| Tue 16 Aug 2011, 17:49 | | EMI - Emira Property Fund - Reviewed financial results for the year ended 30 |
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EMI
EMI
EMI - Emira Property Fund - Reviewed financial results for the year ended 30
June 2011 and income distribution declaration
EMIRA PROPERTY FUND
(A property fund created under the Emira Property Scheme, registered in terms
of the Collective Investment Schemes Control Act)
Share code: EMI
ISIN: ZAE000050712
("Emira" or "the Fund")
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2011 AND INCOME
DISTRIBUTION DECLARATION
Distributable income R576,7 million
Distribution per PI 113,52 cents
Net asset value per PI 1 150 cents
12 month total return 16,1%
Commentary
The Board of directors of Strategic Real Estate Managers (Pty) Limited
("STREM" or "the Manager") hereby announces a distribution of 113,
52 cents per Emira participatory interest (PI) for the 12 months to 30 June
2011. This represents growth in distributions of 5,0% on the previous
comparable period.
Emira PI holders enjoyed a healthy total return of 16,1% during the 12 months
to 30 June 2011, comprising capital appreciation of 7,2% and an income return
of 8,9%, which represents the distributions actually paid out during the
period under review. During the period capital values in the listed property
sector benefited from a search for yield from investors, while expectations
that global and local interest rates will remain lower for longer benefited
bonds yields, to which property yields are closely related. The percentage of
weighted average PIs in issue that traded in the 12-month period equated to
31.5%.
The highlight during the period under review was the announcement by the Fund
on 16 September 2010 that the conditions precedent required for the
amendments to the Trust Deed had been met. The amendments, which were
approved by virtually all PI holders who cast their ballots and became
effective on 15 September 2010, would enable the Scheme to: (i) extend the
ambit of the Manager`s investment policy so that the Fund can invest in a
broader class of assets; (ii) increase the limit of borrowing by the Scheme
from the current limit of 30% to 40% of the value of the underlying assets
comprising the relevant portfolio; and (iii) amend the existing service
charge arrangement in respect of the Fund from a monthly charge based on
enterprise value, to a monthly charge equal to the actual operating costs
incurred by the Manager in administering the Fund, and the payment of a
cancellation payment of R 197,4 million - R68 million of which is deferred
until October 2011 - to the Manager. Emira was also able to raise an amount
of R244 million to fund the cancellation payment, as well as other capital
requirements, through the issue of PIs for cash. The transaction was earnings
enhancing from the effective date.
Another feature during the period was the increased investment in Growthpoint
Properties Australia ("GOZ"). The acquisition of a further 9,175 million
stapled securities in GOZ for a total consideration of A$17,43 million
(R116,8 million) was secured via a rights issue that took place in September
2010 and resulted in Emira`s stake in GOZ rising to a total of 19,426 million
stapled securities, at a total cost of R234,5 million, or 9,1% of the total
securities in issue. This investment in GOZ, which had a market value of
R268,2 million as at 30 June 2011, represents a small (3,1% of Emira`s total
assets), passive stake in a high quality, but under-rated, listed Australian
REIT, backed by extremely secure, long-term leases with blue-chip tenants at
a yield higher than that which is achievable by buying South African
commercial property. The transaction was earnings enhancing from the date of
purchase and is expected to be realised on a re-rating of the stapled
securities, which is expected to occur in the medium to long term.
Subsequent to year-end Emira increased its stake in GOZ by a further 4,4
million stapled securities at a price of A$1,90 per stapled security through
its participation in the A$102,7 million rights issue by GOZ to facilitate
the acquisition of Rabinov Property Trust and reduce gearing. This took
Emira`s holding in GOZ to 23,8 million stapled securities, or 8,2% of the
securities in issue, at a total cost of R295,5 million, which has a current
market value of R328,0 million.
On 20 June 2011 Emira repaid R500 million that was raised in 2006 through the
Freestone Finance Series 1 commercial mortgage backed securitisation by
drawing down on a new R500 million facility with Rand Merchant Bank (RMB).
This facility will be repaid via the issue of R500 million of notes issued in
terms of a four year, secured corporate bond. These notes, which were
accorded an AA (RSA) rating by Global Credit Ratings are to be issued on 19
August 2011 at an all in margin of 163bp. The RMB facility will thereafter
be retained for the capital requirements of the Fund outlined below.
