Wrap Text
Provisional summarised reviewed consolidated financial statements for the eight months ended 28 February 2018
CASTLEVIEW PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2017/290413/06)
JSE share code: CVW
ISIN: ZAE000251633
(Approved as a REIT by JSE)
("Castleview" or "the Company" or "the group")
PROVISIONAL SUMMARISED REVIEWED CONSOLIDATED FINANCIAL STATEMENTS FOR THE EIGHT MONTHS ENDED 28 FEBRUARY 2018
DIRECTORS' COMMENTARY
Nature of business
Castleview is a property holding and investment company that is invested in a well-located small regional shopping centre in the Eastern
Cape.
Property portfolio
Castleview's property portfolio consists of one property, namely Pier 14 Shopping Centre in Govan Mbeki Road, Port Elizabeth, which is
defined as a small regional shopping centre with 30 345m2 of rentable space and is anchored by large national tenants such as Shoprite,
Jet, Pep, Ackermans and Mr Price.
Strategy
Castleview intends to invest further in retail properties which are anchored by high quality national tenants on long term, escalating
leases, where opportunities to increase value to shareholders through sound asset management strategies are available and providing
investors with exposure to consumers from a cross-section of income categories.
Castleview may also invest in listed property shares in the future.
Commentary on results, distributable earnings and net asset value
The portfolio remains in a healthy state with vacancies of 4.1% by gross rental and 4.9% by gross lettable area (GLA) at year end. Pier 14
continues to attract and retain high quality tenants which are prepared to sign long-term leases, with close to 90% of tenants by GLA
comprising high quality tenants including large international and national tenants, JSE-listed companies, as well as major franchisees and
medium to large professional firms.
Notwithstanding tough economic conditions in 2017, which have resulted in retailers' earnings remaining under pressure, a variety of
factors have contributed to a pleasing improvement in turnover at Pier 14 in 2018 to-date, including: the positive leasing activity that
has taken place at the centre in the past 24 months; real growth in disposable income of consumers in lower income brackets as a result of
healthy wage growth and lower consumer inflation; and a significant improvement in consumer confidence following Mr Cyril Ramaphosa being
appointed President of South Africa in February 2018.
Distributable earnings for the period of 11.60 cents per share is marginally lower than the guidance provided in the pre-listing statement
of 12.00 cents per share.
A dividend of 16.72 cents per share has been declared, which is in excess of the distributable earnings for the period, due to the board
recommending that net income previously being forecast to be retained now be distributed.
Castleview has increased its net asset value per share from R5.00 at listing to R5.12, an increase of 2.4%.
Summary of financial indicators
28 February
2018
Shares in issue 33 000 000
Distributable earnings per share 11.60 cents
Dividend per share 16.72 cents
Net asset value per share R5.12
Loan-to-value ratio* 43.8%
Property cost-to-income ratio 26.2%
* The loan-to-value ratio is calculated by dividing interest bearing borrowing net of cash on hand by the total of investment property.
Sectoral split, lease expiry profile and vacancies
GLA Gross rentals
Sectoral split
Based on:
Retail 74.7% 81.0%
Office 25.3% 19.0%
100.0% 100.0%
Lease expiry profile (unreviewed)
Based on:
Vacant 4.9% 4.1%
Feb 2019 23.8% 28.3%
Feb 2020 12.1% 15.7%
Feb 2021 29.8% 25.8%
Feb 2022 9.2% 6.0%
> Feb 2022 20.2% 20.1%
100.0% 100.0%
Loan funding
Amount
Approved drawn down at
loan February 2018 Interest
R'm R'm rate
Facility
Floating prime
ABSA Bank 165.0 164.1 less 1% (9.0%)
Floating prime
Urban Retail Property Investments 1 (URP1) 28.4 30.1* less 0.25% (9.75%)
* Interest on the URP1 loan is capitalised monthly and payable annually in arrears, with the first payment being due on 31 December 2018.
The ABSA facility is secured by a first mortgage bond and security cessions over the fixed property comprising Pier 14 Shopping Centre.
