| Wed 1 Feb 2012, 17:05 | | CPL - Capital Property Fund - Condensed audited consolidated financial |
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CPL
CPL
CPL - Capital Property Fund - Condensed audited consolidated financial
statements for the year ended 31 December 2011
CAPITAL PROPERTY FUND
("Capital" or "the Fund")
Share code CPL ISIN ZAE000001731
(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)
("PFM")
Condensed audited consolidated financial statements for the year ended
31 December 2011
DIRECTORS` COMMENTARY
1 DISTRIBUTABLE EARNINGS
Total distributions for the year ended 31 December 2011 increased by 9,13%
to 65,63 cents per unit. Capital`s distribution of 34,27 cents per unit for
the final six months represents an increase of 7,84% over the distribution
of 31,78 cents per unit for the comparable period in the previous year.
2 REVIEW
A number of significant transactions were completed in the 2011 financial
year transforming Capital as a listed real estate fund. The most significant
event was the acquisition by Capital of all the Pangbourne Properties
Limited ("Pangbourne") linked units in issue that were not already owned by
it. This resulted in Capital increasing its market capitalisation
substantially making it the third largest listed property fund on the JSE
Limited.
Boardwalk Shopping Centre in Richards Bay was sold for R1 028 million to
Resilient Property Income Fund Limited ("Resilient") at a yield of 8%. The
purchase price was settled 50% in cash and 50% in Resilient linked units
issued at R31,71. A portfolio of seven predominantly rural retail properties
was sold to Fortress Income Fund Limited ("Fortress") for R704 million at a
yield of 9,78%, settled through Fortress A and B units issued at R10,63 and
R3,17 respectively. These sales are in line with management`s strategy of
divesting from retail and focusing on prime office and industrial properties
in Johannesburg, Pretoria, KwaZulu-Natal and the Western Cape.
Demand for offices is weak with vacancies increasing and renewal rentals
under pressure. As a result of the rental differentials between A- and B-
grade offices decreasing, tenants have taken the opportunity to move to A-
grade space, negatively impacting on B-grade office vacancies.
Demand for industrial properties, particularly warehousing for distribution,
is firm with a notable increase for bigger boxes in well located areas, such
as Linbro Park, Longmeadow and Raceway Industrial Park. Demand for
manufacturing space continues to decline in line with the downward trend in
this sector. Capital`s strategy for the past five years has been to reduce
exposure to the manufacturing sector and these tenants currently occupy 20%
of Capital`s industrial space. The intention is to reduce this further
through the development pipeline of new distribution facilities.
Increases in rates and taxes, utility charges and additional levies imposed
by local authorities, at rates well ahead of inflation, continue unabated.
This has continued to negatively impact distribution growth as it is not
always possible to recover increases from tenants. While the merger with
Pangbourne makes direct comparisons with prior periods difficult, the
current direct property cost to income ratio of 33,2% is an area of concern.
Despite a noticeable increase in company liquidations and the difficult
economic environment, arrears have remained under control at 2,6% of the R1
909 million gross billings, whilst R13,4 million of bad debts were written
off.
Vacancies of 6,3% comprise 4,8% industrial, 13,4% offices and 4,7% retail
based on gross lettable area. Industrial vacancies have declined, retail
vacancies have increased marginally and office vacancies have continued to
deteriorate.
3 DEVELOPMENTS
Capital`s strategy includes the development of A-grade warehousing space in
the nodes favoured by corporate tenants. These are being built at lower
costs per square metre and with higher specifications than properties
available for sale in the market. Pursuant to this strategy, Capital is
seeking to acquire additional vacant industrial land. Large office
developments will be considered on a pre-let basis. These developments will
allow Capital to increase its gearing and continue to rejuvenate the
portfolio.
