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Archives for November 2024

Delivering strong performance aligned with strategic goals

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Delivering strong performance aligned with strategic goals

Attacq Limited is proud to share its latest pre-close update, reflecting solid progress aligned with our strategic vision and reinforcing confidence in achieving our FY25 distributable income per share (DIPS) growth guidance of 17% to 20%.

As a JSE-listed REIT, Attacq remains committed to delivering long-term value for stakeholders, with recent achievements demonstrating our dedication to sustainable growth and resilience.

Key highlights from the update include:

–  A high occupancy rate of 92% and an impressive collection rate of 98.7%, reflecting the strength of our portfolio and partnerships

– The successful R760 million DMTN issuance at reduced margins fortifies our financial flexibility, with FY25 interest cover ratio projected above 2.5 times and gearing below 30%

– Five rooftop PV systems are in progress, elevating our renewable energy mix to 9.3% and advancing sustainablity objectives

– The Waterfall Junction water connection has been finalised, creating pathways for developments and sustained economic growth

– Strategic upgrades, including a 1 995m² Checkers expansion and 23 store revamps, modifying the retail experience and enhancing value for our clients and shoppers.

Attacq’s achievements are a testament to our unwavering commitment to people, purpose, and progress. “Our journey is driven by a vision to create spaces that inspire, deliver sustainable growth, and leave a lasting impact on the communities we serve,” says CEO Jackie van Niekerk.

With an eye on the future, Attacq continues to lead through innovation and purpose, building a sustainable legacy characterised by growth and resilience

Hyprop set for growth given the reduced risks and financial strength

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Hyprop set for growth given the reduced risks and financial strength

Hyprop, a total returns-focused fund that specialises in retail property announced its operational update for the four months ended 31 October 2024. The Group’s dominant retail centres in South Africa and Eastern Europe continued to grow tenants’ turnover and trading density. This reflects management’s ongoing repositioning initiatives and leasing strategies, combined with better consumer sentiment.

“The pleasing performance reflects our investments over the last few years, not only in centre and tenant upgrades and improvements but also in energy and water projects at all our centres,” said Hyprop CEO Morné Wilken. “We have given particular attention to areas most affected by infrastructure decay, to ensure our tenants and shoppers can continue to trade without disruption.”

The company’s pre-close operational update showed a pro-forma improvement in the loan-to-value ratio (LTV) to 35.2% at end-October from 36.4% at end-June, and an increase in interest cover to 2.62 times from 2.5 times. This follows the completion of the disposal of the sub-Saharan Africa (SSA) portfolio to Lango Real Estate Limited. At the end of the period, Hyprop held R575 million cash on hand and R1.2 billion of available bank facilities, after paying the 2024 dividend.

Given factors such as the improvement in the overall risk environment, that Hyprop has caught up on historic capital underspending in SA, the sub-Saharan portfolio has now been sold and Hyprop’s balance sheet strength, the Board intends to review the dividend policy and payout ratio. Any changes will be communicated when the results for the six months ending 31 December 2024 are released in March 2025.

Operational performance

South Africa

In the four months to end-October, Hyprop welcomed several new stores to its centres in South Africa, some of which were “firsts” for the country. It also refurbished and “right-sized” (expanding some spaces and reducing others) stores, where necessary.

Tenants’ turnover in this period was 5.2% higher than in the same period in 2023 and trading density was 3.9% better. Foot count was flat (-0.2%). The improving trend in rent reversions continued, with a positive weighted average reversion rate of 6.7%. Retail vacancies, at 2%, were well controlled.

Some of the highlights were:

In the Western Cape, Canal Walk has been enhanced by some exciting new concepts. These include Old School, a retailer specialising in the sale of South African sports supporters’ jerseys and other merchandise; and the first South African store for Baseus, one of the world’s fastest-growing consumer electronics brands. Silki, which sells luxurious skin, hair and body care products, opened its first stand-alone store.