Outlook
Castleview will continue to focus on a disciplined approach to the management of its existing asset and the growth of the portfolio in
order to return growth in capital and income to shareholders.
CASTLEVIEW PROPERTY FUND LTD
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 28 FEBRUARY 2018
Reviewed
28 February
2018
Notes R
ASSETS
Non-current assets
Property, plant and equipment 784 573
Investment property 3 308 690 842
Operating lease asset 6 152 965
Deferred tax 429 433
316 057 813
Current assets
Trade and other receivables 1 320 458
Cash and cash equivalents 56 281 732
Total current assets 57 602 190
Total assets 373 660 003
EQUITY AND LIABILITIES
Equity
Share capital 4 165 000 000
Accumulated profit 3 845 546
Non-controlling interest 186 660
169 032 206
Liabilities
Non-current liabilities
Other financial liabilities 5 164 055 652
Loan from parent company 6 28 419 384
192 475 036
Current liabilities
Trade and other payables 8 129 782
Loan from parent company 6 1 692 314
Current tax payable 2 330 665
12 152 761
Total liabilities 204 627 797
Total equity and liabilities 373 660 003
CASTLEVIEW PROPERTY FUND LTD
SUMMARISED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 28 FEBRUARY 2018
Reviewed
eight months
ended
28 February
2018
Notes R
Revenue 17 802 346
Other operating expenses (10 089 950)
Operating profit 7 712 396
Bargain purchase on acquisition of subsidiary 2 511 373
Investment income 1 808 880
Finance costs (7 925 635)
Profit before taxation 4 107 014
Taxation (258 203)
Profit for the period 3 848 811
Other comprehensive income -
Total comprehensive income 3 848 811
Profit attributable to:
Owners of the parent 3 845 546
Non-controlling interest 3 265
3 848 811
Earnings per share information (cents per share)
Basic and diluted earnings per share 8 12.97
CASTLEVIEW PROPERTY FUND LTD
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 28 FEBRUARY 2018
Total
attributable
to equity Non-
Accumulated holders of controlling Total
Share capital profit the group interest equity
R R R R R
Reviewed
Balance at 1 July 2017 - - - - -
Issue of shares 165 000 000 - 165 000 000 - 165 000 000
Business combinations - - - 183 395 183 395
Total contributions by and distributions to owners
of company recognised directly in equity 165 000 000 - 165 000 000 183 395 165 183 395
Profit for the period - 3 845 546 3 845 546 3 265 3 848 811
Total comprehensive income for the period - 3 845 546 3 845 546 3 265 3 848 811
Balance at 28 February 2018 165 000 000 3 845 546 168 845 546 186 660 169 032 206
CASTLEVIEW PROPERTY FUND LTD
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 28 FEBRUARY 2018
8 months
ended
28 February
2018
R
Cash flows from operating activities
Cash generated from operations 8 230 661
Interest income 1 808 880
Finance costs (5 479 615)
Net cash from operating activities 4 559 926
Business combinations (23 623 773)
Net cash from investing activities (23 623 773)
Cash flows from financing activities
Proceeds on share issue 40 000 000
Other financial liabilities advanced 35 345 579
Net cash from financing activities 75 345 579
Total cash movement for the period 56 281 732
Total cash and cash equivalents at the end of the period 56 281 732
SIGNIFICANT FINANCIAL STATEMENT NOTES
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The provisional summarised reviewed consolidated financial statements are prepared in accordance with the requirements of the JSE Listings
Requirements for provisional reports and the requirements of the Companies Act of South Africa. The Listings Requirements require
provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information
required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the financial statements from which
the summary financial statements were derived are in terms of IFRS, and are consistent with those applied in the pre-listing statement.
The directors have adopted and wish to disclose the following material accounting policies:
1.1 Significant judgements and sources of estimation uncertainty
The preparation of provisional summarised reviewed consolidated financial statements in conformity with IFRS requires management, from time
to time, to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities,
income and expenses. These estimates and associated assumptions are based on experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future
periods affected.