In line with the long-term strategy of the Fund, management continues to
improve the quality of the Emira portfolio through; (i) the acquisition of
new properties; (ii) the refurbishment of existing assets; as well as (iii)
the disposal of those properties deemed to be non-core. Activity in the
portfolio increased significantly during the period and compromised the
following:
Acquisitions: In June 2010, Emira, in partnership with the Eris Property
Group, agreed to purchase a 50% undivided share in a 12 500 m2, multi-
tenanted office building located at 80 Strand Street, Cape Town for R124
million (Emira`s share is R62 million). The property comprises several ground
floor retail units, with ten floors of offices above and, when compared to
similar Cape Town CBD commercial buildings, has a high parking ratio of 3,0
bays per 100 m2. The property was transferred on 11 October 2010 and is
expected to yield 10,4%.
In January 2011, the Board approved the acquisition of a new 13 782 mSquared
A grade office building to be developed by Eris Property Group, on the corner
of Corobay Avenue and Aramist Avenue, in Menlyn Pretoria, for R306,9 million.
The building, which is 70% pre-let to KV3 Engineers for 10 years and has a
one year gross rental warranty on the balance of the vacant space from
completion from the developer, is expected to be complete by 30 June 2012 and
to yield 9,1% per annum.
Refurbishments and extensions concluded: Eight earnings enhancing projects
totalling R146,5 million were concluded during the period, which consisted
of; (i) extensions to and the refurbishment of Randridge Mall (R110 million)
for existing blue-chip tenants including Pick n Pay, Woolworths and Dis-Chem;
(ii) the refurbishment of Rigel Park, which is now substantially let (R14
million); (iii) the refurbishment of Wesbank House (R9,8 million); (iv) the
rebuilding of a portion of Universal Print House (R4,1 million) ; (v)
extensions for Woolworths at Market Square shopping centre (R3,8 million);
(vi) refurbishment of WGA Epping for Santam (R3,2 million); as well as
smaller projects at One Highveld and Tin Roof for national tenants.
Refurbishments and extensions underway: A further seven projects worth
approximately R297,0 million are underway, which include; (i) the
redevelopment of Podium Office Park in Menlyn, comprising the construction of
9,239 m2 of prime, ideally located office space by April 2012 at a total cost
of R176,1 million, for which tenants are being sought; (ii) the complete
refurbishment of 267 West, located opposite the Gautrain station in Centurion
(R36,3 million); (iii) the construction of a new Audi dealership with a ten-
year lease and refurbishment of the Virgin Active at Cresta Corner (R32.0
million); (iv) the extensions to Market Square shopping centre for Edgars and
Clicks (R28,8 million);
and (v) the refurbishment of Albury Office Park in Dunkeld West (R19,1
million).
Refurbishments and extensions approved: Three further projects totalling R75
million - FNB Heerengracht, Gift Acres and Park Boulevard - have been
approved by the Board, however have yet to be initiated as the Fund is
waiting for the conclusion of certain leases before commencing construction.
Disposals: The disposal of non-core buildings continued during the period,
with five properties being transferred out of the Fund - Howick Gardens,
Standard Bank Glenwood, QD House, 8 Grader Road and Nampak Building - for
R75,3 million, while a section of Georgian Place and Crocker Road Industrial
Park have been lodged subsequent to year-end (R25,1 million). Offers have
been accepted for Hurlingham Office Park, Umhlanga Centre, Midline Business
Park, Linkview, Century Gate, Ciros House, Dresdner House and Flexitainer
(R233,3 million) at in excess of December 2010 book value, although these
sales are still conditional.
A further 15 non-core properties worth approximately R600 million, mainly
comprising B-grade office space, remain on the disposal list. The disposal of
these properties will significantly improve the quality of the portfolio,
reduce vacancies and also allow management to focus on larger buildings, with
better income growth prospects. The proceeds from the disposals are expected
to be utilised for the Fund`s significant capital expenditure project
pipeline mentioned above, acquisitions or, in the event that the returns are
sufficiently rewarding, PI buybacks.
Results
The period under review was characterised by tougher than expected conditions
in the physical portfolio. Although there was still leasing activity in all
three sectors that Emira is exposed to - office, retail and industrial -
rentals were under pressure and landlords needed to be competitive when
trying to attract or retain tenants, particularly in the office sector. The
lower than expected growth in net property income was mitigated by the
benefits of the amendments to the Trust Deed approved by PI holders in
September 2010.