The following developments have been approved:
Esti- Estimated Estimated
% mated commence- completion
Property name owned GLA yield ment date date
N1 Business Park 20% 9 150m2 10% Commenced Aug 2012
Montague Business Park 25% 13 200m2 9% Mar 2012 Oct 2012
253 covered
parking
Grand Central 100% bays 10% Mar 2012 Oct 2012
Raceway Industrial Park 100% 12 000m2 9,5% Commenced Jun 2012
The following developments are currently being evaluated:
Esti- Estimated
% mated commence-
Property name owned GLA yield ment date
52 000m2 (additional
Tradeport City Deep 100% buildings in park) 9,0% May 2012
55 000m2 (additional
Raceway Industrial Park 100% buildings in park) 9,0% Jun 2012
4 DISPOSALS
Capital sold the following office and industrial properties during 2011:
Valuation at
Proceeds 31 Dec 2010 Yield Effective
Property name (R`000) (R`000) (%) date
Porcelain Street
Olifantsfontein 53 800 57 000 N/A 6 Jun 11
Jurgens Street Isando 33 500 31 000 8,0% 5 Sep 11
Montague Business Park
(land)(25%) 22 022 15 061 N/A 18 Feb 11
Redlands Office Park 20 000 17 900 8,5% 5 Oct 11
20 Malcolm Road Westmead 12 356 12 100 5,9% 11 Jul 11
Moores Rowland House Durban 11 000 14 300 N/A 4 Oct 11
Capital sold the following retail properties during 2011:
Valuation at
Proceeds 31 Dec 2010 Yield Effective
Property name (R`000) (R`000) (%) date
Boardwalk Shopping Centre 1 028 000 908 000 8,0% 1 Dec 11
Park Central Shopping Centre 154 000 138 000 10,2% 1 Dec 11
N1 Value Centre 154 000 140 400 9,1% 24 Jun 11
Mutsindo Mall & Capricorn Plaza 145 000 123 000 8,4% 1 Dec 11
Morone Shopping Centre
Burgersfort 120 500 95 000 9,6% 1 Dec 11
Crossroads 90 000 82 700 11,6% 1 Dec 11
West Street Durban 83 500 67 800 8,5% 1 Dec 11
Venda Plaza 81 000 80 200 10,8% 1 Dec 11
KwaMashu Shopping Centre (75%) 77 625 66 675 12,7% 25 Oct 11
Shoprite Port Shepstone 30 000 29 600 10,8% 1 Dec 11
5 EQUITY INVESTMENTS
Capital owns 3 900 000 New Europe Property Investments plc shares,
16 200 000 Resilient linked units, 50 600 000 Fortress A linked units and 96
000 000 Fortress B linked units.
6 CAPITAL STRUCTURE AND SECURITISATION
Capital received an A3.za long term and P-2.za short term investment grade
rating from international ratings agency, Moody`s. This enabled Capital to
raise unsecured finance in the capital markets through a Domestic Medium
Term Note programme ("DMTN").
R700 million of unsecured debt was raised in the capital markets, R200
million in three month commercial paper and R500 million in three year
bonds, replacing secured debt from banks. The two Commercial Mortgage Backed
Securitisation programmes, totalling R1 091 million, will be repaid in July
and October 2012. Capital has facilities in place to cover these
commitments.
Capital`s gearing has decreased from 24,8% at 30 June 2011 to 22,2% at
31 December 2011. The board is comfortable with gearing of up to 30%.
7 OUTLOOK
The board forecasts growth in distributions of between 4% and 8% per Capital
unit for the 2012 financial year. This forecast has not been reviewed or
reported on by Capital`s auditors.
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.
By order of the board
Barry Stuhler Rual Bornman
Managing director Financial director
1 February 2012
Johannesburg
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
Dec 2011 Dec 2010
R`000 R`000
ASSETS
Non-current assets 17 949 605 7 122 844
Investment property 15 728 251 5 923 042
Straight-lining of rental revenue adjustment 125 413 88 667
Investment property under development 468 241 166 702
Investments 689 700 944 433
Investment in associate company 938 000 -
Current assets 262 810 15 281
Trade and other receivables 198 411 15 099
Cash and cash equivalents 64 399 182
Total assets 18 212 415 7 138 125
EQUITY AND LIABILITIES
Capital of Fund 12 520 641 5 298 062
Trust capital 9 273 620 2 645 963
Non-distributable reserves 3 247 021 2 652 099
Retained earnings - -
Total liabilities 5 691 774 1 840 063
Non-current liabilities 2 502 069 752 814
Interest-bearing borrowings 1 949 538 693 781
Deferred tax 552 531 59 033
Current liabilities 3 189 705 1 087 249
Trade and other payables 543 955 194 682
Unitholders for distribution 550 714 228 046
Income tax payable 3 894 -
Interest-bearing borrowings 2 091 142 632 329
Bank overdraft - 32 192
Total equity and liabilities 18 212 415 7 138 125
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
for the year for the year
ended ended
Dec 2011 Dec 2010
R`000 R`000
Net rental and related revenue 1 312 883 518 240
Recoveries and contractual rental revenue 1 909 449 704 415
Straight-lining of rental revenue adjustment 36 746 16 348
Rental revenue 1 946 195 720 763
Property operating expenses (633 312) (202 523)
Distributable income from investments 16 093 70 926
Fair value gain on investment property
and investments 796 358 564 468
Fair value gain on investment property 661 560 467 247
Adjustment resulting from straight-lining
of rental revenue (36 746) (16 348)
Fair value gain on investments 171 544 113 569
Administrative expenses (74 864) (35 545)
Impairment of goodwill (98 042) -
Impairment of subsidiary loans - (319)
Distributable income from associate 5 970 -
Profit before net finance costs 1 958 398 1 117 770
Net finance costs (263 768) (130 183)
Finance income 178 879 2 484
Interest on units issued cum distribution 175 900 -
Interest received 2 979 2 484
Finance costs (442 647) (132 667)
Interest paid on borrowings (376 795) (122 678)
Capitalised interest 29 245 14 472
Fair value adjustment on interest rate
derivatives (95 097) (24 461)
Profit before income tax expense 1 694 630 987 587
Income tax expense (45 043) (11 143)
Profit for the year attributable to equity
holders 1 649 587 976 444
Total comprehensive income for the year 1 649 587 976 444
Basic earnings per unit (cents)* 102,65 136,07
*The Fund has no dilutionary instruments in issue.
