| Thu 29 Jan 2009, 17:05 | | CPL - Capital Property Fund - Audited results and income distribution |
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CPL
CPL
CPL - Capital Property Fund - Audited results and income distribution
declaration for the year ended 31 December 2008
Capital Property Fund
Share Code: CPL
ISIN: ZAE000001731
("Capital" or "the Fund" or "the Group")
(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 2008
COMMENTARY
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 preparation and disclosure
requirements of IAS 34 and the Collective Investments Schemes Control Act (Act
45 of 2002). The accounting policies are consistent with those of the prior
year. KPMG Inc. has audited the financial statements from which the financial
information set out in this report has been extracted. Their unqualified audit
report for the financial statements is available for inspection at the Fund`s
registered office.
2. Distributable earnings
A distribution of 47,72 cents per unit has been declared for the twelve months
ended 31 December 2008, representing an increase of 13,92% on the distributions
for the previous financial year. The distribution of 25,29 cents for the final
six months represents an increase of 16,06% on the distribution for the final
six months of the 2007 financial year.
3. Commentary on results
Capital`s strategy of focusing on prime industrial and commercial properties has
placed the Fund in a position to achieve strong growth in distributions despite
a challenging macroeconomic environment. The industrial property market
continued to perform well during the year with limited new supply of quality
industrial space and continued firm demand. Demand for the larger units (8 000
mSquared to 15 000 mSquared) has declined due to reduced demand from logistics
operators.
Vacancies of well-located commercial properties have largely been taken up. This
placed upward pressure on the office market rentals during the year. The cost of
replacing `A` grade office space has escalated to such an extent that the
rentals required to justify the development exceeds the affordability level of
most office tenants. We are, however, concerned by a number of speculative
office developments that have been undertaken based on optimistic feasibility
studies. This may limit office rental growth in the future.
4. Acquisition of Monyetla Property Fund Limited
On 26 September 2008 Capital offered to acquire all the linked units in issue of
the JSE-listed Monyetla Property Fund Limited ("Monyetla"). Monyetla unitholders
received 0,50926 units in Capital for each unit in Monyetla. All the final
approvals for the acquisition were obtained in December 2008 and the Monyetla
units were delisted on 19 January 2009. The Monyetla distributable income for
the period 1 July 2008 to 31 December 2008 has been included in Capital`s
results to 31 December 2008. Monyetla unitholders are entitled to Capital`s
distribution for this period.
Based on current valuations, the acquisition of Monyetla increased the property
portfolio by R1,2 billion. The portfolio includes quality decentralised office
space mainly in Bryanston, Sunninghill and Rivonia, as well as five retail
centres and eight industrial properties. Capital previously had limited exposure
to these office nodes. As Capital is a commercial- and industrial-focused fund
the retail properties will be sold when market conditions permit.
5. The property portfolio
The portfolio is performing well with renewals and re-lettings meeting or
exceeding budgeted expectations notwithstanding the slow down in the economy.
Vacancies increased to 2,7% compared to 1,1% at the interim period. This
increase is mainly the result of the acquisition of the Monyetla portfolio. We
foresee that vacancy levels will increase further off this relatively low base
as a result of a weaker economy.
5.1 Acquisitions and developments
During the year two warehouse and office developments of 4 070 mSquared and
2 092 mSquared were completed at N1 Business Park at an initial yield of 10,5%.
Two additional buildings are being developed on the site, one of 4 600 mSquared
for Landis + Gyr at an initial yield of 10,3% and a speculative warehouse of 7
821 mSquared. Both projects are expected to be completed by April 2009. Capital
has a 20% stake in this development.
Construction of a 3 514 mSquared industrial building on unutilised land in
Surprise Park, Pinetown commenced in June 2008. The building is expected to be
completed in March 2009 and is projected to yield 11,5%.
Sellers of quality industrial properties have not adjusted their price
expectations in line with the current economic environment. Acquisitions for
Capital will not be considered unless they are quality enhancing for the Fund.
