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CPL
CPL
CPL - Capital Property Fund - Audited results and income distribution
declaration for the year ended 31 December 2009
Capital Property Fund
("Capital" or "the Fund" or "the Group")
Share code CPL
ISIN ZAE000001731
Audited results and income distribution declaration for the year ended 31
December 2009
DIRECTORS` COMMENTARY
1 DISTRIBUTABLE EARNINGS
The total distribution for the year ended 31 December 2009 is 54,58 cents per
unit, representing an increase of 14,4% on the distributions for the previous
financial year. The distribution of 28,86 cents for the final six months
represents an increase of 14,1% on the distribution for the final six months of
the previous financial year.
2 COMMENTARY ON RESULTS
This strong performance during a challenging year is the result of Capital`s
focus on selling poorer quality properties at the top of the property cycle and
acquiring properties located in prime nodes with corporate tenants. The emphasis
has also been on acquiring properties with sound property fundamentals. In a
market with increased vacancies where tenants have a number of alternatives,
these properties have performed well.
General demand for industrial and commercial space has been subdued and,
notwithstanding the quality of the properties, portfolio vacancies have
increased from 2,7% in December 2008 to 4,4% in December 2009.
3 PROPERTY ACQUISITIONS
3.1 RESILIENT INDUSTRIAL PORTFOLIO
Capital acquired Isando Business Park, City Deep Industrial Park, Chemserve
Spartan and a 25% interest in Montague Business Park from Resilient Property
Income Fund Limited for R611,5 million. The purchase price was settled through
the issue of 98 629 032 Capital units. All the properties were transferred by
year end.
3.2 CULLINAN PLACE and 28-ON-SLOANE
Capital acquired two A-grade office blocks in Morningside and Bryanston in
Johannesburg for R172 million at an initial yield of 9,6%, settled in cash. Both
properties have been transferred.
3.3 IMPROVON INDUSTRIAL PORTFOLIO
Capital has agreed to acquire five A-grade industrial properties for
R219 million at an initial yield of 9,02% from Improvon, payable in cash. The
transaction is subject to Competition Commission approval. Four of the buildings
are located in Longmeadow and one in Rustivia on the East Rand.
4 DISPOSALS
4.1 FORTRESS INCOME FUND LIMITED
Capital sold 14 properties valued at R321,35 million to Fortress Income Fund
Limited ("Fortress") at a yield of 12,1%. The sale was settled through 17 289
250 Fortress A and B linked units and R148,5 million in cash. Capital has
disposed of its holding in Fortress.
Valuation at Sales
31 Dec 2008 price
Property name (R`000) (R`000)
Cunningham Street Uitenhage 54 000 56 000
Sinoville Shopping Centre 50 000 56 000
619 Voortrekker Road Gezina 36 800 39 900
Burry Koen 35 200 34 400
Hanover Square 22 500 25 300
396 Voortrekker Road Parow 22 275 27 000
Elston Street Benoni 17 000 10 800
Eden Park Drive Pietermaritzburg 15 000 16 150
7 - 9 Maitland Street Bloemfontein 14 300 16 900
Silver Creek Centre 14 500 14 000
563 Voortrekker Road Gezina 10 400 9 800
City Centre 6 000 7 000
Brits Office Park 5 000 5 800
31 Indianapolis Street (Unit 1) 2 000 2 300
Total 304 975 321 350
4.2 OTHER PROPERTIES SOLD
Capital sold and transferred the following non-core properties to individual
purchasers during the financial year:
Valuation at Net sales
31 Dec 2008 price Exit
Property name (R`000) (R`000) yield
87 Bofors Circle Epping 16 750 25 480 3,8%
Hendrik Verwoerd Road
Centurion 19 700 20 200 10,3%
349 Roan Crescent 10 800 10 800 9,6%
Pasita Park Belville 10 000 10 540 13,8%
138 Old Main Road Pinetown 6 500 6 825 10,1%
17 Brand Hatch Close 3 400 5 000 6,7%
31 Indianapolis Street
(Unit 3) 2 890 3 000 12,4%
Total 70 040 81 845
5 LISTED EQUITIES
Capital`s conservative gearing at the top of the property cycle allowed the Fund
to take advantage of the discount that the listed property sector presented
during the past 18 months. Capital acquired 43 169 000 units in Pangbourne
Properties Limited during this period at an average cost of R13,85. The
intention is to retain this holding as a long term strategic investment. Capital
has reduced its holding in New Europe Property Investments plc ("Nepi") from 6
155 000 shares to 4 362 837 shares. This investment is no longer equity
accounted and the intention remains to sell the holding over time.