Vacancies rose from 9,2% in June 2010 to 11,4% by December 2010 and further
to 11,5% at June 2011, with all three sectors being impacted. On an adjusted
basis (excluding properties under refurbishment or redevelopment), vacancies
rose from 7,9% to 10,3%. Despite the rising vacancies, with a substantial
portion of Emira`s portfolio on long-term, escalating leases, property income
continued to grow, albeit at a lower rate.
Excluding the straight-line adjustments from future rental escalations,
revenue rose by 7,0% over the comparable period. This was the result of
organic growth in income from the existing portfolio, the inclusion of the
acquired properties from the effective dates, the conclusion of several
capital projects in the previous financial year which contributed for the
full period under review, as well as increased recoveries of municipal
expenses. Excluding municipal recoveries, revenue growth would have been 5%.
Contractual cost escalations were well managed, however growth in net
property income was impacted by sharply rising municipal charges, an increase
in building maintenance and significantly higher leasing charges on the
comparable period. Tenant arrears also continued to rise, resulting in the
actual bad debts charge for the period increasing slightly when compared to
the comparable period. The net effect is that property expenses rose by 14,1%
and net income from properties was 3,4% higher. Excluding the increase in
municipal charges, maintenance, leasing charges and bad debts, property
expenses rose by 2,3%.
The income from the Fund`s holding in GOZ of R27,0 million represents the
distributions from GOZ for the period to 30 June 2010, 31 December 2010 and
30 June 2011. Although the distribution from GOZ to 30 June 2010 was only
received in August 2010, Emira received advice that this income was
attributable to the period in which GOZ trades ex-dividend, being the
financial year to 30 June 2010. As a result, income from the listed
investment is higher than expected by an amount of R5,7 million.
Asset management expenses, being actual asset management expenses to 15
September 2010 plus the recovery of costs for the balance of the year as per
the amended deed, declined by 44% year on year to R20,1 million. Net interest
costs excluding unrealised gains or losses on interest rate swaps rose by
14,5% as a result of increased levels of gearing in the Fund. The claw-back
of R4,1 million represents the income portion of the capital raised in
September 2010 that was attributable to PI holders.
Net asset value declined marginally (-0,3%) in the 12 months from 1 153 cents
(restated) (1 182 cents excluding the deferred tax liability) at 30 June 2010
to 1 150 cents (1 181 cents), largely as a result of the payment to STREM in
respect of the amendment to the existing service charge arrangement.
Distribution statement for the year ended 30 June 2011
R`000 2011 2010 % change
Operating lease rental income 1 232 911 1 152 167 7,0
and tenant recoveries
excluding straight-lining of
leases
Property expenses excluding (441 113) (386 478) 14,1
amortised upfront lease costs
Net property income 791 798 765 689 3,4
Income from listed property 27 001 -
investment
Per statement of 22 373 -
comprehensive income
Pre-acquisition income on 4 628 -
stapled securities acquired
Management expenses (20 085) (36 171) (44,5)
Per statement of (8 418) (36 171) (76,7)
comprehensive income
Reimbursement to STREM in (11 667) -
respect of management
expenses
Administration expenses (45 244) (43,214) 4,7
Per statement of (57 013) (43 214) 31,9
comprehensive income
Management expenses incurred 11 769 -
by STREM included in the
above
Depreciation (9 805) (9 704) 1,0
Finance costs (177 075) (154 840) 14,4
Interest paid and amortised (168 106) (143 219) 17,4
borrowing costs
Interest capitalised to the 4 115 3 065 34,3
cost of developments
Preference share dividends (11 895) (13 351) (10,9)
paid
STC on preference share (1 189) (1 335) (10,9)
dividends paid
Investment income 10 103 5 484 84,2
Per statement of 6 098 5 484 11,2
comprehensive income
Investment income earned by (102) -
STREM
Claw-back of distribution in 4 107 -
respect of participatory
interests issued cum
distribution
Distribution payable to 576 693 527 244 9,4
participatory interest
holders
Number of units in issue 508 010 229 487 827 654 4,1
Distribution per 113,52 108,08 5,0
participatory interest
(cents)
Acquisitions
Properties purchased and transferred to Emira during the 12 months to June
2011
Effec-
Loca- GLA tive
Property Sector tion (mSqua (Rm) (%) date Tenant
red)
80 Strand Office Cape 12 500 62,0 10,4 11 De Vries
Street Town October Inc, CK
(50% CBD 2010 Fried-
undivided lander,
share) Medway
Holdings
Corobay Office Menlyn, n/a 40,0 n/a 18 April n/a
(land for Preto- 2011
develop- ria
ment)
Disposals
In accordance with the strategy of the Fund, certain properties that are
underperforming or pose excessive risk to the Fund are earmarked and disposed
of.