Critical judgements in applying accounting policies
The critical judgements made by management in applying accounting policies, apart from those involving estimations, that have the most
significant effect on the amounts recognised in the provisional summarised reviewed consolidated financial statements, are outlined as follows.
Investment property
In the application of the accounting policy which is described in note 1.2 below, management is required to make judgements, estimates and
assumptions about the fair value of the instrument property that are not readily apparent from other sources.
The fair value of the investment property is determined using current rentals, expected market rentals, expected vacancies and appropriate
capitalisation rates. The valuation of the investment property as at 28 February 2018 which was determined by the directors was compared to
the valuation performed by an independent valuer as more fully described in note 3 and the impact of any adjusting factors was found to
be immaterial.
1.2 Investment property
Property comprising of freehold land and buildings that is held for long term rental yields or for capital appreciation or both, is
classified as investment property and recognised as an asset when, and only when, it is probable that the future economic benefits that
are associated with the investment property will flow to the enterprise, and the cost of the investment property can be measured reliably.
Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.
Fair value
Subsequent to initial measurement investment property is measured at fair value.
Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with
the expenditure will flow to the group and the cost of the item can be measured reliably.
A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises.
A gain or loss arising on disposal of investment property is recognised in profit or loss, measured as the difference between the disposal
proceeds and the carrying amount.
1.3 Revenue
Revenue comprises gross rental revenue including all recoveries from tenants, excluding value added taxation. Rental revenue from investment
property is recognised in profit or loss on a straight line basis over the term of the lease. Lease incentives granted are recognised as an
integral part of the total rental income over the lease period. Contingent rents (turnover rentals) are included in revenue when the amount
can be reliably measured.
Interest is recognised, in profit or loss, using the effective interest rate method.
1.4 Consolidation
Basis of consolidation
The provisional summarised reviewed consolidated financial statements incorporate the financial statements of the company and all
subsidiaries. Subsidiaries are entities (including structured entities) which are controlled by the group.
The group has control of an entity when it is exposed to or has rights to variable returns from involvement with the entity and it has the
ability to affect those returns through use its power over the entity.
The results of subsidiaries are included in the provisional summarised reviewed consolidated financial statements from the effective date of
acquisition to the effective date of disposal.
All inter-company transactions, balances, and unrealised gains on transactions between group companies are eliminated in full on
consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Business combinations
The group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as
the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable
to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest
and costs to issue equity which are included in equity.
The acquiree's identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 Business
combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal groups) that are classified
as held for sale in accordance with IFRS 5 Non-current assets Held For Sale and Discontinued Operations, which are recognised at fair value
less costs to sell.
On acquisition, the acquiree's assets and liabilities are reassessed in terms of classification and are reclassified where the
classification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whose classification remains as
per their inception date.
Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus
non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. If, in the case of a bargain
purchase, the result of this formula is negative, then the difference is recognised directly in profit or loss.
1.5 Share capital and equity
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Ordinary shares are classified as equity.
1.6 Financial instruments
Classification
The group classifies financial assets and financial liabilities into the following categories:
- Financial assets at fair value through profit or loss designated
- Loans and receivables
- Available for sale financial assets
- Financial liabilities measured at amortised cost
Classification depends on the purpose for which the financial instruments were obtained/incurred and takes place at initial recognition.
Classification is re-assessed on an annual basis, except for financial assets designated as at fair value through profit or loss, which
shall not be classified out of the fair value through profit or loss category.
Initial recognition and measurement
Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments.
The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or
an equity instrument in accordance with the substance of the contractual arrangement.
Financial instruments are measured initially at fair value.
For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of
the instrument.
Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.
Subsequent measurement
Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from
changes in fair value being included in profit or loss for the period.
Net gains or losses on the financial instruments at fair value through profit or loss exclude dividends and interest.
Dividend income is recognised in profit or loss as part of other income when the group's right to receive payment is established.
Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.
