Emira grows dividends by 17.4% per share, boosted by its US assets

Emira Property Fund (JSE: EMI) announced a 17.4% increase in its cash-backed dividend of 66.43cps and growth in distributable income per share of 15.0% for the six-month interim period to 31 December 2022 versus the same period in 2021. Its net asset value per share increased by 4.1% to 1,694.60cps.

Geoff Jennett, CEO of Emira Property Fund, attributes this robust performance to consistent strategic delivery, unlocking the best value from investments. He also highlights the post-pandemic recovery in Emira’s US equity investments and lower South African portfolio vacancies, below 5% (4.8%).

Jennett comments, “As a stable, low-risk yet very active business with all its diversified parts working well, our higherthan- expected income and solid results extend Emira’s consistent track record of reliable performance. Our US portfolio delivered particularly pleasing outcomes during the period, confirming it has resurged from the effects of the Covid-19 pandemic that were still evident in the prior interim period. Further, in a challenging SA environment, Emira continued to reinvest in our assets, ensuring they are attractive and sustainable. The results can be seen in our leasing success and lower vacancies.”

Emira’s diversified portfolio is balanced to deliver stability and sustainability through different cycles. It is a mix of retail, office, industrial and residential assets. Investing with US-based partner The Rainier Companies, 18% of Emira’s asset base is made up of equity investments in 12 grocery-anchored open-air convenience shopping centres in the stable economy of the USA, which provide a buffer to current global uncertainty and the low-growth domestic environment.

Strategically recycling capital, Emira advanced transactions for its two major indirect investments in SA during the period. Retail property venture Enyuka Property Fund is in the process of being sold to co-investor One Property Holdings. In addition, Emira obtained control of the specialist residential REIT Transcend Property Fund and consolidated it in October 2022, boosting its exposure to the defensive residential property sector.

As a result of the Transcend transaction, Emira’s directly held portfolio increased from 74 assets to 97 worth R12.1bn, and it grew its direct residential assets from a single building, The Bolton in Rosebank, Johannesburg, to 24 properties or 16% of its total investments.

This change in Emira’s asset base has created a residential portfolio split between Gauteng’s (85% by value) and Cape Town’s (15%) high-demand areas, available at rentals from R4,500 to R8,000/pm per unit, which are popular with the low-to-middle income segment of the affordable property market. Occupancy is at 96.7%. Most of the vacancy
represents sectional title units in the process of being sold.

Emira’s direct commercial portfolio continued to benefit from diversification. It improved its vacancy rate from 5.3% to 4.8% in the six months and improved rental reversions on both renewals and new leases.

The REIT’s industrial and retail portfolios performed well. Its retail portfolio of primarily grocery-anchored neighbourhood centres showed improved trading and higher turnover from retailers. Its diversified industrial portfolio delivered marginal improvements in all metrics and remained surprisingly stable given the increased rolling power cuts. A 3.4% improvement in office vacancies to 11.6% led to a strong showing from its portfolio of mainly P- and A-grade properties, albeit off a low base. “While the office sector seems to have stabilised, its fundamentals remain depressed,” notes Jennett. Emira’s office vacancies outperformed SAPOA’s average of 16.1%.

Emira’s commercial portfolio achieved a tenant retention rate of just below 80%, an unchanged weighted average lease expiry of 2.7 years and increased monthly collections to 102.2% of rent billed.

Property expenses were reduced, and various solar projects saved electricity costs at related buildings. Emira began investing in mitigating the impacts of load shedding and renewable energy as early as 2010. These projects support Emira’s sustainability considerations, a key component of its operations and approach to creating long-term value. Prioritising carbon emissions reductions, Emira steadily increased renewable energy generation, most recently expanding its photovoltaic solar plant at Wonderpark Shopping Centre, Pretoria – its biggest retail asset of more than 91,000sqm – from an output of 1.2MWp to 3.8MWp. It also undertook various energy management and efficiency initiatives and installed backup power at five more properties to help tenants manage the impacts of load shedding.