Properties transferred out of Emira during the 12 months to
June 2011
Valua-
tion
June Sale Exit
GLA `10 price yield Effective
Property Sector Location (mSquared) (Rm) (Rm) (%) date
Howick Office Midrand 3 075 20,7 20,7 9,4 30 August
Gardens 2010
Standard Retail Durban 368 4,5 5,0 11,6 22
Bank September
Glenwood 2010
QD House Indus- Kyalami 3 470 14,9 16,6 11,7 30
trial September
2010
8 Grader Indus- Spartan 3 437 10,3 12,5 9,0 13
Road trial December
2010
Nampak Indus- Denver 24 880 18,0 20,5 8,5 4 January
Building trial 2011
75,3
Properties sold unconditionally but not yet transferred out of Emira at June
2011
Valua- Antici-
tion Exit pated
June Sale yield effec-
GLA `10 price (%) tive date
Property Sector Location (mSqua (Rm) (Rm)
red)
Georgian Office Kelvin, 709 3,1 3,1 9,3 26 July
Place Gauteng 2011
Crocker Indus- Wade- 9 883 19,4 22,0 9,9 September
Road trial ville, 2011
Indus- Gauteng
trial
Park
Vacancies
Vacancies increased from 9,2% in June 2010 to 11,5% by June 2011, with all
three sectors of the portfolio experiencing tougher letting conditions. If
the vacancies in the buildings that are currently either under refurbishment
or pending refurbishment (FNB Heerengracht (6 519 m2 office), 267 West (5 509
m2 office), Albury Office Park (2 007 m2 office), Cresta Corner (3 308 m2
retail) and Park Boulevard (1 079 m2 retail)) are removed, adjusted portfolio
vacancies drop to 10,3%.
Office vacancies rose from 16,2% to 18,4% (16,2% adjusted), with the major
vacancies, besides those mentioned above, being located in Hurlingham Office
Park (6 739 m2), Fleetway House (4 800 m2) and Lincolnwood Office Park (4 765
m2).
Retail vacancies increased from 5,3% to 7,5% (6,4% adjusted) - Montana Value
Centre (3 826 m2), Gift Acres (2 637 m2) and WorldWear (2 438 m2).
Industrial vacancies rose from 5,1% to 7,2% - Isando Unitrans
(4 970 m2), Industrial Village Kya Sands (4 212 m2) and Johnson
& Johnson (3 472 m2).
June 2010 Vacancy June 2011 Vacancy
GLA (m2) June 2010 % GLA (m2) June 2011 %
Office 447 289 72 293 16,2 443 802 81 761 18,4
Retail 384 640 20 454 5,3 387 455 29 072 7,5
Industrial 386 061 19 746 5,1 354 823 25 494 7,2
Total 1 217 990 112 493 9,2 1 186 080 136 327 11,5
Valuations
One-third of Emira`s portfolio is valued by independent valuers at the end of
every financial year, with the balance being valued by the directors.
Sector June 2010 June 2011 Dif- Dif-
ference ference
(R`000) R/mSqu (R`000) R/mSq (%) (R`000)
ared uared
Office 3 696 931 8 265 3 794 720 8 550 2,6 97 789
Retail 2 846 316 7 373 2 905 769 7 500 2,1 59 453
Industrial 1 339 683 3 470 1 345 723 3 793 0,5 6 040
Property 130 996 130 996
under
development
Total 7 882 930 8 177 208 294 278
Investment properties increased by R294,3 million, made up of acquisitions
and capital expenditure including interest of
R301,9 million, disposals of R75,3 million, depreciation of
R9,8 million, and a slight upward revision in property values
of R77,5 million.
Debt
Emira has a relatively low level of gearing, with available debt facilities
at attractive margins which will enable the Fund to acquire good quality
properties with sustainable income streams.