Hyprop is adding 5 500m² of GLA at Somerset Mall as a part of its redevelopment and expansion project. The project planning is progressing well with most council and other regulatory approvals obtained. Construction work will commence later this financial year and is expected to be complete at the end of July 2026. The project will add 50 new stores to the vibrant centre, focusing on affordable luxury and athleisure as well as family entertainment and food.

In Gauteng, new store openings in Rosebank Mall included the first Cable & Co (fashion and footwear) in Gauteng and Ajmaan, which sells modest clothing. Continental Linen, Waxit and Ribz N Wings all opened during the period. In July 2024, the Soko District became fully let.

The Glen welcomed Porter & Craft, a luxury leather goods retailer and Cannafrica during the period. While The Glen Continental Linen and Chateau Gateaux during the period.

There were exciting developments at Hyde Park Corner. The Forum (a new events venue) and Workshop 17 (flexible office space) both opened in October. The centre also welcomed new outlets for strong global brands such as Birkenstock and Ted Baker; Avenue 2A, which houses international luxury brands; Colourbox, an international and local luxury lifestyle brands retailer; Kids Around, a luxury and premium children’s fashion brand; and Health Works, a health store that offers both products and a blend of traditional healing and cutting edge services.

Eastern Europe (EE)

The EE portfolio continued to achieve strong operational results in these four months, notably in tenant turnover and trading density. Asset management initiatives and investments in upgrades have distinguished Hyprop’s centres from its competitors, allowing it to benefit from the overall growth in retail within the region.

As at 31 October 2024, the EE portfolio’s retail vacancy rate was an impressive 0.2%. Tenants’ turnover was up 11.5% for the four-month period compared with the same period in 2023 and trading density lifted by 9.4%. Foot count was 1.6% higher.

Some of the highlights were:

In Croatia, both City Center one East and City Center one West reported growth in all key metrics, including foot count, despite the non-working Sundays Trade Act, which allows retailers to operate only 16 Sundays per calendar year. Centres are not allowed to trade on public holidays.

In Bulgaria, The Mall’s new tenants included Jeff de Bruges, a new premium chocolatier concept; Intesa, a locksmith; Stilna jena, a Bulgarian ladies fashion brand; Sunday Habit, a Bulgarian influencers’ merchandise shop; and Elenski Balkandjii, a farmer’s deli shop.

In North Macedonia, Skopje City Mall continues to refine its tenant mix and will soon welcome Gerry Weber, M House Roastery Café and mobile operator M-tel. Cineplexx has undergone a comprehensive upgrade, and Skopje City Mall is now the only centre in North Macedonia with a state-of-the-art cinema as part of its entertainment offering.

Environmental initiatives

Hyprop has made progress on ensuring energy and water security for its centres in South Africa, with a gas and battery storage project underway at Rosebank Mall. Management is taking steps to source solar power through Power Purchase Agreements at The Glen and Cape Gate and is looking at wheeling green energy from a third party to Canal Walk and Somerset Mall. Projects have started to install potable water storage at Clearwater Mall, Woodlands and Hyde Park Corner and similar projects will begin at the Glen and Rosebank Mall in 2025.

Canal Walk, Somerset Mall, Woodlands, and The Glen have all achieved net zero waste status. The integration of Table Bay Mall with the Group’s waste management strategy is progressing.

Outlook

Wilken said management’s priorities in the current year and beyond would include driving the implementation of sustainable solutions to reduce the impact of the infrastructure challenges we face in South Africa, expedite organic growth opportunities, for example, the Somerset Mall expansion in the South African portfolio, reviewing the portfolios annually to evaluate the case for recycling of assets and to consider new growth opportunities, disposing of the shareholding in Lango and redeploying the capital into new growth opportunities, and maintaining the health of the balance sheet.

“With these priorities in place, we are well-positioned to pursue growth opportunities without being hindered by past structural, financial, and asset-related issues,” he said.

