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ACP
ACP
ACP - Acucap - Audited Consolidated Results for the year ended 31 March 2010
Acucap Properties Limited
(Reg No. 2001/021725/06)
(Incorporated on 12 September 2001)
"Acucap" or "the company"
Share Code: ACP
ISIN : ZAE000037651
Audited Consolidated Results for the year ended 31 March 2010
Statement of Financial Position
at 31 March 2010
2010 2009
Restated
R`000 R`000
Assets
Property assets 5 841 064 5 360 301
Investment properties 5 379 866 4 857 961
Non-current receivable 112 284 112 591
Current receivable 24 005 17 204
Investment properties and related 5 516 155 4 987 756
receivables
Investment properties held for sale and 50 000 140 578
related receivables
Investment properties under development 203 400 191 111
Owner-occupied property 10 344 10 828
Property development inventory 61 165 30 028
Other non-current assets 1 312 873 1 128 639
Loans in respect of unit purchase 294 230 248 689
scheme
Equipment 1 459 1 687
Intangible assets 82 786 106 736
Interest in subsidiaries and jointly 98 368 98 368
controlled entities
Listed investments 786 424 612 210
Deferred tax assets 49 606 60 949
Other current assets 224 220 169 288
Trade and other receivables 186 308 134 748
Interest in jointly controlled entities - 12 335
Cash and cash equivalents 37 912 22 205
Total assets 7 378 157 6 658 228
Equity and liabilities
Shareholders` interest 2 489 553 2 043 812
Share capital and share premium 1 535 933 1 334 619
Non-distributable reserve 1 155 931 793 096
Accumulated loss (202 311) (83 903)
Non-current liabilities 4 040 431 3 857 960
Debentures 1 496 030 1 381 108
Financial liabilities 2 008 111 2 045 969
Financial instruments 110 565 95 901
BEE instrument 76 547 40 421
Deferred tax liabilities 349 178 294 561
Current liabilities 848 173 756 456
Trade and other payables 103 503 116 183
Financial liabilities 518 518 424 217
Tax payable 30 635 46 341
Debenture interest payable 195 517 169 715
Total equity and liabilities 7 378 157 6 658 228
Statements of Comprehensive Income
for the year ended 31 March 2010
2010 2009
Restated
R`000 R`000
Revenue 552 151 558 332
- Contractual 545 215 545 496
- Straight lining 6 936 12 836
Net operating expenses (56 161) (67 398)
Loss on disposal of investment properties (1 281) (14 500)
Amortisation of intangible assets (23 950) (12 923)
Profit before fair value adjustments, interest 470 759 463 511
and taxation
Fair value adjustment to investment properties 216 648 (7 687)
Fair value adjustment to BEE instrument (36 126) 7 835
Fair value adjustment to government bonds 5 701 (20 067)
Profit before interest and taxation 656 982 443 592
Interest income 107 912 97 533
Interest expense
- debentures (388 249) (346 390)
- other (223 342) (250 036)
Share of loss of equity accounted investees (net - (356)
of income tax)
Profit/ (loss) before taxation 153 303 (55 657)
Taxation (48 142) (4 250)
Profit/ (loss) for the year 105 161 (59 907)
Other comprehensive income/ (expense)
Net change in fair value of listed investments, 149 824 (34 994)
net of taxation
Net change in fair value of cash flow hedge (10 558) (94 834)
recognised directly in equity, net of taxation
Other comprehensive income/ (expense) for the 139 266 (129 828)
year, net of income tax
Total comprehensive income/ (expense) for the 244 427 (189 735)
year
Cents Cents
Basic and diluted earnings/ (loss) per share 73.39 (43.89)
Interest distribution per linked unit
- interim 128.70 121.30
- final 130.56 122.76
Distribution per linked unit 259.26 244.06
Statement of
Changes in Equity
for the year
ended 31 March
2010
Share Share Non- Accumul Total
capital premium distribut- ated
able loss
reserve
R`000 R`000 R`000 R`000 R`000
BALANCE AT 31 129 1 211 988 146 (89 2 110
MARCH 2008 156 218) 213
Restatement of - - ( 3 837) 3 837 -
prior period due
to change in
accounting policy
Restated balance 129 1 211 984 309 (85 2 110
at 31 March 2008 156 381) 213
Total
comprehensive
income/expense
for the year
Loss for the year (59 (59 907)
907)
Other - - -
comprehensive
expense for the
year
Net change in - - (34 994) - (34 994)
fair value of
listed
investments
Net change in - - (94 834) - (94 834)
fair value of
cash flow hedge
recognised
directly in other
comprehensive
income
(restated)*
Total - - (129 828) (59 (189
comprehensive 907) 735)
expense for the
year
Transactions with
owners, recorded
directly in
equity
Issue of 8 000 8 108 632 - - 108 640
000 shares in May
2008
Proceeds 8 108 712 - - 108 720
Share issue costs - ( 80) - - ( 80)
Issue of 1 200 1 14 693 - - 14 694
000 shares in
November 2008
Proceeds 1 14 729 - - 14 730
Share issue costs - ( 36) - - ( 36)
Transfer to non- - - (61 385) 61 385 -
distributable
reserve
Total 9 123 325 (61 385) 61 385 123 334
transactions with
owners
BALANCE AT 31 138 1 334 793 096 (83 2 043 812
MARCH 2009 481 903)
Total
comprehensive
income/expense
for the year
Profit for the - - - 105 105 161
year 161
Other
comprehensive
income/ (expense)
for the year
Net change in - - 149 824 - 149 824
fair value of
listed
investments
Net change in - - (10 558) - (10 558)
fair value of
cash flow hedge
recognised
directly in other
comprehensive
income
Total - - 139 266 105 244 427
comprehensive 161
expense for the
year
Transactions with
owners, recorded
directly in
equity
Issue of 525 000 1 8 695 - - 8 696
shares in
September 2009
Proceeds 1 8 724 - - 8 725
Share issue costs - (29) - - ( 29)
Issue of 9 698 10 169 065 - - 169 075
649 shares in
October 2009
Proceeds 10 170 105 - - 170 115
Share issue costs - (1 040) - - (1 040)
Issue of 1 280 1 23 542 - - 23 543
000 shares in
November 2009
Proceeds 1 23 582 - - 23 583
