions, influenced by a
variety of factors impacting on consumer spend and letting of space.
SA Retail Properties Limited, including the Sharemax portfolio, was acquired
with effect from 19 April 2007, and the bulk of the Buffcol properties were
transferred in the fourth quarter of 2007. Net income from these investments is
only included in net profit from the effective date of each transaction.
The breakdown of distributable earnings is set out below:
6 months to 6 months to 12 months to
30.06.2008 30.06.2007 31.12.2007
DISTRIBUTABLE EARNINGS (R000) Unaudited Unaudited Audited
Rent (excluding straight line
adjustment) 388,469 210,227 576,832
Net property expenses (31,724) (19,198) (51,595)
Property expenses (128,484) (67,698) (187,834)
Recovery of property expenses 96,760 48,500 136,239
Net property income 356,745 191,029 525,237
Interest income from associate
company (Oryx) 5,999 - 6,310
Net funding cost (34,738) (34,338) (64,895)
Interest received 9,530 3,304 12,725
Interest paid (44,268) (37,642) (77,620)
Fund expenses (22,084) (15,191) (38,880)
Distribution contributions 162 134,818 191,606
Pre-acquisition dividend received
(SA Retail pre acquisition earnings) - 124,476 124,476
Prepaid distribution received in
advance on unit issues 162 10,342 67,130
Distributable earnings 306,084 276,318 619,378
Units in issue 2,110,925,891 1,625,398,610 2,089,335,506
Distribution (cents per unit) 14.50 17.00 32.00
- Interim 14.50 14.60 14.60
- Interim SA Retail once
off contribution N/A 2.40 2.40
- Final N/A N/A 15.00
2. Revaluation
The full portfolio was independently valued by CBRE and ACRES on a discounted
cash flow basis at 30 June 2008, at R9,0 billion. This resulted in an upward
fair value adjustment of R179 million. The standing portfolio saw an increase in
value of 3.4% since 1 January 2008, with the industrial portfolio showing good
capital growth of 9.4%. The retail portfolio`s value is flat on December 2007.
The forward yields and internal rates of return (IRR`s) of the three property
types in the Fund`s standing portfolio at 30 June 2008, calculated on a weighted
basis are as follows:
Property type Initial (forward) yield IRR
Retail 8.9% 14.1%
Offices 8.7% 15.6%
Industrial 7.9% 15.3%
Total 8.5% 14.6%
This valuation gives rise to a net tangible asset value (NTAV) of 385 cents per
unit, inclusive of the distribution to be paid (2007: 353 cents per unit). At
the closing price of 247 cents per unit on 30 June 2008, the units were trading
at a 36% discount to NTAV, and despite recent strengthening in the listed
property market, the units continue to trade at a discount of over 20%.
3. Portfolio investment activity
The current market pricing of property investment opportunities, together with
the cost of funding thereof, would have resulted in acquisition activity being
earnings dilutive and accordingly there have been no acquisitions or
developments during the period under review other than those reported in the
results announcement released on 25th February 2008 and set out below:
Date Property Total cost Yield Sector Region
completed R`000
February 2008 13 Wellington Road 40,770 8.15% Office Gauteng
(Buffcol property)
May 2008 Nzhelele Shopping 41,300 9.50% Retail Other
Centre* - Polokwane
May 2008 1 Holwood Park, 119,000 11.00% Office KZN
La Lucia
201,070
Expected
completion
date
July 2008 Philani Valley 118,000 8.50% Retail KZN
Centre*#
October 2008 Renbro Centre* 106,200 9.00% Retail Other
- Hammanskraal
September 2008 Fuel Group 45,300 9.25% Industrial Gauteng
- Jet Park#
October 2008 Bell Equipment 142,000 9.50% Industrial Gauteng
- Jet Park#
December 2008 Unipark 56,600 11.00% Office Other
Bloemfontein - Bloemfontein
November 2008 Paarden Eiland# 66,300 9.50% Industrial Western Cape
534,400
* Denotes investments into previously disadvantaged areas
# Commenced during 2007
One property, 2 Nereide Street in Paarden Eiland, had been disposed of by 30
June 2008, for an amount of R18 million. The sale of Cnr Anvil and Industry
Roads is unconditional and awaits transfer and the sale of 22 Chancery Lane
Pinetown is currently being concluded. These properties have been valued at
their estimated net disposal proceeds and are classified as held for disposal.
