| Mon 12 Mar 2012, 9:00 | | VPF - Vunani Property Investment Fund Limited - Condensed unaudited |
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VPF
VPF
VPF - Vunani Property Investment Fund Limited - Condensed unaudited
consolidated interim results for the six months ended 31 December 2011
Vunani Property Investment Fund Limited
("VPIF" or "the Company" or "the Fund")
Incorporated in the Republic of South Africa
Registration number: 2005/019302/06
JSE code: VPF ISN: ZAE000157459
Listed on the JSE Limited ("JSE")
CONDENSED UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2011
- Cash distribution of 27 cents per unit for 20 weeks to 31 December 2011
- Acquisitive growth since listing of 12%
COMMENTARY
PROFILE
Vunani Property Investment Fund offers investors an opportunity to participate
in the only office-dominated JSE listed property fund, which sector the
directors believe is well-poised for recovery. The portfolio currently
comprises 25 strategically located, high quality buildings, 80% tenanted by
blue chip or government tenants with an above market lease expiry profile. The
portfolio is tightly managed with minimal arrears. This gives investors a
robust distribution with a consistent growth profile.
The investment strategy of VPIF has been consistent since 2006 and it
continues to deliver on its commitment to aggressively grow the Fund whilst
protecting the distribution and portfolio quality. The directors are pleased
to announce that the Fund has increased its Enterprise Value by 37% to date.
Each of the acquisitions has been yield-enhancing and has improved the key
performance indicators in the Fund.
Despite the high demand for assets, VPIF is seeing solid opportunities in its
chosen section of the market, namely well located B+ and A grade office
buildings with a stable tenant profile. Management believe it is this segment
of the market that will experience attractive rental growth when the current
oversupply is absorbed. In the short term, the Fund will avoid premium AAA
grade "trophy" buildings, which the directors believe do not represent good
value at this time. In addition, VPIF has a track record of sourcing buildings
in which yield-enhancing refurbishments can be carried out.
VACANCIES
VPIF`s property portfolio is relatively small at 25 properties, predominantly
tenanted by blue chip or government tenants, allowing nimble and hands-on
management of the Fund. Management is actively involved in value enhancing and
redevelopment opportunities, and have longstanding relationships with tenants.
Most of the material lease negotiations for 2012 have been successfully
concluded at budgeted rentals.
The vacancy at the reporting date was 5,37% which is materially below the
Investment Property Databank ("IPD") average.
PROPERTY PORTFOLIO
The current portfolio composition by gross lettable area ("GLA") comprises 97%
office space and 3% retail. Total GLA is 136 303 m2 with additional,
strategically located undeveloped bulk of 19 000 m2 in the portfolio.
VPIF`s portfolio is predominantly located in high growth or strategic nodes in
Gauteng and the Western and Eastern Cape provinces and is 80% tenanted by
national or JSE listed clients. The value of the property portfolio at the
reporting date was R1,059 billion and rose to R1,309 billion post the
acquisition of the Foretrust building, representing an increase of 38% since
listing.
There have been no disposals during the review period.
ACQUISITIONS
The Company acquired the following prime office properties since listing:
Lion Roars Office Park - Port Elizabeth
The office park comprises 4 280 m2 and was acquired as a going concern for a
purchase consideration of R52,1 million. It is located in the premier
decentralised node with national tenants and is 100% occupied. The yield is
12%.
Xstrata Building - Rustenburg
Rustenburg is experiencing strong growth. This building comprises 3 720 m2 and
is 100% occupied by national tenants and was acquired at a 10,85% yield. The
purchase consideration was R28,982 million.
Mabe Park - Rustenburg
Located in the premier office node, this 1 642 m2 building is 100% occupied by
national tenants and was acquired at 10,85% yield. The purchase consideration
was R24 million.
Foretrust Building - Cape Town
The Fund has taken transfer of the Foretrust building on 14 February 2012 as
is dealt with in Subsequent Events.
