Emira Property Fund has posted its results for the six months ended 30th September 2024, reporting an increase in its interim distributable income per share of 6.9% with a 1.1% higher cash-backed interim dividend per share of 62.39 cents.
The REIT’s net asset value (NAV) per share increased by 12.3% to 1 945.50 cents per share (1 703.10 cents for the comparative period), driven by rising property valuations and the fair value equity gain from its maiden investment in Poland.
“Emira’s local portfolio outperformed, our US investments are comfortably on track, and we completed the first tranche of our investment into DL Invest, bolstering our diversification by tapping into Poland’s burgeoning economy with its unique growth drivers and opportunities,” commented CEO of Emira Property Fund, Geoff Jennett.
The REIT invested €55.5 million for an initial effective 25% equity stake in DL Invest Group, a Luxembourg-headquartered property company that develops logistics, mixed-use/office, and retail park assets, valuing its assets at €730 million with a NAV of €278 million pre-investment.
Emira has the option to expand its position in DL Invest Group by investing an additional €44.5 million which will increase its equity holding to 45%. This second tranche subscription option must be exercised by the 31st of January 2025, and it requires shareholder approval. Castleview Property Fund, which holds around 58% of Emira’s issued shares, has given its irrevocable vote in favour of exercising the option.
DL Invest Group has a seventeen-year track record in Polish commercial real estate company with a €730 million portfolio focused on logistics. Emira’s investment will fund this development pipeline with the aim of creating a €1 billion business. Emira will participate actively, with board representation, and has committed to an initial five to six-year investment term.
Funding for the first tranche of investment came from Emira’s balance sheet and recent disposals. Its non-core commercial and residential property sales transferred, completed and agreed upon during the period totalled R2.6 billion.
Emira’s balance sheet represents an adequate 2.3x interest cover ratio with its loan-to-value (LTV) ratio declining from 42.40% to 42% over the six months which it anticipates decreasing further as property disposals transfer with a portion of the proceeds to be deployed to reducing debt.
It has unutilised debt facilities of R370 million and cash on hand of R112.8 million which will increase as the proceeds from disposals are realised.
The first tranche of its latest transaction increased Emira’s international investments to 26.80% of its portfolio – with 15.5% in the US and 11.3% in Poland – while 73% remains in SA. The second tranche DL Invest Group option creates the potential for nearly 37% offshore.
Its SA assets surpassed most key targets with commercial vacancies low and tightening to 3.9% from 4.1%. The portfolio saw an increase in like-for-like valuation of 4.7%.
Residential occupancy remained strong at 96.70% and maintained like-for-like valuation levels.
Its commercial asset value is split between urban retail (43%), office (25%), and industrial (15%) of its directly held SA portfolio. All sector vacancies are below the benchmarks with tenant retention having increased from 81% to 83% by revenue during the period.
The 15-property directly held retail portfolio of primarily grocery-anchored neighbourhood centres reported improved metrics including low vacancies of 4.2%. Despite the slump in the office sector, its portfolio of 20 mainly P- and A-grade office assets saw vacancies improve into single-digit territory from 10.90% to 9.4%.
Emira’s industrial portfolio of 28 assets reported near full occupancy with vacancies of 0.7%.
Overall, the commercial portfolio benefited from R119.8 million in tactical upgrades, including various sustainability-driven initiatives, reconfigurations and refurbishments. Emira also invested R8.6 million into its residential portfolio.
Emira’s twelve equity investments in US grocery-anchored dominant value-oriented power centres total R2.56 billion (US$147.1 million). The US economy remains on a steady and stable growth trajectory, with GDP up 3% for Q2 2024 and 2.8% for Q3 2024 coupled with low unemployment, easing inflation and a 50bps cut to interest rates in September and another 25 basis points trim in November. While US elections introduced some uncertainty to the economy, stability should return with clarity of the new government’s priorities and policy. This environment continues to support Emira’s investment in US open-air centres focused on popular value and needs-based retail in robust markets.
The US portfolio reported a low vacancy rate of 3.5% with a combined portfolio weighted average lease expiry (WALE) of 4.5 years. It delivered a solid performance, adding R120.1 million to Emira’s distributable income.