RECONCILIATION OF PROFIT FOR THE YEAR TO HEADLINE EARNINGS AND
DISTRIBUTABLE INCOME
Audited Audited
for the year for the year
ended ended
Dec 2011 Dec 2010
R`000 R`000
Profit for the year attributable to equity
holders 1 649 587 976 444
Adjusted for: (480 632) (433 962)
- Fair value gain on investment property (661 560) (467 247)
- Adjustment resulting from straight-lining of
rental revenue 36 746 16 348
- Impairment of goodwill 98 042 -
- Impairment of subsidiary loans - 319
- Income tax effect 46 140 16 618
Headline earnings 1 168 955 542 482
Reconciliation of profit for the year to
amount available for distribution
Profit for the year attributable to equity
holders 1 649 587 976 444
Straight-lining of rental revenue adjustment (36 746) (16 348)
Fair value gain on investment property (661 560) (467 247)
Adjustment resulting from straight-lining of
rental revenue 36 746 16 348
Fair value gain on investments (171 544) (113 569)
Impairment of goodwill 98 042 -
Impairment of subsidiary loans - 319
Fair value adjustment on interest rate
derivatives 95 097 24 461
Income tax expense 45 043 11 143
Distributable income 1 054 665 431 551
Less: distribution declared (1 054 665) (431 551)
Interim (503 951) (203 505)
Final (550 714) (228 046)
Income not distributed - -
Headline earnings per unit (cents) 72,74 75,60
Basic earnings per unit is 102,65 cents (2010: 136,07 cents).
The calculation of the basic earnings per unit is based on a weighted
average number of units in issue during the year of 1 606 986 279
(2010: 717 578 059) and earnings of R1 649,587 million
(2010: R976,444 million).
Headline earnings per unit is 72,74 cents (2010: 75,60 cents).
The calculation of headline earnings per unit is based on a weighted
average number of units in issue during the year of 1 606 986 279
(2010: 717 578 059) and headline earnings of R1 168,955 million
(2010: R542,482 million).
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
Dec 2011 Dec 2010
R`000 R`000
Cash (outflow)/inflow from operating
activities (88 167) 31 933
Cash inflow/(outflow) from investing
activities 825 450 (361 265)
Cash (outflow)/inflow from financing
activities (640 874) 272 145
Increase/(decrease) in cash and cash
equivalents 96 409 (57 187)
Cash and cash equivalents at the beginning of
the year (32 010) 25 177
Cash and cash equivalents at the end of the
year 64 399 (32 010)
Cash and cash equivalents consist of:
Cash on call iro securitisation 59 621 -
Current accounts 4 778 182
Bank overdraft - (32 192)
64 399 (32 010)
CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS` INTEREST
Non-
Trust distributable Retained
capital reserves earnings Total
R`000 R`000 R`000 R`000
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
Total comprehensive
income for the year 1 649 587 1 649 587
Issue of units
- 889 408 220 on
4 April 2011 6 627 657 6 627 657
Transfer to non-
distributable reserves 594 922 (594 922) -
Distribution (1 054 665) (1 054 665)
Balance at
31 December 2011 9 273 620 3 247 021 - 12 520 641
PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The condensed audited consolidated financial statements have been prepared
in accordance with the measurement and recognition requirements of IFRS,
the AC500 standards as issued by the Accounting Practices Board, the
information contained in IAS 34: Interim Financial Reporting, the JSE
Listings Requirements, the requirements of the South African Companies Act
and the Collective Investment Schemes Control Act (Act 45 of 2002). This
report was compiled under the supervision of Rual Bornman, the financial
director.
The accounting policies adopted are consistent with those applied in the
prior periods.
The directors are not aware of any matters or circumstances arising
subsequent to 31 December 2011 that require any additional disclosure or
adjustment to the financial statements.
Deloitte & Touche have issued their unmodified opinion on the group
financial statements for the year ended 31 December 2011. These condensed
financial statements have been derived from the group financial statements
and are, in all material respects, consistent with the group financial
statements. A copy of their audit report is available for inspection at
the Fund`s registered office.