Share issue costs - (40) - - (40)
Transfer to non- - - 223 569 (223 -
distributable 569)
reserve
Total 12 201 302 223 569 (223 201 314
transactions with 569)
owners
BALANCE AT 31 150 1 535 1 155 931 (202 2 489 553
MARCH 2010 783 311)
Statements of Cash Flows
for the year ended 31 March 2010
2010 2009
R`000 R`000
Cash flows from operating activities
Cash generated from operations 426 097 427 975
Changes in property purchases 6 863 (5 580)
Income tax (paid) / refunded (18 172) 9 516
Interest received 107 912 97 533
Interest paid (585 789) (571 556)
Net cash outflow from operating activities (63 089) (42 112)
Net cash (outflow)/inflow from investing activities (299 584) 10 569
Cash flows from financing activities
Proceeds from the issue of shares 201 314 123 334
Proceeds from the issue of debentures 114 922 91 908
Financial liabilities raised 530 000 232 865
Financial liabilities repaid (467 856) (406 612)
Net cash inflow from financing activities 378 380 41 495
Net cash inflow for the year 15 707 9 952
Cash and cash equivalents at beginning of year 22 205 12 253
Cash and cash equivalents at end of year 37 912 22 205
2010 2009
Gross Net of Gross Net of
tax tax
Headline (loss)/earnings R`000 R`000 R`000 R`000
The calculation of the headline
earnings per share is based on a
weighted average of 143 287 206
(2009: 136 500 471 ) shares in issue
during the year and the headline
earnings is calculated as follows:
Profit/ (loss) for the year 105 161 (59 907)
Fair value adjustment of investment (216 648) (165 075) 7 687 6 321
properties
Loss on disposal of investment 1 281 1 102 14 500 12 470
properties
Headline loss - shares (58 812) (41 116)
Interest paid to debenture holders 388 249 346 390
Headline earnings - linked units 329 437 305 274
Cents Cents
Headline loss per share (41.04) (30.12)
Headline earnings per linked unit 229.91 223.64
BASIS OF PREPARATION AND AUDIT OPINION
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IAS 34 and interpretations adopted
by the International Accounting Standards Board (IASB) and the requirements
of the South African Companies Act.
The financial statements are prepared on the historical cost basis, except
for investment properties, investment properties held for sale, derivative
financial instruments, financial assets and available-for-sale financial
assets which are measured at fair value.
The financial statements are prepared on the going concern basis and Acucap`s
accounting policies have been applied consistently to all periods presented,
except for IAS1 (revised) which is now applied, affecting presentation only.
In prior years, the group did not account for deferred taxation on the fair
value of interest rate swaps at each financial year end. As the fair value of
the interest rate swaps results in either taxable or deductible temporary
differences, deferred taxation should have been provided at each financial
year end since the inception of the interest rate swap contracts.
KPMG Inc. has audited the financial information set out above. Their
unmodified audit report is available for inspection at the company`s
registered office. The information contained in the commentary below does not
form part of the audit opinion.
COMMENTARY
1. REVIEW OF RESULTS AND OPERATIONS
Acucap`s board is pleased to report a distribution of 130.56 cents per unit
(cpu) for the six months ended 31 March 2010. This represents growth of
6.36% over the same six month period last year. Together with the interim
distribution of 128.7 cpu, this gives unitholders an annual distribution of
259.26 cpu, a growth rate of 6.23% over the previous financial year.
The South African economy is showing clear signs of recovery, although the
recovery is expected to be gradual, and may suffer occasional setbacks as
the global economy deals with the after-effects of the credit crisis and
the more recent budget deficit concerns in parts of the Eurozone. For
Acucap, as a predominantly retail fund, the most reliable indicator of
South Africa`s economic recovery is the growth in consumer spending, as
evidenced by the performance of the fund`s retail tenants. Reported tenant
revenue across all Acucap`s retail assets grew by 2.3% in nominal terms for
the year to 31 March 2010 compared to the previous year, and by 3.8% for
the quarter ended on that date compared to the same quarter last year. The
upward trend is clear, although this result was dampened by temporary
vacancies arising from a high level of redevelopment activity in Acucap`s
retail portfolio. Excluding the assets under redevelopment, annual tenant
revenue growth was a nominal 3.12%, and revenue growth for the last quarter
was 4.71%. Seen in the context of a declining inflation rate, these trading
results show a gradual but encouraging improvement in real consumer
spending.
Acucap`s high quality office portfolio performed well in the period under
review, with the office vacancy rate remaining constant at around 2.5% and
renewal rentals achieved coming in at just over 97% of budget. In line
with forecast, there was once again a lower contribution to profits from
Helderberg Village as this development nears completion, but combined
income from Acucap`s investment in Sycom Property Fund and its management
company Sycom Property Fund Managers (SPFM) continued to show steady
growth.
Bad debts written off and tenant receivables impaired amounted to R3.5m, up
from R1m in the prior year and R2.6m in 2008, as the effects of the recent
recession remained evident throughout the year under review. Smaller retail
tenants in particular are likely to remain under pressure until the
economic recovery is more firmly established.
