| Thu 22 Feb 2007, 17:00 | | SAC - SA Corporate Real Estate Fund - Reviewed res |
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SAC
SAC
SAC - SA Corporate Real Estate Fund - Reviewed results and distribution
declaration
SA CORPORATE REAL ESTATE FUND
Share code: SAC & ISIN code: ZAE000083614
REVIEWED RESULTS AND DISTRIBUTION DECLARATION
* Distributions
- 12 cents per unit for 5 months
- 18% increase on comparable period
- 38 cents per unit for 17 months
* Property Portfolio
- Vacancies reduced to 1%
- Value exceeds R3 billion
- 17% increase since July 2006
* SA Retail Offer
- 70% irrevocable acceptance to date
- Combined portfolio of R6 billion
- Greater alignment with IPD
portfolio weightings
- Significant acquisition and development
pipeline
- Unit price increase of 12% since offer announced
The directors of SA Corporate Real Estate Fund Managers Limited (formerly
Marriott Property Fund Managers Limited), management company of SA Corporate
Real Estate Fund (SA Corporate) (formerly Martprop Property Fund), submit their
report on the reviewed results of the SA Corporate group for the seventeen
months ended 31 December 2006.
31.12.2006 31.07.2005
CONSOLIDATED BALANCE SHEET(R000) (Reviewed) (Restated)
Assets Non-current assets Investment property 2 959 851 1 888 902
At valuation 3 026 564 1 947 500
Straight line rental adjustment (66 713) (58 598)
Property under development - 13 282
Rental receivable straight line adjustment 55 199 46 085
Current assets
Properties classified as held for disposal 76 410 -
Trade and other receivables 43 649 39 914
Rental receivable straight line adjustment 11 514 12 513
Cash resources and short-term investments 22 096 66 529
TOTAL ASSETS 3 168 719 2 067 225
Unitholders` funds and liabilities
Unitholders` funds 2 375 610 1 774 925
Non-current liabilities
Interest bearing borrowings 652 665 155 000
Interest rate swap derivative - 1 602
Deferred capital gains taxation 24 484 11 763
Current liabilities
Trade and other payables 28 900 25 738
Capital gains taxation and secondary
taxation on companies 64 3 905
Distributions payable 86 996 94 292
TOTAL UNITHOLDERS` FUNDS AND LIABILITIES 3 168 719 2 067 225
Seventeen Twelve
Note months to months to
31.12.2006 31.07.2005
CONSOLIDATED INCOME STATEMENT (R000) (Reviewed) (Restated)
Income 478 980 292 645
Rental 385 086 239 086
Straight line rental adjustment 8 115 1 556
Recovery of property expenses 78 879 47 563
Interest 6 900 4 440
Expenses 194 016 107 687
Accounting and secretarial fees 5 848 4 037
Audit fees 1 198 735
Administrative fees 3 087 1 238
Interest paid 50 127 15 805
Property administrative fees 13 485 8 419
Property expenses 105 593 69 328
Service fees 16 280 8 639
Surplus on revaluation of interest rate
swap derivative (1 602) (514)
Deferred taxation on straight line rental
adjustment (496) (57)
Headline earnings 1.1 284 468 184 901
Capital (deficit)/surplus on disposal of
investment properties (2 091) 1 154
Write-up on revaluation of investment properties 606 220 369 534
Revaluations 614 335 371 090
Straight line rental adjustment valuation (8 115) (1 556)
Taxation on property revaluation (12 665) (10 881)
On capital transactions (13 161) (10 938)
Straight line rental adjustment 496 57
Net profit 875 932 544 708
Units in issue (000) 725 184 725 184
Headline earnings per unit (cents)
Prior to straight line rental adjustment 38,18 25,29
Straight line rental adjustment 1,05 0,21
After straight line rental adjustment 1.1 39,23 25,50
Net profit per unit (cents) 1.1 120,79 75,11
Distributable income per unit (cents) 1.1 38,00 25,50
Seventeen Twelve
Note months to months to
CONSOLIDATED STATEMENT OF CHANGES 31.12.2006 31.07.2005
IN UNITHOLDERS` FUNDS (R000) (Reviewed) (Restated)
Unitholders` funds at beginning of period 1 774 925 1 395 250
Prior year deferred taxation on straight
line rental adjustment 1.2 - 19 889
Restated balance at beginning of period 1 774 925 1 415 139
Capital movements 600 685 361 820
Write-up on revaluation of investment properties 606 220 369 534
Capital (deficit)/surplus on disposal of
investment properties (2 091) 1 154
Taxation on property revaluation (12 665) (10 881)
Surplus on revaluation of interest rate
swap derivative 1 602 514
Straight line rental adjustment net of taxation 7 619 1 499
Maintenance reserves