SUMMARY OF FINANCIAL PERFORMANCE
Dec 2011 Jun 2011 Dec 2010 Jun 2010
Distribution per
unit (cents) 34,27 31,36 31,78 28,36
Units in issue 1 606 986 279 1 606 986 279 717 578 059 717 578 059
Net asset value R7,79 R7,39 R7,38 R6,65
Gearing ratio* 22,2% 24,8% 18,6% 19,4%
*The gearing ratio is calculated by dividing interest-bearing borrowings
by total assets.
HEDGED BORROWINGS
Nominal
amount Interest % of
Expiry R`million rate borrowings
Interest rate swaps
Oct 2012 10 8,22% 0,25%
Feb 2013 100 8,18% 2,47%
Aug 2013 100 8,05% 2,47%
Sep 2013 400 9,85% 9,90%
May 2014 50 8,67% 1,27%
May 2014 100 8,60% 2,47%
Aug 2014 100 7,15% 2,47%
Mar 2015 100 7,69% 2,47%
Apr 2015 300 8,26% 7,42%
Jul 2015 100 7,50% 2,47%
Sep 2015 200 9,61% 4,95%
Dec 2015 100 7,85% 2,47%
Aug 2016 200 8,51% 4,95%
Sep 2016 400 8,42% 9,90%
Dec 2016 200 7,50% 4,95%
Mar 2017 300 8,60% 7,42%
Jun 2017 100 7,69% 2,47%
Nov 2017 200 7,91% 4,95%
Dec 2017 200 7,66% 4,95%
Jan 2018 200 7,55% 4,95%
Jul 2018 300 8,62% 7,42%
Securitised loan
Jul 2012 621 9,98% 15,37%
The securitised loan is shown as nominal annual compounded semi-annually
and is inclusive of lending margin.
Total hedged borrowings 4 381 108,41%
Variable rate borrowings (340) (8,41%)
Total gearing 4 041 9,99% 100,00%
SECTORAL SPLIT (Unaudited) Dec 11 Dec 11 Dec 10 Dec 10
Based on: GLA Book GLA Book
Value value
Offices 19% 34% 26% 44%
Industrial 71% 50% 68% 46%
Retail 9% 14% 6% 10%
Other 1% 2% - -
100% 100% 100% 100%
LEASE EXPIRY PROFILE (Unaudited)
Based on: GLA Rental
income
Vacant 6,3%
Dec 2012 27,5% 29,3%
Dec 2013 18,7% 20,4%
Dec 2014 18,8% 21,6%
Dec 2015 12,2% 12,2%
Dec 2016 9,1% 8,3%
>Dec 2016 7,4% 8,2%
100,0% 100,0%
SEGMENTAL ANALYSIS
Audited Audited
Dec 2011 Dec 2010
R`000 R`000
Segmental revenue - recoveries and contractual
rental revenue
Offices 577 318 311 250
Industrial 892 103 319 660
Retail 405 273 73 505
Other 34 755 -
Total 1 909 449 704 415
Property operating expenses
Offices (186 050) (84 971)
Industrial (290 626) (95 883)
Retail (149 352) (21 669)
Other (7 284) -
Total (633 312) (202 523)
Segmental revenue - rental revenue
Offices 594 167 318 715
Industrial 918 946 327 972
Retail 384 347 74 076
Other 48 735 -
Total 1 946 195 720 763
Profit for the year
Offices 534 548 462 622
Industrial 852 375 399 394
Retail 528 212 107 123
Other 22 562 -
Corporate (288 110) 7 305
Total 1 649 587 976 444
CAPITAL COMMITMENTS
Audited Audited
Dec 2011 Dec 2010
R`000 R`000
Authorised and contracted 160 163 9 035
Authorised and not yet contracted 78 067 67 240
238 230 76 275
INCOME DISTRIBUTION
Notice is hereby given that a cash distribution of 34,27 cents interest
per unit, being number 57 for Capital Property Fund, has been declared in
respect of the period 1 July 2011 to 31 December 2011 and is payable to
the unitholders recorded in the books of Capital at the close of business
on the record date, Friday, 24 February 2012. Unitholders are advised that
the last day to trade cum distribution will be Friday, 17 February 2012.
The units will trade ex distribution from Monday, 20 February 2012.
Payment will be made on Monday, 27 February 2012. Unit certificates may
not be dematerialised or rematerialised during the period 20 February 2012
to 24 February 2012, 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
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
Java Capital
Company secretary
Inge Pick
Directors
Willy Ross (chairman)*, Barry Stuhler (managing director), Iraj Abedian*,
Rual Bornman, Des de Beer, Andries de Lange, Protas Phili*, Andrew Teixeira,
Banus van der Walt*, Tshiamo Vilakazi*, Trurman Zuma*
*Independent non-executive director
Date: 01/02/2012 17:05:01 Produced by the JSE SENS Department.
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