No buildings were sold in the period under review, and two acquisitions
were announced. The first was the acquisition of the remaining 50%
undivided share in Bayside Shopping Centre that Acucap did not already own,
announced in May 2009, with transfer on 16 October 2009. The second was the
acquisition of Tyger Hills Investments (Pty) Ltd, the co-owner of Cape
Town`s prestigious Tyger Hills Office Park. The remainder of this high
quality office park is owned by Sycom. The acquisition was announced on 12
March 2010 and transfer will be effected as soon as approval is granted by
the competition authorities. Further details of this acquisition are
provided in part 3 of this announcement..
On the basis of individual assets and asset segments, Acucap`s net income
is attributable as follows :
% of Net % of
Contractual total property total
rental income
income
R`000`s R`000`s
Festival 18.4% 18.8%
Mall 94,140 89,989
Key West 10.9% 10.8%
55,775 51,794
Other 39.5% 37.8%
retail 202,642 180,653
Offices 28.4% 29.9%
146,096 143,145
Industrial 2.8% 2.7%
14,353 12,946
Total 100.0% 100.0%
513,006 478,527
2. SIMPLIFIED FINANCIAL INFORMATION
Simplified financial information is presented to eliminate the effects of
IFRS and accounting adjustments that do not form part of Acucap`s
distribution.
Simplified distribution income statement for the year
ended 31 March 2010
year to 31 year to
March 31 March
2010 2009
Note R`000 R`000
Revenue 1 506,070 499,180
Net operating expenses 2 -58,992 -56,114
Profit before interest 447,078 443,066
and taxation
Income from investment 5 24,321 8,010
in Sycom Property Fund
Managers
Development profits 6 31,748 41,823
Interest received 10 14,604 14,821
Income from Listed 10 59,811 56,631
Investments
Interest received on 10 19,664 16,508
Unit Purchase Trust
Notional Interest 10 16,594 13,250
received on units
issued
Debenture holders 11 -203,570 -186,890
interest paid - interim
Other interest paid 12 -203,735 -227,166
Profit for the period 206,515 180,053
Final distribution per
unit 130.56 122.76
Notes to the simplified
distribution income
statement
1 Revenue as stated 552,151 558,332
Less : straight lining -6,936 -12,836
revenue reversed
Less : Helderberg sales -39,145 -46,316
506,070 499,180
2 Net operating expenses -56,161 -67,398
as stated
Less : Net income from -24,321 -8,010
Sycom Property Fund
Managers
Add : CShell (BEE 99 97
transaction) expenses
Less : Development
costs 21,391 19,197
-58,992 -56,114
3 (Loss) / Profit on sale -1,281 -14,500
of properties as stated
Non-distributable 1,281 14,500
capital profit / loss
reversed
0 0
4 Amortisation of -23,950 -12,923
Intangible Assets as
stated
Reversal of 23,950 12,923
amortisation of
intangible asset
0 0
5 Income from Sycom
Property Fund
transferred from net 27,437 8,010
operating expenses
27,437 8,010
6 Helderberg sales 39,145 46,316
transferred from
Revenue
Realised development 12,591 -
profits
Development expenses -21,391 -19,197
Helderberg units sold 16,107 -
not yet transferred -
Mar-10
Helderberg units sold -14,704 14,704
not yet transferred -
Mar-09
31,748 41,823
7 Fair value adjustment 216,648 -7,687
to investment
properties
Less: Fair value -216,648 7,687
adjustment to
investment properties
reversed
0 0
8 Fair value adjustment -36,126 7,835
to BEE instrument
Less: Fair value 36,126 -7,835
adjustment to BEE
instrument reversed
0 0
9 Fair value adjustment 5,701 -20,067
to Government bonds
Less: Fair value -5,701 20,067
adjustment to
government bonds
reversed
0 0
10 Interest received as 107,912 97,533
stated
Add : Interest received 2,761 3,677
from CShell, previously
eliminated on
consolidation
Less : Income received -59,811 -56,631
on listed units
separately disclosed
Less : Interest -19,664 -16,508
received on Unit
Purchase Trust
separately disclosed
Less : Notional -16,594 -13,250
Interest received on
units issued separately
disclosed
14,604 14,821
11 Debenture interest paid -388,249 -346,390
as stated
Reverse debenture 388,249 346,390
interest as stated
Notional interest iro -14,130 -8,979
units issued after
period end
Interim debenture -189,440 -177,911
interest to 30
September 2009
-203,570 -186,890
12 Other interest paid as -223,342 -250,036
stated
Less : Other interest 18,495 22,062
paid by CShell,
previously inculded on
consolidation
Less : Net reversal of 1,112 808
interest provided from
period end to
distribution payment
date
-203,735 -227,166
13 Number of linked units 149,752,754 138,249,105
in issue per IFRS at 31
March 2010
CShell linked units 8,420,994 8,420,994
previously treated as
treasury units on
consolidation
Actual units in issue 158,173,748 146,670,099
Simplified Balance
Sheet at 31 March 2010
31-Mar-10 31-Mar-09
R`000 R`000
Assets
Property assets 14 5,729,899 5,189,695
Listed property 15 817,276 641,958
investments
Other non-current 16 526,449 516,429
assets
Other current assets 17 298,003 211,105
Total assets 7,371,627 6,559,187
Equity and liabilities
Shareholder`s interest 18 4,457,649 3,839,090
Non-current liabilities 19 2,574,785 2,379,326
Current liabilities 20 339,193 340,771
Total equity and 7,371,627 6,559,187
liabilities
NAV
28.18 26.53
Notes to the simplified
balance sheet
14 Property assets as 5,841,064 5,360,301
stated
Less : Properties held -50,000 -140,578
for sale, removed from
assets
Less : Property -61,165 -30,028
inventory
5,729,899 5,189,695
15 Listed investments as 786,424 612,210