Available for sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not
determinable, which are measured at cost less accumulated impairment losses.
Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in equity until the asset
is disposed of or determined to be impaired. Interest on available for sale financial assets calculated using the effective interest method
is recognised in profit or loss as part of other income. Dividends received on available for sale equity instruments are recognised in
profit or loss as part of other income when the group's right to receive payment is established.
Changes in fair value of available for sale financial assets denominated in a foreign currency are analysed between translation differences
resulting from changes in amortised cost and other changes in the carrying amount. Translation differences on monetary items are recognised
in profit or loss, while translation differences on non monetary items are recognised in other comprehensive income and accumulated in
equity.
Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the
group has transferred substantially all risks and rewards of ownership.
Impairment of financial assets
At each reporting date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether
there is objective evidence that a financial asset or group of financial assets has been impaired.
For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and
default of payments are all considered indicators of impairment. Where financial assets are impaired through use of an allowance account,
the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made
against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses.
Trade and other receivables
Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective
interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade
receivable is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of
estimated future cash flows discounted at the effective interest rate computed at initial recognition.
Trade and other receivables are classified as loans and receivables.
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate
method.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially recorded at fair
value and subsequently measured at amortised cost, using the effective interest rate method.
Taxation and deferred taxation
Income tax expense comprises current and deferred taxation. Income tax expense is recognised in profit or loss except to the extent that it
relates to items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable on taxable income, after deducting the qualifying distribution for the period of assessment, using tax
rates that have been enacted or substantively enacted by the reporting date and includes adjustments for tax payable in respect of previous
years. In accordance with the REIT status, dividends declared are treated as a qualifying distribution in terms of section 25BB of the
Income Tax Act, No 58 of 1962 (as amended).
Withholding tax relating to foreign distributions received is recognised as part of the current tax expense. The distribution received is
presented gross of withholding tax in the financial statements.
Deferred income tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values
for financial reporting purposes. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can
be utilised. Such assets and liabilities are not recognised if the temporary difference arises:
- From the initial recognition of goodwill in a business combination;
- From the initial recognition of other assets and liabilities in a transaction which is not a business combination and affects neither accounting
profit nor taxable income; or
- Differences related to investments in subsidiaries, joint ventures and associates, to the extent that it is probable that they will not reverse
in the foreseeable future and the group is able to control the reversal.
Deferred tax is not recognised on the fair value of investment properties. Such items will be realised through sale and, in accordance with the
income tax requirements relating to the REIT status, capital gains tax is no longer applicable. Deferred tax is not recognised for temporary differences
that will form part of future qualifying distributions.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate
to income tax levied by the same authority on the same taxable entity, or on different tax entities, but they intend to settle current tax assets and
liabilities on a net basis or their tax assets and liabilities will be realised simultaneously.
Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred and are calculated using the effective interest rate method.
Property, plant and equipment
Property, plant and equipment are tangible assets which the group holds for its own use or for rental to others and which are expected to be used for more
than one period.
An item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the
group, and the cost of the item can be measured reliably.
Property, plant and equipment is initially measured at cost. Cost includes all of the expenditure which is directly attributable to the acquisition of the asset.
Property, plant and equipment is subsequently stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is charged to write off the asset's carrying amount
over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset's economic benefits are consumed
by the group. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognised.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Depreciation method Average useful life
Plant and machinery Straight line 5 to 15 years
Furniture and fixtures Straight line 5 to 15 years
Motor vehicles Straight line 5 to 6 years
Office equipment Straight line 5 to 7 years
IT equipment Straight line 5 years
Signage Straight line 9 years
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous
estimates, the change is accounted for prospectively as a change in accounting estimate.
1.7 General
The provisional summarised reviewed consolidated financial statements were compiled by Elana Kruger CA(SA), the financial director.
A dividend of 16.72 cents was declared on 16 May 2018. Please see note 11 for further details.
The directors are not aware of any other matters or circumstances arising subsequent to the period-end that require any additional
disclosure or adjustment to the provisional summarised reviewed consolidated financial statements.
