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GRT
GRT - Growthpoint Properties Limited - Audited results for the year ended 30
June 2011
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code GRT ISIN ZAE 000037669
(Growthpoint or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2011
Highlights
- 8.1% distribution growth to 131,0 cents per linked unit
- Acquisition of 50% interest in V&A Waterfront for R5,0 billion
- Growthpoint Australia grows its portfolio by R2,9 billion
- Entry into corporate bond market raises R1,0 billion
Statement of Comprehensive Income
30 June 30 June
2011 2010
Notes Rm Rm
Revenue, excluding straight-line 4 435 3 956
lease income adjustment
Straight-line lease income 205 250
adjustment
Revenue 4 640 4 206
Property expenses (1 009) (915)
Net property income 3 631 3 291
Other operating expenses (135) (101)
Operating profit 3 496 3 190
Fair value adjustments 1 (282) (182)
Finance costs (1 237) (1 157)
Non-cash items 2 (111) 67
Capital items - (30)
Finance income 90 128
Profit before debenture interest 1 956 2 016
Debenture interest (2 070) (1 874)
(Loss)/profit before taxation (114) 142
Taxation (121) (36)
- normal taxation (1) (2)
- capital gains taxation (7) 13
- deferred taxation charge (141) (75)
- deferred taxation credit 28 28
(Loss)/profit for the year (235) 106
(Loss)/profit attributable to:
Equity holders (323) 38
Non-controlling interest 88 68
Other comprehensive income:
Foreign currency translation 325 (8)
gain/(loss)
Total comprehensive income 90 98
Equity holders (97) 32
Non-controlling interest 187 66
Calculation of distributable
earnings
Operating profit 3 496 3 190
Less: straight-line lease income (205) (250)
adjustment
Finance costs (1 237) (1 157)
Finance income 90 128
Non-controlling interest share of (71) (36)
distribution (excluding fair value
adjustments)
Pre-acquisition profit - 3
Taxation (1) (2)
Distributable earnings 2 072 1 876
Total distribution (2 072) (1 876)
- Debenture interest (2 070) (1 874)
- Ordinary dividend (2) (2)
Linked units Linked units
Linked units in issue at the end of 1 591 971 441 1 547 521 924
the year
Weighted number of linked units in 1 591 971 441 1 547 521 924
issue
cents cents
Distribution per linked unit 131.00 121.20
Six months ended 31 December 63.90 59.10
Six months ended 30 June 67.10 62.10
Basic (loss)/earnings per share 3 (20.29) 2.46
Headline earnings per linked unit 4 104.58 94.76
Rm Rm
Note 1:
Fair value adjustments (282) (182)
Gross investment property fair value 1 960 865
adjustment
Less: straight-line lease income adjustment (205) (250)
Net investment property fair value 1 755 615
adjustment
Listed property investments - 1
Borrowings and derivatives (128) (492)
Foreign exchange gain 2 18
Long-term loans granted to BEE consortia 59 54
Zero-coupon loans profit - 14
Debentures (1 970) (392)
Debentures are adjusted to fair value which
represents the net asset value attributable
to Growthpoint`s debenture holders,
excluding the intangible assets.
The debenture fair value adjustment
consists of:
Fair value adjustments on other assets and (1 688) (210)
liabilities excluding fair value adjustment
on debentures
Straight-line lease income adjustment (205) (250)
Capital gains taxation 7 (13)
Deferred taxation - GOZ 141 75
Non-cash financing charge - 20
Fair value adjustment on GOZ (254) (95)
Non-controlling interest`s portion of fair 17 35
value adjustments
Decrease in other long-term employee 12 16
benefits
Capital items - 30
Debenture fair value adjustment (1 970) (392)
Note 2:
Non-cash items (111) 67
Non-cash financing charge - (20)
Amortisation of intangible asset (99) (99)
Negative goodwill - 202
Decrease in other long-term employee (12) (16)
benefits
Note 3:
The directors are of the view that the disclosure of earnings per share,
while obligatory in terms of IAS 33, Earnings per Share, and the JSE
Listings Requirements, is not meaningful to investors as the shares are
traded as part of a linked unit and practically all the revenue earnings are
distributed in the form of debenture interest plus dividends in the ratio of
1 000 to 1. In addition, headline earnings include fair value adjustments on
interest-bearing borrowings and debentures as well as non-cash charges,
which do not affect distributable earnings. The calculation of distributable
earnings as set out above is more meaningful to investors and is in
accordance with Growthpoint`s reporting policies.