The sectoral and geographic weightings at 30 June 2008 are set out below:
Industrial
34%
R3,0b
106 props
720 829m2
Retail
57%
R5,1b
54 props
605 083m2
Offices and other
9%
R0,9b
31 props
89 978m2
Western Cape
10%
R0,9b
23 props
131 612m2
KwaZulu Natal
45%
R4,0b
87 props
600 148m2
Gauteng
41%
R3,7b
76 props
635 780m2
Other
4%
R0,4b
5 props
48 350m2
4. Lease expiries and vacancies
The lease expiry of the respective components of the property portfolio by area
is as follows:
Property type Vacancies 2008 2009 2010 2011 Thereafter
Retail 4.1% 18.7% 15.5% 10.8% 12.7% 38.2%
Offices 10.5% 1.7% 10.3% 27.1% 20.7% 29.7%
Industrial 0.0% 8.9% 11.3% 29.5% 15.7% 34.6%
Portfolio total 2.4% 12.7% 13.1% 21.3% 14.8% 35.7%
Vacancies at 30 June 2008 of 2.4% of lettable space or 4.0% of total income are
much in line with those at year end (2007: 2.7% and 3.9% respectively) and are
set out in detail below:
Property type % of area % of total rental
Retail 4.1% 3.4%
Offices 10.5% 0.6%
Industrial 0.0% 0.0%
Portfolio total 2.4% 4.0%
5. Borrowings
Debt has been used to fund all investments during the period under review, with
the exception of the last Buffcol property. The debt profile is set out below:
Type Maturity Fix expiry Quantum Current
(Rm) Rate
Floating -
Fixed - straight 31.10.2015 13.09.2013 100 10.57%
Fixed - straight 31.12.2012 31.12.2012 500 10.82%
Fixed - stepped * 18.09.2014 30.04.2013 300 10.57%
Fixed - stepped * 18.09.2014 05.06.2013 400 10.98%
Total 1,300 10.79%
* The interest cost increases by 6% per annum.
The debt level, at 15% of the total property portfolio value at 30 June 2008, is
low relative to industry norms. Interest rate swaps have been entered into, in
order to convert variable interest exposure to fixed rates, resulting in a fair
value adjustment of R17 million at 30 June 2008, which has been taken straight
to equity. Consequently, all borrowings are at fixed rates.
6. Units issued and liquidity
The last remaining Buffcol property was transferred during the first quarter and
this property, along with one which was transferred just before year end, was
funded through the issue of 21 590 385 new units as per the contractual
arrangements concluded last year. No further units have been issued.
SA Corporate remains one of the most traded funds, with R0.7 billion trading in
the 6 months to 30 June 2008.
7. BEE & Transformation
Listed property prices have fallen sharply in 2008 and, as a consequence of the
lower SA Corporate unit price, the ownership of the Wipken Trust passed from the
BEE parties to the funders of the Trust. The various parties continue to pursue
avenues to revive the BEE equity ownership in the Fund. Mr Musa Ngcobo and Ms
Louisa Mojela have remained on the Board.
8. Prospects
The industrial and office letting markets are expected to remain buoyant.
However, the more difficult retail trading conditions are expected to continue
over the short to medium term and may adversely influence turnover rentals,
rental renewal levels, vacancies and bad debts in the Fund`s retail centres.
This, together with the higher cost of debt funding, is expected to impact on
the Fund`s performance, albeit not materially.
