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MTP
MTP
Martprop Property Fund - Reviewed interim results and distribution
declaration
Martprop Property Fund
Share code: MTP
ISIN code: ZAE000037271
Reviewed interim results and distribution declaration
The directors of Marriott Property Fund Managers Limited, management
company of Martprop Property Fund (Martprop) submit their report on the
reviewed results of the Martprop group for the twelve months ended 31
July 2006.
Distribution increased by 8% on last distribution
Portfolio valued at R2,6 billion
Acquisitions and developments
- invested R469 million
- contracted R74 million
Vacancy factor 1,5%
31.07.2006 31.07.2005
CONSOLIDATED BALANCE SHEET (R000) (Reviewed) (Restated)
Assets
Non-current assets
Investment property 2 438 160 1 888 902
At valuation 2 500 164 1 947 500
Straight line rental adjustment (62 004) (58 598)
Property under development 61 976 13 282
Rental receivable straight line 50 433 46 085
adjustment
Current assets
Properties classified as held for 42 304 -
disposal
Trade and other receivables 35 368 39 914
Rental receivable straight line 11 571 12 513
adjustment
Cash resources and short-term investments 17 715 66 529
TOTAL ASSETS 2 657 527 2 067 225
Unitholders" funds and liabilities
Unitholders" funds 1 985 443 1 774 925
Non-current liabilities
Interest bearing borrowings 538 000 155 000
Interest rate swap derivative - 1 602
Deferred capital gains taxation 9 728 11 763
Current liabilities
Trade and other payables 25 704 25 738
Capital gains taxation and secondary
taxation on companies 726 3 905
Distributions payable 97 926 94 292
TOTAL UNITHOLDERS" FUNDS AND LIABILITIES 2 657 527 2 067 225
Note Twelve months to Twelve months
CONSOLIDATED INCOME STATEMENT 31.07.2006 to
(R000) (Reviewed) 31.07.2005
(Restated)
Rental income 254 412 239 086
Straight line rental 3 406 1 556
adjustment
Revenue 257 818 240 642
Net property income 226 398 205 051
Interest received 5 187 4 440
Interest paid (26 702) (15 805)
Surplus on revaluation of 1 602 514
interest rate swap derivative
Fund expenses (12 903) (9 242)
Deferred taxation on straight (223) (57)
line rental adjustment
Headline earnings 1.1 193 359 184 901
Capital (deficit)/surplus on (1 964) 1 154
disposal of investment
properties
Write-up on revaluation of 205 554 369 534
investment properties
Revaluations 208 960 371 090
Straight line rental (3 406) (1 556)
adjustment valuation
Taxation on property 2 143 (10 881)
revaluation
On capital transactions 1 920 (10 938)
Straight line rental 223 57
adjustment
Net profit 399 092 544 708
Units in issue (000) 725 184 725 184
Headline earnings per unit
(cents)
Prior to straight line rental 26,19 25,29
adjustment
Straight line rental 0,47 0,21
adjustment
After straight line rental 1.1 26,66 25,50
adjustment
Net profit per unit (cents) 1.1 55,03 75,11
Distributable income per unit 1.1 26,00 25,50
(cents)
CONSOLIDATED STATEMENT OF CHANGES IN Note Twelve Twelve
UNITHOLDERS" FUNDS (R000) months to months to
31.07.2006 31.07.2005
(Reviewed) (Restated)
Unitholders" funds at beginning of 1 774 925 1 395 250
period
Prior year deferred taxation on 1.2 - 19 889
straight line rental adjustment
Restated balance at beginning of 1 774 925 1 415 139
period
Capital movements 210 518 361 820
Write-up on revaluation of 205 554 369 534
investment properties
Capital (deficit)/surplus on (1 964) 1 154
disposal of investment properties
Taxation on property revaluation 2 143 (10 881)
Surplus on revaluation of interest 1 602 514
rate swap derivative
Straight line rental adjustment net 3 183 1 499
of taxation
Maintenance reserves
Net transfers from maintenance - (2 034)
reserves
Revenue movements - -
Net profit 399 092 544 708
Transfers to capital (210 518) (361 820)
Net transfers from maintenance - 2 034
reserves
Available for distribution 188 574 184 922
Distribution attributable to (188 574) (184 922)
unitholders
Unitholders" funds at end of period 1 985 443 1 774 925
ABRIDGED CONSOLIDATED CASH FLOW Twelve Twelve
STATEMENT (R000) months to months to
31.07.2006 31.07.2005
(Reviewed) (Restated)
Cash inflows from operating activities
Net profit for the period 399 092 544 708
Adjustments for:
Interest received (5 187) (4 440)
Interest paid 26 702 15 805
Write-up on revaluation of investment (207 697) (358 653)
properties net of taxation
Taxation on straight line rental 223 57
adjustment
Capital deficit/(surplus) on disposal 1 964 (1 154)
