International and Residential exposure helps Emira distribution growth

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Emira Property Fund CEO Geoff Jennett, says its international and residential strategies helped the company to counter the effects of the relentlessly difficult domestic economy that is impeding growth. Emira Property Fund CEO Geoff Jennett, says its international and residential strategies helped the company to counter the effects of the relentlessly difficult domestic economy that is impeding growth.

Emira Property Fund declared a 3.1% increase in distributions for its financial year ended June 2019, thanks to a push into the USA and local residential rental market.

The diversified group continued optimising its property portfolio metrics by rebalancing its portfolio of assets out of offices, recycling underperforming capital into in the USA and diversifying into residential property locally.

CEO Geoff Jennett said its international and residential strategies helped the company to counter the effects of the relentlessly difficult domestic economy that is impeding growth.

Overrall vacancies were at 3.6% in the reporting period. Office vacancies improved from 7.1% to 5.3%, mostly thanks to its R1.8bn portfolio disposal to B-BBEE entity Inani Prop Holdings.

The company has reduced its directly held South African office exposure from 35.3% to 24.5% of total overall assets, leaving it to 21 office buildings.

As a result of this portfolio disposal and a further two non-core individual asset sales, Emira closed the year with 80 directly held South African properties, valued at R10.9bn.





New letting and contractual escalations saw Emira’s stable portfolio notch up like-for-like net revenue growth of 3.1%. A highlight this year was leasing four of the eleven floors of 80 Strand, Cape Town, co-owned by Emira and Swish, to global co-working brand WeWork on a long lease agreement that includes the option to take up more space in future.

The company also invested R239.2m in upgrades of the existing assets. Additionally, at a total cost of R209.3m, Emira’s The Bolton residential conversion in Rosebank with co-investors the Feenstra Group, came on stream to become Emira’s sole directly-held residential property.

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

“Residential property is still a small 5% of our portfolio, but it benefits from SA’s best residential expertise,” says Jennett.

Enyuka, Emira’s rural retail property venture with One Property Holdings, which holds R1.1bn of lower LSM shopping centre assets, contributed R77.5m to Emira’s distributable income for the year.

Locally, Emira also earned fee income of R5.1m from loans it made to Transcend and Inani.

Emira’s partnership with US private Dallas-based group Rainier has been highly successful since the two started coinvesting in grocery-anchored convenience retail centres a year ago.

Over the past two years, Emira has steadily grown its US portfolio. This year, it more than doubled its assets from four to nine properties, to make up 7.6% of Emira’s total assets or USD75.9m. The latest asset to transfer in June, is University Town Center in Norman, Oklahoma. it also invested a total USD12.4m for 49.6% equity interest in the centre. Emira’s after tax income from co-investment in the equity of grocery-anchored dominant value-orientated convenience retail centres in robust markets in the US totalled R64.7m.

With Growthpoint Properties Australia (GOZ) enjoying all-time-high share prices and robust investor demand, Emira took advantage of the opportunity to dispose of 7,429,119 of its shares during the year. It still holds more than double this number of units, comprising 2.4% of GOZ’s total units in issue, with a total value of R759.7m compared to an initial investment cost of R272.0m, equating to a 179.3% increase in capital value. Income from GOZ decreased by 3% to R53.4m.

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Listed Property / REITs  |  Emira Property Fund  |  Growthpoint Properties Australia (GOZ)  |  Geoff Jennett  |  Transcend Residential Property Fund  |  WeWork  |  Rainier  |  Rainier Group