Net transfers from maintenance reserves - (2 034)
Revenue movements - -
Net profit 875 932 544 708
Transfers to capital (600 685) (361 820)
Net transfers from maintenance reserves - 2 034
Unclaimed distributions written back 323 -
Available for distribution 275 570 184 922
Distribution attributable to unitholders (275 570) (184 922)
Unitholders` funds at end of period 2 375 610 1 774 925
Seventeen Twelve
months to months to
ABRIDGED CONSOLIDATED 31.12.2006 31.07.2005
CASH FLOW STATEMENT (R000) (Reviewed) (Restated)
Cash inflows from operating activities
Net profit for the period 875 932 544 708
Adjustment for:
Interest received (6 900) (4 440)
Interest paid 50 127 15 805
Write-up on revaluation of investment properties
before straight line rental adjustment and
net of taxation (601 670) (360 209)
Taxation on straight line rental adjustment 496 57
Capital deficit/(surplus) on disposal of
investment properties 2 091 (1 154)
Surplus on revaluation of interest rate
swap derivative (1 602) (514)
Unclaimed distribution written back 323 -
Operating profit before working capital changes 318 797 194253
Working capital changes and taxation (4 854) (27 058)
Cash generated from operations 313 943 167 195
Interest received 6 900 4 440
Interest paid (50 127) (15 805)
Distributions paid (282 866) (181 107)
Net cash outflow from operating activities (12 150) (25 277)
Cash outflow from investing activities (529 948) (141 353)
Cash inflow from financing activities
Increase in interest bearing borrowings 497 665 155 000
Net decrease in cash (44 433) (11 630)
Cash resources at beginning of period 66 529 78 159
Cash resources at end of period 22 096 66 529
REVIEW BY INDEPENDENT AUDITORS
SA Corporate`s auditors, Deloitte & Touche and PKF Durban, have reviewed the
financial results of the group for the seventeen months ended 31 December 2006.
Their unmodified report is available for inspection from the group`s secretary.
Seventeen Twelve
OTHER INFORMATION (R000) months to months to
31.12.2006 31.07.2005
(Reviewed) (Restated)
Debt funding facility
Loan facility 750 000 350 000
Additional debt funding capacity 181 000 238 000
Less: Facility utilised (652 665) (155 000)
Drawdown on facility (699 265) (197 500)
Facility repaid, available for re-advance 46 600 42 500
Facility available at end of period 278 335 433 000
Adjusted for future capital commitments and
proceeds on disposal (64 451) (348 853)
Capital commitments (140 861) (382 968)
Expected proceeds on disposal 76 410 34 115
Anticipated available loan facility 213 884 84 147
Capital cash 162 33 533
Vacancy factor (based on lettable area) 1% 2%
Valuation analysis (cents per unit)
Net asset value (including distribution yet to be paid) 340 258
Listed market price 340 291
Capitalised interest (R000) 5 853 311
NOTES TO THE FINANCIAL STATEMENTS
1. The group`s results have been prepared in accordance with International
Financial Reporting Standards (IFRS). These 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
Seventeen Twelve
months to months to
31.12.2006 31.07.2005
(Reviewed) (Restated)
R000 CPU R000 CPU
Net profit (earnings) 875 932 120,79 544 708 75,11
Adjustments for:
Capital deficit/(surplus) on
disposal of
investment properties 2 091 (1 154)
Write-up on revaluation of
investment
properties net of taxation (593 555) (358 653)
Headline earnings 284 468 39,23 184 901 25,50
Surplus on revaluation of interest
rate swap
derivative (1 602) (514)
Net transfers from maintenance
reserves - 2 034
Unclaimed distributions written back 323 -
Adjusted for straight line rental
adjustment net of taxation (7 619) (1 499)
Distributable income 275 570 184 922
Distribution attributable to
unitholders 275 570 38,00 184 922 25,50
1.2 Prior year adjustment
In the prior period 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:
Seventeen Twelve
months to months to
31.12.2006 31.07.2005
(R000) (Reviewed) (Restated)
Unitholders` funds at beginning of period - 19 889
Net profit for the period - 544
- 20 433
1.3 Primary operational segments for the seventeen months ended 31 December 2006
Business segment (R000) Industrial Office Retail Corporate Group
Income statement
Rental income 241 593 44 854 98 639 - 385 086
Straight line rental
adjustment (1 412) 105 9 422 - 8 115
Revenue 240 181 44 959 108 061 - 393 201