Frenzied shopping season awaits as Black Friday arrives late

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A frenzied festive shopping season awaits as Black Friday arrives late

Black Friday’s late arrival on 29 November sets the stage for a uniquely condensed peak shopping season. With five fewer days until Christmas compared to the November 25 and 24 dates of the past two years, the question remains: how will this impact retail sales performance?

Black Friday has come to symbolise the kick-off of the holiday shopping period. Despite the earlier dates, the past two years have seen disappointing Black Friday spending. Savvy shoppers demand real value and great experiences, and many South Africans have been particularly cash-strapped.

A shortened shopping season but more consumer confidence

This year, fewer shopping days between Black Friday and Christmas Eve could signal lower sales over the festive period, even with a surge in shopping as consumers scramble to make purchases. However, consumers are feeling more confident about spending than in recent years, and some even have a little more to spend, which could result in bigger baskets balancing out the effects of the compressed timeline.

Factors contributing to this rise in confidence include a settling political landscape, the suspension of load shedding, a stabilising currency, improving inflation rates, a second local interest rate cut, and the first payouts from South Africa’s new Two-Pot Retirement System.

Retailers adapt

General dealers like Game, Makro, Builders, and Jumbo Cash & Carry have already responded to this festive season’s time-crunch dynamic with month-long Black Friday promotions starting in early November.

These extended campaigns may actually work in consumers’ favour, allowing them to feel more secure in their purchasing decisions as they have longer to evaluate deals and sales. That said, campaigns like Game’s, which notes “When it’s gone, it’s gone”, send a clear message not to dither over purchasing decisions too long.

Interest rates and disposable income

Historically, when consumers perceive their financial situation as stable or improving, they’re more likely to splurge during seasonal shopping peaks.

With last week’s announcement of a further 25bps interest rate cut resulting in interest rates being 50bps lower than this time last year, putting a bit more money in consumers’ pockets, we can expect a positive impact on festive spending. The start of a downward interest rate cycle in September means consumers will have some more disposable income to allocate towards non-essential purchases.

Wage increases and year-end bonus payouts are expected to improve in 2024, adding to seasonal spending power. Yet, many companies remain under financial strain, with limited capacity to pay bonuses, instead opting for retail gift cards for their employees.

The two-pot effect

When it comes to the first payouts from the Two-Pot Retirement System, indications are that much of this will go to debt repayment and education-related spending. Still, it will also benefit retail as the easing of other financial pressures allows people to loosen their spending belts a little.

A focus on essentials

However, for the 2024 festive season overall, consumers will continue to remain cautious, focusing primarily on essentials. At Emira, recognising the increasing preference for an all-in-one shopping experience has led to a focus on providing exceptional shopper experiences and smooth journeys.

Buy-now-pay-later

The attractiveness of buy-now-pay-later (BNPL) options like Pay Just Now and Payflex will play a role in festive buying trends – online and instore, offering consumers no-fee, interest-free repayment plans that are especially appealing to budget-conscious consumers.

The role of social media

Social media will have an immense influence on the choice of gifts and the season’s most-wanted items, with platforms like TikTok, Facebook, and Instagram becoming virtual shop windows. Influencers have become modern-day advertisements that help retailers reach audiences in an authentic way.

Seamless shopping experiences

For shopping centres and retailers, the short season means a greater emphasis on providing seamless experiences. Ensuring ease throughout the shopping journey means customers can enjoy frictionless festive shopping outings.

Many price-conscious and time-pressed shoppers arrive at a shopping centre knowing what they want after comparing products and pricing online but still prefer the in-store purchasing experience. So, it’s important to make their shopping trip a good one.

All-in-one shopping

At Emira, our retail centres offer a variety of essential and unique retailers. One example is Wonderpark Shopping Centre in Pretoria, which is expanding its entertainment and leisure offering with the launch of Goldrush in November and a refurbished Play Area and Kiddies Club in time for December and the school holidays, surrounded by various restaurants and eateries. These amenities invite customers to linger longer, providing maximum value to their overall shopping experience.