A new three-year, R500 million facility has been arranged with RMB, which was
used to redeem the Freestone securitisation notes in June 2011. This loan
will be repaid on 19 August 2011, using the proceeds of a new issue of
Domestic Medium Term Notes (DMTN) which were auctioned on 12 August 2011.
Thereafter the facility will be used to fund the Corobay and Podium projects
which are currently underway.
Emira has entered into various swap agreements a summary of which is set out
below. As a result, 92,7% of the Fund`s debt has been fixed for periods of
between four and 13 years. As at 30 June 2011, the weighted average cost of
debt equated to 9,36%.
Weighted Weighted Amount %
average average (Rm) of
rate % term Debt
Debt - Swap 9,53 8,7 years 1 906,6 92,7
- Floating 7,11 149,9 7,3
Total 9,36 2 056,5 100,0
Less: Costs capitalised (5,8)
not yet amortised
Per statement of 2 050,7
financial position
Directorate
Mr Nkunku Sowazi, a non executive director from Kagiso Tiso Holdings has
announced his intention to resign from the STREM Board. The Board would like
to express its sincere gratitude to Nkunku for his valuable contribution to
the Board and wishes him every success in his future endeavours. The Board
has appointed Mr Vuyisa Nkonyeni deputy CEO of Kagiso Tiso Holdings in his
stead, pending regulatory approval. An announcement will be made when
approval has been granted.
Prospects
The underlying conditions in the commercial property sector remain tough.
Although there is demand for space across all three sectors of the portfolio,
it remains a tenant`s market, with landlords competing aggressively for long
term, high quality leases. Together with expected downward rental reversions
in certain portions of the portfolio that are expiring, this is expected to
result in muted growth in gross income. Costs such as municipal expenses,
leasing commissions - which are expensed by Emira in the year incurred - and
refurbishments, are anticipated to continue rising in excess of income. This
together with increasing interest costs is expected to result in a slight
reduction in the distribution per PI payable for the financial year ending 30
June 2012.
The forecast financial information on which this statement has been based has
not been reviewed or reported on by the Fund`s auditors.
Independent review
The financial information has been reviewed by PricewaterhouseCoopers Inc.,
whose unqualified reviewed conclusion is available for inspection at Emira`s
registered address. The distribution statement was not reviewed.
Income distribution declaration
Notice is hereby given that a final cash distribution of
58,31 cents (2010: 56,24 cents) per participatory interest has been declared
payable to participatory interest holders, payable on 19 September 2011. The
source of the distribution comprises: net income from property rentals;
income earned from the Fund`s listed property investment and interest earned
on cash on deposit. Please refer to the statement of comprehensive income for
further details.
Last day to trade cum distribution Friday, 9 September 2011
Participatory interests trade ex
distribution Monday, 12 September 2011
Record date Friday, 16 September 2011
Payment date Monday, 19 September 2011
PI certificates may not be dematerialised or rematerialised between Monday,
12 September, 2011 and Friday, 16 September 2011, both days inclusive.
Notice of annual general meeting
Notice is hereby given that the eighth annual general meeting of PI holders
of Emira Property Fund will be held at 14:00 on 15 November 2011, at 3 Gwen
Lane, Sandton, to transact the business as stated in the annual general
meeting notice forming part of the annual financial statements.
