JSE-listed Emira Property Fund’s strategy is to remain a diversified real estate investment trust (Reit) with the group having consolidated Transcend Residential into its investment base. Emira itself has become a subsidiary of JSE-listed Castleview Property Fund.
Emira released financial results on Wednesday wherein it detailed its operations for the nine months to new financial year end on March 31 2023. The company declared a final dividend of 30.35c per share for the three month ending on March 31 2023, taking its dividend per share for the nine months to 96.78c per share. Its net asset value per share increased 4.2% to 1,697c per share over the nine-month reporting period.
“While the nine-month financial period cannot be directly compared to either the prior or coming 12-month financial years, the company is firmly focused on its strategic progress and operational metrics. They are in good shape,” said Geoff Jennett, CEO of Emira Property Fund.
Jennett said Emira was able to unlock value in a variety of ways which helped the company develop a strong balance sheet which included directly held properties, stakes in other funds as well as exposure to the US, which is the largest real estate market in the world.
“Both our SA and US portfolios delivered pleasing operational performances, notwithstanding local and global challenges. The solid results extend Emira’s consistent track record of reliable performance, and our leasing success and lower vacancies are clear indicators of an attractive and sustainable portfolio,” said Jennett.
“During this period of change, we remain focused on fundamentals and managing the elements within our control. As a diversified fund, Emira has several levers at our disposal, all of which are working well to ensure that we are stable, have lower risk and attractive to the market,” said Jennett.
In South Africa, Emira’s portfolio includes retail, office, industrial and residential assets. Further, 18% of Emira’s asset base is made up of equity investments in 12 grocery-anchored open-air convenience shopping centres in the US, where Emira invests with Texas-based partner The Rainier Companies.
Emira’s US investment provides a buffer to current global uncertainty and the low-growth domestic environment, according to Jennett.
During the shorter than usual reporting period, Emira gained control of the specialist residential Reit Transcend Residential, consolidating it in October 2022 and boosting its exposure to the defensive residential property sector. It also prepared to transfer its holding in BBBEE retail property venture Enyuka Property Fund to co-investor One Property Holdings.
Castleview owns approximately 56% of the shares in issue of Emira. Emira in turn has a 68.2% shareholding in Transcend.
Emira’s portfolio composition changed noticeably in the nine months. The Transcend consolidation saw Emira’s directly held portfolio increase from 74 assets to 94 worth R12.1bn.
Residential rental assets increased from one to 23 properties, 20% of Emira’s directly held SA portfolio. Emira also gained direct access to residential assets in Cape Town for the first time. The portfolio totaled 4,315 units split between Gauteng’s, 85% by value and Cape Town’s, 15% by value, high-demand areas, available at rentals from R4,500 to R8,000 per month per unit, which are popular with the low-to-middle income segment of the affordable property market. The residential portfolio has a vacancy of 2.6% and is considered to be a defensive portfolio.
Emira’s direct commercial portfolio is split between urban retail which makes up 41% of the SA portfolio value, office making up 24% and industrial making up 15%. Vacancies among this portfolio improved from 5.3% to 4.7% over the nine months, with all sector vacancies well below the applicable benchmarks. Rental collections were 101.6%.
The 17-property strong retail portfolio of primarily grocery-anchored neighbourhood centres was trading well with improved metrics. The total weighted average rental reversion lifted from -13.0% to -5.5%. Tenant retention was 88%. Retailer trading densities grew 4.5% in the nine months.
Emira’s industrial portfolio of 34 properties delivered a stable performance, according to Jennett. Portfolio vacancies decreased from 2.7% to 2.1%. As much as 79.1% of maturing leases were renewed and rental reversions improved from -20.1% to -6.5%.
Improved office vacancies moved down from 15.0% to 12.5% despite the challenging and uncertain environment from its portfolio of 20 mainly P- and A-grade properties, even with depressed fundamentals in this sector, said chief operating officer, Ulana van Biljon.
Emira’s ESG strategy supported the sustainability of Emira’s properties by prioritising energy efficiency, water conservation, and biodiversity, said Jennett.
Around 79% of gross lettable area in Emira’s commercial portfolio has full backup power, including tenant generators. With the increased need for backup power, Emira’s diesel costs rose substantially for the nine months to R27m from R4.9m for the prior 12 months. Emira recovered 84% of these costs.
,Emira is exploring new ways to assist its tenants in reducing their total cost of occupation and combating the significant costs associated with loadshedding. Battery solutions and wheeling energy produced by independent suppliers are among the alternatives being considered.
In the US, Emira’s 12 equity investments, which are grocery-anchored dominant value-oriented power centres, total R2.7bn ($151.9m). The gradual but consistent positive growth in the US economy and low unemployment of about 3.5% supports Emira’s investment in US open-air centres with a high-quality tenant base focused on popular value retail and essential goods and services.
US portfolio vacancies were reduced from 4.5% to 2.6%, with positive rental reversions of 7.9% and an extended portfolio lease expiry profile of 5.6 years. It delivered an even better-than-anticipated performance to add R176.m to Emira’s distributable income.
“This is mostly due to our latest acquisition, Summit Woods, contributing for the full nine months and the meaningful ZAR weakening against the USD during the period,” said Jennett.
Emira’s balance sheet had a 2.9x interest cover ratio, unutilised debt facilities of R376.2m and cash-on-hand of R125m.
Emira’s loan-to-value ratio was temporarily elevated at 44% as its strategic initiatives played out.
The fund would continue to be acquisitive but was not likely to buy assets from the likes of Rebosis Property Fund, a group which is currently in business rescue.