Capital did however acquire Tilt-Up Park in Mahogany Ridge for R65 million,
payable in cash, at an initial yield of 9,2%. The acquisition is subject to
competition commission approval.
The most attractive opportunity for the past financial year was in the South
African listed property sector, which traded at a substantial discount to
underlying value for much of the year. Capital took advantage of this
opportunity to acquire 12 million units in Pangbourne Properties Limited at an
average price of R12,75.
5.2 Disposals
The following properties were sold and transferred prior to 31 Dec 2008:
Book Net sales
value price
Building R` 000 R` 000
Palm Centre 10 250 10 250
Somerset West 20 500 20 500
Unit 5, 31 Indianapolis Street 1 484 1 500
Mc Carthy Drive 14 900 12 000
Edgars Centre Sasolburg 15 916 15 916
Mr Price Home Nelspruit 12 043 12 043
Edgars Centre Ermelo 9 550 9 550
Morkels Centre Witbank 4 510 4 510
Mass Stores Klerksdorp 1 751 1 751
The following properties were sold and are awaiting transfer:
Book Sales
value price
Building R` 000 R` 000
Unit 3, 31 Indianapolis Street 2 948 3 000
Portion 1 of erf 293
(Portion of Albert Amon Road) 10 201 8 837
349 Roan Crescent 9 700 11 000
396 Voortrekker Road, Parow 21 800 22 500
Pinetown (Liberty) 8 085 6 500
6. Gearing
Capital`s gearing has increased from 10,2% at the end of 2007 to 20,8% at the
end of 2008, mainly as a result of the Monyetla acquisition. The board is
satisfied with this outcome, especially since it coincides with a declining
interest rate environment. Capital remains in a strong position to take
advantage of further opportunities and has unutilised facilities exceeding R200
million. In view of current market conditions the board would, however, not be
in favour of gearing increasing beyond 25%.
7. Sectoral split (based on book value)
Commercial 50%
Industrial 37%
Retail 13%
8. Lease expiry profile (based on contractual rental income)
December 2009 24,5%
December 2010 26,7%
December 2011 18,7%
December 2012 14,6%
December 2013 7,8%
December 2014 4,5%
Thereafter 3,2%
100,0%
9. Prospects
The industrial and commercial property markets are anticipated to weaken during
the 2009 financial year. Capital`s tenant profile is, however, dominated by
corporate tenants and expiring rentals are generally below current market
rentals. Further upward reversion in rentals is expected in 2009 which places
Capital in a strong position to achieve growth in distribution.
10. Income distribution
Notice is hereby given that a cash distribution of 25,29 cents interest per
unit, being number 51 for Capital Property Fund, has been declared in respect of
the period 1 July 2008 to 31 December 2008 and is payable to the unitholders
recorded in the books of Capital at the close of business on the record date,
Friday, 20 February 2009. Unitholders are advised that the last day to trade
"cum" distribution will be Friday, 13 February 2009. The units will trade "ex"
distribution from Monday, 16 February 2009. Payment will be made on Monday, 23
February 2009. Unit certificates may not be dematerialised or rematerialised
during the period from 16 February 2009 to 20 February 2009, both days
inclusive.
