The six-month-end December 31 saw a slight decrease in distributable earnings at R329-million by JSE-listed Emira Property Fund.
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 in excess of R103 million at the end December
Distributable income per share was 62.99c, compared to 63.84c per share in the previous 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.
Portfolio operating profit decreased by 10.5% 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 didn’t make any acquisitions or disposals during the six-month period under review. However, the company acquired Northpoint industrial park in Cape Town for R103-million and also sold Epsom Downs shopping center and Epping warehouse. The company also put up two assets, The Colony and Universal industrial, for sale.
CEO Geoff JennettIn a presentation on February 16, the company said that it had done well to withstand the uncertain times of the past two-years, which saw great disruption both economically and operationally.
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 properties that were directly owned valued at R9.8-billion as of December 31, 2014. Of these 14.8%, or R1.92-billion, consisted of equity investments made in 11 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.
Emira also expanded its solar photovoltaic facility at Wonderpark Shopping Centre, Pretoria, during the six-month period under review to increase its output from 1.25 MW to 3.8 MW.
The company also began development of a new solar farm in 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 accounted for 30% of total property assets, were 81.8% under occupation. Emira noted that rising Covid-19 vaccination rates bode well to the return of offices.
The changing working environment and the difficult environment suggests that office supply will be outpacing demand for some time. Emira is continuing to intensify its tenant acquisition strategies.
Emira’s industrial properties had a stable occupancy of 96.5% with a broad tenant base. The industrial properties make up 19% of the overall portfolio.
Jennett confirmed that Emira was experiencing a rising demand for these properties. However, Jennett also noted that Emira is sensitive to the ongoing power supply disruptions which threaten the sustainability 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 fell to 92.2% by December, but it has returned to 95% since then. This will increase as Rosebank-based corporates return their employees to their offices.
Emira’s indirect exposure to residential rental properties increased in the interim period. Emira also increased its 39.2% stake at Transcend Residential Property Fund (specialist JSE-listed realty trust),
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.
Emira, through its 49.9% share in Enyuka Property Fund (a dedicated rural and lower Living Standards measure retail property venture with One Property Holdings), indirectly invests in 24 shopping centers valued at R1.7 billion. These centres performed well during the six-month period under review.
Enyuka contributed R42.6-million to Emira’s distributable income in the interim period.
OFFICE COMMENTARY
Emira COO Ulana van BiljonAccording to most businesses, the working environment in 2022’s first half was still challenging. Many are uncertain if Covid-19’s impacts will continue.
However, there was a steady rise in retail trade and healthy industrial demand. She highlighted that the office sector was still under pressure.
The office sector vacancy rate was 18.2% at the end, compared to 3.6% and 2.6% respectively in urban retail and industrial areas.
The office sector’s recovery was mostly dependent on economic growth, including increasing inflation, high unemployment numbers and hikes in interest rates. These factors had an impact on the demand for office space and the oversupply in the market.
Emira was doing this to ensure it was adapting its strategies for letting to meet both landlord and tenant needs.
Van Biljon anticipated flexible working environments to continue expanding, while many businesses were currently evaluating the best model for the future.