30.06.2008 30.6.2007 31.12.2007
CONSOLIDATED BALANCE SHEET (R000) Unaudited Unaudited Audited
Assets
Non-current assets
Investment property 8,641,169 6,524,782 8,241,267
As per valuation 8,772,092 6,677,855 8,401,198
Straight line rental adjustment (130,923) (153,073) (159,931)
Property under development 126,350 6,857 50,067
Investment in associate 171,626 - 168,954
Goodwill 1,009,143 1,008,761 1,009,094
Interest rate swap derivative 16,990 - -
Rental receivable - straight line
adjustment 113,607 135,656 121,853
Current assets 586,695 785,873 244,573
Properties classified as held for
disposal 57,150 448,950 18,000
Trade receivables and accrued interest 145,107 118,949 123,615
Rental receivable - straight line
adjustment 17,316 17,417 38,078
Cash resources and short term
investments 367,122 200,557 64,880
Total assets 10,665,580 8,461,929 9,835,808
Unitholders` funds and liabilities
Unitholders` funds 8,699,335 6,309,784 8,433,253
Non-current liabilities 1,603,250 1,022,492 982,505
Interest bearing borrowings 1,300,000 742,096 667,960
Deferred capital gains taxation 303,250 280,396 314,545
Current liabilities 362,995 1,129,653 420,050
Trade and other payables 40,880 852,638 90,945
Capital gains taxation and secondary
taxation on companies 15,033 65 15,033
Unclaimed distributions 998 632 767
Distributions payable 306,084 276,318 313,305
Total unitholders` funds and
liabilities 10,665,580 8,461,929 9,835,808
6 months to 6months to 12 months to
30.6.2008 30.6.2007 31.12.2007
CONSOLIDATED INCOME STATEMENT (R000) Unaudited Unaudited Audited
Revenue 456,220 274,169 735,371
Income 471,749 277,473 754,406
Rent 388,469 210,227 576,832
Straight line rental adjustment (29,009) 15,442 22,300
Recovery of property expenses 96,760 48,500 136,239
Interest income from associate company 5,999 - 6,310
Interest 9,530 3,304 12,725
Expenses (194,836) (120,531) (304,334)
Accounting and secretarial fees (4,614) (2,276) (7,934)
Audit fees (472) (800) (1,109)
Administrative fees (1,449) (1,104) (2,958)
Interest paid (44,268) (37,642) (77,620)
Property administrative fees (14,763) (7,774) (21,360)
Property expenses (113,721) (59,924) (166,474)
Service fees (15,549) (11,011) (26,879)
Share of associate company`s after
tax profit 2,672 - -
Deferred taxation on straight line
rental adjustment 5,164 (346) (17,006)
Headline earnings 284,749 156,596 433,066
Capital surplus/(deficit) on disposal
of investment property 24 (987) (5,388)
Write up on revaluation of investment
property 178,892 312,286 721,624
Revaluations 149,883 327,728 743,924
Straight line rental adjustment
valuation 29,009 (15,442) (22,300)
Taxation on property revaluation 6,131 (27,938) (60,659)
On capital transactions 11,295 (28,284) (77,665)
Straight line rental adjustment (5,164) 346 17,006
Net profit attributable to unitholders 469,796 439,957 1,088,643
Units in issue (000) 2,110,926 1,625,399 2,089,336
Weighted units in issue (000) 2,107,213 1,040,744 1,457,525
Cents Cents Cents
Distribution per unit 14.50 17.00 32.00
Net profit per unit 22.26 27.07 52.10
Weighted net profit per unit 22.29 42.27 74.69
6 months to 6 months to 12 months to
CONSOLIDATED STATEMENT OF CHANGES 30.6.2008 30.6.2007 31.12.2007
IN UNITHOLDERS` FUNDS (R000) Unaudited Unaudited Audited
Unitholders` funds at beginning of
period 8,433,253 2,375,610 2,375,610