A January boost?

Interestingly, the condensed festive season may actually lead to higher spending in January. Consumers may feel rushed, postponing certain purchases until the new year. The growth in the popularity of gift cards as presents means redemptions will occur in January, driving sales.

Back-to-school dash

Back-to-school shopping in January may also see a more pronounced trend than in the past, with both inland and coastal public schools, as well as most private schools, starting on the same day, 15 January 2025. This creates another potential time crunch, emphasising excellent seasonal planning to meet demand and quickly pivot from one retail season into another.

The stakes are high

The stakes are always high for retailers and shopping centres over the holiday season, and this year’s condensed timelines intensify the pressure.

Shopping centres that deliver smooth, seamless, all-in-one experiences, with retailers offering trending products and services, various payment options, and great customer service, will be best positioned to benefit from the upside of the early improvement in consumer sentiment.

Vukile’s first-half puts it firmly on track for full-year guidance

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Vukile’s excellent first-half puts it firmly on track for full-year guidance

Vukile Property Fund (JSE: VKE) has reported an impressive 6.0% increase in its interim cash dividend to 55.2cps for the six months to 30 September 2024. The consumer-focused retail real estate investment trust (REIT), distinguished by its sector specialisation and international diversification, has reported excellent half-year operational results. This strong performance positions it comfortably to meet its full-year guidance of growth in FFO per share of 2% to 4%, with a trajectory towards the upper end of its 4% to 6% DPS growth target.

Laurence Rapp, CEO of Vukile Property Fund, comments, “Our strong first-half performance delivered outstanding operating results and solid trading metrics across our property portfolios, which positions us well for continued growth. Vukile’s businesses in South Africa and Spain are intentionally structured for seamless success, driving the strategic and operational progress that we’re pleased to report.”

Vukile is a leader in consumer-focused shopping centres with total property assets of R40.1bn. Its commitment to customers shines through in its convenient, community-focused, needs-based retail centres. It is invested in a portfolio of 33 urban, commuter, township, and rural malls in South Africa. Through Vukile’s 99.5% held Spanish subsidiary Castellana Properties, it has a portfolio of 15 shopping centres in Spain and a portfolio of three newly acquired shopping centres in Portugal. Some 59% of Vukile’s assets are in the Iberian Peninsula, and almost 48% of its property net operating income is earned in Euros.

In South Africa, Vukile’s robust operating platform, coupled with a strengthening macroeconomic environment, has delivered outstanding results.

“With sentiment improving, loadshedding decreasing, consumer confidence rising, and interest rates falling, the sustained strong metrics produced by our successful operating platform enjoyed a welcome boost. We anticipate this momentum to persist into the second half and beyond,” notes Rapp.

Valued at R16bn, Vukile’s defensive, dominant South African portfolio delivered strong performance and growth, with like-for-like net operating income growth of 4.6% and a 3.7% increase in the value of its retail portfolio. Vacancies remain at an exceptionally low 1.9%, supported by active letting, with 85% of leases signed at better or the same rental level and 93% tenant retention success. The portfolio achieved impressive trading density growth of 4.2%, with Vukile’s shopper-first focus driving increased footfalls and sales. A key highlight is the portfolio’s decreased cost-to-income ratio, down to 15%, the lowest level in a decade.

Vukile’s solar PV rollout in South Africa has been tremendously successful, driving margin and propelling it towards carbon neutrality. During the six months, it added four PV plants with 4.9MWp of capacity to its existing 28 plants of 21.6MWp. It is also applying the same focus to water management and efficiency.

Adding value to its South African portfolio through acquisitions and developments, Vukile’s redevelopment of the recently acquired Mall of Umthatha is on of schedule, with completion and substantial letting expected by the first quarter of 2025. Vukile anticipates a minimum 10% yield on this acquisition. The reconfigured East Rand Mall in Boksburg is trading exceptionally well following the introduction of Checkers FreshX as its first-ever grocery anchor. The R141m Bedworth Centre upgrade in Vanderbijlpark is progressing rapidly, with both new anchor tenants, Boxer and Shoprite, opening in time for the festive season. The development of Thavhani Retail Park in Thohoyandou, Limpopo, where Vukile acquired a 33% stake for R101m on an 8.6% yield, has broken ground. It is located adjacent to Vukile’s very successful Thavhani Mall asset.