By order of the STREM Board
Martin Harris Ben van der Ross James Templeton
Company Secretary Chairman Chief Executive Officer
Sandton
15 August 2011
Condensed consolidated statement of comprehensive income
Audited
Reviewed restated
year ended year ended
30 June 30 June
R`000 2011 2010
Revenue 1 223 960 1 162 179
Operating lease rental income from 1 232 911 1 152 167
investment properties
Allowance for future rental escalations (8 951) 10 012
Income from listed property investment 22 373 -
Property expenses (444 230) (391 807)
Management expenses (8 418) (36 171)
Payment in respect of amendment to (129 150) -
existing service charge arrangement
Administration expenses (57 013) (43 214)
Depreciation (9 805) (9 704)
Operating profit 597 717 681 283
Net fair value adjustments 125 165 42 430
Net fair value gain on investment 89 551 39 661
properties
Change in fair value as a result of 8 951 (10 012)
straight-lining lease rentals
Change in fair value as a result of 3 117 5 329
amortising upfront lease costs
Change in fair value as a result of 77 483 44 344
property appreciation in value
Unrealised gain on fair valuation of 35 614 2 769
listed property investment
Profit before finance costs 722 882 723 713
Net finance costs (162 892) (211 839)
Finance income 10 205 5 484
Interest received 6 098 5 484
Claw-back of distribution in respect of 4 107 -
participatory interests issued cum
distribution
Finance costs (173 097) (217 323)
Interest paid and amortised borrowing (168 106) (143 219)
costs
Interest capitalised to the cost of 4 115 3 065
developments
Preference share dividends paid (11 895) (13 351)
Unrealised surplus/(deficit) on 2 789 (63 818)
interest-rate swaps
Profit before income tax charge 559 990 511 874
Income tax charge (18 269) 1 511
S A normal taxation (322) -
Deferred taxation (16 758) 2 846
- Revaluation of investment properties (12 100) 581
- Other timing differences including (4 658) 2 265
allowance for future rental escalations
STC on preference share dividends paid (1 189) (1 335)
Profit for the year attributable to 541 721 513 385
equity holders
Total comprehensive income attributable 541 721 513 385
to equity holders
Reconciliation between earnings and headline earnings and distribution
Audited
Reviewed restated
year ended year ended
30 June 30 June
R`000 2011 2010
Profit for the year attributable to equity 541 721 513 385
holders
Adjusted for:
Net fair value gain on revaluation of (89 551) (39 661)
investment properties
Deferred taxation on revaluation of 12 100 (581)
investment properties
Headline earnings 464 270 473 143
Adjusted for:
Allowance for future rental escalations 8 951 (10 012)
Amortised upfront lease costs 3 117 5 329
Unrealised (surplus)/deficit on interest- (2 789) 63 818
rate swaps
Unrealised gain on listed property (35 614) (2 769)
investment
Pre-acquisition income on stapled 4 628 -
securities acquired
Payment in respect of amendment to 129 150 -
existing service charge arrangement
S A normal taxation 322 -
Deferred taxation - other timing 4 658 (2 265)
differences
Distribution payable to participatory 576 693 527 244
interest holders
Distribution per participatory interest
Interim (cents) 55,21 51,84
Final (cents) 58,31 56,24
Total (cents) 113,52 108,08
Number of participatory interests in issue 508 010 487 827
at the end of the year 229 654
Weighted average number of participatory 504 305 487 827
interests in issue 482 654
Earnings per participatory interest 107,42 105,24
(cents)
The calculation of earnings per participatory interest is based on
net profit for the year of R541,7 million (2010: R 513,4 million),
divided by the weighted average number of participatory interests
in issue during the year of 504 305 482 (2010: 487 827 654).
Headline earnings per participatory 92,06 96,99
interest (cents)
The calculation of headline earnings per participatory interest
is based on net profit for the year, adjusted for non-trading
items, of R464,3 million (2010: R473,1 million), divided by the
weighted average number of participatory interests in issue during
the year of 504 305 482 (2010: 487 827 654).
Condensed consolidated statement of financial position
at 30 June 2011
Audited Audited
Reviewed restated restated
R`000 30 June 30 June 30 June
2011 2010 2009
Assets
Non-current assets 7 622 389 7 655 558 7 355 777
Investment properties 7 174 508 7 334 034 7 158 603
Allowance for future rental 147 089 162 838 152 826
escalations
Unamortised upfront lease 32 557 39 019 44 348
costs
Fair value of investment 7 354 154 7 535 891 7 355 777
properties
Listed property investment 268 235 119 667 -
Current assets 194 577 103 526 95 233
