Results at Emira Property Fund meets Forecasts

Emira Property Fund CEO James Templeton, attributes this major improvement in Emira’s performance to its successful strategies that have resulted in significant progress achieved across all key metrics.

JSE-listed Emira Property Fund‚ whose portfolio assets comprise 141 properties valued at R9,7 billion‚ on Wednesday announced distribution growth of 6.5% for its six-month period to 31 December 2013.

Vacancies have also been reduced to 5.1 percent at December 2013 from 5.6 percent at June 2013, which represents a decline in vacancies of 7407 square meters, driven by substantial leasing in all the retail, office and industrial sectors.

It’s net asset value grew by 8.7% during the 2013 calendar year.

James Templeton, CEO of Emira, attributes this major improvement in Emira’s performance to its successful strategies that have resulted in significant progress achieved across all key metrics.

The Real Estate Investment Trust (REIT) listed group also disposed of six non-core properties for R329 million and acquired a fully-let industrial building in Cape Town as well as an industrial site for development in Pretoria.

With market capitalisation of R6,3 billion, Emira said that it has R603 million worth of refurbishment and extension projects under development. The most significant is the major R513 million upgrade and extension of Wonderpark Shopping Centre, its biggest asset. The centre is being enlarged from 63,000sqm to 90,000sqm.

Offices comprise just less than half of Emira’s diversified property portfolio by value, at 47%. “We’ve done well to gain back share in a difficult market and reduce vacancies to levels below the SAPOA average, which we expect to continue” says Templeton.

“Emira have successfully been able to reduce vacancies over the last few years‚ however this comes at a cost of weak rentals and onerous occupier demands‚” Investec analyst Peter Clark said.

The office portfolio would remain under pressure as the office leasing environment was weak coupled with additional supply that was coming to market‚ said Mr Clark.

“This is likely to limit Emira’s distribution growth to below sector average going forward‚” he said.

Net income from the entire portfolio grew by 4.5% like-for-like on the comparable period last year.

Income from Emira’s Rand-hedge investment in Growthpoint Properties Australia (ASX:GOZ) increased by 17.5% thanks to growing distributions from GOZ as well as a weaker Rand against the Australian Dollar and also because Emira followed its rights in respect of a rights issue in December 2013. Emira’s GOZ investment comprises 6% of its assets. It is valued at R626 million, compared with its investment cost of R372 million.

Emira closed the half year period with a moderate 30.6% loan-to-value ratio. Some 76% of its debt is fixed at a weighted duration of five years and nine months at an all-in weighted average interest rate of 8.5%. It also continued to take advantage of lower rates of funding available on debt capital markets during the period.

Old Mutual Investment Group portfolio manager Evan Robins said the results may have wiped out some negative sentiment about the fund.

“These are pleasing considering their portfolio is not prime quality but continued progress with offices are the fund’s bug bear. Some investors in the market must have been worried as Emira’s share price has been weak leading up to the results‚” he said.