6 STRATEGY
Capital`s focus is to invest in industrial and commercial properties. Retail
properties constitute 10% (based on book value) of the portfolio and, should the
opportunity arise, the board will consider selling these properties.
The Fund`s gearing is currently 21,2%. With the economy showing signs of
recovery, the board will support an increase in gearing to up to 30% should
attractive investment opportunities present themselves.
7 PROSPECTS
The industrial and commercial property markets are expected to stabilise in 2010
and no further increases in valuation capitalisation rates for A-grade
properties are expected. This should support further growth in asset values.
Vacancies should stabilise around current levels and start reducing towards the
end of the financial year.
Capital`s growth prospects for 2010 remain positive and the board anticipates
growth in distributions of between 9% and 11% for the 2010 financial year. This
forecast has not been reviewed or reported on by the Fund`s auditors.
By order of the board
Andrew Teixeira Rual Bornman
Managing director Financial director
28 January 2010
Johannesburg
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AUDITED AUDITED
31 Dec 2009 31 Dec 2008
GROUP R`000 R`000
ASSETS
Non-current assets 6 090 175 4 850 819
Investment property 5 033 139 4 459 286
Straight-lining of rental revenue adjustment 72 319 58 107
Investment property under development 126 091 41 703
Investment in associate company - 118 923
Investments 858 626 172 800
Current assets 60 286 107 249
Investment property held for sale - 50 692
Straight-lining of rental revenue adjustment - 610
Trade and other receivables 25 497 54 941
Cash and cash equivalents 34 789 1 006
Total assets 6 150 461 4 958 068
EQUITY AND LIABILITIES
Capital of Fund 4 698 372 3 772 738
Trust capital 2 645 963 1 981 763
Non-distributable reserves 2 052 409 1 790 975
Retained earnings - -
Total liabilities 1 452 089 1 185 330
Non-current liabilities 1 156 652 798 702
Interest-bearing borrowings 1 053 965 731 615
Deferred tax 102 687 67 087
Current liabilities 295 437 386 628
Trade and other payables 78 732 171 371
Interest-bearing borrowings - 53 531
Unitholders for distribution 207 093 154 003
Bank overdraft 9 612 7 723
Total equity and liabilities 6 150 461 4 958 068
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AUDITED AUDITED
31 Dec 2009 31 Dec 2008
GROUP R`000 R`000
Net rental and related revenue 447 516 260 213
Recoveries and contractual rental revenue 600 059 361 113
Straight-lining of rental revenue adjustment 13 602 (7 555)
Rental revenue 613 661 353 558
Property operating expenses (166 145) (93 345)
Distributable income from investments 49 815 1 831
Fair value gain on investment property and
investments 293 198 377 043
Fair value gain on investment property 144 433 351 465
Fair value adjustment resulting from
straight-lining of rental revenue (13 602) 7 555
Fair value gain on investments 162 367 18 023
Administrative expenses (28 665) (17 025)
Share of post acquisition reserves from
associate 8 493 6 639
Distributable income from associate 8 064 10 711
Profit/(loss) from associate 429 (4 072)
Profit before net finance costs 770 357 628 701
Net finance costs (106 966) (3 383)
Finance income 8 617 27 737
Interest on units issued cum distribution 6 100 27 027
Interest received 2 517 710
Finance costs (115 583) (31 120)
Interest on borrowings (112 637) (27 623)
Interest capitalised 7 179 3 607
Fair value adjustment on interest rate
derivatives (10 125) (7 104)
Profit before income tax 663 391 625 318