Note 4:
In terms of Circular 3/2009, issued by SAICA, both the fair value adjustment
on investment property and debentures are added back in the calculation of
headline earnings per linked unit. The Circular does not make provision for
the fair value adjustment on other non-current financial liabilities to be
added back.
Rm Rm
Basic (loss)/earnings are reconciled to
headline earnings as follows:
(Loss)/profit after taxation - attributable (323) 38
to equity holders
Bargain purchase - (202)
Add back: net fair value adjustment - (1 501) (526)
investment property
- Fair value adjustment (1 755) (615)
- Applicable taxation 254 89
Headline loss attributable to shareholders (1 824) (690)
Add back: net fair value adjustment - 1 418 282
debentures
- Fair value adjustment 1 970 392
- Applicable taxation (552) (110)
Add back: debenture interest paid 2 070 1 874
Headline earnings attributable to linked 1 664 1 466
unitholders
Note 5:
Non-current liabilities - debentures
Fair value at the beginning of the year 20 795 18 641
Issued during the year 698 1 762
Fair value adjustment (Note 1) 1 970 392
Fair value at the end of the year 23 463 20 795
Statement of Financial Position
30 June 30 June
2011 2010
Note Rm Rm
ASSETS
Non-current assets 47 442 36 398
Fair value of investment property for 43 653 32 903
accounting purposes
Straight-line lease income adjustment 1 510 1 305
Fair value of long-term property assets 45 163 34 208
Intangible assets 1 535 1 634
Other long-term employee benefits 5 29
Equipment 17 3
Loan receivables 126 -
Long-term loans granted to BEE consortia 594 491
Derivative assets 2 33
Current assets 1 289 1 293
Investment property reclassified as held 539 691
for sale
Trade and other receivables 411 292
Cash and cash equivalents 339 310
Total assets 48 731 37 691
EQUITY AND LIABILITIES
Shareholders` interest 1 421 1 550
Ordinary share capital 79 77
Foreign currency translation reserve 192 (6)
Non-distributable reserve 1 150 1 479
Non-current liabilities - debentures 5 23 463 20 795
Linked unitholders` interest 24 884 22 345
Non-controlling interest 1 377 496
Total unitholders` interest 26 261 22 841
Other non-current liabilities 16 502 10 338
Other non-current financial liabilities 15 983 9 932
Deferred tax liability 519 406
Current liabilities 5 968 4 512
Trade and other payables 858 821
Current portion of other non-current 3 969 2 705
liabilities
Taxation payable 9 2
Linked unitholders for interest and 1 132 984
dividends
Total equity and liabilities 48 731 37 691
cents cents
Net asset value per linked unit 1 563 1 444
Tangible net asset value per linked unit 1 499 1 365
Statement of Cash Flows
30 June 30 June
2011 2010
Rm Rm
Cash generated from operations 3 168 3 048
Investment income 46 88
Finance costs (1 233) (1 197)
Taxation (paid)/received (7) 10
Capital items - (30)
Distribution to unitholders (1 995) (1 715)
Net cash (outflow)/inflow from operating (21) 204
activities
Net cash outflow from investing activities (7 458) (1 741)
Net cash inflow from financing activities 7 493 1 352
Translation effects on cash and cash equivalents 15 (2)
of foreign operation
Net increase/(decrease) in cash and cash 29 (187)
equivalents
Cash and cash equivalents at beginning of the year 310 497
Cash and cash equivalents at end of the year 339 310
Statement of Changes in Equity
Non- Foreign
distri- currency
Ordinary butable translation
share reserve reserve Retained
capital (NDR) (FCTR) earnings
Rm Rm Rm Rm
Balance at 30 June 2009 70 1 366 - -
Shares issued 7 - - -
Total comprehensive income - - (6) 38
Transfer amortisation net - (71) - 71
of deferred taxation to NDR
Transfer bargain purchase - 202 - (202)
to NDR
Business acquisition- GOZ - - - 77
Transfer to NDR reserves - 77 - (77)
with NCI
Transfer fair value - (95) - 95
adjustment on GOZ to NDR
Dividends declared- NCI - - - -
Dividends declared - - - (2)
Balance at 30 June 2010 77 1 479 (6) -
Shares issued 2 - - -
Total comprehensive income - - 226 (323)