These provisional summarised reviewed consolidated financial statements for the eight months ended 28 February 2018 have been reviewed by
Nolands Inc, who expressed an unmodified review conclusion. A copy of the auditor's review report is available for inspection at the
company's registered office together with the financial statements identified in the auditor's report. The auditor's report does not
necessarily report on all the information contained in these financial results. Shareholders are therefore advised that in order to obtain
a full understanding of the auditor's engagement they should obtain a copy of the auditor's report together with the accompanying financial
information from the company's registered office.
The directors take full responsibility for the preparation of these results and confirm that the financial information has been correctly
extracted from the underlying financial statements.
2. SEGMENT ANALYSIS
Segment information
At 28 February 2018, the group is organised into one main operating segment:
- Mixed use
28 February 2018 Admin
and corporate
Mixed use costs Total
R R R
Revenue 17 802 346 - 17 802 346
Property operating expenses (6 332 135) - (6 332 135)
Administrative expenses - (3 757 815) (3 757 815)
Operating profit/(loss) 11 470 211 (3 757 815) 7 712 396
Bargain purchase on acquisition of subsidiary - 2 511 373 2 511 373
Investment income 857 562 951 318 1 808 880
Finance costs (6 231 893) (1 693 742) (7 925 635)
Profit/(loss) before taxation 6 095 880 (1 988 866) 4 107 014
Taxation (258 203) - (258 203)
Profit/(loss) for the period 5 837 677 (1 988 866) 3 848 811
Non-controlling interest (3 265) - (3 265)
Profit/(loss) attributable to owners of the parent 5 834 412 (1 988 866) 3 845 546
Reconciliation of profit for the period to distributable income:
Bargain purchase on acquisition of subsidiary (2 511 373)
Headline earnings 1 334 173
Lease straight-lining adjustment (717 425)
Listing expenses 3 354 726
Depreciation 63 765
Deferred tax movement (207 915)
Distributable income 3 827 324
The amounts provided to management with respect to total assets are measured in a manner consistent with that in the statement of financial
position. These assets are allocated based on the operations of the segment.
28 February 2018 Admin
and corporate
Mixed use costs Total
R R R
Property, plant and equipment 784 573 - 784 573
Investment property 308 690 842 - 308 690 842
Operating lease asset 6 152 965 - 6 152 965
Deferred tax 429 433 - 429 433
Trade and other receivables 1 035 458 285 000 1 320 458
Cash and cash equivalents 45 689 379 10 592 353 56 281 732
362 782 650 10 877 353 373 660 003
The amounts provided to management with respect to total liabilities are measured in a manner consistent with that in the statement of
financial position. These liabilities are allocated based on the operations of the segment.
28 February 2018 Admin
and corporate
Mixed use costs Total
R R R
Other financial liabilities 164 055 652 - 164 055 652
Loan from parent company - 30 111 698 30 111 698
Trade and other payables 8 012 782 117 000 8 129 782
Current tax payable 2 330 665 - 2 330 665
174 399 099 30 228 698 204 627 797
3. INVESTMENT PROPERTY
Reviewed
28 February
2018
Carrying
value
R
Group
Investment property at fair value 308 690 842
Reviewed
28 February
2018
R
Group
Reconciliation of investment property
Additions through business combination 308 690 842
Recognised lease obligations arising from business combination 5 435 540
Recognised lease obligations during the current period 717 425
Recognised in property, plant and equipment 156 193
Valuation obtained 315 000 000
Pledged as security
Mortgage bonds have been registered over the entire investment property as security
for the ABSA bond (see note 5).
Details of property
Pier 14 Shopping Centre
A retail shopping centre located in Port Elizabeth
This property consists of erven no. 3801 and 3536 situated in the Nelson Mandela Metropolitan Municipality held under title deed no.
T19792/2007 and T20268/1994.
No contractual obligations exist to purchase, construct or develop investment property or for repairs, maintenance or enhancements.