of investment properties
Surplus on revaluation of interest (1 602) (514)
rate swap derivative
Operating profit before working 213 495 195 809
capital changes
Working capital changes and taxation 1 219 (28 614)
Cash generated from operations 214 714 167 195
Interest received 5 187 4 440
Interest paid (26 702) (15 805)
Distributions paid (184 940) (181 107)
Net cash inflow/(outflow) from 8 259 (25 277)
operating activities
Cash outflow from investing activities (440 073) (141 353)
Cash inflow from financing activities
Increase in interest bearing 383 000 155 000
borrowings
Net decrease in cash (48 814) (11 630)
Cash resources at beginning of period 66 529 78 159
Cash resources at end of period 17 715 66 529
REVIEW BY INDEPENDENT AUDITORS
Martprop"s auditors, Deloitte & Touche and PKF Durban, have reviewed
the financial results of the group for the twelve months ended 31 July
2006. Their unmodified report is available for inspection from the
group"s secretary.
OTHER INFORMATION (R000) Twelve months Twelve
to months to
31.07.2006 31.07.2005
(Reviewed) (Restated)
Debt funding facility
Loan facility 750 000 350 000
Additional debt funding capacity 31 000 238 000
Less: Facility utilised (538 000) (155 000)
Drawdown on facility (613 000) (197 500)
Facility repaid, available for re- 75 000 42 500
advance
Facility available at end of period 243 000 433 000
Adjusted for future capital commitments (44 766) (348 853)
and proceeds on disposal
Capital commitments (85 340) (382 968)
Expected proceeds on disposal 40 574 34 115
Anticipated available loan facility 198 234 84 147
Capital cash 3 411 33 533
Vacancy factor (based on lettable area) 1.5% 2.0%
Valuation analysis (cents per unit)
Net asset value (including interim 287 258
distribution yet to be paid)
Listed market price 280 291
Capitalised interest (R000) 4 698 311
NOTES TO THE FINANCIAL STATEMENTS
1. The group"s results have been prepared in accordance with
International Financial Reporting Standards (IFRS). The condensed
financial statements have been prepared in accordance with IAS 34. The
policies applied are consistent with those used in the prior period.
The comparative figures have been restated in order to give effect to
the prior year adjustment referred to in note 1.2.
1.1 Headline earnings and distribution attributable to unitholders
31.07.2006 31.07.2005
(Reviewed) (Restated)
R000 CPU R000 CPU
Net profit (earnings) 399 092 55,03 544 708 75,11
Adjustments for:
Capital deficit/(surplus) on 1 964 (1 154)
disposal of investment
properties
Write-up on revaluation of (207 697) (358 653)
investment properties net of
taxation
Headline earnings 193 359 26,66 184 901 25,50
Surplus on revaluation of (1 602) (514)
interest rate swap derivative
Net transfers from maintenance - 2 034
reserves
Adjusted for straight line (3 183) (1 499)
rental adjustment net of
taxation
Distributable income 188 574 184 922
Distribution attributable to 188 574 26,00 184 922 25,50
unitholders
1.2 Prior year adjustment
In the prior year deferred taxation was provided on the straight-line
rental adjustment for properties owned by the Fund. Confirmation that
the Fund is deemed to be a vesting trust for taxation purposes requires
that no deferred taxation should be provided on the straight-line
rental adjustment for properties owned by the Fund. The financial
statements of the prior period have been restated to reflect this
change. The effect of the restatement on the financial statements is
summarised below:
(R000) Twelve months Twelve
to months to
31.07.2006 31.07.2005
(Reviewed) (Restated)
Unitholders" funds at beginning of - 19 899
period
Net profit for the period - 544
- 20 443
1.3 Primary operational segments for the twelve months ended 31 July
2006
Business segment Industrial Office Retail Corporate Group
(R000)
Income statement
Rental income 163 674 26 743 63 995 - 254 412
Straight line (2 628) (1 359) 7 393 - 3 406
rental adjustment
Revenue 161 046 25 384 71 388 - 257 818
Net property income 143 712 19 389 63 297 - 226 398
Interest received - - - 5 187 5 187
Interest paid - - - (26 702) (26 702)
Surplus on
revaluation of - - - 1 602 1 602
interest rate swap
derivative
Fund expenses - - - (12 903) (12 903)
Deferred taxation
on straight line 291 64 (578) - (223)
rental adjustment
(Capital
deficit)/surplus on (680) (2 470) 1 186 - (1 964)
disposal of
investment
properties
Write-up on
revaluation of