Transfer amortisation net - (71) - 71
of deferred taxation to NDR
Business acquisition - GOZ - - (28) (4)
Transfer to NDR reserves - (4) - 4
with NCI
Transfer fair value - (254) - 254
adjustment on GOZ to NDR
Joint venture acquisition - - - - -
V&A
Foreign translation - - - -
difference on NCI
Dividends declared - NCI - - - -
Dividends declared - - - (2)
Balance at 30 June 2011 79 1 150 192 -
Non-
Share- controlling
holders` interest Total
interest (NCI) equity
Rm Rm Rm
Balance at 30 June 2009 1 436 - 1 436
Shares issued 7 - 7
Total comprehensive income 32 66 98
Transfer amortisation net - - -
of deferred taxation to NDR
Transfer bargain purchase - - -
to NDR
Business acquisition- GOZ 77 466 543
Transfer to NDR reserves - - -
with NCI
Transfer fair value - - -
adjustment on GOZ to NDR
Dividends declared- NCI - (36) (36)
Dividends declared (2) - (2)
Balance at 30 June 2010 1 550 496 2 046
Shares issued 2 - 2
Total comprehensive income (97) 187 90
Transfer amortisation net - - -
of deferred taxation to NDR
Business acquisition - GOZ (32) 756 724
Transfer to NDR reserves - - -
with NCI
Transfer fair value - - -
adjustment on GOZ to NDR
Joint venture acquisition - - 5 5
V&A
Foreign translation - 4 4
difference on NCI
Dividends declared - NCI - (71) (71)
Dividends declared (2) - (2)
Balance at 30 June 2011 1 421 1 377 2 798
Segmental Analysis
South Africa
Retail Office Industrial
Rm Rm Rm
STATEMENT OF COMPREHENSIVE
INCOMEEXTRACTS
Year ended 30 June 2011
Revenue, excluding straight-line lease 1 374 1 555 874
income adjustment
Property expenses (390) (367) (191)
Segment result 984 1 188 683
Fair value adjustment:
- investment property 1 150 687 101
- investment property - non- - - -
controlling interest
Total fair value adjustment on total 1 150 687 101
investment property
South
Africa
V&A Australia Total
Rm Rm Rm
STATEMENT OF COMPREHENSIVE
INCOMEEXTRACTS
Year ended 30 June 2011
Revenue, excluding straight-line lease 25 607 4 435
income adjustment
Property expenses (8) (53) (1 009)
Segment result 17 554 3 426
Fair value adjustment:
- investment property (3) 15 1 950
- investment property - non- - 10 10
controlling interest
Total fair value adjustment on total (3) 25 1 960
investment property
South Africa
(excl V&A) V&A Australia Total
Rm Rm Rm Rm
Further extracts of
statement of comprehensive
income
Other operating expenses 101 - 34 135
Finance costs 953 (3) 287 1 237
South Africa
Retail Office Industrial Australia Total
Rm Rm Rm Rm Rm
Year ended 30 June
2010
Revenue, excluding 1 258 1 442 838 418 3 956
straight-line lease
income adjustment
Property expenses (337) (321) (209) (48) (915)
Segment result 921 1 121 629 370 3 041
Fair value adjustment:
- investment property 359 449 (108) 126 826
- investment property - - - 39 39
-non-controlling
interest
Total fair value 359 449 (108) 165 865
adjustment on total
investment property
South Africa Australia Total
Rm Rm Rm
Further extracts of statement
ofcomprehensive income
Other operating expenses 79 22 101
Finance costs 954 203 1 157
South Africa
Retail Office Industrial
Rm Rm Rm
STATEMENT OF FINANCIAL POSITION
EXTRACTS
At 30 June 2011
- Investment property
Opening balance - 30 June 2010 10 669 12 686 6 667
Acquisitions - Income producing - - -
assets
Acquisitions - Undeveloped bulk - - -
Acquisitions - Other 253 122 82
Developments and capital expenditure 166 264 143
Disposals (253) (90) (152)
Foreign exchange gain - - -
Fair value adjustment 1 150 687 101
Fair value of total property assets 11 985 13 669 6 841
- 30 June 2011
- Fair value of long-term property 11 842 13 442 6 710
assets
- Investment property reclassified 143 227 131
as held for sale
South Africa
V&A Australia Total
Rm Rm Rm
STATEMENT OF FINANCIAL POSITION
EXTRACTS
At 30 June 2011
- Investment property
Opening balance - 30 June 2010 - 4 877 34 899
Acquisitions - Income producing 4 179 - 4 179
assets
Acquisitions - Undeveloped bulk 600 - 600
Acquisitions - Other - 2 881 3 338
Developments and capital expenditure 7 20 600
