Annual Report - Campus Living Villages

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4 Campus Living Villages Annual Report 09/10 Campus Living Villages Fund DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010 FUND Introduction The directors of Campus Living Funds Management Limited (“CLFM”) as the Responsible Entity (“RE”) of the Campus Living Villages Fund (“the Fund”) present their report on the Fund consisting of CLLT (USA), other trusts within the stapled group and its subsidiaries for the year ended 30 June 2010. Fund structure and formation The Fund is a stapled arrangement of four trusts and its controlled subsidiaries, which was established on 9 January 2007. The four trusts are Campus Living Land Trust (USA) (“CLLT (USA)”) which is the parent entity, Campus Living Finance Trust (“CLFT”), Campus Living Australia Trust (“CLAT”) and Campus Living Overseas Trust (“CLOT”). The units of the four trusts forming the Fund can only be purchased or sold in its current stapled arrangement. Directors The following persons are the directors of CLFM and were in office during the whole of the financial year and up to the date of this report, except where otherwise stated: Professor John Niland AC Professor Steve Burdon Walter Carpenter Gayle Tollifson (appointed 16 April 2010) Nicholas James Principal activities The principal business activities of the Fund are to provide accommodation to students through owned and managed facilities and project management and development of new facilities, some of which will be owned by the Fund. These businesses are located in the United States of America (“US”), Australia, New Zealand (“NZ”) and the United Kingdom (“UK”). Distributions The Fund declared the following distributions: 2010 financial year 2009 financial year Date Amount Cents per unit 29 September 2008 $1,999,890 0.70 17 December 2008 $2,499,919 0.81 27 March 2009 $3,499,948 1.13 26 June 2009 $2,899,745 0.94 Total $10,899,502 Review of operations The Fund completed the purchase of an 847 bed facility serving the Texas Tech University in Lubbock, Texas, for US$52.5m on 24 September 2009. The purchase was funded by US$34.4m of debt finance and US$18.1m of equity. This acquisition has contributed US$1.9m to EBITDA for the nine months since acquisition. During the previous financial year, the RE secured total equity commitments of $149.6m under the Information Memorandum (“IM”) dated 19 August 2008 (amended finally on 31 March 2010) of which $109m can be called subject to fulfilment of a condition precedent associated with the refinance of the first and second lien loan syndicated facilities in the US. At the date of this Report, a further $79.8m will be available once this condition precedent has been satisfied. The RE agreed and executed a 12 month extension of the Fund’s Equity Bridge Facility (“EBF”) with the Australia and New Zealand Banking Group Limited (“ANZ”) on 11 January 2010. The US business has engaged the Royal Bank of Scotland (RBS) in New York to act as placement agent with respect to a proposed US Private Placement to be used to refinance the current first and second lien loan syndicated facilities amounting to US$201.2m. Although the first lein loan (US$181m) is not due for repayment until April 2011, the refinancing of this loan is required to satisfy the above condition precedent and release $79.8m of equity. Date Amount Cents per unit 28 September 2009 $1,000,204 0.30 18 December 2009 $999,743 0.24 31 March 2010 $3,999,748 0.97 29 June 2010 $10,099,966 2.44 Total $16,099,661 The RE called $96.2m of equity which was used to repay funds drawn from the EBF for acquisitions and developments. Following the call made on 8 December 2009, all the equity raised under the original Information Memorandum dated 12 October 2006 has been called. The performance of the Fund has increased at a revenue and EBITDA level even after considering the strengthening of the Australian Dollar against the US Dollar. The Fund recorded a loss before tax of $28.2m (2009: $77.5m) which results in operating cash flow generated of $14.8m (2009: $12.9m) after adding back working capital movements and non-cash items of depreciation, amortisation and fair value adjustments:
Campus Living Villages Annual Report 09/10 5 Campus Living Villages Fund DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010 $m 2010 2009 Loss before taxation (28.2) (77.5) Depreciation and amortisation of assets 34.8 33.9 Impairment of assets 3.5 10.3 Amortisation of borrowing costs 2.7 2.3 Fair value adjustments on derivatives (0.9) 35.7 Other non-cash items 2.2 6.1 Working capital movements 0.7 2.1 Operating cash flow generated 14.8 12.9 Changes in state of affairs There have been no other changes in the state of affairs of the fund. Fund Valuation The directors of CLFM have determined the final Net Asset Value (“NAV”) of the Fund as at 30 June 2010 to be $388,311,717 (2009: $303,562,529). The NAV has been determined in accordance with the Fund’s Valuation Protocol. Under the Valuation Protocol, the Fund’s NAV is determined using a discounted cash flow analysis. The discounted cash flow is determined by estimating the future cash flows that are expected to be generated by the Fund’s assets, discounted to their present value using appropriate discount rates recommended by independent advisors. Outlook for the following financial year The next financial year will be a period of consolidation and growth. The main focus will be on existing assets and that the committed developments meet projected outcomes. At the same time, the Fund will continue to look for opportunities in existing markets. Environmental regulation The Fund undertakes the development and construction of new student accommodation facilities in the US, Australia, NZ and the UK and is subject to the regulations of those countries and the respective states and counties. The Fund is subject to and complies with the regulations and legislation that govern development and construction of new student accommodation facilities in these regions. Loans to directors and executives There were no loans to or from directors or executives during the year, at year end or at the date of this report. Insurance of officers During the financial year, the RE paid a premium to insure the directors, officers and senior management of the RE and the Fund. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Fund, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Fees paid to and units held by the responsible entity and the responsible entity’s associates Fees paid to the RE and the RE’s associates are included in the Related party transactions note 27 in the financial statements. The RE and the RE’s associates hold 30,656,416 units in the Fund. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 10. Rounding of amounts The Fund is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that Class Order to the nearest thousand dollars or, in certain cases, to the nearest dollar. Auditor PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. FUND
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