A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the
registered office of the company.
Details of valuation
On 1 October 2017, the company obtained a valuation from an independent valuer, Michael Gibbons at Mills Fitchet Magnus Penny & Wolffs.
Michael Gibbons is a registered professional property valuer with a National Diploma in Property Valuations. He is a Member of the
Institute of Valuers and currently serves on the Executive committee of the Southern Branch of the South African Institute of Valuers. Mills
Fitchet Magnus Penny & Wolffs are not connected to the company and have recent experience in location and category of the investment
property being valued. The property was revalued using the discounted cash flow of future income streams method. The key assumptions used
by the independent valuer in determining fair value were as follows:
- Discount rate 15.00%
- Market cap rate 10.00%
- Expense growth rate 7.00%
- Income growth rate 6.00%
- Initial yield 9.70%
- Discounted cash flow term 10 years
Whilst the effective date of the valuation of the company's property portfolio was pre 28 February 2018, the directors of the company have
considered the impact of any potential adjusting factors to the relevant inputs utilised by the valuator in his valuation model. The
potential impact of these adjusting factors has been considered immaterial by the directors of the company, and consequently no fair value
adjustment has been recognised for the period. These assumptions are based on current market conditions.
Inter-relationship between key unobservable inputs and fair value measurements
The estimated fair value would increase/(decrease) if:
- Discount rate was lower/(higher);
- Capitalisation rate was lower/(higher);
- Expected expense growth rate was lower/(higher);
- Expected market rental growth rate was higher/(lower);
- Initial yield was (lower)/higher;
- Exit capitalisation rate was lower/(higher).
Reviewed
28 February
2018
R
Amounts recognised in profit and loss for the period
Rental income from investment property 17 802 346
Direct operating expenses from rental generating property (6 332 135)
11 470 211
Fair value hierarchy
The table below analyses assets and liabilities carried at fair value.
The levels are defined as follows:
Level 3: Unobservable inputs for the asset or liability.
Reviewed
28 February
2018
R
Level 3
Recurring fair value measurements
Assets
Investment property
Pier 14 Shopping Centre 314 843 807
The fair value of trade and other receivables, cash and cash equivalents and trade and other payables approximate their carrying value and
are not included in the hierarchy analysis as their settlement terms are short-term and therefore from a materiality perspective their fair
values are not required to be modelled.
4. SHARE CAPITAL
Reviewed
28 February
2018
Authorised
Ordinary shares of no par value 1 000 000 000
Reconciliation of no. of shares issued:
Issue of shares - ordinary shares of no par value 33 000 000
Issued
No par value ordinary shares R165 000 000
Unissued ordinary shares are under the control of the directors.
5. OTHER FINANCIAL LIABILITIES
Reviewed
28 February
2018
R
Held at amortised cost
Mortgage bond 164 055 652
In October 2017, the company entered into a loan
agreement with ABSA Bank.
This loan is on an interest only repayment profile for 36 months, following which the loan will
be repayable in full.
The loan bears interest at the South African Prime lending rate less 1%.
The following security cession and credit support were provided:
- Cession in security of rights in and to all leases and rentals in respect of the investment property;
- Proceeds on any sale or transfer of the investment property;
- Revenues in respect of the investment property;
- Any claims in respect of insurance policies and insurance proceeds;
- Limited guarantees by I Group Investments (Pty) Ltd for the amount of R25 000 000, including cession
of claims and loan accounts;
- A subordination agreement in terms of which all claims by Urban Retail Property Investments 1 (Pty) Ltd
in I Group Investments (Pty) Ltd are subordinated in favour of the company; and
- An undertaking by I Group Investments (Pty) Ltd to cover all funds needed for cash flow and interest
shortfalls in respect of the investment property.
The fair value of the other financial liability held at amortised cost is estimated to approximate its
carrying value due to the interest rates being market-related for similar entities.