Disposals - (129) (624)
Foreign exchange gain - 750 750
Fair value adjustment (3) 25 1 960
Fair value of total property assets 4 783 8 424 45 702
- 30 June 2011
- Fair value of long-term property 4 783 8 386 45 163
assets
- Investment property reclassified - 38 539
as held for sale
South Africa
(excl V&A) V&A Australia Total
Rm Rm Rm Rm
Further extracts of
statement of financial
position
Intangible assets 1 535 - - 1 535
Trade and other receivables 356 24 31 411
Cash and cash equivalents 76 88 175 339
Trade and other payables (718) (56) (84) (858)
Total interest-bearing (15 022) - (4 930) (19 952)
liabilities
- Nominal value - interest- (14 249) - (4 465) (18 714)
bearing liabilities
- Fair value adjustment (773) - (73) (846)
- Foreign translation - - (392) (392)
differences
South Africa
Retail Office Industrial
Rm Rm Rm
STATEMENT OF FINANCIAL POSITION
EXTRACTS
At 30 June 2010
- Investment property
Opening balance- 30 June 2009 10 152 12 399 6 682
Acquisitions - GOZ - - -
Acquisitions - Other 102 11 50
Developments and capital expenditure 202 284 103
Disposals (146) (457) (60)
Foreign exchange loss - - -
Fair value adjustment 359 449 (108)
Fair value of total property assets 10 669 12 686 6 667
- 30 June 2010
Fair value of long-term property 10 669 12 124 6 600
assets
Investment property reclassified as - 562 67
held for sale
Australia Total
Rm Rm
STATEMENT OF FINANCIAL POSITION
EXTRACTS
At 30 June 2010
- Investment property
Opening balance- 30 June 2009 - 29 233
Acquisitions - GOZ 4 272 4 272
Acquisitions - Other 467 630
Developments and capital expenditure 14 603
Disposals - (663)
Foreign exchange loss (41) (41)
Fair value adjustment 165 865
Fair value of total property assets 4 877 34 899
- 30 June 2010
Fair value of long-term property 4 815 34 208
assets
Investment property reclassified as 62 691
held for sale
South
Africa Australia Total
Rm Rm Rm
Further extracts of statement
offinancial position
Intangible assets 1 634 - 1 634
Trade and other receivables 273 19 292
Cash and cash equivalents 202 108 310
Trade and other payables (782) (39) (821)
Total interest-bearing (9 846) (2 791) (12 637)
liabilities
- Nominal value - interest- (9 191) (2 730) (11 921)
bearing liabilities
- Fair value adjustment (655) (61) (716)
COMMENTARY
INTRODUCTION
Growthpoint is the largest South African listed property company with a
quality portfolio of 424 directly owned properties in South Africa valued at
R32,5 billion, 37 properties in Australia valued at R8,4 billion and has
recently acquired a 50% interest in the V&A Waterfront with properties
valued at R9,6 billion.
The company`s objective is to grow and nurture a diversified portfolio of
quality investment properties, providing accommodation to a wide spectrum of
users and delivering sustainable income distributions and capital
appreciation, optimised by effective financial structures. Effectively, all
rental income received by the company, less operating costs and interest on
debt, is distributed to unitholders semi-annually, so that the company`s
business model is the same as the Real Estate Investment Trust (REIT) models
that are well established internationally. Growthpoint`s distributions are
based on sustainable income generated from rentals. The company does not
distribute capital profits.
Growthpoint is included in the JSE ALSI Top 40 Companies Index, having a
market capitalisation of R29,1 billion at 30 June 2011. Over the last year,
on average more than 63 million linked units traded per month (2010: 67
million). The monthly average value traded was R1,1 billion (2010: R950
million).
The South African portfolio represents 82% of the total portfolio by value,
and 85% by GLA, after the acquisition of the 50% interest in the V&A
Waterfront, and is well diversified in the three major sectors of commercial
property, being office, retail and industrial. The bulk of the value of the
South African properties is situated in the major metropolitan areas in
strong economic nodes.