REFURBISHMENTS AND EXTENSIONS UNDERWAY
Several refurbishment projects and extensions with a combined value of
approximately R13 million are underway.
This includes the two phase extension of Motherwell Shopping Centre that
resulted in long leases with SuperSpar, Tops, Pep and Build-it. Phase 1 was
completed in November and is yield enhancing. The refurbishment of Wale Street
Chambers in Cape Town is in hand which will enhance rentals and lettability.
The Fund is also in the process of a R3 million refurbishment of its Rynlal
property due for completion in June 2012. Despite only being half way through
the construction, leasing activity and gross rentals are improving.
The Fund will continue to upgrade the portfolio whilst being mindful of the
need to protect distributions.
FINANCIAL RESULTS
The Company`s year end has been changed from June to December; consequently
the comparative interim period as required by IAS 34 Interim Financial
Reporting, is the six months to 30 June 2011.
VPIF has declared a maiden distribution of 27,0 cents per linked unit for the
20 week interim period since listing on 11 August 2011.
Revenue increased by 24,5% from R55,9 million from June to December 2011, to
R69,6 million in the reporting period, mainly as a result of acquisitions and
above budget performance of the existing assets. Property expenses increased
from R24,3 million to R43,3 million, predominantly as a result of the once off
charge of R13,5 million associated with the listing on the JSE Limited.
Substantial finance cost amortisation of R44,7 million (six months to 30 June
2011: R2 million) relates to break costs incurred as a result of market
volatility during the listing period. The Fund committed to breaking
historical fixes on listing and break costs rose from R7,3 million as stated
in the PLS to R23 million. The remaining R21,7 million relates to the break
cost incurred prior to listing which has now been fully expensed in profit or
loss and does not impact distribution. This resulted in a net operating loss
of R25 million in the reporting period, against a net operating income of R15
million in the six months to 30 June 2011. The Fund has taken advantage of the
low longterm rates and has hedged 80% of its other financial liabilities
through interest rate swaps.
BORROWINGS
At the reporting date, VPIF had a relatively low gearing with a loan to value
of 18,31%. Post the acquisition of the Foretrust building, the loan to value
ratio increased to 33,8%. The Company remains well capitalised to take
advantage of any potential yield enhancing acquisitions. The Fund has a
conservative approach to debt and 80% of the other financial liabilities are
hedged for five years through the use of interest rate swap agreements.
Currently the average cost of debt is 8,68%. The Loan to Value is not
anticipated to exceed 40%.
SUBSEQUENT EVENTS
Subsequent to the period end, the Company received the approval from its
linked unitholders to acquire the building known as the Foretrust building
from Redefine Properties Limited for an amount of R249,5 million. The property
was transferred on 14 February 2012 to the Company.
Foretrust Building - Cape Town
The building is located in a development node and comprises 26 809 m2. It is
100% occupied by National tenants on a six year lease. The building was
acquired at a purchase price of R249,5 million at a yield of 11%.
SHARE AND DEBENTURE CAPITAL
The authorised share capital is R5 million, divided into 2 000 000 000
ordinary shares of R0,0025 each. Each ordinary share is linked to one variable
rate debenture of R2,4975 each.
The ordinary shares and debentures trade as linked units on the JSE. On 11
August 2011, 63,6 million new units were issued at a price of R7,05 taking the
issued share and debenture units to 120,6 million.
CASH DISTRIBUTION
Notice is hereby given of debenture interest payment number 1 of 27,00 cents
per linked unit for the six months ended 31 December 2011.
