JSE-listed Emira Property Fund says that its portfolio has performed in line with expectations for the four months ended October 31.
While the fourth wave of Covid-19 infections is expected to slow down the recovery of the local economy and deteriorate property metrics further, the diversified nature of Emira’s investments both on a sectoral basis and geographically, including its offshore exposure and the current condition of its properties, will provide some defence, it notes.
With the information currently at hand and factoring in the anticipated impact of the fourth wave, Emira expects to achieve its objectives for the interim period to December 31.
The local property market remains challenging, specifically the office sector, and vacancies across Emira’s portfolio increased to 7% (by gross letting average) at the end of October, compared with 6.4% as at June 30.
The Emira team continues to focus on core property fundamentals. Retaining tenants is one of the team’s key focus areas and 85% (by revenue) of the fund’s leases which expired in the period were retained.
Rental reversions for the period improved to -12%, from -14.6% as at June 30. Negative rent reversions are expected to continue for the immediate future as landlords compete with one another to either retain existing tenants or attract new ones.
Emira’s weighted average lease expiry of 2.6 years as at period end is similar to that reported at the end of the company’s 2021 financial year.
Yearly lease escalations remain under pressure and reduced marginally by the end of the period to an overall average of 7%, compared with 7.1% as at June 30.
The average yearly escalations achieved on renewals were 6.9% compared with 7.2% on new leases.
Collections are another focus area and Emira’s normal debtor collections versus billings for the period were at 95.9%.
Emira collected R2.1-million of deferred rentals in the period, being R500 000 (or 100%) of the deferrals billed in the period and R1.6-million of the brought forward arrears.
Rent remissions of R1.9-million were provided in the period to those tenants whose ability to trade in July was directly impacted by Covid-19 restrictions.
Emira has concluded agreements to dispose of four properties (two retail and two industrial) for R269.8-million. The disposals are unconditional and are expected to transfer over the next four to eight weeks.
The remaining conditions for the fund’s acquisition of Northpoint Industrial Park have also been met and the property is expected to transfer into Emira’s name during the same period.
The US portfolio also performed in line with expectations. As at period-end, vacancies across all 11 properties were at 6.6%, an improvement from 7.1% as at June 30, owing to a number of new leases at multiple properties.
The US economy and retail outlook has continued its anticipated recovery. Collections on aggregate across the portfolio have been in line with payment terms of existing leases and concession agreements where applicable. It is still anticipated that nine of the 11 investments will pay dividends in full-year 2022.
As at period-end, Emira had unused debt facilities of R660-million, which together with cash-on-hand of R71.8-million, provides assurance that the group is able to meet its short-term commitments.
The weighted average duration to expiry of Emira’s debt facilities at the end of the period reduced to 1.9 years.
During the period, R130-million of maturing debt was refinanced with a further R261-million refinanced in November, leaving R431-million to be refinanced before the end of June 2022.
A marginally higher loan-to value is anticipated by the end of December, but this is dependent on the completion of the interim property valuations, the closing rand:dollar exchange rate and the timing of the property disposals and the Northpoint acquisition.