Income tax expense (35 670) (11 525)
Profit for the year attributable to equity
holders 627 721 613 793
Total comprehensive income for the year 627 721 613 793
Basic earnings per unit (cents)* 93,93 110,32
Headline earnings per unit (cents)* 79,69 47,86
*The Fund has no dilutionary instruments in issue
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
AUDITED AUDITED
31 Dec 2009 31 Dec 2008
GROUP R`000 R`000
Profit for the year attributable to equity
holders 627 721 613 793
Adjusted for: (95 161) (347 495)
- Fair value gain on investment property (144 433) (351 465)
- Fair value adjustment resulting from straight-
lining of rental revenue 13 602 (7 555)
- Income tax 35 670 11 525
Headline earnings 532 560 266 298
Reconciliation of profit for the year to amount
available for distribution
Profit for the year attributable to equity
holders 627 721 613 793
Straight-lining of rental revenue adjustment (13 602) 7 555
Fair value gain on investment property (144 433) (351 465)
Fair value adjustment resulting from straight-
lining of rental revenue 13 602 (7 555)
Fair value gain on investments (162 367) (18 023)
(Profit)/loss from associate (429) 4 072
Fair value adjustment on interest rate
derivatives 10 125 7 104
Income tax 35 670 11 525
Distributable income 366 287 267 006
Distribution declared 366 287 267 006
Interim 159 194 113 003
Final 207 093 154 003
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
AUDITED AUDITED
31 Dec 2009 31 Dec 2008
GROUP R`000 R`000
Net cash (outflow)/inflow from operating
activities (25 386) 44 828
Cash outflow from investing activities (875 739) (160 947)
Cash inflow from financing activities 933 019 128 180
Increase in cash and cash equivalents 31 894 12 061
Cash and cash equivalents at the beginning of the
year (6 717) (18 778)
Cash and cash equivalents at the end of the year 25 177 (6 717)
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Non-
Trust distributable Retained
capital reserves earnings Total
GROUP R`000 R`000 R`000 R`000
Balance at
31 December 2007 1 382 567 1 444 188 - 2 826 755
Total
comprehensive
income for the
year 613 793 613 793
Issue of units 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
Total
comprehensive
income for the
year 627 721 627 721
Issue of units
10 000 000 units
on 1 April 2009 57 679 57 679
- 98 629 032
units effective
1 August 2009 606 521 606 521
Transfer to non-
distributable
reserves 261 434 (261 434) -
Distribution (366 287) (366 287)
Balance at
31 December 2009 2 645 963 2 052 409 - 4 698 372
PREPARATION AND ACCOUNTING POLICIES
The summarised consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS),
IAS 34, the JSE Listings Requirements, the requirements of the South African
Companies Act and the Collective Investment Schemes Control Act (Act 45 of
2002). The accounting policies are consistent with those applied for the year
ended 31 December 2008 except for the adoption of the revised IAS1 and the
application of Circular 3/2009 for the calculation of headline earnings (the
impact of which is included in the headline earnings reconciliation).
The Group previously disclosed profit and loss on disposal of investments and
investment property separately from the fair value adjustments on these items.
To better reflect the nature of these transactions the amounts are now combined
into the fair value adjustment lines in the statement of comprehensive income.
The independent auditors PKF (Jhb) Inc. have audited these results. Their
unqualified report is available for inspection at the Fund`s registered office.