Capital movements 266,082 3,934,174 6,057,643
Write-up on revaluation of investment
properties 178,892 312,285 721,624
Capital surplus/(deficit) on disposal
of investment properties 24 (987) (5,388)
Taxation 6,131 (27,938) (60,659)
Straight line rental adjustment net
of taxation (23,845) 15,097 5,294
Share of associate company`s after
tax profit 2,672 - -
Surplus on revaluation of interest
rate swap derivative 16,990 - -
21 590 385 units issued at prices
ranging between 409.26 cpu and
414.06 cpu 85,444 3,770,828 5,593,725
Unit issue costs (64) (293) (5,347)
Transfer to revenue of pre-acquisition
distribution received - (124,476) (124,476)
Transfer to revenue of distribution
prepaid received in advance (162) (10,342) (67,130)
Revenue movements - - -
Net profit for the period 469,796 439,957 1,088,643
Transfers to capital (163,874) (298,457) (660,871)
Pre-acquisition dividend received - 124,476 124,476
Transfer to revenue of distribution
prepaid received in advance 162 10,342 67,130
Available for distribution 306,084 276,318 619,378
Distribution attributable to
unitholders (306,084) (276,318) (619,378)
Unitholders` funds at end of period 8,699,335 6,309,784 8,433,253
6 months to 6 months to 12 months to
ABRIDGED CONSOLIDATED 30.6.2008 30.6.2007 31.12.2007
CASH FLOW STATEMENT (R000) Unaudited Unaudited Audited
Net cash flow from operating
activities (76,037) 803,575 17,264
Net cash flows from investing
activities (339,141) (4,485,080) (2,173,642)
Net cash flows from financing
activities 717,420 3,859,966 2,199,162
Net increase in cash resources 302,242 178,461 42,784
Cash resources at beginning of year 64,880 22,096 22,096
Cash resources at end of period 367,122 200,557 64,880
6 months to 6 months to 12 months to
30.6.2008 30.6.2007 31.12.2007
OTHER INFORMATION (R000) Unaudited Unaudited Audited
Debt funding facility
Loan and guarantee facilities 1,950,000 1,102,500 2,840,339
Difference between facility and
funding capacity 788,165 1,038,000 (300,000)
Total debt funding capacity 2,738,165 2,140,500 2,540,339
Less: Facility utilised (debt and
guarantees issued) (1,406,200) (742,096) (705,799)
Loan capacity available at end of
period 1,331,965 1,398,404 1,834,540
Adjusted for future capital
commitments and proceeds on disposal (238,349) 24,958 (714,365)
Debt funded capital commitments (net
of guarantees issued) (295,499) (423,992) (732,365)
Expected proceeds on disposal 57,150 448,950 18,000
Anticipated available funding capacity 1,093,616 1,423,362 1,120,175
Vacancy factor (based on gross
lettable area) 2.4% 2.0% 2.7%
Valuation analysis (cents per unit)
Net asset value (including distribution
yet to be paid) 427 405 419
Net tangible asset value# 385 353 377
Listed market price 247 390 400
Capital commitments (R000) 401,699 1,388,506 732,365
Capitalised interest (R000) 6,823 10,645 16,384
# Including distribution yet to be paid and adding back deferred taxation not
payable in terms of current tax legislation (prior period adjusted accordingly)
NOTES TO THE FINANCIAL STATEMENTS
These condensed financial statements have been prepared in accordance with IAS
34 and the JSE requirements. The policies and methods of computation applied are
consistent with those used in the prior period. All new and effective accounting
standards and guidelines have been adopted and have not had an impact on the
results of the Fund.
