| Thu 3 Feb 2011, 17:00 | | CPL - Capital Property Fund - Condensed audited results and income |
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CPL
CPL
CPL - Capital Property Fund - Condensed audited results and income
distribution declaration for the year ended 31 December 2010
Capital Property Fund
Share Code: CPL
ISIN: ZAE000001731
("Capital" or "the Fund")
(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
(Registration No. 1980/009531/06)
CONDENSED AUDITED RESULTS AND INCOME DISTRIBUTION DECLARATION
FOR THE YEAR ENDED 31 DECEMBER 2010
DIRECTORS` COMMENTARY
1 DISTRIBUTABLE EARNINGS
The distribution of 31,78 cents per unit for the final six months represents
an increase of 10,1% over the distribution of 28,86 cents per unit for the
comparable period of the previous financial year.
Total distributions for the year ended 31 December 2010 increased by 10,2% to
60,14 cents per unit.
2 COMMENTARY ON RESULTS
Capital`s quality property portfolio has continued to perform well despite
the weaker economy. Most of Capital`s properties are located in high demand
nodes in Cape Town, Durban, Johannesburg and Pretoria which, together with
the strong corporate tenant profile, has placed it at an advantage relative
to the market. The Fund`s focus remains on the flexibility, general
utilisation and functionality of its properties, whilst avoiding tenant
specific or specialised properties.
In a difficult operating environment these combined strategies ensured a
resilient portfolio with high levels of tenant retention, above market growth
in rentals and lower vacancies, relative to the market.
The arrears book has decreased marginally and remains firmly under control.
Vacancies increased from 4,4% at 31 December 2009 to 5,2% at 31 December 2010
comprising 6,2% industrial, 3,5% commercial and 3,0% retail based on gross
lettable area.
Gross income of the property portfolio (excluding sales and acquisitions in
2009 and 2010), increased by 11,4%, whilst expenses increased by 21,5%
resulting in growth in net property income of 8,1%. The sharp increase in
expenses is largely due to substantial increases in utilities and rates and
taxes. The growth in distribution was positively impacted on by yield
enhancing acquisitions and the benefit of gearing in the Fund.
3 PROPERTY PORTFOLIO
Capital`s strategy remains the investment in and acquisition of A-grade
industrial and commercial properties and the disposal of the retail assets
over time. This will result in a focused industrial and commercial fund,
concentrating on the four major commercial nodes and this is in accordance
with international best practice, where specialised funds are favoured by
investors.
3.1 ACQUISITIONS
In line with its strategy, Capital acquired the following industrial and
commercial properties during the financial year:
Purchase
price Initial Effective
Property name (R`000) yield date
146 Serenade Road, Rustivia 30 519 9,40% 1 Feb 10
9 Ayshire Avenue, Longmeadow 41 169 9,25% 1 Feb 10
5 - 7 Ayshire Avenue, Longmeadow 21 538 9,25% 1 Feb 10
3 - 4 Drakensberg Drive, Longmeadow 107 666 8,75% 1 Feb 10
10 Drakensberg Drive, Longmeadow 18 196 9,25% 1 Feb 10
87 - 91 Goodwood Road* 33 600 9,00% 13 Oct 10
31 Jeffels Road, Prospecton 94 000 9,75% 22 Dec 10
Westway Office Park** 41 905 10,50% 1 Nov 10
14 Fitzmaurice Avenue, Epping 2** 25 238 10,50% 1 Nov 10
5 Bertie Avenue, Epping 2** 15 000 11,00% 1 Nov 10
Total 428 831
*Includes vacant land
**Not yet transferred
3.2 DISPOSAL
Capital disposed of the following non-core property:
Valuation Sales
at 31 Dec 2009 price Exit Effective
Property name (R`000) (R`000) yield date
A portion of 4th Street
Wynberg,
(Portion 1 of erf 473) 5 696 9 000 8,50% 30 Jun 10
4 LISTED EQUITIES
Capital has retained its holding of 43 169 000 units in Pangbourne Properties
Limited ("Pangbourne") which equates to 9,8% of Pangbourne`s market
capitalisation. The holding in New Europe Property Investments plc ("Nepi")
was reduced from 4 362 837 shares to 3 450 000 shares. The intention remains
to sell the holding over time.
5 PANGBOURNE MERGER
Capital has made an offer to acquire all of the Pangbourne linked units in
issue that are not already held by it pursuant to a scheme of arrangement.
The offer is primarily on the basis of an all-unit consideration which would
entail Pangbourne unitholders swapping their linked units in Pangbourne for
units in Capital at a swap ratio of 2,38 Capital units for each Pangbourne
unit.