HIGHLIGHTS FOR THE YEAR
Acquisition of 50% interest in V&A Waterfront for R5,0 billion
On 7 June 2011, Growthpoint realised a long-held ambition, when it, jointly
with the Government Employees Pension Fund, represented by the Public
Investment Corporation Limited ("PIC"), acquired, 100% of the V&A Waterfront
("V&A") for a total of R9,9 billion. Growthpoint`s share of the price was
initially fully debt-funded but on 22 July 2011 a portion of the debt was
repaid from the proceeds of an issue of new linked units that raised R1,8
billion.
The V&A is a landmark South African property asset and is the country`s top
tourist destination. The developed property portfolio boasts a well-
established and high-quality portfolio of properties offering attractive
rentals, rental escalations and lease expiry profiles. Whilst the
transaction is consistent with Growthpoint`s objectives of providing its
linked unitholders with long-term sustainable income and capital growth, it
also creates the opportunity to unlock significant value through the
development of the undeveloped bulk. The acquisition also improves the
diversification of Growthpoint`s property portfolio, through greater
exposure to the Retail and Leisure sectors and to the Western Cape.
Development rights have been approved for 603 868mSquared, of which 220
035mSquared of bulk remains available for development ("undeveloped bulk").
Borrowing costs in respect of the undeveloped bulk acquired will be
capitalised, while in development stage.
Overview of developed portfolio:
% average
base Weighted
rental average
% of escalation* lease expiry*
Sector total rental GLA (by GLA) (years)
Retail 59.9 88 923 7.8 4
Office 19.5 89 023 8.7 10
Hotel and Leisure 11.8 83 508 Note 1 25
Fishing and 8.8 122 379 8.9 23
Industrial
100 383 833
Note 1: The nature of the hotel leases vary significantly between tenants,
the majority of which are land leases.
The anticipated initial yield on the income producing assets acquired is
expected to be approximately 7.25%*.
In terms of IAS 31, Interest in Joint Ventures, Growthpoint proportionately
consolidated its 50% interest of assets and liabilities, as well as income
and expenses from 7 June 2011.
The fair value of the 50% of assets and liabilities of the V&A Waterfront
acquired was as follows:
R`m
Investment property 4 179
Rights to undeveloped bulk 600
Long-term loan 126
Equipment 16
Trade and other receivables 46
Cash and cash equivalents 77
Trade and other payables (94)
Net asset value 4 950
Additional investments by Growthpoint Australia (GOZ)
In the previous financial year, Growthpoint acquired a 76.2% holding in GOZ
for R1,25 billion. In September 2010, GOZ acquired seven direct property
assets from Property Solutions Group for a total price of AUD172 million
(R1,2 billion) at a weighted average yield of 8.4%*. The acquisition
diversified the previously 100% industrial portfolio of GOZ to include the
office sector.
GOZ funded the acquisition through a rights offer that raised AUD101
million, and the balance was funded from existing debt facilities.
In line with our strategy to reduce Growthpoint`s percentage shareholding in
GOZ and create greater liquidity in the listed units, Growthpoint renounced
a portion of its rights, resulting in a dilution of its holding in GOZ to
67.6% subsequent to the rights issue. Growthpoint followed its rights in
respect of 42% of the units offered, resulting in an increased investment in
GOZ of R282 million.
In April 2011, GOZ acquired six office properties held in the Rabinov
Property Trust ("Rabinov") for a total price of AUD184 million (R1,3
billion) at a weighted average yield of 8.3%*. GOZ issued 25 million
additional stapled securities to Rabinov unitholders further diluting
Growthpoint`s unitholding to 60.6%.
At the time that Growthpoint invested in GOZ, it was a focused industrial
fund. One of the strategies stated by Growthpoint was to diversify the fund
into other sectors. Very good progress has been made towards achieving this,
as the office sector represented 28.4% of the portfolio value at year-end.
The distribution received from GOZ for the year amounted to R168 million
(2010: R114 million), resulting in an income return of 11.4% (2010: 9.9%)
and a capital return of 17.2% (2010: 13.4%), due to the increased trading
price, as well as the strengthening of the AUD against the Rand.
Subsequent to year-end, GOZ undertook a renounceable rights issue which was
underwritten by Growthpoint to raise AUD102,6 million at an issue price of
AUD1.90 per stapled security. The proceeds from the rights offer will be
utilised to reduce bank debt and to provide additional capital for
investment into the Energex office development at Nundah, Brisbane.
Growthpoint paid AUD62,1 million to follow its rights and an additional
AUD3,3 million to follow the rights that were not taken up by current
security holders.
