JSE-listed Emira Property Fund has declared a final dividend of 66.65c apiece, taking the dividend for its financial year to June 30 to 118.65c apiece – up 13.7% on the previous year.

The company’s full-year distributable earnings of R649.1-million were 3.2% lower year-on-year, but Emira declared a cash-backed dividend based on its strong balance sheet and liquidity position.

During an August 18 webinar to unpack the company’s results, it was noted that Emira delivered on its key objectives for the year, despite an unprecedented operating environment and providing a further R33.6-million in rental remissions to mitigate the pandemic impacts.

Moreover, the company optimised its net income, selectively recycled an asset, upgraded core properties, maintained above-average occupancy levels, improved liquidity and extended its debt expiry profile.

CEO Geoff Jennett attributed the company’s strong performance to its diversification of assets, tenants, investment methodologies and funding. 

“The diversified nature of Emira’s business model has proven defensive and our pre-pandemic portfolio rebalance has served our stakeholders well. We are pleased with how the portfolio and the business have performed this year in a tough environment, which is an excellent result, all things considered,” he said.

Emira closed its financial year with a 6.4% vacancy level in its direct portfolio.

It increased its tenant retention rate to 82%, achieved monthly collections of 99% of rent billed, and collected 95% of deferred rental from the April, May and June 2020 period.

Arrears decreased by R9.5-million over the year to R63.8-million.

PORTFOLIO ELEMENTS

Like-for-like tenant turnover in Emira’s urban retail portfolio, which comprises 38% of total property asset value and is 95.9% occupied, increased by 6.4% year-on-year.

Its industrial properties, which are 96.5% occupied and make up 14% of the overall Emira property portfolio, were said to have held up well, with an increase in demand for space with relatively favourable rentals being achieved.

Office properties, which comprise 24% of total property assets and are 83% occupied, are said to have the furthest to go owing to shifting working habits and the trend of downsizing and consolidating office space.

Emira’s sole directly held residential property with co-investors the Feenstra Group – The Bolton, Rosebank – had an occupancy of 94% at the end of June.

Emira is still under contract to acquire the multitenant Northpoint Industrial Park, in Cape Town, for R103-milion, but transfer has been delayed and is expected to take place by October.

The company disposed of the Steiner Services property in Gauteng at a 17% premium to book value and an exit yield of 8% and currently has three assets, valued at R224.3-million held for sale.

To maintain and improve its directly-held assets, Emira invested R150-million in projects across its portfolio.

Emira also has indirect exposure to the residential rental property sector, with a 34.9% stake in specialist JSE-listed Transcend Residential Property Fund. Transcend’s total property portfolio is valued at R2.5-billion, and it contributed R37.8-million to Emira’s distributable income for the year.

Through 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, which continued to perform well.

Enyuka contributed R83.7-million to Emira’s distributable income for the year.

INTERNATIONAL OPERATIONS

Emira’s international investment strategy in the US with its partner, The Rainier Companies, saw the successful acquisition of its eleventh US shopping centre asset this year – the Newport Pavilion power centre, in Cincinnati.  

Emira’s equity investments in the US now total R1.7-billion and its after-tax income from equity co-investment in the US totalled R258.8-milion of which R125.5-million is distributable and contributed R96-million to Emira’s distributable income for the year.

A portion of income has been retained at property level in the US to ensure cash reserves remain bolstered.

Vacancies in the US portfolio moved up from 5.2% to 7.1% but improved from the half-year high of 8.5%.

Leasing momentum accelerated in the second half of the financial year as retailers rebounded and resumed their expansion plans.

Overall, leasing activity was solid in light of the many early renewals negotiated in late 2020, and agreements were concluded with positive rental reversions.

The value of Emira’s local properties reduced by net 5.7% to reflect current market prospects.

Emira’s net asset value decreased by 0.8% to 1 518c apiece as a result of the reduction in property values; however, this was offset by a decrease in net derivative liabilities and an increase in its equity-accounted investments in the US.

Emira reduced its loan-to-value (LTV) ratio from 43% to 40.9%, giving it ample debt headroom and bringing it closer in line with the long-term LTV target of below 40%.

Global Credit Rating Company affirmed Emira’s corporate long-term credit rating of A(ZA) and short-term rating of A1(ZA), with the outlook given as negative, in May.

The company said it continues to benefit from diversified sources of funding and has facilities across all major South African banks. It has access to undrawn facilities of R829-million and cash on hand of R96.9-million.

Emira improved its broad-based black economic empowerment rating, moving from a Level 5 contributor to Level 2, with verified effective black ownership of 76.68%.

In the current uncertain circumstances, Emira said it was unable to provide earnings and distribution guidance for the 2022 financial year.

However, in line with its transparent disclosure, it has noted that its management key performance indicators target for distributable earnings is 114.65c apiece for the year to June 30, 2022, and that it expected to continue with its policy to pay out the cash-backed portion as dividends to shareholders.