stated
Listed Sycom investment 30,852 29,748
transferrd from current
assets
Listed property 817,276 641,958
investments
16 Other non-current 1,312,873 1,128,639
assets as stated
Less: Listed property -786,424 -612,210
investments disclosed
separately
526,449 516,429
17 Other current assets as 224,220 169,288
stated
Add: CShell 27,363 26,834
intercompany loan
eliminated on
consolidation
Add : Property 61,165 30,028
inventory
Less : Sycom interest -30,852 -29,748
receivable
Less : Helderberg 27,628 23,981
property sales not yet
transferred
Less : Helderberg -11,521 -9,278
property sold not yet
transferred cost of
sales
298,003 211,105
18 Shareholder`s interest 2,489,553 2,043,812
as stated
Add Debentures 1,496,030 1,381,108
Debenture 84,126 84,126
portion of linked units
issued to CShell
Share capital 109,530 109,530
and premium on shares
issued to CShell
CShell retained 90,434 53,538
income / NDR
Helderberg 16,107 14,703
property sales not yet
transferred net income
Adjust deferred 171,869 152,273
tax to the Capital
Gains Tax rate
4,457,649 3,839,090
19 Non-current liabilities 4,040,431 3,857,960
as stated
Re- 518,518 424,217
classification of
current financial
liabilities
Less:
Proceeds from disposal of -50,000 -140,578
assets classified as held for sale
Adjust deferred tax to -171,869 -152,273
the Capital Gains Tax rate
Debentures -1,496,030 -1,381,108
Financial liabilities -183,736 -183,736
attributable to CShell
Financial instrument -5,982 -4,735
CShell SWAP
Reversal of BEE -76,547 -40,421
financial instrument
2,574,785 2,379,326
20 Current liabilities as stated 848,173 756,456
Add: Debenture interest payable 10,994 10,338
to CShell
Less: Re-classification of -518,518 -424,217
current financial liabilities
Accrued interest -1,456 -1,806
receivable from CShell
339,193 340,771
3. PORTFOLIO ACTIVITIES
Sycom
For the year to March 2010, Sycom Property Fund delivered 6.32% growth in
distributions. Sycom`s performance was negatively affected by two principal
factors. The first of these was high office vacancies that persisted for
much of the year at the Woodlands and Riverwoods office parks, and at
Georgian Crescent. The completion of the 18,828m2 Veld Estates development
at Woodlands added a net new 12,301m2 of unlet office space at a time when
the office market was moving into a cyclical downturn. Nonetheless, Veld
Estates is a top quality extension to what is already a premium office
park, and subsequent to year end, the vacancy at Woodlands has reduced from
17,387m2 to 10,867m2. The second factor that adversely affected Sycom`s
results was the underperformance of its investment in the Stenham European
Shopping Centre Fund (`SESCF`). Dividends received were down by 3% in Euro
terms, and persistent Euro weakness resulted in an overall 20% decline in
income from Sycom`s investment in SESCF.
In all other respects, Sycom`s portfolio performed in accordance with
management`s expectations, showing defensive strength in the retail
portfolio as overall tenant revenues grew by 6.1% for the year to 31 March
2010 compared to the prior year, and by 7.2% for the quarter compared to
the same prior quarter. Net Asset Value increased from R20.74 at the end of
March 2009 to R21.19 a year later.
As announced on 12 March 2010, Acucap has reached agreement with Parkdev
(Pty) Ltd to acquire Pardkev`s remaining 50% of SPFM and the Sycom asset
management contract for R136.3m, and the transaction is now with the
competition authorities for approval. Meaningful cost benefits have
resulted from the economies of scale inherent in a single team managing
both Acucap and Sycom , as shown in the steadily improving cost to income
ratio in part 12 of this announcement. The strongly independent boards of
Acucap and Sycom ensure there are no conflicts of interest arising from
both funds having a common manager, and the fee structure of Acucap`s
contract with Sycom are also tightly prescribed.
Acucap retail portfolio
Tenant revenues at Acucap`s regional retail assets showed little growth
over the prior year, although the quarter ended March 2010 reflected good
recovery to 3.3% growth. Revenues at the fund`s community retail assets
increased by a solid 5.5% for the year, declining slightly for the March
quarter to 4.5%. The overall result is influenced by the high contribution
(in excess of 40%) from the supermarket segment, where revenue growth was
2.3% for the year and 3.8% for the quarter as food inflation slowed
significantly. At an individual asset level, the following activities are
reported:
Bayside Mall
Construction has commenced on a R160m project to introduce Game and Dischem
to the centre, create an upper level banking mall and allow the expansion
of a number of national fashion retailers. This will re-position Bayside as
the first choice regional retail mall within the trade area. The
development will increase the mall`s GLA to 52,000m2.
Festival Mall
Negotiations have been concluded with Mr Price to almost double the Weekend
trading space and Furniture City will come in with a new 1,000m2 store. The
mall introduced a number new smaller national fashion tenants to the
fashion mix this year, providing a wider and more interesting offering.
Key West
A number of national tenants, including Woolworths, Foschini, Truworths,
Pick `n Pay and Virgin, have initiated upgrades during the last 12 months.