“Our energy efficiency improvements and renewable solar power drives have accelerated into top gear in response to increased load shedding. However, generators are only intended as emergency backups, and more load shedding means they are now operating for prolonged periods, increasing business costs. This threatens tenant rentals, escalation levels, and, ultimately, tenancies. It also means buying more diesel for the backup generators at buildings in our portfolio at a high cost, not all of which can be recovered. On the plus side, these initiatives provide Emira and its tenants with better resource security and, to some extent, some protection against load shedding, the continued high increases in utility costs and general deterioration of government infrastructure,” Jennet reports.

In the US, Emira’s 12 equity investments — grocery-anchored dominant value-oriented power centres — now total R2.5bn (USD149.5m). In 2022, the US recorded total real GDP growth of 2.1%, which was 3.2% and 2.9% in the third and fourth quarters, respectively. Considering the ongoing growth in the economy, and consistently low unemployment rates below 4%, the environment remains supportive of Emira’s investment thesis for its US strategy. Its open-air centres have a high-quality tenant base focused on popular value retail and essential goods and services, especially from grocery anchors. They are in robust markets that enjoy sound property fundamentals.

US portfolio vacancies nearly halved from 4.5% to 2.5%, and the portfolio had better-than-anticipated performance to add R117.8m to Emira’s distributable income. “This shows that the effects of the pandemic are moving out of the system in the US, and more can be expected,” believes Jennett.

Emira’s loan-to-value ratio moved to 43.1%, which remains comfortably within Emira’s covenant levels, after using debt funding to gain favourable control of Transcend. It has a more than adequate 2.6x interest cover ratio, unutilised debt facilities of R486.2m and cash-on-hand of R142.3m. Emira benefits from diversified funding and has facilities across all major SA banks and access to debt capital markets.

Jennett concludes, “Emira has done well to increase dividends and continue its strategic direction through active asset management, portfolio-enhancing capital recycling and performing property fundamentals with excellence. The combined effect of Emira’s decision-making in recent years sees our metrics well aligned and places us in a strong position to manage for the future. We are also ready for value-adding opportunities that may arise.”

Emira’s change in year-end to 31 March will see its FY23 final results representing nine months instead of twelve. It will declare a final distribution for the three months ending 31 March 2023.

Released by Emira Property Fund:
Geoff Jennett, CEO
Tel: 011 028 3115

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Powering SA business through load-shedding

Growthpoint Properties is going to great lengths to ensure its buildings and tenants’ businesses remain powered up during South Africa’s electricity crisis resulting from Eskom’s more frequent and longer load-shedding outages.

With 13.5MWp of installed renewable energy generation across two dozen rooftop and carport solar plants and several MWp currently under construction, together with 332MW of generation potential from 330-plus backup generators, Growthpoint is helping to keep the lights on at nearly 3,000 South African businesses, big and small.

“At least 1,053 shops, 833 office tenants and 38 industrial tenants are in a position to continue operating through load shedding as a direct result of Growthpoint’s national energy management programme. In addition, all of the nearly 1,000 tenants of the V&A Waterfront, which Growthpoint co-owns, have full access to backup power from the precinct’s 48 generators,” reports Estienne de Klerk, Growthpoint Properties SA CEO Estienne de Klerk.

“In this way, Growthpoint is helping much of SA Inc avoid business disruption during power outages and, in the process, safeguarding businesses, jobs and livelihoods,” adds de Klerk.

Growthpoint provides generator backup power to just over 70% of its office portfolio by gross lettable area, offering standby power for a whopping 1.2 million square metres of offices with 223 generators, where state-of-the-art technology has been implemented to monitor diesel levels. It also has a supply chain of in-house capabilities and external providers working to keep them fuelled and operating.

In the remaining 30% of office space, most tenants have their own power solutions, or buildings are in areas that do not experience major load shedding, for instance, parts of Pretoria and Cape Town, near national key points. There are some office buildings without generators, and Growthpoint is reassessing these requirements.