6. LOAN FROM PARENT COMPANY
Reviewed
28 February
2018
R
Urban Retail Property Investments 1 (Pty) Ltd (30 111 698)
This four year loan facility is due and payable in full on 31 December 2021. This loan bears interest
at SA Prime less 0.25% and is unsecured. Interest on this facility is capitalised to the loan for the
duration of the loan and is repayable annyally in arrears with the first payment being due 31 December 2018.
This loan facility is convertible into shares in the company at a conversion rate being the higher of the
initial subscription price into the company of R5.00 per share or at the 3-day volume weighted average price
("VWAP") of the company at the date of exercise. This option exists at the election of either the company or
Urban Retail Property Investments 1.
The fair value of the loan payable is estimated to approximate its carrying value due to the interest
being market related for similar entities.
Non-current liabilities (28 419 384)
Current liabilities (1 692 314)
(30 111 698)
7. BUSINESS COMBINATIONS
FEC Prop (Pty) Ltd (previously Gritprop Investments (Pty) Ltd)
On 1 October 2017 the group, through its subsidiary Castleview One (Pty) Ltd subscribed for 99.9% of the voting equity interest of
FEC Prop (Pty) Ltd which resulted in the group obtaining control over FEC Prop (Pty) Ltd. FEC Prop (Pty) Ltd is principally a property
holding company. The business combination was entered into in order to obtain exposure to the retail property sector through assets
owned in FEC Prop (Pty) Ltd.
Reviewed
28 February
2018
Fair value of assets acquired and liabilities assumed: R
Property, plant and equipment 848 337
Investment property (including operating lease asset) 314 126 382
Deposits held (3 824 725)
Trade and other receivables 49 667
Cash and cash equivalents* 5 475 036
Other financial liabilities (127 446 612)
Deferred tax 221 519
Shareholder loan (2 105 159)
Trade and other payables (2 085 130)
Current tax payable (1 864 547)
Total identifiable net assets 183 394 768
Non-controlling interest (0.1% of fair value of total identifiable net assets) (183 395)
Gain on a bargain purchase in a business combination (2 511 373)
180 700 000
Acquisition date fair value of consideration paid
Cash* (29 098 809)
Other loans and receivables, being a loan receivable from I Group Investments (Pty) Ltd, ceded to the company (151 601 191)
(180 000 000)
* Net cash and cash equivalents arising on business combination (23 623 773)
The gain on a bargain purchase occurred due to directors' valuation of investment property during negotiations being R2.5 million
lower than the independent valuation obtained on date of acquisition.
FEC Prop (Pty) Ltd earned revenue of R17 802 346 and profit after tax of R3 264 792 from 1 October 2017 to period-end.
8. PER SHARE INFORMATION
Reviewed
28 February
2018
R
Profit attributable to shareholders 3 845 546
Gain on bargain purchase in a business combination (2 511 373)
Headline earnings 1 334 173
Lease straight-lining adjustment (717 425)
Listing expenses 3 354 726
Depreciation 63 765
Deferred tax movement (207 915)
Distributable income 3 827 324
Number of shares in issue 33 000 000
Weighted average number of ordinary shares in issue 29 658 228
Earnings per share (c) 12.97
Headline earnings per share (c) 4.50
Distributable earnings per share (c) 11.60
Net asset value per share (c) 511.65
Distribution per share (c) 16.72
The company does not have any potential dilutionary instruments in issue.
9. REPORTING PERIOD AND COMPARATIVE FIGURES
The current reporting period is eight months, as the company was incorporated on 6 July 2017. No comparative figures have been presented as
these are the first provisional summarised reviewed consolidated financial statements for the group.
10. RELATED PARTIES
Reviewed
28 February
2018
R
Relationship
Parent company: Urban Retail Property Investments 1 (Pty) Ltd
Companies under common directorships: Castleview Asset Managers (Pty) Ltd
Loan account owing to parent company
Urban Retail Property Investments 1 (Pty) Ltd (30 111 698)
Other receivables owing by companies under common directorships
Castleview Asset Manager (Pty) Ltd 285 000
Interest capitalised on loan owing to parent company
Urban Retail Property Investments 1 (Pty) Ltd 1 692 314
Asset management fees paid to companies under common directorships
Castleview Asset Managers (Pty) Ltd 449 131
Compensation to directors and other key management
Short-term employee benefits 215 000
11. PAYMENT OF DIVIDEND
The board has approved and notice is hereby given of the final gross dividend of 16.71996 cents per share for the eight months
ended 28 February 2018.