Bond issues
In December 2010 Growthpoint issued its first unsecured corporate bond. The
four-year floating rate note was issued at a margin of 156 bps over 3-month
Jibar. Growthpoint was extremely pleased with the strong demand from
institutions and the ability to access debt capital markets directly for
long-term unsecured funding.
In May 2011 Growthpoint issued a further five-year unsecured bond. Strong
demand for the paper saw margins reduce to 134 bps over Jibar. This was
despite Growthpoint being under ratings review from Moody`s at the time.
FINANCIAL RESULTS
For the year ended 30 June 2011, Growthpoint delivered growth in
distributions of 8.1%, in line with expectations at the time of announcing
the interim results.
The recovery from the recession is proving to be sluggish, with slow
economic growth, an uncertain and volatile global outlook and increases in
energy and transport costs that are well above inflation.
The positive side of this has been the slow-down in the development of new
commercial premises which would have increased the supply of lettable space
at a time of weak demand.
It is pleasing to be able to report that in these difficult conditions the
company has achieved a modest decrease in vacancies, bad debts and arrears
percentages.
The inclusion of our 50% share of the profits of the V&A Waterfront from 7
June 2011 resulted in an approximate R595 000 dilution to profits after
borrowing costs in the current financial year. This isin line with our
expectations as it is anticipated that it will take just over a year for
rental escalations in the V&A to increase net income above funding costs.
The investment in GOZ continues to enhance overall profits, based on the
attractive yield of the investment, as well as hedging strategies that take
advantage of Rand weakness relative to the Australian dollar from time to
time to enhance the distributions receivable from GOZ when converted to
Rand.
BASIS OF PREPARATION
The financial statements are considered preliminary based on the JSE
Listings Requirements and are summarised from a complete set of the group
annual financial statements on which the independent auditors, KPMG Inc.,
have expressed an unmodified audit opinion, which is available for
inspection at the company`s registered office.
These summarised consolidated financial statements have been prepared in
accordance with the measurement and recognition criteria of International
Financial Reporting Standards (IFRS), and the AC500 series issued by the
Accounting Practices Board, and have been prepared in accordance with the
presentation and disclosure requirements of IAS 34, Interim Financial
Reporting, and the Companies Act of South Africa.
The company`s accounting policies as set out in the audited financial
statements for the year ended 30 June 2010 have been consistently applied.
Investment property comprises land and buildings held to generate rental
income over the long term. Should any properties no longer meet the
company`s investment criteria and be sold, any profits or losses will be of
a capital nature and will be taxed at rates applicable to capital gains.
Deferred taxation on the revaluation of investment property is offset
against the deferred taxation asset that arises on the revaluation of the
company`s issued debentures (excluding deferred taxation on intangible
assets and the deferred taxation applicable to the investment in GOZ).
* The information marked with "*" has not been subject to audit or review by
the company`s independent external auditor.
ACCOUNTING FOR THE INVESTMENT IN GOZ
In terms of IAS 21, The Effects of Changes in Foreign Exchange Rates, the
consolidated statement of financial position includes 100% of the assets and
liabilities of GOZ, converted at the closing exchange rate at 30 June 2011
of R7.24:AUD1 (2010 R6.44:AUD1). The consolidated statement of comprehensive
income also includes 100% of the revenue and expenses of GOZ, which was
translated at an average exchange rate of R6.91:AUD1 (2010: R6.71:AUD1) for
the year. The resulting foreign currency translation difference is
recognised in other comprehensive income. A non-controlling interest was
raised for the 39.4% (2010: 23.8%) not owned by Growthpoint.
NET PROPERTY INCOME
The increase in revenue (12.1%) was mainly due to contractual rental
escalations, accounting for the acquisition of GOZ made in August 2009 for a
full year, higher revenue of GOZ due to acquisitions made and the inclusion
of revenue of R25 million from the V&A.
The ratio of property expenses to revenue has improved slightly, from 23.1%
to 22.8%. Other operating expenses increased from 2.6% to 3.0% of revenue as
GOZ has increased its very small staff complement to handle its rapid
growth, and in South Africa costs have also increased as the company has
continued to grow.
FAIR VALUE ADJUSTMENTS
The revaluation of properties resulted in an upward revaluation of R2,0
billion (4.5%) to R45,7 billion for investment property (including
properties reclassified as held for sale). This was mainly due to increased
rentals and an average decrease of 0.5% in discount rates. The revaluation
of interest-bearing borrowings and derivatives resulted in a fair value loss
of R128 million as a result of interest rates being lower than a year ago.