Summary of the salient dates relating to the cash distribution are as follow:
Declaration date Monday, 12 March 2012
Last date to trade in order to participate in the cash distribution
Thursday, 29 March 2012
Linked units to trade ex-distribution Friday, 30 March 2012
Record date Thursday, 5 April 2012
Payment date Tuesday, 10 April 2012
Linked units may not be dematerialised or rematerialised between Friday, 30
March 2012 and Thursday, 5 April 2012, both dates inclusive.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
Six months Six months
31 December 30 June
2011 2011
Note R`000 R`000
Revenue - Investment property 69 593 55 869
income
Straight-line effect of leases 575 328
Other income 96 -
Revenue 70 264 56 197
Property expenses 1 (43 270) (24 284)
Net property income 26 994 31 913
Finance income 1 054 232
Finance cost amortisation 2 (44 694) (1 987)
Finance cost (8 372) (15 204)
Net operating income (25 018) 14 955
Fair value adjustments 3 7 299 (7 505)
(Loss)/profit before debenture (17 719) 7 450
interest and taxation
Distributions - pre-listing (4 273) (16 351)
Trust distributions - net rental 2 324 (6 494)
income
Debenture interest 1 949 (9 857)
Distributions - post-listing 4 (32 570) -
Debenture interest accrual (32 570) -
Net loss before taxation (54 562) (8 901)
Income tax expense (2 111) 1 981
Total comprehensive loss for the (56 673) (6 920)
period
Total comprehensive loss for the
period attributable to:
Equity holders of the group (56 673) (6 920)
Basic, diluted and headline
earnings per unit
Basic (loss)/earnings per unit 5 (18,69) 16,54
Headline (loss)/earnings per unit 5 (18,69) 16,85
Basic loss per share 5 (53,41) (12,14)
Linked units in issue at the end 120 618 080 57 024 000
of the period:
Weighted average number of units 106 102 040 57 024 000
in issue at the end of the period
Diluted earnings per unit
There were no dilutive instruments
in issue at the end of the period
Calculation of distributable
earnings:
Net operating income (25 018) 14 955
Adjustments for:
Straight-line effect of leases (575) (328)
Listing costs included in property 13 469 1 724
expenses
Finance cost amortisation 44 694 -
Distributable earnings 32 570 16 351
Summary reconciliation of linked
units for the period
1 July 2011 - 10 August 2011 ("pre-
listing")
Linked units in issue - pre- 57 024
listing
Distributions - pre-listing 4 273
Distribution per linked unit 7,49
(cents)
Summary reconciliation of linked
units for the period
11 August 2011 - 31 December 2011
("post-listing")
Linked units in issue - pre- 57 024
listing
Linked units issued on 11 August 63 594
2011
Linked units in issue post-listing 120 618
Distributions - post-listing 32 570
Distribution per linked unit 27,00
(cents)
Summary reconciliation of linked
units for the period
1 July 2011 - 31 December 2011
Total linked units in issue post- 120 618
listing
Total distributions 36 843
Distribution per linked unit 30,54
(cents)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
As at As at
31 December 30 June
2011 2011
Note R`000 R`000
ASSETS
Non-current assets 1 063 096 791 477
Investment property 6 1 051 984 782 437
Plant and equipment 7 278 5 938
Other non-current assets 3 834 3 102
Current assets 55 449 10 139
Trade and other receivables 6 855 6 165
Cash and cash equivalents 48 594 3 974
Total assets 1 118 545 801 616
EQUITY AND LIABILITIES
Equity 229 413 285 930
Share capital 301 143
Accumulated (loss)/retained earnings (54 154) 8 282
Non-distributable reserves 283 266 277 505
Debentures 7 590 597 142 417
Linked unit holders` interest 820 010 428 347
Liabilities
Other non-current liabilities 241 140 344 379
Other financial liabilities 192 888 298 505
Deferred tax 48 252 45 874
Current liabilities 57 395 28 890
Short-term portion of other - 7 355
financial liabilities
Current tax payable 96 -
Linked unitholders for interest 32 570 -
Trade and other payables 24 729 21 535
Total liabilities 298 535 373 269
Total equity and liabilities 1 118 545 801 616
Net asset value per linked unit 679,84 751,20
(cents)
Net assets less deferred tax per 719,84 831,60
