JSE-listed Emira Property Fund posted a marginal decrease in distributable earnings to R329-million for the six months ended December 31.

The real estate investment trust had, however, declared a higher interim dividend at 56.59c apiece, compared with an interim dividend of 52c apiece declared in the prior corresponding six months, owing to the company’s cash-backed position.

Emira had cash and cash equivalents of R103-million as at the end of December.

Distributable income a share was 62.99c apiece, compared with 63.84c apiece posted in the prior interim period.

Its net asset value per share (NAVPS) was at 1 540c as at December 31 – a 1.5% year-on-year increase on the 1 518c NAVPS posted in the prior comparable six months.

The portfolio operating profit decreased by 10.15% year-on-year to R319-million.

Vacancies had been reduced to 6.1% from 6.4% and tenant retention increased to 86%, while Emira’s loan-to-value ratio came in at 41.8%.

Emira did not undertake any disposals or acquisitions in the six months under review; however, the company has since acquired the Northpoint industrial park, in Cape Town, for R103-million, and sold its Epsom Downs shopping centre and Epping warehouse, and put up two other assets, The Colony shopping centre and Universal industrial, for sale.  

CEO Geoff Jennett said in a results presentation on February 16 that the company had done well to endure through uncertain times over the last two years, with huge disruption experienced operationally and economically.

He attributed the company’s resilience to its multi-sector strategy across geographically diverse assets in South Africa and the US.

He shed some light on the challenges the company experienced in the six months under review, including some impact from the fourth wave of Covid-19 infections in South Africa, but only through minor restrictions on tenants’ businesses.

“The steady performance of the local industrial and retail sectors had countered the strained office market, while the fund’s exposure to the stable economy of the US had provided a buffer to the low-growth South African environment.”

Emira had 77 directly held properties valued at R9.8-billion at the end of December, of which 14.8%, or R1.9-billion worth of assets, comprised of equity investments in 11 grocery-anchored convenience shopping centres in the US.

“Our US investment strategy proved its value as a buffer against South Africa’s constrained economy with its dollar-denominated returns driven by supportive fundamentals in a more resilient environment. We will continue to explore acquisition opportunities that match our selective criteria,” noted Jennett.

Meanwhile, Emira in the six months under review, started expanding its solar photovoltaic plant at Wonderpark Shopping Centre, in Pretoria, to increase output from 1.2 MW to 3.8 MW.

The company also started development of a new solar farm at its Knightsbridge office park, in Johannesburg.

SPATIAL MOVEMENT

During the six months under review, Emira gave its tenants, numbering 159 businesses, primarily in the hospitality and entertainment sectors, rental concessions totalling R1.8-million – which is a significantly lower amount than the prior six months.

Positive tenant trading continued in Emira’s resilient urban retail portfolio, which comprised 49% of total property asset value and was 96.4% occupied.

Office properties, which comprised 30% of total property assets, were 81.8% occupied. Increasing Covid-19 vaccination rates bode well for the return to offices, Emira noted.

However, the challenging environment in light of shifting working habits suggested office supply will outpace demand for some time. Emira continues to intensify its tenant attraction strategies.

Emira’s industrial properties had a stable occupancy of 96.5% with a broad tenant base. The industrial properties comprise 19% of the overall group property portfolio.

Jennett confirmed that Emira was experiencing rising demand for these properties, albeit alongside sensitivity to the ongoing power supply disruptions that challenge the sustainability of businesses in this sector.

Emira’s only direct residential asset was The Bolton, Rosebank, a co-investment with the Feenstra Group, targeting high-demand, mid to lower markets. Its occupancy levels dipped to 92.2% at end-December but it has since returned to 95% and should increase further as Rosebank-based corporates return employees to their offices.

Emira grew its indirect exposure to residential rental property in the interim period, with an increased 39.2% stake in specialist JSE-listed real estate investment trust Transcend Residential Property Fund.

Transcend’s total property portfolio was valued at R2.3-billion, and it contributed R14.7-million to Emira’s distributable income for the period.

Through its 49.9% stake in Enyuka Property Fund, a dedicated rural and lower Living Standards Measure retail property venture with One Property Holdings, Emira invests indirectly in 24 shopping centres valued at R1.7-billion, which continued to perform well in the six months under review.

Enyuka contributed R42.6-million to Emira’s distributable income in the interim period.

OFFICE COMMENTARY

Emira COO Ulana van Biljon said the working environment in the first half of the 2022 financial year was still tough, with most businesses being uncertain of whether Covid-19 impacts will continue.

There was, however, a steady recovery in retail trade and healthy demand in the industrial space. The office sector remained under pressure, she highlighted.

The office sector vacancy rate sat at 18.2% at the end of the period, compared with vacancy rates of 3.6% and 2.6% in the urban retail and industrial spaces, respectively.

The office sector’s recovery was mostly dependent on economic growth, including increasing inflation, high unemployment numbers and hikes in interest rates. These factors influenced the take-up of new space and, in turn, in oversupply of office space in the market.

Emira was, to this end, ensuring it was adapting its letting strategies to accommodate both tenant and landlord requirements.

Van Biljon expected flexible working environments to continue growing, while many businesses were in the process of considering the best working model going forward.