Net property income 218 286 35 940 98 776 - 353 002
Interest received - - - 6 900 6 900
Interest paid - - - (50 127) (50 127)
Surplus on revaluation of
interest rate swap derivative - - - 1 602 1 602
Fund expenses - - - (26 413) (26 413)
Deferred taxation on
straight line rental
adjustment 753 137 (1 386) - (496)
Capital deficit on disposal
of investment properties (987) (2 426) 1 322 - (2 091)
Write-up on revaluation of
investment properties net
of taxation 405 872 53 468 134 215 - 593 555
Net profit 623 924 87 119 232 927 (68 038) 875 932
Balance sheet
Investment properties 1 781 262 377 041 801 548 - 2 959 851
As per valuations 1 823 614 382 851 820 099 - 3 026 564
Straight line rental
adjustment (42 352) (5 810) (18 551) - (66 713)
Current and other long term
assets 107 319 43 514 32 525 25 510 208 868
Excluding rental straight
line adjustment 64 967 37 704 13 974 25 510 142 155
Rental straight line
adjustment 42 352 5 810 18 551 - 66 713
Total assets 1 888 581 420 555 834 073 25 510 3 168 719
Interest bearing borrowings - - - 652 665 652 665
Trade payables 8 089 2 711 7 077 11 023 28 900
Taxation 15 893 525 8 130 - 24 548
Distribution payable - - - 86 996 86 996
Total liabilities 23 982 3 236 15 207 750 684 793 109
COMMENTS
1. Results
As a consequence of the change in the Fund`s year end to December, these results
follow the reviewed results for the twelve month period ended 31 July 2006,
which were released on 24 August 2006.
In the five months to December 2006 the standing portfolio has again delivered
strong rental growth, which has underpinned the growth in distributions to
unitholders. Distributable income for the period from 1 August to 31 December
2006 amounts to R86 996 000 or 12,00 cents per unit. This distribution is 18%
higher than that of the comparative five month period last year.
The reconciliation of the comparative results for the period 1 August to 31
December for both years is set out below:
2006 2005
R000 R000
Revenue * 130 674 99 734
Net property expenditure (12 793) (12 546)
Net property income 117 881 87 188
Interest received 1 713 2 032
Interest paid (23 425) (8 208)
Surplus on revaluation of interest rate
swap derivative - 622
Fund expenses (9 496) (7 262)
Headline earnings 86 673 74 372
Surplus on revaluation of interest rate
swap derivative - (622)
Unclaimed distributions written back 323 -
Distributable income for the 5 months to December 86 996 73 750
Distribution per unit for five months (cpu) 12.00 10.17
* Excluding any straight line adjustment
The total distribution paid for the seventeen months ended 31 December 2006 is
38,00 cents per unit. This follows the change in the Fund`s year end from July
to December.
Industrial market rentals continued to show positive growth as a consequence of
the consistent contraction in available space and the high costs of new
developments. SA Corporate has been well positioned to benefit from this growth
and the Fund`s substantial industrial portfolio has performed ahead of
management`s expectations. There is currently no vacant space in the industrial
portfolio and the average gross rental of R26 /m2 in the portfolio is considered
to be below market. This gives rental upside on the expiry of leases.
The office market has, similarly, enjoyed a high level of tenant demand and
rentals in the preferred nodes are now reflecting the fact that the longstanding
oversupply of office space has been absorbed. Demand for new office developments
is supporting this strong rental growth, which has had a positive influence on
rentals in the secondary nodes. The Fund currently has a relatively low
weighting to office property.
Notwithstanding the recent interest rate increases, strong consumer spending has
resulted in retail sales climbing further and market rentals have continued to
strengthen on the back of higher turnovers. The healthy performance of retail
property underscores the fact that these assets are able to respond rapidly to
improving trading conditions, while offering defensive qualities in a softening
market.
The Fund`s exceptional occupancy levels have been maintained and, at 31 December
2006, the overall vacancy, by area was at 1%.
2. Portfolio activity
In the five-month period the Fund made three acquisitions as set out in the
table below.