Howard Centre
The last 6 months of the financial year has seen Howard Centre trading
through a major redevelopment and upgrade program. Three of the four banks
are expanding or relocating, the mall and the public facilities are being
upgraded, and the upper level offices redeveloped. A new central court has
been introduced and the Woolworths store extended by just under 1,000m2.
Construction has progressed well with completion of the main atrium and
malls scheduled for the end of June 2010. The estimated capital cost of
the project is R53m, with a projected first year yield of 11%.
Westville Mall
The planned upgrading of Westville Mall is complete after 8 months of
redevelopment work. The new look mall was launched at the end of October
2009 and has been well received by shoppers and tenants. The existing
facade, parking area, and internal mall finishes have all been upgraded,
and the existing GLA extended by 800m2. The capital cost for the project
was R23m with an expected first year yield of 9%. Based on the solid
trading patterns of the mall, Woolworths has agreed to expand the existing
food market, and both Checkers and Virgin Active Gym have indicated an
intention to upgrade their offerings in the 2011 financial year. An
additional parking deck has been designed for the centre, providing 96 new
bays and allowing the construction of an additional 1,600m2 of retail
space. This bulk will be utilised to increase the national tenant mix
within the centre.
Watermeyer Park Shopping Centre
The centre has been upgraded, including facade treatment, a new vehicle
ramp connecting the upper and lower parking levels, improved walkways and
public facilities, new shopfronts and new centre signage. The upgrade cost
R12.5m and was necessitated by a certain degree of deterioration in the
building, as well as its dated look in the face of competing new retail
products within its secondary catchment area. As a result of the upgrade,
leasing of vacant space has progressed well, supported by a substantial
upgrade to the Woolworths Food Store that anchors the centre.
Village Square Randfontein
Three adjacent residential properties have been acquired and are now being
rezoned in order to facilitate the future expansion of this highly
successful shopping centre. The planned expansion will cost in the order of
R15m, with an expected first year yield of 10.5%.
Acucap office portfolio
On 12 March 2010 Acucap announced the acquisition of a portion of the Tyger
Hills Office Park in Cape Town. The whole park has a GLA of 26,489m2, and
Acucap acquired phases 3, 5 and 6 of the park, measuring 15,569m2. Sycom
Property Fund acquired the remaining 10,920m2. The purchase consideration
was R276.8m, at a yield of 8.94%.
The Howard Terraces building in Pinelands and the Saddle Drive building in
Woodmead were classified as non-core assets and earmarked for disposal.
Progress in these two instances is detailed below:
Howard Terraces, Pinelands
A sectional title register has been opened to facilitate disposal of this
building as a sectional title scheme. A lease cancellation agreement was
negotiated with the tenant, a division of Old Mutual, which has vacated the
building and relocated to Old Mutual`s head office in Pinelands.
Saddle Drive, Woodmead
A new lease was entered into with On Digital Media for 3,984m2 of office
space. The building was sold during the year under review, with transfer
expected to take place during the first half of the new financial year.
Significant leasing activities during the year under review were as
follows:
Bremerton Office Park, Port Elizabeth
A new 10 year lease was concluded with Nedbank Limited over the entire
building, which measures 3,643m2.
Golf Park, Mowbray
This office park comprises 16,293m2 of GLA. Leases over 1,675m2 expired and
were successfully renewed, with new leases being entered into over a
further 796m2 of space that was vacant at the end of the March 2009
financial year.
Acucap industrial portfolio
Acucap`s industrial interests are represented by N1 Business Park in
Midrand and Montague Park in Cape Town. Whilst they currently represent a
small proportion of the fund`s portfolio, the parks will comprise a more
meaningful proportion of Acucap`s investment properties once the build-out
of the respective developments is complete.
N1 Business Park
Whilst there is pressure on the industrial sector as a whole, tenant demand
has remained firm for space in this premium industrial park. The latest
signing is for a 3,224m2 facility on terms that will provide an initial
yield of 10.42%. This transaction takes the total lease area at N1 Business
Park to 29,7122 out of a total anticipated build out of approximately
115,000m2.
Montague Park
Infrastructural works have commenced. The initial phase of this process is
anticipated to be complete by September 2010 and the secondary phase
(including external road upgrades) by January 2012. Eskom has confirmed
that the site`s full power requirements will be available from July 2010
and in light of this, negotiations with numerous industrial tenants have
commenced. The site has a package of zoning rights, including retail, and
negotiations are on-going with regard to a proposed retail development on
the Koeberg / Plattekloof corner of the site. It is anticipated that this
matter will be finalised shortly.
4. HELDERBERG VILLAGE
Acucap had budgeted to sell 9 units in the current financial year, and by
year end, a total of 11 units had been sold. Net revenue from Helderberg
sales was R23m, compared to R42m in the prior year. There are 6 units left
to sell, all of which are budgeted to be sold in the 2011 financial year.
5. BORROWINGS
The company has total borrowings of R2.3 billion as tabulated below
(excluding BEE funding). Interest rates are hedged on 70% of total
borrowings, at a weighted average rate of 10.7% and a weighted average
maturity of 7.1 years. The Nedbank facilities are subject to renewal in two
tranches, the first renewal for the R977m facility effective 31 March 2012,
and the second renewal for the R792m facility effective 31 March 2013. The
smaller Omsfin and Standard Bank facilities run to May and June 2011
respectively. Acucap`s gearing ratio at 31 March 2010 was 37%.
