James Templeton, CEO of Emira Property Fund
Emira Property Fund today reported distribution growth per participatory interest (PI) of 7.5% for its financial year ended 30 June 2014, up from its half-year distribution growth of 6.5%.
Emira’s net asset value increased by 9.2% during the year to 1 447 cents per PI.
James Templeton, CEO of Emira Property Fund, attributes its strong performance to far-reaching progress in all areas of its multifaceted strategy. This includes achieving contractual escalations on the bulk of the portfolio, an extremely successful vacancy reduction drive and stringent cost control, including savings from its property management tender, investing in upgrades to prime properties, as well as disposing of non-core properties.
Templeton says: “Emira is on the right track. Our amplified performance is driven by improved operations. It builds on Emira’s positive turnaround for investors and delivers on our promise of real growth in distributions. We’ve delivered on every one of our key performance indicators set by the Board in the past financial year and we intend to continue on this path.”
He adds Emira is expecting to achieve a further healthy improvement in distribution growth for its 2015 financial year.
“During 2014, Emira achieved the highest occupancy level across its portfolio since 2005. The benefit of our improved occupancies and our forecast containment of property expenses in the coming year will drive another year good performance in 2015, should there be no major deterioration in the economy,” says Templeton. “We’ll also continue to look at every area of the business and, where there is opportunity to improve, we will enhance our operations.”
Listed on the JSE since 2003, Emira Property Fund began trading as a REIT from 1 July 2013. It has a diversified portfolio of office, retail and industrial properties. Its assets comprise 141 properties valued at R10.8 billion. Emira is also internationally diversified through its direct interest in ASX-listed Growthpoint Properties Australia (GOZ), valued at R666 million at 30 June 2014, with total assets now at R11.6 billion.
Emira improved its occupancies all round this year, with vacancy levels decreasing from 5.6% to 4.5%. Industrial property played a significant part in this improvement, achieving vacancies of a mere 1%, fully-let portfolios in KwaZulu-Natal and the Western Cape and good demand countrywide. Emira’s retail vacancies are a low 2.7% while its office vacancies improved vastly from 10.7% to 8.8%, both well below the national average.
“Office occupancies depend largely on where properties are located, in this market. As a result we’re focusing our investment in better-performing nodes,” explains Templeton. “Emira has a fully-let office portfolio in Bryanston, for example. We’ve also limited our exposure in Sandton, which has significant new supply under development.”
Emira reported excellent tenant retention levels of 80% — its highest in the past three years.
Its strategic acquisitions and disposals also supported occupancy levels, as well as improving the quality of its portfolio. During the year, the average value of Emira’s properties increased from around R64 million to R76 million – advancing one of the fund’s strategic objectives. Six sold buildings transferred out of Emira’s portfolio during the year and another seven were sold, but awaiting transfer. The total sales, both effected and pending, amount to R501 million, at a forward yield of 7.9%, making them earnings enhancing for the fund.
The proceeds of its disposals have gone towards growing the fund with value-adding acquisitions, of which R1.6 billion were completed or near finalisation at year end, at a combined forward yield of 9.1%. This includes the R614 million acquisition of the prestigious, fully-let 25 767m² prime-grade Menlyn Corporate Park office development in Pretoria, which is expected to yield 8.6% in the first year; and, a diversified portfolio of eight properties, of which six are in the Western Cape, strategically enhancing its exposure to the province, where Emira has historically been under-exposed. Menlyn Corporate Park is located directly opposite the site for the newly approved R3 billion urban entertainment destination to be developed for Sun International. The recent acquisitions will boost Emira’s portfolio value by 15%.
“These acquisitions, while neutral in the first year, will be value enhancing to Emira in following years,” explains Templeton. Emira successfully raised R310 million of equity on the JSE in July, which is being used to fund the acquisitions, in addition to the proceeds of the disposals, with the balance funded through debt. “Our oversubscribed capital raise denotes a positive investor outlook for Emira.”
Income from Emira’s listed investment in Australia increased by 21.7% due to an increase in the distribution per unit received from GOZ, the depreciation of the Rand against the Australian dollar and its increased units held. Growth in Rands on a comparable basis was 15%. Emira followed its rights as part of an issue in December 2013. At June 2014 GOZ’s unit price was AUD2.45 resulting in Emira’s investment of 27 225 813 units, amounting to 5.0% of the units in issue, being valued at R666 million compared to a cost of R372 million.
“We’re pleased to report yet another set of positive results for our investors. Emira has made good strategic progress this year and will continue to innovate to create sustainable, growing investor value in 2015 and beyond,” says Templeton.