FINANCE COSTS
The increase in finance costs was due to the higher debt of GOZ as a result
of acquisitions.
ARREARS
At the end of June 2011, arrears for South Africa (excluding V&A) amounted
to R34,8 million (2010: R36,3 million) with a provision of R16,8 million
(2010: R14,9 million) having been raised for potential bad debts. Included
in the purchase price allocation of the V&A was an amount of R23,6 million
for arrears with a provision of R14,9 million raised for potential bad
debts.
For the period to June 2011, the total bad debts expense amounted to R9,6
million (2010: R12,5 million).
VACANCY LEVELS
At 30 June 2011 Growthpoint`s (South Africa, excluding V&A) vacancy levels,
as a percentage of gross lettable area (GLA) were:
Retail 2.9% (2010: 2.7%)
Office 8.1% (2010: 9.0%)
Industrial 4.3% (2010: 6.7%)
Total 5.0% (2010: 6.4%)
The Office sector started the year with relatively high vacancies in certain
recently developed or re-developed properties and managed to reduce these
considerably. The impact of the large development pipeline of a few years
ago has now effectively come to an end. Despite relatively high office
vacancies nationally, Growthpoint will be aggressively marketing its
available space and expects vacancies to decline in the year ahead.
Growthpoint`s regional shopping centres and other high quality smaller
centres such as Constantia Village and Walmer Park, which collectively
account for 73% of the value of the Retail portfolio, proved their
resilience throughout the recession. Demand from national tenants for space
in these dominant centres remains strong. The current high occupancy rates
are expected to be maintained in the year ahead.
The improvement in occupancy levels in the Industrial sector was partly due
to letting some large areas and partly due to the sale of two vacant
buildings. Conditions are expected to remain tough in the Industrial sector
where Growthpoint has a large number of smaller businesses who are facing a
weak economy and increasing cost pressures.
ACQUISITIONS AND COMMITMENTS
In addition to the acquisition of the 13 properties by GOZ, mentioned in the
highlights, it also acquired Worldpak, an office building in Adelaide, for
AUD47 million (R334 million). The initial yield on the property is 9.0% and
the weighted average lease expiry is 12.8 years. GOZ has a capital
commitment to the value of AUD69,5 million in respect of development of
Energex office at Nundah. In addition Growthpoint South Africa has
commitments outstanding in respect of developments amounting to R478 million
and acquisitions amounting to R299 million.
DISPOSALS
11 South African properties were sold for R233 million realising a profit of
R104 million on cost, and three Australian properties were sold for the
equivalent of R129 million.
BORROWINGS
At 30 June 2011, the loan to value ratio (LTV) measured by dividing the
nominal value of interest-bearing borrowings (net of cash) by the fair value
of property assets, including investment property held for sale, was 40.2%
(2010: 33.2%). The increase was mainly due to the additional R4,5 billion
debt raised to pay for the V&A. The issue of new linked units in July 2011
raised R1,8 billion which has been used to reduce debt and reduced the LTV
to below 40.0%.
As a result of the higher gearing following the V&A acquisition, Moody`s
have lowered Growthpoint`s credit rating by one notch. Growthpoint`s credit
rating remains an investment-grade rating and we have continued to see
strong demand for Growthpoint`s bonds and short-term commercial paper.
Growthpoint currently enjoys the following ratings, with a stable outlook:
Global long-term Baa3
Global short-term P-3
National long-term A-2.za
National short-term P-2.za
Including R2,0 billion of swaps that commence on 1 July 2011, 77.1% (30 June
2010: 99.3%) of interest-bearing borrowings were fixed for a weighted
average of 5.3 years at 30 June 2011.
On 1 August 2011 Growthpoint repaid R969 million of Commercial Mortgage
Backed Securitisation (CMBS) notes that expired on that date. On 1 September
2011 the last R1 billion of CMBS notes will be repaid, utilising existing
committed debt facilities.
From 30 September 2011 as a result of entering into additional swaps, the
ratio of fixed interest rate debt increased to 94.0% for the rest of FY2012.
SHARE AND DEBENTURE CAPITAL
The authorised share capital is R100 000 000 divided into two billion
ordinary shares of five cents each. Each ordinary share is linked to ten
variable rate debentures of 250 cents each.
