Emira focused on steady, incremental growth amid tough market conditions

19th February 2020

By: Marleny Arnoldi

Deputy Editor Online

     

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JSE-listed real estate investment trust (Reit) Emira Property Fund says the performance of its US-based assets has contributed to the company’s distribution growth of 1.7% year-on-year for the six months ended December 31.

The Reit declared an interim dividend of 74.10c for the six months under review, compared with an interim dividend of 72.68c for the six months ended December 31, 2018.

Emira expects similar growth in dividends for the second half of the financial year to June 30.

CEO Geoff Jennett says Emira’s rebalanced portfolio and its allocation of capital into more resilient economies underpinned the Reit’s ability to maintain distribution growth, even within South Africa’s low-growth economy.

In the six months under review, the company reduced its vacancy rate to 3% from 3.6% in the prior comparable six months.

Jennett states that tenant retention remains a strategic priority for Emira, especially with the tough operating environment.

With innovative leasing strategies, 82% of expiring tenants, by revenue, were renewed by Emira during the period. Jennett notes that while rental reversions are inevitable in this market, it is certainly easier to digest when your buildings are full.

The Reit achieved like-for-like rental income growth of 2.9% year-on-year, which is in line with expectations, considering increases in electricity costs and rates and taxes.

At the end of the six months under review, Emira owned 79 properties in South Africa, valued at R10.9-billion.

About 10% of Emira’s portfolio comprises offshore assets. The US assets are valued at $76-million – through Emira’s US-based subsidiary. The Australian assets are valued at R234-million – through Emira’s holding in ASX-listed Growthpoint Properties Australia.

However, the Reit continues to dispose of its Australian interests, as part of its focus on diversifying the portfolio into the US where it has more control over the assets. The Reit sold A$55-million worth of its Australian interests in the six months under review.

Subsequent to the reporting six months, Emira acquired its tenth property with its US-based partner, The Rainier Companies, in February. This means the US assets comprise 7.9% of Emira’s portfolio and the value thereof is $89-million.

These assets are located in Texas, Florida, Missouri, Oklahoma, Indiana, Ohio and Georgia.

Additionally, Emira sold the final property of 25 in its R1.8-billion disposal portfolio to broad-based black economic empowerment entity Inani Prop Holdings, in the reporting period.

These South African disposals have reduced Emira’s exposure to office properties – the company is down to 20 office properties in the six months under review, compared with 44 office properties in the prior comparable six months.

Emira’s South African portfolio comprises 20 retail properties, 18 industrial properties, 20 office properties and one directly-owned residential property.

Jennett highlights that its Transcend transaction closed in the six months under review, whereby Emira bought a 34.9% holding. Transcend’s total residential-focused portfolio is valued at R2.8-billion.

Emira also acquired a R108-million industrial property called North Point, based in the Western Cape, which will transfer in March.

The Reit used proceeds from its Australian asset disposals and South African office disposals to reduce its debt, which is now at R4.9-billion.

The company’s gearing ratio subsequently decreased from 36.1% in the prior comparable six months to 35.5% in the six months under review, and its group’s interest cover ratio is at a healthy 3.2 times.

Meanwhile, Emira invested R95-million in major projects to strengthen its asset base and unlock value from its properties. The Reit refurbished its Hyde Park Lane, The Bolton, Granada Square and Denver warehouse properties in the six months under review.

Additionally, the Reit continues to invest in alternative energy and environmental sustainability initiatives. Emira has, to date, completed the construction of six solar farms at some of its properties, while three solar farms will be complete by June. The Reit has 14 water efficiency projects running, saving a combined 50-million litres of water a year.  

This while just over 60% of its portfolio offers back-up electricity and a growing percentage have back-up water facilities.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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