linked unit (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Audited
Six months Six months
31 December 30 June
2011 2011
R`000 R`000
Net cash inflow from operating 14 637 1 838
activities
Net cash outflow from investing (218 169) (8 759)
activities
Net cash inflow from financing 248 152 6 009
activities
Net increase/(decrease) in cash 44 620 (911)
and cash equivalents
Cash and cash equivalents at the 3 974 4 886
beginning of the period
Cash and cash equivalents at the 48 594 3 974
end of the period
STATEMENT OF CHANGES IN EQUITY
Non- Accumulated
Ordinary Distri- (loss)/ Total
share butable retained
capital reserves earnings equity
R`000 R`000 R`000 R`000
Balance at 31 December 143 292 683 24 292 850
2010
Total comprehensive - - (6 920) (6 920)
loss for the period
Transfer from non- - (15 178) 15 178 -
distributable reserves
Balance at 30 June 143 277 505 8 282 285 930
2011
Total comprehensive - - (56 673) (56 673)
loss for the period
Issue of shares and 158 - - 158
units
Transfer to non- - 5 761 (5 761) -
distributable reserves
Balance at 31 December 301 283 266 (54 154) 229 413
2011
CONSOLIDATED SEGMENTAL ANALYSIS
Kwa-Zulu-
Unaudited Head office Gauteng Natal
Six months - 31 December 2011 R`000 R`000 R`000
Revenue - Investment property - 59 093 1 565
income
Straight-line effect of leases - 678 (49)
Other income - 96 -
Revenue - 59 867 1 516
Property expenses (14 662) (22 564) (482)
Net property income (14 662) 37 303 1 034
Finance income 1 037 6 -
Finance cost amortisation (44 694) - -
Finance cost (8 108) - -
Net operating income (66 429) 37 309 1 034
Fair value adjustments 7 299 - -
Reportable segment (59 130) 37 309 1 034
(loss)/profit before debenture
interest and tax
Reportable segment assets 47 108 811 934 24 607
Reportable segment liabilities (220 635) (41 415) (153)
Kwa-Zulu-
Audited Head office Gauteng Natal
Six months - 30 June 2011 R`000 R`000 R`000
Revenue - Investment property - 47 550 1 562
income
Straight-line effect of leases 328 - -
Other income - - -
Revenue 328 47 550 1 562
Property expenses (4 033) (17 267) (354)
Net property income (3 704) 30 284 1 208
Finance income 124 103 -
Finance cost amortisation (1 987) - -
Finance cost (15 201) (3) -
Net operating income (20 767) 30 383 1 208
Fair value adjustments (7 505) - -
Reportable segment (28 273) 30 383 1 208
(loss)/profit before debenture
interest and tax
Reportable segment assets 4 007 685 388 24 607
Reportable segment liabilities (357 717) (14 414) (123)
CONSOLIDATED SEGMENTAL ANALYSIS (continued)
Northern Western Eastern
Unaudited Province Cape Cape
Six months - 31 December 2011 R`000 R`000 R`000
Revenue - Investment property income 497 6 903 1 536
Straight-line effect of leases (26) 363 (392)
Other income - - -
Revenue 471 7 266 1 144
Property expenses (83) (5 029) (447)
Net property income 388 2 237 697
Finance income - 9 2
Finance cost amortisation - - -
Finance cost - (264) -
Net operating income 388 1 982 701
Fair value adjustments - - -
Reportable segment (loss)/profit 388 1 982 701
before debenture interest and tax
Reportable segment assets 7 680 96 508 77 634
Reportable segment liabilities (24) (36 308) -
Northern Western Eastern
Audited Province Cape Cape
Six months - 30 June 2011 R`000 R`000 R`000
Revenue - Investment property income 470 4 859 1 427
Straight-line effect of leases - - -
Other income - - -
Revenue 470 4 859 1 427
Property expenses (85) (2 236) (309)
Net property income 385 2 623 1 119
Finance income - 2 3
Finance cost amortisation - - -
Finance cost - - -
Net operating income 385 2 624 1 122
Fair value adjustments - - -
Reportable segment (loss)/profit 385 2 624 1 122
before debenture interest and tax
Reportable segment assets 7 718 57 358 22 538
Reportable segment liabilities (42) (419) (553)
CONSOLIDATED SEGMENTAL ANALYSIS (continued)
North
Unaudited West Total
Six months - 31 December 2011 R`000 R`000
Revenue - Investment property income - 69 593
Straight-line effect of leases - 575
Other income - 96
Revenue - 70 264
Property expenses (3) (43 270)
Net property income (3) 26 994
Finance income - 1 054
Finance cost amortisation - (44 694)