By order of the board
28 January 2009
Johannesburg
Registered office: 4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191
(PO Box 2555, Rivonia, 2128)
Transfer secretaries: Computershare Investor Services
(Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor: Java Capital (Proprietary) Limited
Company secretary: Abraham Bornman
Directors: Willy Ross (Chairman)*, Rowland Chute*, Jorge da Costa*,
Des de Beer, Andries de Lange, Protas Phili*, Barry Stuhler#,
Andrew Teixeira (Managing director), Tshiamo Vilakazi*, Tracey Visser
*Independent non-executive director
*Non-independent non-executive director
BALANCE SHEET
Audited Audited
31 Dec 2008 31 Dec 2007
GROUP R`000 R`000
ASSETS
Non-current assets 4 850 819 3 211 420
Investment property 4 459 286 3 009 277
Straight-lining of rental income adjustment 58 107 46 020
Investment property under development 41 703 31 981
Investment in associate company 118 923 124 142
Investments 172 800 -
Current assets 107 249 45 440
Investment property held for sale 50 692 30 463
Straight-lining of rental income adjustment 610 287
Trade and other receivables 54 941 14 476
Cash and cash equivalents 1 006 214
Total assets 4 958 068 3 256 860
EQUITY AND LIABILITIES
Capital of Fund 3 772 738 2 826 755
Trust capital 1 981 763 1 382 567
Non-distributable reserves 1 790 975 1 444 188
Retained earnings - -
Total liabilities 1 185 330 430 105
Non-current liabilities 798 702 252 053
Interest-bearing borrowings 731 615 196 491
Deferred tax 67 087 55 562
Current liabilities 386 628 178 052
Trade and other payables 171 371 46 978
Interest-bearing borrowings 53 531 -
Unitholders for distribution 154 003 109 803
Income tax payable - 2 279
Bank overdraft 7 723 18 992
Total equity and liabilities 4 958 068 3 256 860
INCOME STATEMENT
Audited Audited
31 Dec 2008 31 Dec 2007
GROUP R`000 R`000
Net rental and related income 260 213 242 260
Recoveries and contractual rental income 361 113 299 773
Straight-lining of rental income adjustment (7 555) 18 000
Rental income 353 558 317 773
Property operating expenses (93 345) (75 513)
Distributable income from investments 1 831 -
(Loss)/profit on disposal of investment
property (2 389) 42 784
Fair value gains on investments and
investment property 379 432 528 688
Fair value gain on investment property 353 854 546 688
Fair value adjustment resulting from
straight-lining of rental income adjustment 7 555 (18 000)
Fair value gain on investments 18 023 -
Administrative expenses (17 025) (15 961)
Share of post acquisition reserves
from associate 6 639 1 147
Distributable income from associate 10 711 1 147
Loss from associate (4 072) -
Profit before net finance costs 628 701 798 918
Net finance (costs)/income (3 383) 1 851
Finance income
Fair value adjustment on interest
rate derivatives - 4 907
Interest on units issued cum distribution 27 027 14 114
Finance costs
Interest on borrowings (23 306) (17 170)
Fair value adjustment on interest
rate derivatives (7 104) -
Profit before income tax 625 318 800 769
Income tax expense (11 525) (14 847)
Profit for the year attributable to
equity holders 613 793 785 922
Basic earnings per unit (cents)* 110,32 159,69
Headline earnings per unit (cents)* 44,62 46,59
*The Fund has no dilutionary instruments in issue.