Following implementation of the scheme, Capital will be one of the largest
property funds in South Africa, by market capitalisation, differentiated by
its industrial and commercial focus. The enlarged Capital may attract
interest from a wider group of investors enhancing the liquidity of its
units. Increased market capitalisation and enhanced liquidity may result in
Capital`s inclusion in a number of stock exchange and property indices and,
over time, may result in a re-rating of Capital. The potential re-rating and
lower yield would position Capital to make further revenue enhancing
acquisitions and its increased size, together with its moderate debt and
secure cash flows, should enhance Capital`s access to capital markets.
As part of, and subject to the implementation of the scheme, it has been
agreed that, with effect from 1 January 2011, the asset management fee
charged by PFM in respect of Capital will be reduced from 0,5% to 0,4% of the
market capitalisation and borrowings of Capital.
Unitholders are referred to the circulars dated and to be posted on or about
3 February 2011, for full details of the transaction.
6 BORROWINGS
Capital, through Monyetla which was acquired in 2008, was exposed to
Pangbourne`s PROPS 2 securitisation vehicle. On 4 January 2011 this vehicle
was restructured with Monyetla exiting the structure utilising a new R360
million facility provided by Standard Bank.
Capital`s expiring banking facilities, totalling R550 million with Standard
Bank, were renewed for a further two years after year end. In addition,
Capital accepted a new facility of R350 million from RMB which was utilised
to finance acquisitions.
7 PROSPECTS
The board expects vacancy levels to increase during the next six months,
followed by an improvement as the economy grows and excess capacity is taken
up. Rentals remain under pressure as a result of the higher vacancy levels in
the property market.
Capital`s growth prospects remain positive and the board anticipates growth
in distributions of between 8% and 10% for the 2011 financial year, excluding
the impact of the proposed merger. The growth is based on the assumptions
that a stable macro-economic environment will prevail, no major corporate
failures will occur and that tenants will be able to absorb the recovery of
rising utility costs. Budgeted rental income was based on contractual
escalations and market related renewals. This forecast has not been reviewed
or reported on by Capital`s auditors.
By order of the board
Andrew Teixeira Rual Bornman
Managing director Financial director
2 February 2011
Johannesburg
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AUDITED RESTATED RESTATED
31 DEC 2010 31 DEC 2009 31 DEC 2008
R`000 R`000 R`000
ASSETS
Non-current assets 7 122 844 6 090 175 4 850 819
Investment property 5 923 042 5 033 139 4 459 286
Straight-lining of rental revenue
adjustment 88 667 72 319 58 107
Investment property under
development 166 702 126 091 41 703
Investment in associate company - - 118 923
Investments 944 433 858 626 172 800
Current assets 15 281 60 286 107 249
Investment property held for sale - - 50 692
Straight-lining of rental revenue
adjustment - - 610
Trade and other receivables 15 099 25 497 54 941
Cash and cash equivalents 182 34 789 1 006
Total assets 7 138 125 6 150 461 4 958 068
EQUITY AND LIABILITIES
Capital of Fund 5 298 062 4 753 169 3 800 285
Trust capital 2 645 963 2 645 963 1 981 763
Non-distributable reserves 2 652 099 2 107 206 1 818 522
Retained earnings - - -
Total liabilities 1 840 063 1 397 292 1 157 783
Non-current liabilities 752 814 1 101 855 771 155
Interest-bearing borrowings 693 781 1 053 965 731 615
Deferred tax 59 033 47 890 39 540
Current liabilities 1 087 249 295 437 386 628
Trade and other payables 194 682 78 732 171 371
Interest-bearing borrowings 632 329 - 53 531
Unitholders for distribution 228 046 207 093 154 003
Bank overdraft 32 192 9 612 7 723
Total equity and liabilities 7 138 125 6 150 461 4 958 068
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AUDITED RESTATED
31 Dec 2010 31 Dec 2009
R`000 R`000
Net rental and related revenue 518 240 447 516
Recoveries and contractual rental revenue 704 415 600 059
Straight-lining of rental revenue adjustment 16 348 13 602
Rental revenue 720 763 613 661
Property operating expenses (202 523) (166 145)
Distributable income from investments 70 926 49 815
Fair value gain on investment property
and investments 564 468 293 198
Fair value gain on investment property 467 247 144 433
Fair value adjustment resulting from
straight-lining of rental revenue (16 348) (13 602)
Fair value gain on investments 113 569 162 367
Administrative expenses (35 545) (28 665)
Impairment of subsidiary loans (319) -
Share of post acquisition reserves
from associate - 8 493
Distributable income from associate - 8 064
Profit from associate - 429
Profit before net finance costs 1 117 770 770 357
Net finance costs (130 183) (106 966)
Finance income 2 484 8 617
Interest on units issued cum distribution - 6 100
Interest received 2 484 2 517
Finance costs (132 667) (115 583)
Interest on borrowings (122 678) (112 637)
Interest capitalised 14 472 7 179
Fair value adjustment on
interest rate derivatives (24 461) (10 125)
Profit before income tax 987 587 663 391
Income tax expense (11 143) (8 420)
Profit for the year attributable to
equity holders 976 444 654 971
Total comprehensive income for the year 976 444 654 971
Basic earnings per unit (cents)* 136,07 98,01
Headline earnings per unit (cents)* 75,60 79,69
*The Fund has no dilutionary instruments in issue.