Accounts receivable and 100 065 62 845 51 892
prepayments
Derivative financial - - 6 817
instruments
Cash and cash equivalents 94 512 40 681 36 524
Non-current assets held for 823 054 347 039 362 300
sale
Total assets 8 640 020 8 106 123 7 813 310
Equity and liabilities
Participatory interest 5 839 850 5 626 621 5 640 480
holders` capital and
reserves
Non-current liabilities 1 508 533 1 434 194 1 717 289
Redeemable preference shares - 200 000 200 000
Interest-bearing debt 1 350 748 1 093 067 1 373 316
Deferred taxation 157 785 141 127 143 973
Current liabilities 1 291 637 1 045 308 455 541
Short-term portion of 700 000 498 596 -
interest-bearing debt
Accounts payable 241 204 215 357 199 627
Derivative financial 54 212 57 001 -
instruments
Distribution payable to 296 221 274 354 255 914
participatory interest
holders
Total equity and liabilities 8 640 020 8 106 123 7 813 310
Condensed consolidated statement of cash flows
Reviewed Audited
year ended year ended
R`000 30 June 2011 30 June 2010
Cash generated from operations 738 268 691 269
Finance income 10 205 5 484
Interest paid (168 106) (143 219)
Preference share dividends paid (11 895) (13 351)
Taxation paid (1 270) (1 523)
Payment in respect of amendment to (129 150) -
existing service charge arrangement
Pre-acquisition income on stapled 4 628 -
securities acquired
Distribution to participatory (554 826) (508 804)
interest holders
Cash flows from operating activities (112 146) 29 856
Acquisition of, and additions to, (297 785) (139 337)
investment properties and fixtures
and fittings
Proceeds on sale of investment 75 300 12 189
properties and fixtures and fittings
Acquisition of investment in listed (117 582) (116 898)
property fund
Cash flows from investing activities (340 067) (244 046)
Participatory interests issued 244 442 -
Increase in interest-bearing debt 259 085 218 347
Cash balance from subsidiary acquired 2 517 -
Cash flows from financing activities 506 044 218 347
Net increase in cash and cash 53 831 4 157
equivalents
Cash and cash equivalents at the 40 681 36 524
beginning of the year
Cash and cash equivalents at the end 94 512 40 681
of the year
Change in accounting policy
An amendment to IAS 12 now requires that deferred capital gains tax ("CGT")
in respect of the entire revaluation of properties held by the Fund`s
subsidiaries, be calculated at the CGT rate. Previously deferred CGT was
required to be calculated at the CGT rate on the revaluation of the land
portion and at normal income tax rate on the revaluation of the building
portion.
The Fund has applied the IAS 12 amendment retrospectively. The effect of this
change in accounting policy on the Group`s financial statements is as
follows:
Reconciliation of deferred tax credit
Revised Effect on
(based on statement of
Previously IAS 12 Comprehensive
R`000 reported amendment) income
2009 66 571 168 699 102 128 Increase in profit
for the year
2010 4 018 2 846 (1 172) Decrease in profit
for the year
Reconciliation of participatory interest holders` capital and
reserves
Previously
reported Revised Increase
2009 5 538 352 5 640 480 102 128
2010 5 525 665 5 626 621 100 956
Condensed consolidated statement of changes in equity
for the year ended 30 June 2011
Revalua- Non-con
tion
Partici- and Retained Troll-
patory other ing in-
R`000 interest reserves earnings Terest Total
Balance at 3 511 484 2 028 213 (1 345) - 5 538 352
1 July 2009
as previously
stated
Deferred tax - 102 128 - - 102 128
restated
Balance at 3 511 484 2 130 341 (1 345) - 5 640 480
1 July 2009
restated
Total - - 513 385 - 513 385
comprehensive
income for
the year
restated
Distribution - - (527 244) - (527 244)
to partici-
patory
interest
holders
Transfer to - (13 859) 13 859 - -
fair value
reserve (net
of deferred
taxation)
Balance at 3 511 484 2 116 482 (1 345) - 5 626 621
30 June 2010
Participatory 244 442 - - - 244 442
interests
issued
Non- - - - 3 759 3 759
controlling
interest in
subsidiary
acquired
Total - - 541 721 - 541 721
comprehensive
income for
the year
Distribution - - (576 693) - (576 693)
to partici-
patory
interest
holders
Transfer to - (34 961) 34 961 - -
fair value
reserve (net
of deferred
taxation)
Balance at 3 755 926 2 081 521 (1 356) 3 759 5 839 850
30 June 2011
Related parties and related party transactions
Momentum Group ("Momentum") is the major participatory interest holder. At 30
June 2011, Momentum owned 13,2% of the Fund`s participatory interests and the
Fund`s BEE partners - The Tiso Group, The Shalamuka Foundation, Avuka
Investments, The RMBP Broad Based Empowerment Trust and Mr B van der Ross -
held 12,0%. The remaining 74,8% were widely held.