Vukile remains keen to invest in South Africa. “We are actively exploring opportunities and are currently in the early stages of evaluating several potential deals in the market,” confirms Rapp.

Vukile’s well-established investment in Spain has cemented Castellana’s position as a market leader, capitalising on the advantages of the country’s status as a European growth powerhouse. The on-the-ground presence of Castellana not only ensures first-hand market knowledge but operates as a local business, which has proven a distinct advantage in accessing opportunities.

With Spain’s economy leading the Eurozone and its financially healthy consumers driving growth, Castellana’s consistent consumer-focused model has excelled, surpassing market benchmarks and outshining peers with high footfall and sales.

The Spanish portfolio remains fully let, with marginal vacancies of around 1% and 95% of space let to blue-chip international and national tenants. It achieved like-for-like rental growth of 2.1% and exceptionally high positive rental reversions of 45.5%. The portfolio has the market’s lowest occupancy-cost ratio, 9.5%, providing further room for future rental growth.

Vukile is well-known for its astute capital allocation. Post-period in October, it accepted the offer to sell its entire 28.8% stake in Lar Espana for €200 million, generating a capital profit of some €70 million and an IRR exceeding 30% in Euros. The proceeds will be redeployed into physical assets in well-advanced transactions currently being evaluated

As previously disclosed, Castellana remains in exclusive discussions to acquire the largest shopping centre in Spain’s Valencia province, Bonaire Shopping Centre, from multinational retail REIT Unibail-Rodamco-Westfield. The transaction’s closing has been extended due to the tragic floods in Spain, pending a full damage assessment and remediation timeline for the flood-impacted shopping centre.

Rapp notes that a key highlight executed post the reporting period was Castellana’s strategic entry into Portugal, a compelling new market, which has expanded its Iberian investment footprint. “The move capitalises on Portugal’s strong economic growth and fragmented retail property sector ripe for consolidation, mirroring opportunities seized in Spain.”

With its investment in a high-quality, blue-chip-tenanted portfolio of three Portuguese shopping centres valued at €176.5m, the expected 10%-plus cash-on-cash yield in Euros underscores the market’s potential for value creation. Castellana’s on-the-ground expertise positions it to add substantial value to the Portuguese assets while growing in this market, with liquidity in place and further transactions under consideration.

Vukile’s robust balance sheet and disciplined capital allocation are enduring merits for this REIT. Its balance sheet remains exceptionally strong, with a reduced LTV of 35%, an increased ICR of 2.5-times, and R6.4 billion in liquidity, including R5.1 billion of cash on hand and R1.3 billion undrawn facilities.

Vukile remains one of the most highly rated credits in the property sector with its AA(za) corporate rating reaffirmed by GCR, with an upgraded positive outlook. Fitch also upgraded Castellana’s Long-term Issuer Rating of BBB- with a positive outlook. These high international investment-grade credit ratings underscore excellent access to debt and equity capital markets. Vukile raised approximately R2bn during the period from new share issuances.

“We are tremendously appreciative of the support shown for our capital allocation strategy, as evidenced in our equity and debt capital raises. Strong capital allocation lies at the heart of our expansion strategy, and we are dedicated to dealmaking discipline in seeking new opportunities that are strategically aligned and financially accretive in our core markets of Spain, Portugal and South Africa,” says Rapp.

He concludes, “Vukile delivered excellent first-half operating performance and has laid a firm foundation for future growth. We remain committed to our scalable consumer-led model to create value for all our stakeholders.”