The dividend is payable to Castleview's shareholders in accordance with the timetable set out below:
Last date to trade cum dividend: Tuesday, 5 June 2018
Shares trade ex dividend: Wednesday, 6 June 2018
Record date: Friday, 8 June 2018
Payment date: Monday, 11 June 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 6 June 2018 and Friday, 8 June 2018, both days inclusive.
In accordance with Castleview's status as a REIT, shareholders are advised that the dividend meets the requirements of a "qualifying
distribution" for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962 ("Income Tax Act"). The dividend will be deemed to
be a dividend for South African tax purposes, in terms of section 25BB of the Income Tax Act.
The dividend received by or accrued to South African tax residents must be included in the gross income of such shareholders and will not
be exempt from income tax (in terms of the exclusion to the general dividend exemption, contained in paragraph (aa) of section 10(1)(k)(i)
of the Income Tax Act) because it is a dividend distributed by a REIT. This dividend is, however, exempt from dividend withholding tax in
the hands of South African tax resident shareholders, provided that the South African resident shareholders submitted the following forms
to their Central Securities Depository Participant ("CSDP") or broker, as the case may be, in respect of uncertificated shares, or the
company, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the company, as the case may be, should the circumstances affecting the exemption
change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service (SARS). Shareholders are advised to contact their CSDP,
broker or the company, as the case may be, to arrange for the above-mentioned documents to be submitted prior to payment of the dividend, if
such documents have not already been submitted.
Dividends received by non-resident shareholders will not be taxable as income and instead will be treated as an ordinary dividend, which is
exempt from income tax in terms of the general dividend exemption in section 10(1)(k)(i) of the Income Tax Act. On 22 February 2017, the
dividends withholding tax was increased from 15% to 20% and, accordingly, any dividends received by non-residents from a REIT will be subject
to dividend withholding tax at 20%, unless the rate is reduced in terms of any applicable agreement for the avoidance of double taxation
("DTA") between South Africa and the country of residence of the shareholders. Assuming dividend withholding tax will be withheld at a rate
of 20%, the net dividend amount due to non-resident shareholders is 13.37597 cents per share. A reduced dividend withholding rate, in terms
of the applicable DTA, may only be relied upon if the non-resident shareholder has submitted the following forms to their CSDP or broker, as
the case may be, in respect of uncertificated shares, or the company, in respect of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the company, as the case may be, should the circumstances affecting the reduced rate
change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the SARS. Non-resident shareholders are advised to contact their CSDP, broker or the
company, as the case may be, to arrange for the above-mentioned documents to be submitted prior to payment of the dividend, if such documents
have not already been submitted, if applicable.
The dividend will be transferred to dematerialised shareholders' CSDP/broker accounts on Monday, 11 June 2018. Certificated shareholders'
dividend payments will be paid to certificated shareholders' bank accounts on, or about, Monday, 11 June 2018.
Shares in issue at the date of declaration of dividend: 33 000 000.
Castleview's income tax reference number: 9366916188.
By order of the board
James Templeton Elana Kruger
Chief executive officer Financial director
Cape Town
17 May 2018
CORPORATE INFORMATION
Directors
JWA Templeton, E Kruger, RG Volks, GC Bayly, DJ Green, A Padayachee
Registered office
411 The Hills, Buchanan Square, 160 Sir Lowry Road, Woodstock, 7925
PO Box 55240, Sunset Beach, 7435
Website
www.castleview.co.za
Company secretary
Statucor
Transfer secretary
Link Market Services
Designated adviser
Java Capital
Date: 17/05/2018 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.