Real estate investment trust (Reit) Emira Property Fund on Wednesday reported a 3.1% increase in its distributions a share for the financial year ended June 30, adding that it had also delivered on its market guidance and continued to achieve dividend growth for the second consecutive year.

According to the Emira team, the results demonstrate the company’s ability to create value sustainably with its strategies.

These international and residential strategies assisted Emira in countering the effects of the difficult domestic economy, which is impeding overall growth, CEO Geoff Jennett told the media on Wednesday, adding that the divergence taking place in the South African market was as a result of a lack of confidence, power utility Eskom’s financial and electricity supply challenges and low projected growth for the country.

“Our conservative and responsible approach to growth and diversification underpinned our positive performance, despite the tough local trading conditions experienced throughout the year,” he commented.

Touching on the company’s results for the period, he said Emira’s office vacancies decreased from 7.1% to 5.3% mainly as a result of the disposal of its R1.8-billion portfolio to Inani Prop Holdings. By year-end, 24 of the 25 properties had been transferred.

Emira also reduced its directly held South African office exposure from 35.3% to a low 24.5% of total overall assets during the period, leaving it “fundamentally rebalanced” with 21 office buildings.

As a result of these portfolio disposals and a further two noncore individual asset sales, Emira closed the year with 80 directly held South African properties, valued at R10.9-billion. Its gross cost-to-income ratio increased from 36.8% to 37.6%, with expenses having increased at a higher rate than income, mainly as a result of soaring electricity costs and higher municipal rates.

Overall, vacancies were at 3.6%, which was upheld through Emira selling noncore buildings, focusing on tenant retention, building maintenance as well as constant strategy revision and the company’s broker community across the country, Emira COO Ulana van Biljon told the media.

New letting and contractual escalations saw Emira’s stable portfolio increase like-for-like net revenue growth of 3.1%.

The Reit also invested R239.2-million in upgrades that was said to have unlocked value and strengthened the attractiveness of its assets.

Additionally, at a total cost of R209.3-million, Emira’s Rosebank-based The Bolton residential conversion with co-investor Feenstra Group, came on stream during the period and became Emira’s sole directly-held residential property.

Completed in May, it was more than 75% let by year-end and currently stands at 86% let.

Emira also has indirect exposure to the residential rental property sector through its 34.9% stake in Transcend Residential Property Fund, which it took up during the year. Transcend made a positive R37.9-million contribution to Emira’s total income.

“Residential property is still a small 5% of our portfolio, but it benefits from South Africa’s best residential expertise,” Jennett added. Residential does, however, have the potential to expand to 10% of Emira’s portfolio, but no immediate opportunities are currently on the cards for the company.

Emira’s rural retail property venture with One Property, Enyuka, contributed R77.5-million to Emira’s distributable income for the year.

Emira also earned fee income of R5.1-million from loans it made to Transcend and Inani.

US PORTFOLIO

Emira has steadily grown its US portfolio over the past two years, with 2019 having seen the company increasing its assets from four to nine properties to make up 7.6% of Emira’s total assets of $75.9-million.

The latest asset to transfer in June was the University Town Center in Norman, Oklahoma, where Emira invested a total $12.4-million for 49.6% equity interest in the centre at an equity yield of 10.8%.

Emira’s after-tax income from co-investment in the equity of grocery-anchored dominant value-orientated convenience retail centres in markets in the US totalled R64.7-million.

With Growthpoint Properties Australia (GOZ) enjoying all-time-high share prices and robust investor demand, Jennett told the media that the company “took advantage of the opportunity” to dispose of just over 7.4-million of GOZ shares during the financial year.

Emira still holds more than double this number of units, comprising 2.4% of GOZ’s total units in issue, with a total value of R759.7-million. As a result, income from GOZ decreased by 3% to R53.4-million during the period.

Moreover, R3.3-billion of Emira’s debt matured in the year and was either refinanced long-term or settled. As a result, Emira closed the year with 91.2% of its debt fixed for a weighted average term to expiry of three years.

“Factoring in slow economic growth in South Africa for the foreseeable future, Emira’s offshore assets will provide much-needed diversification for investors, even with our rebalanced local portfolio being better positioned to weather economic headwinds,” Jennett commented.

Internationally, he averred that Emira would continue to grow its investments responsibly, while locally, the company intended to focus on opportunities that would add value in ways that were in the best interest of Emira shareholders.

Overall, shareholders could expect positive dividend growth for the year ahead, Jennett promised.