The following transactions were carried out with related parties:
Reviewed Audited
year ended year ended
R`000 30 June 2011 30 June 2010
Strategic Real Estate Managers
(Proprietary) Limited
Expenditure comprising asset 8 418 36 171
management fees - pre-amendment to
service charge arrangement
Expenditure comprising asset 11 667 -
management fees - post-amendment to
service charge arrangement
Payment in respect of amendment to 129 150 -
existing service charge arrangement
Relationship: Manager of Emira
Property Fund
Rand Merchant Bank (a division of
FirstRand Bank Limited)
Long-term interest-bearing debt -* 1 099 475
Net finance cost in respect of long- -* 93 617
term interest-bearing debt
Cash on call -* 5 000
Cash reserve -* 2 000
Finance income on cash on call -* 1 572
Eris Property Group (Proprietary) -* 58 773
Limited
Expenditure comprising: property -* 53 409
management fee and letting
commissions
Development fees relating to -* 5 364
refurbishments and extensions
*As a result of the disposal of Momentum Group Limited by FirstRand Bank
Limited and the subsequent unbundling of shares in MMI Holdings Limited,
FirstRand Bank Limited and Eris Property Group (Proprietary) Limited are no
longer associates of Emira.
The above transactions were carried out on commercial terms and conditions no
more favourable than those available in similar arm`s length dealings at
market-related rates.
Segmental information
Adminis-
trative
Office Retail Industrial and Cor- Total
Sectoral porate
segments R`000 R`000 R`000 R`000 R`000
Revenue 542 575 494 445 186 940 1 223 960
Revenue 553 187 488 880 190 844 1 232 911
(10 612) 5 565 (3 904) (8 951)
Allowance
for
future
rental
escala-
tions
Segmental
result
Operating 321 813 278 931 129 411 (132 438)* 597 717
profit
Invest- 3 924 716 2 905 769 1 345 723 8 177 208
ment
proper-
ties
Geograp-
hical
segments
Revenue
- Gauteng 398 010 324 949 139 726 862 685
- Western 74 285 44 231 21 654 140 170
and
Eastern
Cape
- Kwa 46 611 81 550 25 560 153 721
Zulu-
Natal
- Free 23 669 43 715 - 67 384
State
542 575 494 445 186 940 1 223 960
Invest-
ment
proper-
ties
- Gauteng 2 945 419 1 890 626 1 007 186 5 843 231
- Western 572 332 288 770 163 840 1 024 942
and
Eastern
Cape
- KwaZulu- 286 273 489 473 174 697 950 443
Natal
- Free 121 692 236 900 - 358 592
State
3 925 716 2 905 769 1 345 723 8 177 208
*Includes management expenses of R137,6 million, income from listed property
investment of R22,4 million and general Fund expenses of R17,2 million
Basis of preparation and accounting policies
The condensed consolidated preliminary financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS") including IAS 34, and are in compliance with the Listings
Requirements of the JSE Limited. The accounting policies used in the
preparation of these financial statements are consistent with those used in
the annual financial statements for the year ended 30 June 2010, except for
the change in accounting policy relating to the treatment of tax in respect
of the capital gains on the revaluation of investment properties held by
subsidiaries of the Fund, as set out below.
As a result of the amendment to the service charge arrangements, in terms of
IFRS, the risk and rewards of the manager of Emira, Strategic Real Estate
Managers (Proprietary) Limited (STREM) are deemed to be attributable to
Emira. The financial statements of STREM have therefore been consolidated
with those of Emira, with effect from 15 September 2010, even though Emira
has no direct or indirect shareholding in STREM. Had the amendment to the
service charge arrangement taken place on 1 July 2010, the net profit after
tax of Emira would have increased by R5,3 million.
Fund Manager: Strategic Real Estate Managers (Pty) Limited Directors of the
Fund Manager: BJ van der Ross (Chairman)*,
JWA Templeton (Chief Executive Officer), MS Aitken*, BH Kent*,
V Mahlangu*, NE Makiwane*, W McCurrie*, MSB Neser*, WK Schultze, NL Sowazi*,
PJ Thurling *Non-executive Director Registered address: 3 Gwen Lane,
Sandton, 2146 Sponsor: Rand Merchant Bank (a division of FirstRand Bank
Limited) Transfer Secretaries: Computershare Investor Services (Pty)
Limited, 70 Marshall Street, Johannesburg, 2001
Date: 16/08/2011 17:49:19 Produced by the JSE SENS Department.
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