Basic earnings per unit and headline earnings per unit are based on the
weighted average of 717 578 059 (2009: 668 263 543) units in issue during
the year.
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
AUDITED RESTATED
31 Dec 2010 31 Dec 2009
R`000 R`000
Profit for the year attributable
to equity holders 976 444 654 971
Adjusted for: (433 962) (122 411)
- Fair value gain on investment property (467 247) (144 433)
- Fair value adjustment resulting from
straight-lining of rental revenue 16 348 13 602
- Impairment of subsidiary loans 319 -
- Income tax expense 16 618 8 420
Headline earnings 542 482 532 560
Reconciliation of profit for the year to
amount available for distribution
Profit for the year attributable to equity
holders 976 444 654 971
Straight-lining of rental revenue adjustment (16 348) (13 602)
Fair value gain on investment property (467 247) (144 433)
Fair value adjustment resulting from
straight-lining of rental revenue 16 348 13 602
Fair value gain on investments (113 569) (162 367)
Impairment of subsidiary loans 319 -
Profit from associate - (429)
Fair value adjustment on interest rate
derivatives 24 461 10 125
Income tax expense 11 143 8 420
Distributable income 431 551 366 287
Distribution declared 431 551 366 287
Interim 203 505 159 194
Final 228 046 207 093
CONSOLIDATED STATEMENT OF CASH FLOW
AUDITED AUDITED
31 Dec 2010 31 Dec 2009
R`000 R`000
Net cash inflow/(outflow) from
operating activities 31 933 (25 386)
Net cash outflow from investing activities (361 265) (875 739)
Net cash inflow from financing activities 272 145 933 019
(Decrease)/increase in cash and
cash equivalents (57 187) 31 894
Cash and cash equivalents at the beginning
of the year 25 177 (6 717)
Cash and cash equivalents at the
end of the year (32 010) 25 177
Cash and cash equivalents consist of:
Bank overdraft (32 192) (9 612)
Current accounts 182 34 789
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Non-dis-
Trust tributable Retained
capital reserves earnings Total
RESTATED R`000 R`000 R`000 R`000
Balance previously reported
at 31 December 2008 1 981 763 1 790 975 - 3 772 738
Change in accounting
policy for deferred tax 27 547 27 547
Restated balance at
31 December 2008 1 981 763 1 818 522 - 3 800 285
Total comprehensive
income for the year 654 971 654 971
Issue of units 664 200 664 200
Transfer to non-
distributable reserves 261 434 (261 434) -
Change in accounting
policy for deferred tax 27 250 (27 250) -
Distribution (366 287) (366 287)
Restated balance at
31 December 2009 2 645 963 2 107 206 - 4 753 169
Total comprehensive
income for the year 976 444 976 444
Transfer to non-
distributable reserves 544 893 (544 893) -
Distribution (431 551) (431 551)
Balance at
31 December 2010 2 645 963 2 652 099 - 5 298 062
PREPARATION AND ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS), IAS 34,
the AC500 Standards, 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 in the prior
periods except for the recognition of deferred tax. In December 2010 the IASB
released amendments to IAS 12 effective from 1 January 2012. These amendments
impact on the rate at which deferred tax is recognised specifically on the
fair value movement of the building component of investment property as it
establishes a presumption that it will be recovered through disposal and
hence will attract deferred tax at the capital gains tax rate. Capital has
elected the early adoption of these amendments and applied them
retrospectively as required by IAS 8. It is the view of the board that the
adoption of this policy results in more accurate and meaningful information.
The effect the early adoption of the amendments to IAS 12 had on the deferred
tax balance was as follows: 31 Dec 2008: R27,547 million decrease; 31 Dec
2009: cumulative decrease of R54,797 million.
The directors are not aware of any matters or circumstances arising
subsequent to year-end that require any additional disclosure or adjustment
to the financial statements.
The independent auditors PKF (Jhb) Inc. have audited these results. Their
unmodified report is available for inspection at the Fund`s registered
office.