Fixed Amount Effective
period R`000 interest
rate
Nedbank 27-Sep-11 50,000 10.26%
Standard 01-Oct-11 50,000 10.20%
Omsfin 15-Dec-11 50,000 9.73%
Nedbank 31-Mar-12 50,000 13.20%
Standard 01-Oct-12 50,000 10.05%
Nedbank 08-Feb-13 200,000 11.23%
Standard 01-Oct-13 50,000 9.80%
Omsfin 11-Oct-13 120,000 9.95%
Nedbank 01-Aug-16 70,000 11.15%
Nedbank 30-Sep-16 50,000 10.71%
Nedbank 31-Jul-17 50,000 10.94%
Nedbank 17-Jul-19 50,000 11.63%
Nedbank 31-Jul-20 50,000 11.08%
Nedbank 05-Aug-20 50,000 10.91%
Nedbank 30-Sep-20 50,000 10.44%
Nedbank 31-May-21 250,000 11.73%
Nedbank 31-Jul-23 50,000 10.93%
Nedbank 09-Oct-23 100,000 9.98%
Nedbank 30-Nov-13 24,000 11.82%
Bond shorts 2025/2036 218,517 9.20%
R186/R209
Fixed 1,632,517
interest loans
Floating 710,375 7.98%
interest loans average
Total borrowings 2,342,892
Details of loan covenants are set out below:
Facility LTV Interest cover
Nedbank facility A 55% 1.5x
Nedbank facility B 55% 1.5x
Nedbank facility E 55% 1.5x
Omsfin overnight n/a n/a
Omsfin term facility 50% 1.5x
Blueprint Originator 50% 1.5x
Standard Bank facilities
A to D 50% 1.5x
Actual at 31 March 2010 36% 2.36x
6. PROPERTY PORTFOLIO VALUATION
Acucap has adopted a formal valuation policy which requires adherence to
certain standards and practices The purpose of adopting this policy is to
ensure that the fund`s valuers inspect every property close to the
valuation date, that they reconcile tenancies on site to rent rolls, that
they audit no less than two thirds of all leases in detail, and that they
gain an understanding of how retail centres are trading by looking at
tenant revenue figures.
Independent peer review valuations are carried out on properties
representing no less than 15 % by value and 10% by number of assets in
Acucap`s overall portfolio.
Applying this policy, the Acucap portfolio was independently revalued at 31
March 2010 by the fund`s appointed valuers, Quadrant Properties in Gauteng
and Natal, Magnus Penny in the Western Cape and Majola & Boyd in the
Eastern Cape. Independent peer review valuations were carried out by DJB
Hoffman, (Nat. Dip. Property Valuation MIV (SA)) on properties representing
19% by value and 12% by number of assets in Acucap`s overall portfolio. In
all cases, his valuations concurred with those of the fund`s independent
valuers. A complete property valuation schedule is set out below. In
addition to independent values and capitalisation rates, the schedule also
indicates average net through rentals per m2 for each property, as well as
its occupancy level. In the case of the office segment, average net rental
rates per m2 include parking revenue.
Schedule of investment Independent Cap rate Average Occupancy
properties valuation at rental per rate at
31/03/2010 31/03/2010 square 31/03/2010
meter at per
31/03/2010 rentable
area
R`000
Retail 3 981 609 8.57% 95.6%
95.06
Festival Mall, Kempton 1 022 000 8.00% 96.9%
Park 95.00
Keywest, Krugersdorp 661 400 8.25% 97.5%
88.71
Bayside Centre, Table 582 000 8.80% 95.9%
View 111.88
Gardens Centre, Cape 370 000 8.60% 95.9%
Town 172.60
Howard Centre, 198 600 9.15% 77.0%
Pinelands 105.63
The Village Square, 194 000 9.00% 99.3%
Randfontein 85.10
Westville Mall, Durban 161 500 8.75% 96.1%
81.46
East Rand Value Mall, 154 800 8.75% 85.2%
Boksburg 99.14
Roodepoort Hyperama 152 000 9.00% 100.0%
51.48
50% Hillcrest Corner, 134 500 9.25% 92.2%
Durban 125.28
27.5% of The Bridge, 113 009 9.00% 99.3%
Port Elizabeth 76.94
Sunward Centre, 106 400 9.25% 98.5%
Boksburg 75.14
Rondebosch-on-Main, 78 000 9.10% 95.0%
Cape Town 93.27
Watermeyer Park, 46 200 10.25% 83.9%
Pretoria 73.24
Boulevard Piazzas, 7 200 10.00% 100.0%
Illovo 147.95
Offices 1 382 950 9.25% 96.0%
116.72
Golf Park, Mowbray 194 000 9.75% 96.0%
109.29
Microsoft, Bryanston 149 300 8.50% 99.7%
112.50
82 Grayston Drive, 131 500 9.00% 100.0%
Sandown 129.98
Tiger Brands, Bryanston 100 150 8.75% 100.0%
103.87
28 Fricker Road, Illovo 94 600 9.25% 100.0%
130.50
Bogare, Menlyn, 86 000 9.25% 100.0%
Pretoria 104.22
The Village, Faerie 82 900 10.25% 64.3%
Glen, Pretoria 113.90
Nautica, Granger Bay, 82 000 9.30% 95.7%
Cape Town 151.30
4 Fricker Road, Illovo 76 100 9.00% 100.0%
113.70
Kagiso House, Illovo 73 500 8.75% 100.0%
137.42
SA Weather Services, 69 000 9.50% 100.0%
Pretoria 118.24
Colliers, Illovo 60 500 9.25% 84.1%
141.28
Pharos House, Westville 57 000 8.75% 94.6%
Mall, Durban 88.51
Bremerton Office Park, 44 500 9.50% 100.0%
Port Elizabeth 91.63
Albion Springs, 44 000 10.70% 100.0%
Rondebosch 125.45
Selborne Fourways Golf 37 900 9.50% 91.1%
Park, Gauteng 104.21
Industrial 135 500 9.11% 95.4%
49.00
Kargo, Denver 49 800 9.75% 100.0%
41.22
30% of Tellumat, 40 500 9.00% 84.7%
Retreat, Cape Town 53.94
N1 Business Park, 45 200 8.50% 100.0%
Midrand 58.96
Total investment 5 500 059 8.76% 95.7%
properties 97.56
7. RETAIL PORTFOLIO PERFORMANCE
Segmental contribution to turnover within the Acucap retail portfolio is
shown below.
