February 15 2023
Emira Property Fund, the JSE-listed real estate investment trust (Reit) on Wednesday released financial results for the six month period to end-December, wherein it announced a 17.4% increase in its cash-backed dividend of 66.43c per share and growth in its distributable income per share of 15%. Its net asset value per share increased 4.1% to 1694.60c per share. The company’s share price climbed 1.96% to R10.40 during trade on the day.
Emira is one of the early announcers of financial results this reporting season.
Geoff Jennett, CEO of Emira, said the Reit’s performance was robust and that Emira had managed to deliver a consistent strategy. Post the 2020 pandemic, vacancies had dropped steadily. Emira had equity investment exposure to retail centres in the US, the world’s largest property market, which were proving to be shrewd buys.
“As a stable, low-risk yet very active business with all its diversified parts working well, our higher-than-expected income and solid results extend Emira’s consistent track record of reliable performance. Our US portfolio delivered particularly pleasing outcomes during the period, confirming it has resurged from the effects of the Covid-19 pandemic that were still evident in the prior interim period,” he said.
Emira’s diversified portfolio includes a mix of retail, office, industrial and residential assets. It has invested in the US with its partner The Rainier Companies for more than five years. As much as 18% of Emira’s asset base is made up of equity investments in 12 grocery-anchored open-air convenience shopping centres in the US.
Jennett said the US economy was performing given global uncertainty and a low-growth South African economic environment.
Emira has also been refining its capital structure. It is selling its retail property venture Enyuka Property Fund to co-investor One Property Holdings for example. Emira also gained control of the residential Reit, Transcend Property Fund and consolidated it in October 2022.
Following the Transcend transaction, Emira’s directly held portfolio increased from 74 assets to 97 worth R12.1bn, and it grew its direct residential assets from a single building, The Bolton in Rosebank, Johannesburg, to 24 properties or 16% of its total investments.
The residential portfolio is split between Gauteng and Csape Town, 85% and 15% by value, respectively. The units in its buildings are available at rentals from R4,500 to R8,000 per month. These units are popular with the low-to-middle income segment of the affordable property market. Occupancy is at 96.7%. Most of the vacancy in the portfolio represents sectional title units in the process of being sold.
Emira’s office portfolio continued to benefit from diversification. It improved its vacancy rate from 5.3% to 4.8% in the six months and improved rental reversions on both renewals and new leases.
The Reit’s industrial and retail portfolios also performed well, according to Emira’s chief operating officer, Ulana van Biljon.
“The retail portfolio of primarily grocery-anchored neighbourhood centres showed improved trading and higher turnover from retailers. The diversified industrial portfolio delivered marginal improvements in all metrics and remained surprisingly stable given the increased rolling power cuts. A 3.4% improvement in office vacancies to 11.6% led to a strong showing from its portfolio of mainly P- and A-grade properties, albeit off a low base,” she said.
Emira’s office vacancies outperformed the South African Property Owners’ Association (Sapoa)’s average of 16.1%. Its commercial portfolio achieved a tenant retention rate of just below 80%, an unchanged weighted average lease expiry of 2.7 years and increased monthly collections to 102.2% of rent billed.
Emira also increased renewable energy generation by expanding its photovoltaic solar plant at Wonderpark Shopping Centre, Pretoria, its largest retail asset at more than 91,000 m2 from an output of 1.2MWp to 3.8MWp.
In the US, Emira’s 12 equity investments which are grocery-anchored ower centres are now worth R2.5bn. ($149.5m). In 2022, the US recorded total real GDP growth of 2.1%, with 3.2% and 2.9% in the third and fourth quarters, respectively.
Considering the ongoing growth in the economy, and consistently low unemployment rates below 4%, the environment was supportive of Emira’s investment thesis for its US strategy, Jennett said.
US portfolio vacancies nearly halved from 4.5% to 2.5%, and the portfolio had better-than-anticipated performance to add R117.8m to Emira’s distributable income.
Emira’s loan-to-value ratio moved to 43.1%, which was comfortably within Emira’s covenant levels, after using debt funding to gain control of Transcend. It had a 2.6 times interest cover ratio, unused debt facilities of R486.2m and cash-on-hand of R142.3m.
Emira changed its year-end to March 31, which would see its Financial Year 2023 final results representing nine months instead of twelve. It will declare a final dividend for the three months to end-March 2023.