investment 184 334 13 404 9 959 - 207 697
properties net of
taxation
Net profit 327 657 30 387 73 864 (32 816) 399 092
Balance sheet
Investment 1 476 602 249 472 712 086 - 2 438 160
properties
As per valuations 1 517 733 253 822 728 609 - 2 500 164
Straight line (41 131) (4 350) (16 523) - (62 004)
rental adjustment
Property under 61 976 - - - 61 976
development
Current and other
long term assets 69 979 29 865 35 645 21 902 157 391
Excluding rental
straight line 28 848 25 515 19 122 21 902 95 387
adjustment
Rental straight 41 131 4 350 16 523 - 62 004
line adjustment
Total assets 1 608 557 279 337 747 731 21 902 2 657 527
Interest bearing - - - 538 000 538 000
borrowings
Current liabilities 1 068 2 592 7 345 14 699 25 704
Taxation 9 805 463 186 - 10 454
Distribution - - - 97 926 97 926
payable
Total liabilities 10 873 3 055 7 531 650 625 672 084
COMMENTS
1. Name and directorship changes
Following the acquisition of the Fund"s management company by Old
Mutual Property Group, the name of the Fund will be changing to SA
Corporate Real Estate Fund in October 2006. This name identifies with
the new direction that the Fund will be pursuing with regard to the
active expansion of the portfolio as well as the positioning of the
Fund to attract significant domestic and foreign equity investment.
A circular regarding the name change will be posted to unitholders on
20 September 2006 with an effective date of 16 October 2006. The new
JSE share code is SAC and the revised logo of the Fund is set out
below.
With effect from 7 July 2006 Messrs Tony Ardington, Mick Hyatt and Mike
Mun-Gavin resigned from the board of the management company and have
been replaced by Old Mutual Property Group executives, Ben Kodisang,
Colin Young and Michael Anderson.
2. Results
Unitholders have been advised of the change in the Fund"s year end to
31 December and, accordingly, the results reported on are in respect of
the twelve months ended 31 July 2006. The next reported results period
will be for the seventeen months to 31 December 2006.
As anticipated, the six months to 31 July 2006 have seen a much
improved performance from the Fund"s standing property portfolio,
signalling the end of the negative rental reversions which have
constrained earnings and distribution growth in recent years. The
rental growth attributable to the core portfolio has been sustained by
the strong underlying property fundamentals and management is confident
that unitholders can expect distributions to grow in line with sector
expectations in the years ahead.
Distributable income for the six months to 31 July 2006 amounts to R97
926 000 or 13,50 cents per unit. This distribution is some 8% higher
than the interim distribution paid for the six months to 31 January
2006 and, while the previously reported negative reversions have also
impacted on the second six months, the balance of the portfolio has
performed very well to deliver this over all growth.
Vacancies in the portfolio continue to be contained at some 1,5% of
total lettable area, which indicates a strong rental demand for good
quality, well located property assets. The portfolio outperformed both
the listed fund benchmark and the IPD Universe benchmark in the annual
IPD index for 2005, with a total return of some 34,4% measured against
the Universe return of 28,8%. In the index, industrial property was
the top performing property type with a total return of 33,1% and the
Fund"s industrial portfolio delivered 40,5%. This underpinned the
portfolio"s strong performance against the benchmark.
3. Portfolio activity
In the twelve months to 31 July 2006 the Fund disposed of the following
properties:
Address Sector Disposal price(R)
62 Harden Avenue, Umhlatuzana, KZN Industrial 2 000 000
12 Patrick Road, Jet Park, Gauteng Industrial 3 800 000
309 15th Road, Randjespark, Gauteng Industrial 7 500 000
20 Harden Avenue, Umhlatuzana, KZN Industrial 2 500 000
449 Sydney Road, Durban, KZN Industrial 6 000 000
437 Sydney Road, Durban, KZN Industrial 4 100 000
9 Summit Road, Dunkeld West, Gauteng Office 6 800 000
287 Berg Street, Pietermaritzburg, KZN Industrial 1 400 000
310 Berg Street, Pietermaritzburg, KZN Industrial 1 400 000
280 Kent Avenue, Randburg, Gauteng Office 4 140 000
Total 39 640 000
The following properties were acquired in the twelve months. These
buildings are well let to national tenants and offer sound income
growth to unitholders in the long term.
