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Capital Property Fund FY 2012 results
 

Capital Property Fund FY 2012 results

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Capital Property Fund FY 2012 results

Capital Property Fund FY 2012 results

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    Capital Property Fund FY 2012 results Capital Property Fund FY 2012 results Document Transcript

    • www.capitalproperty.co.za (“Capital” or “the Fund”) Share code CPL ISIN ZAE000001731 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited Dec 2012 R'000 Audited Dec 2011 R'000 ASSETS Non-current assets 20 082 071 17 949 605 Investment property 15 910 791 15 728 251 Straight-lining of rental revenue adjustment 154 523 125 413 Investment property under development 870 009 468 241 Investments 1 788 434 689 700 Investment in associate companies 1 358 314 938 000 Current assets 257 577 262 810 Trade and other receivables 243 524 198 411 Cash and cash equivalents 14 053 64 399 Total assets 20 339 648 18 212 415 EQUITY AND LIABILITIES Capital of Fund 13 963 835 12 520 641 Trust capital 9 273 620 9 273 620 Non-distributable reserves 4 690 215 3 247 021 Retained earnings – – Total liabilities 6 375 813 5 691 774 Non-current liabilities 4 379 852 2 502 069 Interest-bearing borrowings 3 643 718 1 949 538 Deferred tax 736 134 552 531 Current liabilities 1 995 961 3 189 705 Trade and other payables 635 072 543 955 Unitholders for distribution 586 550 550 714 Taxation payable – 3 894 Interest-bearing borrowings 774 339 2 091 142 Total equity and liabilities 20 339 648 18 212 415 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited for the year ended Dec 2012 R'000 Audited for the year ended Dec 2011 R'000 Net rental and related revenue 1 446 479 1 312 883 Recoveries and contractual rental revenue 2 140 307 1 909 449 Straight-lining of rental revenue adjustment 29 110 36 746 Rental revenue 2 169 417 1 946 195 Property operating expenses (722 938) (633 312) Distributable income from investments 73 822 16 093 Fair value gain on investment property and investments 1 496 665 796 358 Fair value gain on investment property 930 742 661 560 Adjustment resulting from straight-lining of rental revenue (29 110) (36 746) Fair value gain on investments 595 033 171 544 Gain on disposal of portion of associate 62 218 – Administrative expenses (91 030) (74 864) Impairment of goodwill – (98 042) Income from associate 189 255 5 970 Non-distributable 117 907 – Distributable 71 348 5 970 Profit before net finance costs 3 177 409 1 958 398 Net finance costs (413 082) (263 768) Finance income 13 334 178 879 Fair value adjustment on derivatives 12 231 – Interest on units issued cum distribution – 175 900 Interest received 1 103 2 979 Finance costs (426 416) (442 647) Interest paid on borrowings (408 112) (376 795) Capitalised interest 56 855 29 245 Fair value adjustment on derivatives (75 159) (95 097) Profit before income tax expense 2 764 327 1 694 630 Income tax expense (199 778) (45 043) Profit for the year attributable to equity holders 2 564 549 1 649 587 Total comprehensive income for the year 2 564 549 1 649 587 Basic earnings per unit (cents)* 159,59 102,65 *The Fund has no dilutionary instruments in issue. RECONCILIATION OF PROFIT FORTHEYEARTO HEADLINE EARNINGS AND DISTRIBUTABLE INCOME Audited for the year ended Dec 2012 R'000 Audited for the year ended Dec 2011 R'000 Profit for the year attributable to equity holders 2 564 549 1 649 587 Adjusted for: (812 044) (480 632) – Fair value gain on investment property (930 742) (661 560) – Adjustment resulting from straight-lining of rental revenue 29 110 36 746 – Impairment of goodwill – 98 042 – Fair value adjustment on investment property of associate (80 464) – – Income tax effect 170 052 46 140 Headline earnings 1 752 505 1 168 955 Reconciliation of profit for the year to amount available for distribution Profit for the year attributable to equity holders 2 564 549 1 649 587 Straight-lining of rental revenue adjustment (29 110) (36 746) Fair value gain on investment property (930 742) (661 560) Adjustment resulting from straight-lining of rental revenue 29 110 36 746 Fair value gain on investments (595 033) (171 544) Gain on disposal of portion of associate (62 218) – Impairment of goodwill – 98 042 Income from associate – non-distributable (117 907) – Fair value adjustment on derivatives 62 928 95 097 Income tax expense 199 778 45 043 Distributable income 1 121 355 1 054 665 Less: distribution declared (1 121 355) (1 054 665) Interim (534 805) (503 951) Final (586 550) (550 714) Income not distributed – – Headline earnings per unit (cents) 109,06 72,74 Basic earnings per unit is 159,59 cents (2011:102,65 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 (2011: 1 606 986 279) and earnings of R2 564,549 million (2011:R1 649,587 million). Headline earnings per unit is 109,06 cents (2011: 72,74 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 (2011:1 606 986 279) and headline earnings of R1 752,505 million (2011:R1 168,955 million). ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS Audited for the year ended Dec 2012 R'000 Audited for the year ended Dec 2011 R'000 Net cash outflow from operating activities (29 373) (88 167) Cash (outflow)/inflow from investing activities (398 350) 825 450 Cash inflow/(outflow) from financing activities 377 377 (640 874) (Decrease)/increase in cash and cash equivalents (50 346) 96 409 Cash and cash equivalents at the beginning of the year 64 399 (32 010) Cash and cash equivalents at the end of the year 14 053 64 399 Cash and cash equivalents consist of: Cash on call iro securitisation – 59 621 Current accounts 14 053 4 778 14 053 64 399 CONSOLIDATED STATEMENT OF CHANGES IN UNITHOLDERS’INTEREST Audited Trust capital R'000 Non– distributable reserves R'000 Retained earnings R'000 Total R'000 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 Total comprehensive income for the year 2 564 549 2 564 549 Transfer to non-distributable reserves 1 443 194 (1 443 194) – Distribution (1 121 355) (1 121 355) Balance at 31 December 2012 9 273 620 4 690 215 – 13 963 835 Condensed audited consolidated financial statements for the year ended 31 december 2012 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 SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information required by 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 CA(SA), 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 2012 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 2012.These condensed financial statements have been derived from the group financial statements and are, in all material respects, consistent with the group financial statements.These financial statements have been audited in compliance with all applicable requirements of the Acts. A copy of their audit report is available for inspection at Capital’s registered office. SUMMARY OF FINANCIAL PERFORMANCE Dec 2012 Jun 2012 Dec 2011 Jun 2011 Distribution per unit (cents) 36,50 33,28 34,27 31,36 Units in issue 1 606 986 279 1 606 986 279 1 606 986 279 1 606 986 279 Net asset value R8,69 R7,93 R7,79 R7,39 Gearing ratio* 21,7% 22,8% 22,2% 24,8% *The gearing ratio is calculated by dividing interest-bearing borrowings by total assets. FACILITIES Expiry Facilities R' million Average margin over Jibar 2013 970 0,91% 2014 500 1,60% 2015 1 184 1,40% 2016 1 300 1,63% 2017 1 700 1,69% 5 654 1,47% The overall cost of borrowings at 31 December 2012 was 8,60%. SWAP PROFILE Expiry R' million Average swap rate 2013 200 8,12% 2014 200 7,87% 2015 600 7,97% 2016 800 8,21% 2017 700 7,22% 2018 800 7,68% 2019 300 6,18% 3 600 7,67% SECTORAL SPLIT (Unaudited) Based on GLA Book value Offices 16% 29% Industrial 74% 55% Retail 9% 14% Other 1% 2% 100% 100% LEASE EXPIRY PROFILE (Unaudited) Based on GLA Rental revenue Vacant 5,9% Dec 13 22,1% 22,5% Dec 14 21,7% 22,3% Dec 15 22,5% 20,6% Dec 16 11,5% 13,2% Dec 17 9,6% 12,6% >Dec 17 6,7% 8,8% 100,0% 100,0% SEGMENTAL ANALYSIS Audited Dec 2012 R'000 Audited Dec 2011 R'000 Segmental revenue – recoveries and contractual rental revenue Offices 653 129 577 318 Industrial 1 126 124 892 103 Retail 311 488 405 273 Other 49 566 34 755 Total 2 140 307 1 909 449 Property operating expenses Offices (216 267) (186 050) Industrial (385 603) (290 626) Retail (109 948) (149 352) Other (11 120) (7 284) Total (722 938) (633 312) Segmental revenue – rental revenue Offices 654 546 594 167 Industrial 1 139 919 918 946 Retail 323 773 384 347 Other 51 179 48 735 Total 2 169 417 1 946 195 Profit for the year Offices 627 915 534 548 Industrial 1 231 862 852 375 Retail 421 829 528 212 Other 66 505 22 562 Corporate 216 438 (288 110) Total 2 564 549 1 649 587 CAPITAL COMMITMENTS Audited Dec 2012 R'000 Audited Dec 2011 R'000 Authorised and contracted 555 212 160 163 Authorised and not yet contracted 58 355 78 067 613 567 238 230 INCOME DISTRIBUTION Notice is hereby given that a cash distribution of 36,50 cents interest per unit, being number 59 for Capital Property Fund, has been declared in respect of the period 1 July 2012 to 31 December 2012 and is payable to the unitholders recorded in the books of Capital at the close of business on the record date, Friday 22 February 2013. Unitholders are advised that the last day to trade cum distribution will be Friday, 15 February 2013. The units will trade ex distribution from Monday, 18 February 2013. Payment will be made on Monday, 25 February 2013.Unit certificates may not be dematerialised or rematerialised during the period 18 February 2013 to 22 February 2013,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 CA(SA) 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 