Growthpoint’s major R800m development to ease KZN’s student accommodation

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Thrive Student Living to ease KZN’s student accommodation squeeze with 2,400 new beds in major R800m Growthpoint development

Thrive Student Living has started its largest student accommodation development yet. Representing a significant R800 million investment, the new purpose-built student accommodation development has commenced immediately adjacent to the main gate of the Howard College Campus of University of KwaZulu-Natal in Berea, eThekwini.

Undertaken by Growthpoint Properties’ specialist development division, the project will add 2,400 student beds in the region, which research shows has the biggest shortage of student beds in South Africa.

“Proprietary research commissioned by our team revealed that KZN remains undersupplied with student beds,” says Kobus Blom, Growthpoint’s KwaZulu-Natal Regional Development Manager. “The province has significant demand, and most students live in environments that are not conducive to student outcomes.”

In response to this need, Growthpoint has commenced the two-year development programme for the new building which is set to welcome its first students in January 2027 under the Thrive Student Living banner.

The new development was celebrated with a sod-turning ceremony, attended by the Honourable Mayor of eThekwini, Cllr Cyril Xaba, and the Chief Financial Officer of eThekwini, Dr Sandile Mnguni, as well as representatives of Thrive Student Living and the Growthpoint development team and its partners. This massive investment puts into action Growthpoint’s commitment made at the recent KwaZulu-Natal Investment Conference for R800 million of investment in the province over two years, which it is executing through this development for Thrive Student Living.

Amogelang Mocumi, Fund Manager of Growthpoint Student Accommodation Holdings, which operates under the Thrive Student Living brand, expresses the company’s commitment, “By prioritising student accommodation that supports better education outcomes, we are not only enriching lives but supporting employment and fuelling a more competitive economy. This investment highlights the transformative power of strong partnerships and underscores what is possible through collaborative efforts. To grow these achievements, we need a unified approach across all levels of government, together with private sector investment to support economic growth. Together, we can build a brighter future for young people and our nation.”

Growthpoint develops purpose-built student accommodation located and designed around students to help them succeed and make the most of their university experience.

In line with Thrive Student Living’s ethos of fashioning vibrant campus communities, each unique in its architecture and design to reflect and foster its specific community, it has shaped a beautiful contemporary design for the new 12-storey building incorporating the red face-brick that is an architectural signature in the Berea area.

The design also includes all the added amenities that Thrive Student Living accommodation offers, like study areas and games rooms, gyms and IT rooms, and backup power and water. Uniquely, it has also been designed to include a small element of ground-floor retail tailored towards daily convenience, which will serve building residents, other students, and the immediate community, as there is nothing else in the area fulfilling this need.

The development will also benefit from Growthpoint’s recognised green building leadership, creating healthy, sustainable environments and operating with a social consciousness that adds value to communities. Growthpoint’s developments boost job and economic opportunities, in addition to having long-term positive socioeconomic impacts of education support.

While this is its first purpose-built student accommodation project in KZN,Growthpoint has a proud track record of leading purpose-built student accommodation developments in the university cities of Johannesburg, Pretoria and Cape Town.

It was recently named the winner of the SAPOA Property Development Award for Innovative Excellence in Student Accommodation for its development of Thrive @ Horizon Heights, also for Thrive Student Living, at the bustling heart of Johannesburg’s student community. Thrive @ Horizon Heights opened for the 2024 academic year and was well let, proving popular with those from the nearby University of Johannesburg as well as the University of the Witwatersrand.

The Growthpoint development team is currently completing two new properties for Thrive Student Living for the 2025 academic year: Thrive @ Crescent Studios, a R300m 900-bed property located in Braamfontein, and Thrive @ Arteria Parktown, a R200m 500-bed located in Parktown, both ideally positioned for Wits University students.

Piling commenced at the eThekwini site in the first week of October 2024 in preparation for the main building contractor, which moved onto site today (Monday 18 November 2024), to begin construction.