ACUCAP Retail Segments - Contribution
to Turnover
Segment Segment:
% of
Turnover
Food Majors 40.4%
Apparel 26.6%
Home & Furniture 2.6%
Electronics & Music 3.7%
Mass Discounters 6.7%
Health & Beauty 9.3%
Food Service & Entertainment 6.6%
Other 4.1%
100.0%
67% of tenant turnover is attributable to food and apparel, and these two
segments contribute 52% of Acucap`s retail rental income.
The performance of Acucap`s major retail segments for the full year and for
the last quarter of the year to March 2010 are shown in the chart below.
For the year, the graph shows a resurgent homeware sector, with health &
beauty still performing well. Mass discounters had a disappointing year,
but the last quarter showed a strong improvement. The same trend came
through for apparel and food services. Food majors, comprising the
supermarket segment, had a flat year from a growth perspective, partly
because of a relatively high base in 2009, and partly due to significantly
lower food price inflation.
ACUCAP: Retail segments turnover growth
Segment Quarter-on- Year-on-
Quarter Year
Total Turnover 3.8% 2.3%
Food Majors -0.6% 1.0%
Apparel 5.5% 0.9%
Home 13.8% 23.4%
Electronics 0.4% 2.3%
Mass Discounters 18.2% -1.6%
Health & Beauty 16.8% 15.6%
Food Service 7.3% 4.1%
Acucap also monitors each tenant`s rent to turnover ratio on a monthly
basis for any signs of distress, typically indicated by rent to turnover
ratios exceeding segmental industry norms. The graph below shows these
ratios for each of the seven major segments in Acucap`s retail portfolio.
There were no material changes in rent to turnover ratios.
ACUCAP: Rent to Turnover Ratio by Segment
Segment Rent Ratio Rent Ratio
2009 2010
Food Majors 2.2% 2.3%
Apparel 4.0% 4.2%
Home 9.4% 8.9%
Electronics 3.3% 3.5%
Mass Discounters 4.4% 4.9%
Health & Beauty 2.4% 2.3%
Food Service 7.3% 7.9%
8. HISTORICAL LEASE EXPIRIES OVER THE LAST 12 MONTHS
The table below shows a summary of all leasing activity in the Acucap
portfolio over the last financial year.
New Average
Expirie Average Average leases Average Escalation
s and through escalat and through rate for
termina rent at ion renewals rent new
tions expiry rate at for new leases
expiry leases
8.5% 8.2%
Regional 33,578 114.88 28,874 126.67
retail
Other 8.6% 8.2%
retail 27,956 109.83 25,868 120.14
Offices 9.4% 9.1%
19,556 101.48 18,634 113.68
8.0%
Industri 3,377 51.69
al
Acucap successfully renegotiated over 90% of expiring leases during the
year, with 8.6% of expiries moving into temporary retail vacancies
resulting from redevelopment activities. Retail leases were renewed at a
weighted average net rental that was 9.8% higher than the expiring rental.
Office leases were renewed with a 12% positive reversion.
The pattern of expiries and renewals can be seen in the context of Acucap`s
overall portfolio in the table below, which reconciles the opening and
closing gross lettable area, taking into consideration expiries, renewals,
new leases, extensions to GLA, and acquisitions and disposals.
New Net Closing
Opening Expirie leases area Propert Proper GLA
GLA s and and added ies ties
termina renewa purchas held
tions ls ed for
sale
Total -
421,106 -76,753 76,753 4,843 18,586 10,915 433,620
- let - -
408,860 81,090 76,753 3,463 17,829 10,915 414,900
- vacant
12,246 4,337 1,380 757 18,720
9. FORWARD LEASE EXPIRIES
Over the next financial year, leases for 54,235m2 will expire, representing
12.5% of the portfolio GLA. Details of the expiry rentals are shown below,
together with estimated renewal rentals. For offices, there is an expected
positive reversion of 5.7%, and for retail, a positive reversion of 9.6%.
Area Net Net
terminating rental rental
to 31-3- / m2 at / m2 on
2011 m2 expiry renewal
date
Offices 116.17 122.80
8,486
Retail 110.83 120.88
44,933
Industrial 67.75 75.00
816
Over the longer-term, the fund continues to show a good, long-dated lease
expiry profile. Expiries in the office portfolio are between 3% and 8% by
income per annum over the next 4 years. The retail portfolio shows higher
levels of expiry by income over the next three years, centred largely
around Festival Mall and Key West, where low average through rentals of
just over R100/m2 present an opportunity for meaningful upward rental
reversions.
Lease expiry profile by revenue by
sector
Industrial Offices Retail
to Mar-11 0.2% 2.9% 15.1%
to Mar-12 0.0% 4.5% 15.8%
to Mar-13 0.0% 5.5% 12.9%
to Mar-14 0.1% 8.1% 6.9%
to Mar-15 1.3% 3.0% 13.0%
1.0% 3.2% 6.5%
thereafter
10. MAJOR TENANTS BY AREA AND INCOME
Acucap`s twenty largest tenants account for 51.5% of its rental income,
with retail tenants contributing 41.7% and office tenants 9.8%, in line
with the fund`s high retail weighting in its property portfolio. The
tenants listed below indicate the high quality of Acucp`s rental cash
flows.