Address Sector Acquisition Initial Date of
Cost Yield Transfer
Cnr Staal & Stephenson Roads,
Pretoria West Industrial R34m 11,75% 31/08/2006
Cnr Old Pretoria Road,
Midrand Office R40m 9,10% 19/09/2006
8 Sookay Place, Derby Downs,
Westville Office R30m 10,17% 12/12/2006
Management has stated its intentions of increasing the Fund`s office portfolio
and the current market offers investment opportunities where attractive yields
are supported by rentals with good growth potential.
The development of the distribution warehouse at Tygerberg Business Park in Cape
Town was completed at the end of September 2006. The final development cost of
this building was R71 million and will yield 10,25% in the first year. The
property is let to the Fuel Group Limited.
The following disposals were effected in the period from 1 August 2006 to 31
December 2006. The sale of these properties is in line with the Fund`s policy of
identifying assets which will under-perform in terms of rental growth and,
hence, value appreciation.
Address Sector Disposal Date of
Price Transfer
Kruisfontein Road Investments, Cape Town Retail R5m 11/09/2006
13 Eton Road, Parktown Commercial R5m 13/09/2006
Cnr Blauwberg & Koeberg Road,
Cape Town Industrial R12m 17/11/2006
Milan Street, Cape Town Industrial R6m 29/09/2006
3. Revaluation
SA Corporate`s property portfolio was independently valued at R3,03 billion at
31 December 2006. The standing portfolio, excluding sales, developments and
acquisitions, increased in value by some R426m or 17% from July 2006. The Fund`s
net asset value has increased by 32% to 340 cents per unit from 31 July 2005.
4. BEE Transaction
SA Corporate has advanced negotiations with its approved BEE partners to the
point where the terms of a comprehensive relationship agreement have been
finalised. The final implementation of this agreement will be reported on as
soon as it is formalised.
5. Offer to SA Retail Properties Limited linked unitholders
SA Corporate has announced its intention of making a formal offer to acquire all
the linked units in SA Retail Properties Limited. The process of implementing
the offer will be in terms of section 440(K) of the Companies Act and management
is able to confirm that it has the irrevocable commitment of 70% of the
unitholders in SA Retail to accept the offer of 3,05 SA Corporate units for
every SA Retail unit held.
Should the aquistion of SA Retail proceed as envisaged, this will give rise to
SA Corporate more than doubling in size, with a market capitalisation in the
order of R7 billion. This is likely to bring consequential benefits to
unitholders.
SA Corporate unitholders are advised that a circular detailing the formal offer
will be posted during March 2007.
6. Prospects
Management is encouraged by the underlying rental growth that is being achieved
by the upward reversion of leases to market upon expiry and renewal thereof.
Providing existing economic and investment conditions remain the same,
unitholders can expect to benefit accordingly.
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice is hereby given of the declaration of distribution no. 24 in respect
of the income distribution period 1 August 2006 to 31 December 2006. The
distribution amounts to 12,00 cents per unit.
Last date to trade cum distribution Thursday, 15 March 2007
Units will trade ex-distribution Friday, 16 March 2007
Record date to participate in the distribution Friday, 23 March 2007
Payment of distribution Monday, 26 March 2007
Unit certificates may not be dematerialised or re-materialised between Friday,
16 March 2007 and Friday, 23 March 2007 both days inclusive.
MARRIOTT PROPERTY SERVICES (PTY) LIMITED
a wholly owned subsidiary of Old Mutual Property Group (Pty) Limited
SECRETARIES
21 February 2007
SA CORPORATE REAL ESTATE FUND MANAGERS LIMITED
Registered office Transfer secretaries
Marriott at Kingsmead Computershare Investors Services
Kingsmead Office Park 2004 (Pty) Ltd
Durban 9th Floor, 70 Marshall Street
4001 Johannesburg 2001
P O Box 207 PO Box 61051
Durban 4000 Marshalltown 2107
Tel: (031) 366 - 1111 Tel: (011) 370 - 5000
Auditors
Deloitte & Touche PKF Durban
2 Pencarrow Crescent 12 On Palm Boulevard
Pencarrow Park Gateway
La Lucia Ridge Office Estate 4319
La Lucia 4051
Sponsor
Nedbank Capital
A division of Nedbank Limited
135 Rivonia Road
Sandton
2196
Directors: BM Kodisang (Chairman), CJ Ewin, KJ Forbes, IM Groves, IN Mkhari, RR
Perkin (Managing), ES Seedat, LC Tapping, MI Wyndham, CS Young
Alternate: MJR Anderson
Date: 22/02/2007 17:00:02 Produced by the JSE SENS Department.