SUMMARISED CASH FLOW STATEMENT
Audited Audited
31 Dec 2008 31 Dec 2007
R`000 R`000
Net cash inflow/(outflow) from
operating activities 44 828 (119 611)
Cash outflow from investing activities (160 947) (370 618)
Cash inflow from financing activities 128 180 487 939
Increase/(decrease) in cash
and cash equivalents 12 061 (2 290)
Cash and cash equivalents at the
beginning of the year (18 778) (16 488)
Cash and cash equivalents at the
end of the year (6 717) (18 778)
PROFIT DISTRIBUTIONS
2008 2007
Amount available for distribution 47,72 41,89
Distribution per unit (cents) 47,72 41,89
- Interim 22,43 20,10
- Final 25,29 21,79
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
Audited Audited
31 Dec 2008 31 Dec 2007
GROUP R`000 R`000
Basic earnings 613 793 785 922
Adjusted for: (365 518) (556 625)
- Loss/(profit) on disposal of investment
property 2 389 (42 784)
- Fair value gain on investment property (353 854) (546 688)
- Fair value adjustment resulting from
straight-lining of rental income
adjustment ( 7 555) 18 000
- Fair value gain on investments (18 023) -
- Income tax effect 11 525 14 847
Headline earnings 248 275 229 297
Reconciliation of profit for the year to
amount available for distribution
Profit for the year 613 793 785 922
Straight-lining of rental income adjustment 7 555 (18 000)
Loss/(profit) on disposal of investment property 2 389 (42 784)
Fair value gain on investment property (353 854) (546 688)
Fair value adjustment resulting from
straight-lining of rental income adjustment ( 7 555) 18 000
Fair value gain on investments (18 023) -
Share of post acquisition reserves from
associate 4 072 -
Fair value loss/(gain) on interest rate
derivatives 7 104 (4 907)
Income tax 11 525 14 847
Distributable income 267 006 206 390
Distribution declared 267 006 206 390
- Interim 113 003 96 587
- Final 154 003 109 803
SUMMARISED STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Non-dis-
Trust tributable Retained
capital reserve earnings Total
GROUP - Audited R`000 R`000 R`000 R`000
Balance at
31 December 2006 909 060 805 723 28 306 1 743 089
Profit for the year 785 922 785 922
Issue of units 504 134 504 134
Transfer to non-distributable
reserves
- Transfer prior year
straight-line adjustments 28 306 (28 306) -
- Transfer of prior periods`
profits and losses on
disposal of investment
property (30 627) 30 627 -
- Fair value adjustment on
interest rate derivatives 4 907 (4 907) -
- Property revaluations 531 841 (531 841) -
- Profit on disposal of
investment property 42 784 (42 784) -
Distribution (206 390) (206 390)
Balance at 31 December 2007 1 382 567 1 444 188 - 2 826 755
Profit for the year 613 793 613 793
Issue of units - 105 147 869
units on 19 January 2009* 599 196 599 196
Transfer to non-distributable
reserves 346 787 (346 787) -
Distribution (267 006) (267 006)
Balance at 31 December 2008 1 981 763 1 790 975 - 3 772 738
*These units were issued in consideration for the acquisition of the
Monyetla units on which distribution is payable for the period 1 July 2008
to 31 December 2008.
SEGMENTAL ANALYSIS
Audited Audited
31 Dec 2008 31 Dec 2007
R`000 R`000
Segmental revenue - rental income
Retail 52 677 58 731
Commercial 144 222 127 078
Industrial 156 659 131 964
Total 353 558 317 773
Profit for the year
Retail 35 642 132 589
Commercial 197 769 314 944
Industrial 286 185 369 028
Corporate 94 197 (30 639)
Total 613 793 785 922
CAPITAL COMMITMENTS
Audited Audited
31 Dec 2008 31 Dec 2007
R`000 R`000
Authorised and contracted 87 197 3 058
Authorised and not yet contracted 52 254 82 209
139 451 85 267
SUMMARY OF FINANCIAL PERFORMANCE
31 Dec 30 Jun 31 Dec 30 Jun
2008 2008 2007 2007
Distribution per
unit (cents) 25,29 22,43 21,79 20,10
Units in issue* 608 949 027 503 801 158 503 801 158 480 531 928
Net asset value 6,20 5,61 5,61 4,53
Gearing ratio** 20,8% 10,7% 10,2% 4,0%
** 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 amount Swap rate
Swap maturity R`000
May 2009 45 600 8,51%
October 2009 50 000 9,22%
May 2010 45 600 8,67%
October 2010 50 000 9,19%
December 2011 50 000 8,29%
December 2011 50 000 8,53%
October 2013 50 000 9,47%
341 200
Cap maturity Cap rate
July 2013 50 000 11,55%
Fixed rate borrowings Rate
July 2012 144 000 10,30%
July 2012 218 000 10,49%
362 000
Total hedged borrowings 753 200
Variable rate borrowings 257 794
Total gearing 1 010 994
Date: 29/01/2009 17:05:02 Produced by the JSE SENS Department.
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