Address Sector Major Cost Initial
tenant (R) yield
(%)
Cnr Koornhof and Industrial Chemserve 19 300 000 10,88
Essex Streets,
Meadowdale, Gauteng
5 Yaldwyn Road, Jet Industrial Picpack 35 250 000 10,75
Park, Gauteng Grindrod
Turner and Townsend Office Turner and 26 800 000 10,14
House, Illovo Townsend
Boulevard, Gauteng
20 Commercial Road, Industrial Cobra 12 400 000 11,04
Strydom Park, Watertech
Gauteng
Office Standard 12 000 000 9,50
Standard Bank Bank
Centre, Hillcrest,
KZN Industrial Autoparts 53 000 000 9,64
Distributor
772 Mimetes Road, s
Denver, Gauteng Retail
Game, Spar 32 000 000 9,40
Game Centre, Ermelo,
Mpumalanga Retail
Spar 40 003 000 9,56
Melville Boulevard,
Melville, Gauteng Offices
KV3 71 300 000 11,30
KV3 Portfolio, Engineers
Countrywide
Total 302 053 000
Two developments were concluded during the reporting period. These
developments have generated income yields in excess of what would have
been expected on a direct investment basis and will contribute
positively to rental earnings and growth in the Fund.
Address Sector Major Cost Initial
tenant (R) yield
(%)
Umlazi Mega City, Retail Spar,
Umlazi, KZN Woolworths 83 918 000 11,4o
Highland Mews, Retail Foschini 21 000 000 10,50
Witbank, Group,
Mpumalanga Mr Price
The Fund has also contracted to acquire two properties in Gauteng,
transfer of which is expected by the middle of September 2006. An
office property, leased to ABSA Bank Limited, has been acquired for R33
000 000, and an industrial property, leased to Nampak Limited, has been
purchased for R32 400 000.
The completion of a distribution and warehousing complex for the Fuel
Group in the Western Cape at the end of August 2006 for a total cost of
R70 900 000 will generate a 10,25% initial yield for the Fund.
4. Portfolio revaluation
The Fund"s property portfolio was valued at R2,6 billion at 31 July
2006. A comparison of the standing portfolio shows an increase in
value of 12,4% over that at 31 July 2005. This increase is indicative
of the prevailing strength in the direct property market, with sound
rental fundamentals being compounded by increased investor demand for
these assets. The Fund"s net asset value has increased to 287 cents
per unit from 258 cents per unit twelve months ago.
5. Borrowings
At the end of July 2006, the Fund had borrowings of R538 000 000. This
constitutes some 21% of the value of the property portfolio and is a
relatively low debt level in the current investment environment. The
interest cost on this debt is at prime less 2,3% and is currently on a
variable rate basis.
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice is hereby given of the declaration of distribution no. 23 in
respect of the income distribution period 1 February 2006 to 31 July
2006. The distribution amounts to 13,50 cents per unit.
Last date to trade cum distribution Friday, 15 September 2006
Units will trade ex-distribution Monday, 18 September 2006
Record date to participate
in the distribution Friday, 22 September 2006
Payment of distribution Tuesday, 26 September 2006
Unit certificates may not be dematerialised or re-materialised between
Monday, 18 September 2006 and Friday, 22 September 2006 both days
inclusive.
MARRIOTT PROPERTY SERVICES (PTY) LIMITED
SECRETARIES
24 August 2006
Registered office Transfer secretaries
Marriott at Kingsmead Computershare Investors
Kingsmead Office Park Services 2004 (PTY) Ltd
Durban 4001 9th Floor, 70 Marshall
P O Box 207 Street
Durban 4000 Johannesburg
031 - 366 1111 2001
PO Box 61051
Marshalltown
2107
Tel: (011) 370 - 5000
Auditors Sponsor
Deloitte & Touche PKF Durban Nedbank Capital
2 Pencarrow Crescent 12 On Palm Boulevard A division of Nedbank
Pencarrow Park Gateway Limited
La Lucia Ridge Office 4319 135 Rivonia Road
Estate Sandton
La Lucia 2196
4051
Date: 24/08/2006 05:49:30 PM Produced by the JSE SENS Department
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