3677 visual IGNITION 011 888 5511 DIRECTORS’COMMENTARY UNIT STRUCTURE Capital Property Fund is a Property Unit Trust (“PUT”) which was established in June 1984 in terms of the Unit Trust Control Act and is the oldest listed PUT. PUTs are obliged to distribute all their net rental income to unitholders. Capital is exempt from income tax and assets held in the trust are exempt from capital gains tax. NATURE OF THE BUSINESS Capital owns a portfolio of 262 industrial, office, retail and other properties from which rental income is derived. Capital also owns a portfolio of listed property securities. STRATEGIC DIRECTION Capital’s strategy remains the investment in and development of A-grade distribution and warehousing facilities in nodes preferred by corporate tenants, and P-grade office blocks in nodes such as Sandton CBD. Capital will continue to dispose of industrial properties utilised in manufacturing, smaller retail properties and properties in the Eastern Cape.Properties tenanted by government have been sold. DISTRIBUTABLE EARNINGS Total distributions for the year ended 31 December 2012 increased by 6,32% to 69,78 cents per unit. Capital’s distribution of 36,50 cents per unit for the final six months represents an increase of 6,51% over the distribution of 34,27 cents per unit for the comparable period in the previous year. REVIEW With the exception of a few nodes, such as the Sandton CBD, the office market remains characterised by high vacancy rates with resultant pressure on rentals. Capital has expended considerable resources on ensuring that the properties in its office portfolio are well maintained,refurbished and attractive to the letting market.Strong tenant relationships are maintained to facilitate tenant retention and vacancies are aggressively marketed directly and through the broker network. Despite the fact that the office portfolios which were sold were nearly fully let,vacancies on the office portfolio only increased marginally from 13,3% to 13,6%.This is due to the improvement in the vacancies in the remaining office portfolio from 14,7% to 13,6%.Fourways remains the most challenging office market for Capital. Warehousing and distribution properties within the portfolio continue to perform well. Areas such as Linbro Park, Longmeadow and Raceway Industrial Park have experienced strong tenant demand. Interest in large A-grade warehouses remains firm,while demand for manufacturing space continues to decline in line with the downward trend in this sector in South Africa.The retail properties have continued to perform well. The boards of Capital and Resilient Property Income Fund Limited, the owner of Capital’s management company, Property Fund Managers Limited (“PFM”), are exploring the possibilities of economically internalising PFM to better align investor and management interests. Any changes to the current structure will require unitholder approval. ACQUISITIONS AND DEVELOPMENTS In line with its strategy of acquiring strategically located land for warehousing and distribution facilities, Capital acquired Clairwood Racecourse.This 76,6ha property, to be renamed Clairwood Logistics Park, was acquired at a cost of R430 million.Approximately 400 000m² of warehousing will be developed at a construction cost exceeding R2 billion.The environmental approval and re-zoning processes are progressing well. The 21 345m² warehouse currently being developed in Raceway Industrial Park will be completed in September 2013 and has been let for five years to a multi-national tenant. Capital has entered into an agreement to purchase an 80% undivided share in two prime office sites in the Sandton CBD. The sites have a combined approved bulk of approximately 60 000m². Transfer of the sites is expected by August 2013. The redevelopment of Pineslopes Shopping Centre, a mixed use development, has resulted in a significantly improved tenant mix including Checkers as an additional anchor. The following developments have been completed: Property name % owned 100% GLA Completion date Raceway Industrial Park 100% 11 200m² Jul 12 Montague Business Park 25% 14 679m² Dec 12 Montague Business Park 25% 3 308m² Nov 12 N1 Business Park 20% 9 150m² Aug 12 The following new developments have commenced: Property name % owned 100% GLA Estimated yield Estimated completion date Raceway Industrial Park 100% 21 345m² 9,0% Aug 13 16 Industry Rd 100% 11 182m² 8,0% Aug 13 Montague Business Park 25% 6 134m² 8,4% Aug 13 Montague Business Park 25% 1 605m² 9,9% Feb 13 N1 Business Park 20% 7 355m² 9,5% Mar 13 14 Fitzmaurice Epping 100% 3 300m² 9,0% Feb 13 The following additional developments are planned for 2013: Property name % owned GLA Estimated yield Estimated commencement date Tradeport City Deep 100% 20 000m² (additional buildings in park) 9,0% Mar 13 Raceway Industrial Park 100% 