1 Headline earnings and distribution attributable to unitholders
6 months to 6 months to 12 months to
30.6.2008 30.6.2007 31.12.2007
Unaudited Unaudited Audited
R 000 CPU R 000 CPU R 000 CPU
Net profit (earnings) 469,796 22.26 439,957 27.07 1,088,643 52.10
Adjustments for:
Capital (surplus)/deficit
on disposal of investment
properties (24) 987 5,388
Write-up on revaluation of
investment properties (178,892) (312,286) (721,624)
Taxation thereon (6,131) 27,938 60,659
Headline earnings 284,749 13.49 156,596 9.63 433,066 20.73
Straight line rental
adjustment 29,009 (15,442) (22,300)
Taxation thereon (5,164) 346 17,006
Share of associate
company`s after tax profit (2,672) - -
Pre-acquisition distribution
received - 124,476 124,476
Distribution prepaid
received in advance 162 10,342 67,130
Distributable income 306,084 14.50 276,318 17.00 619,378 32.00
Distribution attributable
to unitholders 306,084 276,318 619,378
Interim 306,084 14.50 237,308 14.60 262,863 14.60
Interim SA Retail once
off contribution - - 39,010 2.40 43,210 2.40
Final - - - - 313,305 15.00
Weighted headline earnings 13.51 15.05 29.71
2 Primary operational segments (R000)
Business segment Industrial Office Retail Group
Extract from income statement
Rental Income 132,784 31,400 224,285 388,469
Straight line rental adjustment 1,023 1,721 (31,753) (29,009)
133,807 33,121 192,532 359,460
Net property expenditure 7,701 4,583 19,440 31,724
Segment result 126,106 28,538 173,092 327,736
Interest income from associate 5,999
Net interest paid (34,738)
Group expenses (22,084)
Share of associate company`s
after tax profit 2,672
Deferred taxation on straight
line rental adjustment 5,164
Headline earnings 284,749
Write-up on revaluation of
investment properties excluding
straight line adjustment, net
of taxation 194,073 8,078 (40,973) 161,178
Other information
Properties 2,964,683 860,293 4,999,693 8,824,669
As per valuations 3,021,226 871,177 5,063,189 8,955,592
Straight line rental
adjustment (56,543) (10,884) (63,496) (130,923)
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice is hereby given of the declaration of distribution no. 27 in respect of
the income distribution period 1 January 2008 to 30 June 2008. The distribution
amounts to 14.50 cents per unit.
Last date to trade cum distribution Thursday, 18 September 2008
Units will trade ex-distribution Friday, 19 September 2008
Record date to participate in the
distribution Friday, 26 September 2008
Payment of distribution Monday, 29 September 2008
Unit certificates may not be dematerialised or re-materialised between Friday,
19 September and Monday, 29 September 2008 both days inclusive.
OLD MUTUAL INVESTMENT GROUP PROPERTY INVESTMENTS (PTY) LTD
SECRETARIES
22 August 2008
SA Corporate Real Estate Fund Managers Limited
Registered office Transfer secretaries
Marriott at Kingsmead Computershare Investor Services
Kingsmead Office Park 2004 (Pty) Ltd
Durban Ground Floor, 70 Marshall Street
4001 Johannesburg 2001
PO Box 207 PO Box 61051
Durban 4000 Marshalltown 2107
Tel: (031) 366 - 1111 Tel: (011) 370 - 500
Auditors Sponsor
Deloitte & Touche Nedbank Capital
2 Pencarrow Crescent A division of Nedbank Limited
Pencarrow Park 135 Rivonia Road
La Lucia Ridge Office Estate Sandton
La Lucia 4051 2196
Directors: BM Kodisang (Chairman), CJ Ewin*, KJ Forbes,
IM Groves, IN Mkhari, LM Mojela, MM Ngcobo, RR Perkin*, ES Seedat,
APW Sparks*, WJ Swain, LC Tapping*, WC van der Vent.
*Executive
Alternates: A Beattie, N Corbishley, GP Dingaan, P Zagaretos
Date: 25/08/2008 07:24:19 Produced by the JSE SENS Department.
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