The ordinary shares and debentures trade as linked units on the JSE Limited
(JSE). In terms of the debenture trust deed, the interest payable on the
debenture component of the linked unit is always 1 000 times greater than
the dividend payable per ordinary share.
23 995 468 new linked units were issued in September 2010 and 20 454 048 new
linked units were issued in March 2011, to those Growthpoint linked
unitholders who elected to reinvest their 2010 final distribution and 2011
interim distribution. The linked units were issued at R15.90 and R16.20 per
unit, respectively.
Subsequent to year-end, Growthpoint has raised R1,8 billion by placing 100
million new linked units with local and international institutional
investors.
CHANGES TO THE BOARD
Mr Zakhele Johannes Sithole was appointed as a non-executive director of
Growthpoint with effect from 3 November 2010.
PROSPECTS
Given the global and local economic uncertainties, higher interest margins
on debt refinance, continuing cost pressures and lackluster demand in
particular in the office sector, Growthpoint expects to show positive growth
in distributions of between 3.0% and 7.0% for FY2012.
The forecast has been based on the company`s budgets for the year to 30 June
2012, taking into account that the majority of the company`s income, is
contractual rental income, as well as the fact that 94.0% of the debt has
been fixed for the next year.
The forecast has not been subject to audit or review by the company`s
independent external auditor.
CASH DISTRIBUTION WITH THE ELECTION TO RE-INVEST THE CASH DISTRIBUTION IN
RETURN FOR GROWTHPOINT LINKED UNITS
Notice is hereby given of final dividend declaration number 50 of 0,067
cents and debenture interest payment number 50 of 67,033 cents per linked
unit totalling 67,1 cents per linked unit for the six months ended 30 June
2011 bringing the total distribution for the year ended 30 June 2011 to
131,0 cents per linked unit.
Linked unitholders will be entitled to elect to re-invest the Cash
Distribution in return for linked units (Linked Unit Alternative), failing
which they will receive the Cash Distribution in respect of all or part of
their linked unitholding.
Linked unitholders who have dematerialised their linked units are required
to notify their duly appointed Central Securities Depository Participant
(CSDP) or broker of their election in the manner and time stipulated in the
custody agreement governing the relationship between the linked unitholder
and their CSDP or broker.
Summary of the salient dates relating to the Cash Distribution and Linked
Unit Alternative are as follows:
2011
Circular and form of election posted to linked Friday, 26 August
unitholders
Announcement of linked unit ratio Friday, 2 September
Last day to trade in order to participate in Friday, 9 September
the Cash Distribution and Linked Unit
Alternative
Linked units to trade ex distribution Monday, 12 September
Listing of maximum number of Linked Unit Monday, 12 September
Alternative linked units commences on the JSE
Last day to elect to receive a Linked Unit Friday, 16 September
Alternative and/or to receive the Cash
Distribution (by 12:00)
Record date Friday, 16 September
Announcement of results of Cash Distribution Monday, 19 September
and Linked Unit Alternative on SENS
Linked unit certificates posted and Cash Monday, 19 September
Distribution posted/paid to certificated
linked unitholders
Accounts credited by CSDP or broker to Monday, 19 September
dematerialised linked unitholders
Announcement of results of election of Cash Tuesday, 20 September
Distribution or Linked Unit Alternative in the
press
Adjustment to linked unit listed on or about Tuesday, 20 September
Linked units may not be dematerialised between Monday, 12 September 2011 and
Friday, 16 September 2011, both days inclusive. The above dates and times
are subject to amendment. Any such amendment will be released on SENS and
published in the press.
By order of the Board
Growthpoint Properties Limited
23 August 2011
Directors
JF Marais (Chairman)
HSP Mashaba (Deputy Chairman)
LN Sasse* (Chief Executive Officer)
EK de Klerk*
MG Diliza
PH Fechter
L Finlay
JC Hayward
HS Herman
R Moonsamy
N Nkabinde
ZJ Sithole
SM Snowball*
CG Steyn
JHN Strydom
FJ Visser
* Executive
Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code GRT ISIN ZAE 000037669
Registered office
The Place, 1 Sandton Drive, Sandton, 2196
PO Box 78949, Sandton, 2146
Transfer secretary
Computershare Investor Services (Pty) Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
Investec Bank Limited
100 Grayston DriveSandown Sandton, 2196
PO Box 78949, Sandton, 2146
www.growthpoint.co.za
Date: 24/08/2011 11:25:03 Produced by the JSE SENS Department.
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