SUMMARY OF FINANCIAL PERFORMANCE
31 Dec 2010 30 Jun 2010 31 Dec 2009 30 Jun 2009
Distribution
per unit
(cents) 31,78 28,36 28,86 25,72
Units in
issue 717 578 059 717 578 059 717 578 059 618 949 027
Net asset
value per
unit R7,38 R6,57 R6,62 R6,18
Gearing
ratio* 18,6% 19,4% 17,1% 23,4%
*The gearing ratio is calculated by dividing interest-bearing borrowings
by total assets.
Hedged borrowings
Nominal
amount Swap
Swap maturity R`000 rate
Feb 2011 100 000 7,85%
May 2011 100 000 7,68%
Dec 2011 50 000 8,29%
Feb 2013 100 000 8,18%
Dec 2013 100 000 8,02%
May 2014 50 000 8,67%
May 2014 100 000 8,60%
Aug 2014 100 000 7,15%
Jul 2015 100 000 7,50%
Dec 2015 100 000 7,85%
Dec 2016 200 000 7,50%
Dec 2017 200 000 7,66%
Total hedged borrowings 1 300 000 7,82%
Variable rate borrowings 26 110
Total borrowings 1 326 110
PROPERTY PORTFOLIO SUMMARY
AUDITED
31 Dec 2010 Number of
R`000 properties
Movement in investment property is as follows:
Carrying value at the beginning of the year 5 105 458 98*
Additions 428 831 10
Disposals (9 000) **
Capital expenditure 18 328
Transfer from investment property
under development 845
Fair value adjustment 450 899
Straight-lining of rental revenue adjustment 16 348
Carrying value at the end of the year 6 011 709
Movement in investment property under
development is as follows:
Carrying value at the beginning of the year 126 091 1*
Cost capitalised 26 984
Interest capitalised 14 472
Transfer to investment property (845)
Carrying value at the end of the year 166 702
Total investment property at 31 December 2010 6 178 411 109
*For number of properties, N1 Business Park is considered as a single
property and is not split as two properties between investment property
and developments.
**Only portion 1 of erf 473, 4th Street, Wynberg was disposed of.
LISTED EQUITY INVESTMENTS
AUDITED
31 Dec 2010
Pangbourne Nepi
Units/shares 43 169 000 3 450 000
Value (R`000) 841 795 102 638
SECTORAL SPLIT
Book
Based on: GLA value
Commercial 26% 44%
Industrial 68% 46%
Retail 6% 10%
100% 100%
LEASE EXPIRY PROFILE
Rental
Based on: GLA income
Vacant 5,2% -
Dec 2011 28,4% 31,7%
Dec 2012 20,7% 24,5%
Dec 2013 17,2% 16,2%
Dec 2014 11,0% 11,9%
Dec 2015 13,0% 10,6%
>Dec 2015 4,5% 5,1%
100% 100%
SEGMENTAL ANALYSIS
AUDITED RESTATED
31 Dec 2010 31 Dec 2009
R`000 R`000
External segmental revenue - recoveries and
contractual rental revenue
Commercial 311 250 284 327
Industrial 319 660 236 792
Retail 73 505 78 940
Total 704 415 600 059
Property operating expenses
Commercial (84 971) (77 822)
Industrial (95 883) (63 935)
Retail (21 669) (24 388)
Total (202 523) (166 145)
External segmental revenue - rental revenue
Commercial 318 715 294 995
Industrial 327 972 243 024
Retail 74 076 75 642
Total 720 763 613 661
Profit for the year attributable
to equity holders
Commercial 462 622 265 142
Industrial 399 394 253 616
Retail 107 123 59 589
Corporate 7 305 76 624
Total 976 444 654 971
CAPITAL COMMITMENTS
AUDITED AUDITED
31 Dec 2010 31 Dec 2009
R`000 R`000
Authorised and contracted 9 035 222 482
Authorised and not yet contracted 67 240 41 638
76 275 264 120
INCOME DISTRIBUTION
Notice is hereby given that a cash distribution of 31,78 cents interest per
unit, being number 55 for Capital Property Fund, has been declared in respect
of the period 1 July 2010 to 31 December 2010 and is payable to the
unitholders recorded in the books of Capital at the close of business on the
record date, Friday, 25 February 2011. Unitholders are advised that the last
day to trade cum distribution will be Friday, 18 February 2011. The units
will trade ex distribution from Monday, 21 February 2011. Payment will be
made on Monday, 28 February 2011. Unit certificates may not be dematerialised
or rematerialised during the period 21 February 2011 to 25 February 2011,
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
Company secretary
Rual Bornman
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*, Banus van der Walt*, Tshiamo Vilakazi*,
Tracey Visser *Independent non-executive director
03 February 2011
Date: 03/02/2011 17:00:02 Produced by the JSE SENS Department.
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