Emira reports robust half-year results and reshapes its portfolio 

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Emira Property Fund (JSE: EMI) reported strategic delivery, diversification-enhancing acquisitions, active capital recycling, and strong operational and balance sheet metrics for its six-month interim period ended 30 September 2024. The company’s interim distributable income per share increased by 6.9%. It declared a 1.1% higher cash-backed interim dividend per share of 62.39c. Emira’s net asset value per share increased by 12.3% to 1,945.50cps during the six months, driven by rising property valuations and the fair value equity gain from Emira’s maiden investment in Poland.

Geoff Jennett, CEO of Emira Property Fund, attributes the positive performance to strengthening operational metrics, active asset recycling, and strategic deal-making, reflected in its reshaped portfolio. He adds that Emira is on track to deliver on its objectives for the full year, which it expects to result in marginally higher distributable income compared to that achieved for its past financial year.

Jennett reports, “Emira’s local portfolio outperformed, our US investments are comfortably on track, and we completed the first tranche of our investment into DL Invest, bolstering our diversification by tapping into Poland’s burgeoning economy with its unique growth drivers and opportunities.”

Emira invested €55,5 million for an initial effective 25% equity stake in DL Invest Group, a Luxembourg-headquartered property company developing logistics centres, mixed-use/office complexes and retail parks, valuing its assets at €730 million and NAV at €278 million pre-investment.

Emira has the option to expand its position in DL Invest Group by investing an additional €44,5 million, which will   increase its equity holding to 45%. This second tranche subscription option must be exercised by 31 January 2025 and requires shareholder approval to pursue. Castleview Property Fund, which holds around 58% of Emira’s issued shares, has given its irrevocable vote in favour of exercising the option, and shareholders can expect to receive a circular regarding the option.

DL Invest Group has a 17-year track record in Polish commercial real estate, with a €730 million portfolio focused mainly on logistics. Emira’s investment will fund DL Invest Group’s logistics development pipeline, aiming to create a €1 billion business. The partnership aligns with its co-investment strategy with in-country specialists. Emira will participate actively, with board representation, and has committed to an initial five to six-year investment term.

Funding for the first tranche of investment came from Emira’s balance sheet and recent disposals. Its non-core commercial and residential property sales transferred, completed and agreed upon during the period totalled R2.6bn. Emira’s strategic capital recycling strengthens liquidity by disposing of non-core assets that can be sold at fuller value. This creates capacity to invest in undervalued opportunities with stronger growth potential.

Emira’s balance sheet is healthy, with an adequate 2.3x interest cover ratio and a loan-to-value ratio that declined from 42.4% to 42.0% over the six months and is expected to decrease further as property disposals transfer and a portion of the proceeds are deployed to reduce debt. It reported unutilised debt facilities of R370m and cash on hand of R112.8m at half-year which will increase as proceeds from disposals are realised. Emira has a strong and diversified financial foundation, with support from all major South African banks and the proven ability to access the debt capital markets. In October, GCR affirmed its corporate long-term credit rating of A(ZA) and corporate short-term rating of A1(ZA), with a stable outlook.

The first tranche of its latest transaction has immediately increased Emira’s international investments to 26.8% of its portfolio — with 15.5% in the US and 11.3% in Poland — while 73% remains in South Africa, shifting it towards lower-risk, more attractive diversification with enhanced stability and appeal. The second tranche DL Invest Group option creates the potential for this to become nearly 37% offshore.

Emira is a real estate investment trust (REIT) with a diversified portfolio balanced to deliver stability and sustainability through different cycles. This risk-mitigating strategy includes a mix of domestic and international assets in direct holdings and indirect investments with specialist co-investors. Emira’s direct South African portfolio of 84 properties worth R12.1bn is diversified across commercial property sectors and residential rental property. Emira’s exposure to the United States is with US-based partner The Rainier Companies. Emira holds equity interests, with unanimous voting rights, in 12 dominant, value-oriented grocery-anchored power centres.