Major tenants % % GLA
Revenue
Shoprite Checkers 7.7% 11.4%
SA Government and 4.4% 3.8%
parastatals
Pick `n Pay 4.4% 6.6%
Edcon 3.9% 4.5%
Mr Price 3.3% 3.1%
Foschini 3.3% 2.2%
Pepkor 2.8% 2.1%
Nedbank 2.5% 1.9%
Microsoft 2.2% 1.9%
Clicks 1.8% 1.9%
Absa 1.8% 1.1%
Tiger Brands 1.8% 1.7%
Virgin Active 1.8% 2.4%
Woolworths 1.7% 4.0%
Truworths 1.6% 1.4%
Massstores 1.6% 2.5%
Standard Bank 1.5% 1.1%
Kagiso 1.3% 0.9%
First National Bank 1.3% 1.2%
Ster-Kinekor 0.9% 2.5%
11. VACANCIES
Total vacancies by income have ticked up from 2.82% at the end of March
2009 to 4.3% a year later, most of the increase attributable to at the
planned redevelopments of Howard Centre, Bayside Centre, and East Rand
Value Mall. Included is 1.65% for vacancies that have arisen from tenants
being relocated and from temporary vacancies created to allow for
redevelopment activities. Excluding these effects, the vacancy is 2.65% by
income. The table below shows the vacancy attributable to each segment of
the Acucap portfolio.
Vacancy profile by
sector by GLA
% of
Total GLA
Industrial 0.2%
vacancy
Office 0.9%
vacancy
Retail 3.2%
vacancy
GLA let 95.7%
12. COST TO INCOME
Costs remain well controlled, with the net cost to income ratio at 11.1%.
The company continues to benefit from in-house administration, which gives
improved control at a property level, and the advantages of having a
smaller number of good quality properties in its portfolio have become more
obvious during the ore difficult economic conditions of the last 2 years.
Acucap has been in the process of rationalising its in-house administration
costs since the start-up of this function in the 2008 financial year, and
emphasizing the cost benefits which have arisen from the economies of scale
achieved in managing both the Acucap and Sycom portfolios.
2010 2009 2008 2007 2006 2005
Net cost to income 11.1% 11.1% 14.2% 12.6% 12.2% 12.7%
The company`s greatest concern in terms of costs relates to administered
costs such as electricity and rates. Although mostly recoverable from
tenants, the unpredictable rise in these expenses will place pressure on
cost of occupation for Acucap`s tenants, and this could negatively impact
growth in net rental income.
13. UNIT HOLDER SUMMARY
A summary of Acucap`s unit holder profile is set out below. Annual trade in
Acucap`s linked units was 25.26% of the total number of units in issue,
indicating a sound level of liquidity, particularly considering the long-
term nature of many of Acucap`s major unit holders.
2010 2009
Coronation 15.1% 17.6%
Public Investment 14.0% 13.7%
Corporation
Stanlib 10.3% 16.2%
Investec 11.5% 4.2%
Directors and employees 9.45% 9.0%
Nedbank 6.6% 6.5%
Thesele Group (Pty) 5.3% 5.7%
Limited
Catalyst 3.1% 1.8%
Liberty Life 2.3% 3.0%
77.7% 77.7%
Other shareholders 22.3% 22.3%
100.0% 100.0%
Number of unitholders 2 390 2 014
Weighted average units 151,708,200
145,002,154
Units traded 38,315,645
51,778,423
Liquidity 25.26% 35.7%
14. PROSPECTS
The growth of the South African economy is expected to be subdued, with
many tenants still facing difficult trading conditions. Retail turnovers
have shown a pleasing recovery, but rental growth is likely to remain under
pressure as administered costs borne by tenants continue to increase at
rates well in excess of the general rate of inflation. Distributions from
Acucap`s investment in Sycom will be influenced by the demand for office
space in Sycom`s portfolio, where relatively high office vacancies persist,
and Sycom`s performance may also be hampered by a possible recapitalisation
of its investment in SESCF.
Nonetheless, with a small number of good quality assets, a management team
with considerable depth and an efficient cost structure, Acucap is well
placed to continue delivering real distribution growth over the long-term.
The above information has not been reported on by Acucap`s auditors.
15. PAYMENT OF DEBENTURE INTEREST
Notice is hereby given that a final distribution of 130.56 cents per linked
unit has been approved in respect of the six month period ended 31 March
2010. The last date to trade the linked units cum distribution is Friday 18
June 2010 and the record date will be Friday 25 June 2010. The linked units
will start trading ex-distribution from Monday 21 June 2010. Distributions
will be made to unit holders on Monday 28 June 2010.
Linked unit certificates may not be dematerialised or rematerialised
between Monday 21 June and Friday 25 June 2010 both days inclusive.
On behalf of the Board
BS KANTOR PA THEODOSIOU
(Chairman) (Managing Director)
3 June 2010
Registered Office
Suite A11 Westlake Square
Westlake Drive
Westlake
CAPE TOWN
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street
JOHANNESBURG
http://www.acucap.co.za
info@acucap.co.za
Share Code: ACP
ISIN : ZAE 000037651
Directors: Prof BS Kantor (Chairman), PA Theodosiou*# (Managing Director), FM
Berkeley, RC Frolich, N Mandindi, C B Marlow *, M S Moloko, JH Rens*, B Stevens,
NDC Whale
* Executive # British
Sponsor
Nedbank Capital
Date: 03/06/2010 15:08:02 Produced by the JSE SENS Department.
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