Emira Property Fund has reported growth in distributable earnings of 3.8% and a 1% increase in its cash-backed dividend of 119.79 cents per share for the year to June 2022. The REIT’s net asset value per share increased 7.3% during the financial year to 1.628.60 cents per share.
“Emira has done well to increase dividends and, in the consistent Emira way, continue the strategic direction of the fund with active asset management, focusing on basic property fundamentals and performing them with excellence. In a challenging environment, distinguished by the close correlation between the South African economy and real estate sector performance, it is pleasing to see how Emira’s assets have withstood the pressure and how well aligned our business is for the future”, commented CEO, Geoff Jennett.
Emira’s portfolio is a mix of 74 directly held retail, office, industrial, and residential assets worth R9.8 billion and indirectly held investments with specialist co-investors, including Transcend Property Fund and retail property venture Enyuka Property Fund. 18% of Emira’s asset base is made up of equity investments in 12 grocery-anchored, open-air convenience shopping centres in the US.
Locally, its portfolio is most exposed to the retail sector by value and the industrial sector by the number of its assets. Over several years, Emira has reduced its office exposure to 30% of its directly held portfolio value. Its only direct residential asset is The Bolton in Gauteng where occupancies rose to 98.9% as Rosebank-based corporates return to the office.
Emira improved its direct portfolio vacancy rate by 1.1% to 5.3% and achieving a tenant retention rate of 83%, a weighted average lease expiry of 2.7 years and monthly collections of 100.2% of rent billed. Its portfolio arrears decreased further to R47.6 million with estimated credit losses having been appropriately provisioned for. The REIT continues to support its tenants, mainly hospitality and entertainment businesses, with rental concessions of R1.9 million – significantly lower than the prior year’s R33.6 million.
The like-for-like value of Emira’s direct South African portfolio increased by 1.8% during the year and factoring in capital expenditure of R133.1 million, there was a net increase of 0.4%. The company acquired the multi-tenant Northpoint Industrial Park in Cape Town for R103 million and de-risked its portfolio by disposing of five assets during the year, with a further one held for sale.
The REIT grew its indirect exposure to residential rental property by increasing its stake in Transcend Property Fund to 40.69%. Transcend, which has a R2.4 billion portfolio, added R32.7 million to Emira’s distributable income. Post yearend, Emira confirmed its intention to make a general cash offer for all shares in Transcend it does not already own and already has support from 16.7% of Transcend shareholders.
Through its 49.9% stake in Enyuka, a retail property venture with One Property Holdings, Emira invests indirectly in shopping centres valued at R1.7 billion. Enyuka contributed R89.5 million to Emira’s distributable income. Emira has agreed to sell its stake in Enyuka to One for R638,6 million, which Emira will use to continue recycling capital. The transaction is expected to be transferred by December 2022.
For its equity investments in the US, Emira invests with its US partner The Rainier Companies. This year, it grew its international assets to 12 grocery-anchored dominant value-oriented power centres that now total R2.4 billion (USD148.6 million). The US economic environment supports Emira’s value-oriented retail investment, even with rising inflation and interest rates in the broader market. Its open-air centres have quality tenants focusing on the popular value retail segment and providing essential goods and services, especially with grocer anchors. These high-quality value-orientated assets in robust markets enjoy sound property fundamentals and delivered good performance to add R176.7 million to Emira’s distributable income.
Emira’s loan-to-value ratio moved slightly lower to 40.5%, with ample debt headroom and a more than adequate 2.8x interest cover ratio. In May 2022, GCR Ratings confirmed Emira’s corporate long-term credit rating of A(ZA) and short-term rating of A1(ZA) and revised its outlook from negative to stable. The REIT continues to benefit from diversified funding sources and has facilities across all major South African banks and access to debt capital markets. It has access to undrawn facilities of R869 million, including R500 million allocated to the Transcend offer, and cash on hand of R66.7 million.
Given the enduring market uncertainty, Emira chose not to provide earnings and distribution guidance but instead noted its executive directors’ KPI for distributable earnings as 129.46 cents per share for FY23.
“After six years of diligent repositioning and capital recycling into strategic investments that improve our portfolio quality and diversification, all our metrics are well aligned and pointing in the right direction. We are in a strong position to manage for the future”, Jennett concluded.