Finance cost - (8 372)
Net operating income (3) (25 018)
Fair value adjustments - 7 299
Reportable segment (loss)/profit before (3) (17 719)
debenture interest and tax
Reportable segment assets 53 074 1 118 545
Reportable segment liabilities - (298 535)
North
Audited West Total
Six months - 30 June 2011 R`000 R`000
Revenue - Investment property income - 55 869
Straight-line effect of leases - 328
Other income - -
Revenue - 56 197
Property expenses - (24 284)
Net property income - 31 913
Finance income - 232
Finance cost amortisation - (1 987)
Finance cost - (15 204)
Net operating income - 14 955
Fair value adjustments - (7 505)
Reportable segment (loss)/profit before - 7 450
debenture interest and tax
Reportable segment assets - 801 616
Reportable segment liabilities - (373 269)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
BASIS OF PRESENTATION
These condensed consolidated interim results have not been reviewed or audited
by VPIF`s independent external auditors.
The results have been prepared in accordance with the Listing Requirements of
the JSE Limited, the recognition and measurement requirements of International
Financial Reporting Standards ("IFRS"), the presentation and disclosure
requirements of IAS 34 Interim Financial Reporting, the AC 500 series issued
by the Accounting Practices Board and the Companies Act. The accounting
policies as set out in the audited financial statements for the period ended
30 June 2011 have been consistently applied. These condensed consolidated
interim results incorporate the financial statements of the Company and its
subsidiaries. Results of subsidiaries are included from the effective date of
acquisition. All significant transactions and balances between group
enterprises are eliminated on consolidation.
31 December 30 June
2011 2011
1. PROPERTY EXPENSES R`000 R`000
Property expenses consist of:
Property expenses, including other 29 801 22 560
operating expenses
Listing costs 13 469 1 724
43 270 24 284
2. FINANCE COST AMORTISATION
On 11 August 2011, the Company listed on the JSE Limited. The Company raised
R662 million through the issue of 63,5 million new units. As per the Pre-
Listing Statement ("PLS") published on 18 July 2011, the proceeds were
utilised to settle outstanding debt, pay for listing costs, and to facilitate
the acquisition of the new properties. R259 million was paid toward the other
financial liabilities. As disclosed in the PLS, the Company terminated certain
fixed rate loan agreements during the period. The market moved significantly
over the listing period resulting in a break cost of R23,3 million on the
fixed rate funding being incurred compared to the anticipated R7,3 million per
the PLS. The remaining R21,7 million relates to the break cost incurred prior
to the listing which has now been recognised in profit or loss.
3. FAIR VALUE ADJUSTMENTS
The fair value adjustments relate to the reversal of previously recognised
fair value adjustments in respect of the interest rate swap that was closed
out shortly after listing.
31 December 30 June
2011 2011
4. DISTRIBUTABLE EARNINGS R`000 R`000
Net operating income (25 018) 14 955
Adjustments for:
Straight-line effect of leases (575) (328)
Listing costs included in property expenses 13 469 1 724
Finance cost amortisation 44 694 -
Distributable earnings 32 570 16 351
The distribution per linked unit per the PLS for the period 1 July 2011 to 30
June 2012 was forecasted to be 70,84 cents per linked unit. From the listing
date to 31 December 2011 a distribution of 27 cents has been approved. We
would like to draw your attention to the factors that impact on the forecasted
distribution:
- the Company listed on 11 August 2011 and not 1 July 2011 as assumed in the
forecast;
- the forecast assumed that the three acquisitions (being Athol Ridge ("AR"),
Cedar Park Properties 31 Proprietary Limited ("CP") and Pacific Eagle
Investments 204 Proprietary Limited ("PE") were made on 1 July 2011, whereas
the acquisition date was the date of listing; and
- the listing price was R7,05 and not R7,50 as assumed in the PLS.