The local portfolio performed well, surpassing most key targets. SA commercial vacancies are already low and tightened to 3.9% from 4.1%. The portfolio saw an increase in like-for-like valuation of 4.7%, reflecting enhanced metrics across all three sectors and improved business sentiment. Residential occupancy remained strong at 96.7% and, similarly, maintained like-for-like valuation levels. Both sets of metrics signal a property portfolio that is attractive, competitive, adaptable and designed for lasting performance.

Emira’s commercial portfolio by value is split between urban retail (43%), office (25%) and industrial (15%) of the directly held SA portfolio. All sector vacancies are below the applicable benchmarks, and tenant retention increased from 81% to 83% by revenue during the period, reinforcing Emira’s effective leasing strategies. Its 15-property directly held retail portfolio of primarily grocery-anchored neighbourhood centres catering to their communities is trading well with improved metrics, including low vacancies of 4.2%. Despite the slump in office sector fundamentals, Emira’s portfolio of 20 mainly P- and A-grade office properties saw office vacancies improve into single-digit territory, from 10.9% to 9.4%. Emira’s diversified industrial portfolio of 28 properties enjoyed strong demand and delivered a sustained defensive performance at near full occupancy, with vacancies stable at 0.7%.

Residential rental assets comprise 21 properties, or 17% of Emira’s directly held SA portfolio by value, comprised of The Bolton in Rosebank, Johannesburg, and the 20 quality, affordable suburban units of Transcend Residential Property Fund, Emira’s wholly-owned specialist residential company. The portfolio of 3,588 units is split between Gauteng’s (90% by value) and Cape Town’s (10% by value) high-demand areas. The portfolio is achieving rental growth, with sustained demand for accommodation.

Overall, the commercial portfolio benefited from R119.8m in tactical upgrades, including various sustainability-driven initiatives, reconfigurations and refurbishments. Emira also invested R8.6m into its residential portfolio.

Emira collaborates with industry bodies to address South Africa’s deteriorating municipal infrastructure, which is a concern due to underinvestment. Inconsistent utility supply and rising costs hinder operational efficiency. To combat this, Emira is driving sustainability through fast-tracked solar power, water-saving initiatives, and backup systems. “We’re committed to energy-efficient buildings and are passionate about biodiversity. Our ESG strategy makes Emira properties the excellent choice for businesses,” notes Jennett.

Jennett points to easing inflation, declining interest rates, and growing political stability in South Africa, transforming the outlook for local real estate. “With costs stabilising for consumers and businesses alike, spending is set to rise, boosting property demand. More favourable interest rates should bolster investor confidence and reshape tenant demand patterns. Decreased loadshedding has further strengthened business confidence, prompting firms to invest in longer-term plans. Improved sentiment post-election bodes well for stronger long-term returns from the property sector, but short-term growth will be tempered as the market absorbs elevated vacancies and while economic headwinds subside. While it will take time for these positive factors to yield measurable results, they position Emira well to continue delivering strong returns to investors.”

Emira’s 12 equity investments in US grocery-anchored dominant value-oriented power centres total R2.56bn (USD147.1m). The US economy remains on a steady and stable growth trajectory, with GDP up 3% for Q2 2024 and 2.8% for Q3 2024 coupled with low unemployment, easing inflation and a 50bps cut to interest rates in September and another 25bps trim in November. While US elections introduced some uncertainty to the economy, stability should return with clarity of the new government’s priorities and policy. This environment continues to support Emira’s investment in US open-air centres focused on popular value and needs-based retail in robust markets.

Robustly resilient property fundamentals and high-quality tenants underpinned the US portfolio’s low vacancy rate of 3.5% and combined portfolio WALE of 4.5 years. It delivered a solid performance, adding R120.1m to Emira’s distributable income.

Jennett concludes, “Emira’s strategic pivot is in full swing as we target opportunities with robust growth potential tightly aligned with our long-term goals. These solid half-year results put us firmly on track for a marginal increase in distributable income for FY25, reinforcing Emira’s consistent record of reliable performance.”

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