40 000m² (additional buildings in park) 9,0% Feb 13 DISPOSALS Capital sold two large portfolios of properties with government associated tenants. Six properties were sold to Ascension Properties Limited (“Ascension”) for R989,1 million at a yield of 9,1%, settled 50% in cash and 50% in Ascension units. Capital received 91 592 255 Ascension A units issued at R4,05 and 61 824 772 Ascension B units issued at R2,00. Three properties were sold to Delta Property Fund Limited (“Delta”) at a yield of 9,7% for R122,6 million and settled 40% in cash and 60% in Delta units.Capital received 9 001 220 Delta units issued at R8,20. These sales,together with the new warehousing developments,have reduced the office exposure in the portfolio. The six stands in Raceway Industrial Park not required for Capital’s development pipeline were sold and transferred. The following properties were sold during 2012: Property name Sales proceeds R’000 Valuation at 31 Dec 2011 R’000 Exit yield % Effective date Grand Central 492 393 408 400 9,00% 01 Dec 12 Infinity Office Park 203 165 167 000 9,00% 01 Dec 12 Medscheme 133 988 112 800 9,00% 01 Dec 12 238 Roan Crescent Corporate Park 90 936 84 500 9,75% 01 Dec 12 Cape Road Port Elizabeth 56 400 50 800 9,50% 02 Nov 12 Meyersdal 51 880 44 900 9,50% 01 Dec 12 North Ridge Road Morningside 41 220 53 000 9,50% 02 Nov 12 78 Lechwe Street Corporate Park 26 500 26 500 9,67% 17 Aug 12 Richmond Forum Richmond 25 000 23 050 10,50% 02 Nov 12 Harbouredge 25 000 20 600 9,19% 21 Aug 12 108 Elizabeth Avenue 21 750 20 400 9,86% 30 Aug 12 Eastwood Park Bedfordview 19 050 11 700 4,22% 21 Dec 12 Kingfisher Crescent Meyersdal 16 833 13 900 9,50% 01 Dec 12 3 Craighall Park 2 250 1 100 – 07 Jan 12 VACANCIES AND ARREARS There was a marginal deterioration in tenant arrears, however, these are well provided for and no significant increase in bad debts is anticipated. Industrial vacancies increased to 4,5% (30 June 2012:4,4%), office vacancies increased to 13,6% (30 June 2012:13,3%) and retail vacancies decreased to 4,9% (30 June 2012:6,5%) based on gross lettable area.Total vacancies improved marginally from 6,1% at 30 June 2012 to 5,9% at 31 December 2012. EQUITY INVESTMENTS Dec 2012 Jun 2012 Number of units/shares Market value R’000 Number of units/shares Market value R’000 Resilient Property Income Fund Limited 16 200 000 835 758 16 200 000 695 790 New Europe Property Investments plc 15 041 719 797 211 13 351 692 534 866 Fortress Income Fund Limited A linked units* 34 200 000 499 320 42 000 000 564 060 Fortress Income Fund Limited B linked units* 96 000 000 672 000 96 000 000 595 200 Rockcastle Global Real Estate Company Limited 11 650 000 117 665 – – Ascension Properties Limited A linked units* 91 592 255 404 838 – – Ascension Properties Limited B linked units* 61 824 772 132 923 – – Delta Property Fund Limited 4 500 000 37 800 – – 3 497 515 2 389 916 *The investments in Fortress Income Fund Limited and Ascension are equity accounted and have not been revalued for accounting purposes. CAPITAL STRUCTURE AND SECURITISATION The Commercial Mortgage Backed Securitisation (“CMBS”) programme of R470 million managed by ABSA was repaid in October 2012.Capital repaid the CMBS programme of R621 million with RMB in July 2012 and Capital has no further exposure to CMBS financing structures. The Meago Siyam andTokoloho Investments BEE schemes have matured and Capital and its subsidiaries have been released from all financial commitments in this regard. In terms of its unsecured Domestic Medium Term Note programme,Capital has R450 million of commercial paper, R1,1 billion in three year bonds and R200 million in five year bonds in issue. Capital has renewed a R600 million facility from Standard Bank for a further period of five years.A new R800 million facility expiring in June 2017 was accepted from RMB. Capital’s gearing decreased from 22,8% at 30 June 2012 to 21,7% at 31 December 2012. This was the result of the revaluation of the property and equity portfolios as well as the cash proceeds from property sales.The board remains comfortable with gearing levels of up to 30%. OUTLOOK The property market,particularly in offices,is expected to remain challenging during 2013.The growth in the South African economy has been revised down to 2,6%,which does not augur well for the property market.The quality of Capital’s portfolio nevertheless places it in a position to provide a solid performance. The board forecasts growth in distributions of between 4% and 7% per Capital unit for the 2013 financial year. This forecast has not been reviewed or reported on by Capital’s auditors. The forecast 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 anticipated market related renewals. By order of the board Barry Stuhler Rual Bornman Managing director Financial director 30 January 2013 Johannesburg