SUMMARY OF FINANCIAL PERFORMANCE
31 Dec 2009 30 Jun 2009 31 Dec 2008 30 Jun 2008
Distribution per
unit (cents) 28,86 25,72 25,29 22,43
Units in issue 717 578 059 618 949 027 608 949 027 503 801 158
Net asset value 6,55 6,18 6,20 5,61
Gearing ratio* 21,2% 22,5% 20,8% 10,7%
*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
Swap maturity R`000 rate
May 2010 45 600 8,67%
Oct 2010 50 000 9,19%
Feb 2011 100 000 7,85%
May 2011 100 000 7,68%
Dec 2011 50 000 8,29%
Dec 2011 50 000 8,53%
Feb 2012 50 000 8,04%
Feb 2013 100 000 8,18%
Oct 2013 50 000 9,47%
May 2014 100 000 8,60%
May 2014 50 000 8,67%
Aug 2015 50 000 8,39%
795 600 8,36%
Fixed rate borrowings Rate
Jul 2012 144 000 10,30%
Jul 2012 218 000 10,49%
362 000
Total hedged borrowings 1 157 600
Variable rate borrowings 131 516
Total gearing 1 289 116
PROPERTY PORTFOLIO SUMMARY
AUDITED
31 Dec 2009 Number of
R`000 properties
Movement in investment property is as follows:
Carrying value at the beginning of the year 4 568 695 112
Additions 808 610 6
Disposals (461 202) (20)
Capital expenditure 13 889
Transfer from investment property under
development 31 033
Fair value adjustment 130 831
Straight-lining of rental revenue adjustment 13 602
Carrying value at the end of the year 5 105 458
Movement in investment property under development
is as follows:
Carrying value at the beginning of the year 41 703
Additions 97 102 1
Cost capitalised 11 140
Interest capitalised 7 179
Transfer to investment property (31 033)
Carrying value at the end of the year 126 091
Total investment property at 31 December 2009 5 231 549 99
LISTED EQUITY INVESTMENTS
AUDITED
31 Dec 09
Pangbourne New Europe
Properties Property
Limited Investments plc
Units/shares 43 169 000 4 362 837
Value (R`000) 736 031 122 595
SECTORAL SPLIT
Based on: GLA Book value
Commercial 28% 47%
Industrial 65% 43%
Retail 7% 10%
100% 100%
LEASE EXPIRY PROFILE
Rental
Based on: GLA income
Vacant 4,4% -
Dec 2010 25,0% 27,1%
Dec 2011 23,7% 24,6%
Dec 2012 17,6% 21,0%
Dec 2013 10,5% 8,3%
Dec 2014 12,4% 11,8%
Dec 2015 2,6% 2,6%
> Dec 2015 3,8% 4,6%
100% 100%
SEGMENTAL ANALYSIS
AUDITED AUDITED
31 Dec 2009 31 Dec 2008
R`000 R`000
Segmental revenue - rental revenue
Commercial 294 995 144 222
Industrial 243 024 156 659
Retail 75 642 52 677
Total 613 661 353 558
Profit for the year
Commercial 265 142 197 769
Industrial 253 616 286 185
Retail 59 589 35 642
Investments and other 49 374 94 197
Total 627 721 613 793
CAPITAL COMMITMENTS
AUDITED AUDITED
31 Dec 2009 31 Dec 2008
R`000 R`000
Authorised and contracted 222 482 87 197
Authorised and not yet contracted 41 638 52 254
264 120 139 451
PROFIT DISTRIBUTION
Notice is hereby given that a cash distribution of 28,86 cents interest per
unit, being distribution number 53 for Capital Property Fund, has been declared
in respect of the period 1 July 2009 to 31 December 2009 and is payable to the
unitholders recorded in the books of Capital at the close of business on the
record date, Friday, 19 February 2010. Unitholders are advised that the last day
to trade cum distribution will be Friday,
12 February 2010. The units will trade ex distribution as from Monday,
15 February 2010. Payment will be made on Monday, 22 February 2010. Unit
certificates may not be dematerialised or rematerialised during the period 15
February 2010 to 19 February 2010, both days inclusive.
Registered office 4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia,
2191 (PO Box 2555, Rivonia, 2128)
Transfer secretaries Link Market Services South Africa (Proprietary) Limited,
16th Floor, 11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor Java Capital (Proprietary) Limited
Company secretary Kenneth Khumalo
Directors Willy Ross (chairman)*, Andrew Teixeira (managing director), Rual
Bornman, Rowland Chute*, Jorge da Costa* (alternate: Stefano Contardo), Des de
Beer, Andries de Lange, Protas Phili*, Barry Stuhler#, Tshiamo Vilakazi*,
Tracey Visser
*Independent non-executive director #Non-independent non-executive director
Date: 28/01/2010 12:00:01 Produced by the JSE SENS Department.
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