5. BASIC AND HEADLINE (LOSS) PER UNIT/SHARE
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 Limited
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. Headline earnings include fair
value adjustments for financial liabilities and accounting adjustments
required to account for lease income on a straight-line basis, as well as
other non-cash accounting adjustments that do not affect distributable
earnings. The calculation of distributable earnings and the distribution per
linked units as set out above is more meaningful.
In terms of Circular 3/2009, issued by SAICA, the fair value adjustments on
investment property 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.
31 December 30 June
2011 2011
R`000 R`000
Reconciliation of basic (loss)/earnings to
headline (loss)/earnings:
Total comprehensive loss attributable to (56 673) (6 920)
equity holders:
Adjustments for:
Distributions - pre-listing 4 273 16 351
Distributions - post listing 32 570 -
(Loss)/earnings attributable to linked (19 832) 9 431
unitholders
Adjustments for:
Gross revaluation of investment property - 206
Deferred tax on revaluation - (29)
Headline (loss)/earnings attributable to (19 832) 9 608
linked unitholders
6. INVESTMENT PROPERTY
Opening carrying value 782 437 776 523
Additions 214 815 5 792
Acquisition of subsidiaries 54 157 -
Fair value adjustments - (206)
Straight-line effect of leases 575 328
Closing carrying value 1 051 984 782 437
7. DEBENTURES
Debentures at the beginning of the period 142 417 142 417
Issue during the period 448 180 -
Debentures at the end of the period 590 597 142 417
8. BUSINESS COMBINATIONS
On 11 August 2011, VPIF acquired the entire issued share capital of CP and PE
for R3,9 million and R13,0 million respectively. The purchase price was
settled through the issue of linked units in VPIF at a price equal to the
listing price. Since acquisition, after tax profit of R734 000 and R242 000
was included in the profit and loss of VPIF for CP and PE respectively. The
full amount has been attributed to the unitholders of VPIF. If the acquisition
had taken place at the beginning of the year an after profit of R1 million and
R306 000 would have been included in the profit and loss of VPIF for CP and PE
respectively. The AR property was purchased for an amount of R104 million.
CP PE
Net assets acquired R`000 R`000
Investment property 17 057 37 100
Plant and equipment 928 -
Cash and cash equivalents 145 137
Trade and other receivables 86 65
Other financial liabilities (14 337) (23 303)
Deferred tax 509 (775)
Trade and other payables (488) (224)
Cost of investment 3 900 13 000
STATEMENT ON GOING CONCERN
The directors have made an assessment of the Company`s ability
to continue as a going concern and have no reason to believe the business will
not be a going concern in the period ahead.
CORPORATE INFORMATION
Board of directors: PD Naidoo*# (Chairman),
RF Kane (Chief Executive Officer),
M de Lange (Chief Financial Officer), RR Emslie*#, JR Macey*#,
EG DubeEuro, CE Chimombe-MunyoroEuro, PW Mackenzie
*Independent non-executive director
#Member of audit and risk committee
Executive director
EuroNon-executive director
Company secretary: Probity Business Services Proprietary Limited (N Toerien)
Physical/Registered and postal address: Vunani House, Athol Ridge Office Park,
151 Katherine Street, Sandown, Sandton, 2196,
PO Box 652419, Benmore, 2010, Telephone number: +27 11 263 9500,
Facsimile number: +27 11 784 3095
Transfer secretary: Computershare Investor Services Proprietary Limited, 70
Marshall Street, Johannesburg, 2001
Sponsor: Grindrod Bank Limited
This report has been prepared by:
M. de Lange (Chief Financial Officer), B.Com (Law), B.Com (Hon) (Acc)
www.vpif.co.za
Date: 12/03/2012 09:00:01 Produced by the JSE SENS Department.
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