At industrial properties, tenants generally use their own generators, however, Growthpoint provides backup power across three industrial parks in its portfolio, accommodating multiple tenants in 84,153 sqm.

Nine of Growthpoint’s malls have 100% backup power generation, with the tenth currently being added. At shopping centres, the complexity of the electrical reticulation often doesn’t allow a single source of backup power across an entire mall. Where this is the case, Growthpoint provides standby power to common areas. Larger retailers often have their own systems, and smaller tenants are encouraged to use their own battery-powered uninterrupted power supply (UPS).

“We know that fast food, sit-down restaurants, and some service tenants are particularly impacted by load-shedding. Wherever shopping centres are without 100% backup power but have additional standby capacity, to support these tenants we are adding them to shopping centres’ backups where possible,” notes de Klerk.

While this goes a long way to help address the immediate need to power thousands of businesses, it comes at a cost – a significant capital outlay, a substantial monthly diesel bill, and the toll that fossil fuels have on the environment.

Growthpoint spent just over R47 million on diesel to power all its buildings in the six months from July to December 2022. The monthly bill topped R10 million in both October and December 2022 and was just short of this figure in November. The V&A Waterfront independently spent R14.8m on diesel over the same period.

“The costs are substantial, but the burden is mostly shared, with tenants paying for their own additional diesel consumption costs,” confirms de Klerk.

A big concern is the environmental impact of load-shedding, which is forcing businesses to burn diesel at unprecedented rates. As with other businesses, this weighs on Growthpoint’s strategy to be carbon neutral by 2050 and counteracts its environmental goals.

Growthpoint launched an innovative programme of green building and green energy well over a decade ago. To replace electricity generated by fossil fuels with renewable energy in its portfolio, Growthpoint has already invested in 13.5MWp of solar generation capacity and plans to double this by June 2023.

“Our investment in solar power reduces our reliance on the national grid. There is a great need for this right now and amping up our investment in solar makes perfect sense for our strategic, operational and environmental, social and governance (ESG) goals,” says de Klerk.

Of its 24 solar installations, half are at office and mixed-use properties, nine at shopping centres and three at industrial buildings. However, retail installations represent the highest capacity by far, accounting for a combined 9.4MWp.

Growthpoint’s largest solar installation undertaken this year is the 2.5MWp plant at Paarl Mall in the Western Cape, which is paired with a 4.5MWh battery system to form a hybrid renewable energy and storage system. This is the first battery system of its size to be used at a shopping centre in South Africa, and Growthpoint is currently evaluating battery backup for other properties in its portfolio.

With 13.9MWp of solar projects in various phases of construction, Growthpoint is on track to achieve its target of 27.4MWp of installed solar by its 30 June 2023 financial year end and by adding potential solar projects to this list on an ongoing basis, Growthpoint is helping to chart the way forward for renewable energy in commercial real estate in South Africa and its tenants.

Read more about our commitment to sustainability here, or get a full ESG snapshot

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Emira’s signs major deal with international contact centre at Newlands Terraces

Office occupancies in Cape Town and Durban could well be seeing an upswing – welcome news in markets that have suffered from rising vacancies in the wake of corporate downsizing and restructuring in the wake of the COVID-19 pandemic.

According to Ulana van Biljon, COO of Emira Property Fund (JSE: EMI), there has been an increase in enquiries, demand for and take-up of office space by business process outsourcing (BPO) call centres in both the Cape Town and Durban markets recently.

Emira has just concluded a deal worth approximately R44 million with CCI South Africa, the largest international contact centre in South Africa, for just over 4,300sqm of office space at Newlands Terraces in Cape Town.

Newlands is a mixed-use suburb situated at the foot of Table Mountain and is home to upmarket single residential homes, apartment buildings, and student accommodation for the University of Cape Town. It is well known for the Newlands Rugby and Cricket Grounds as well as Newlands Brewery. The location is ideal for CCI, which was looking for a large standalone office building in the southern suburbs of Cape Town.

Newlands Terrace is an A-grade, multi-storey office building located adjacent to the Newlands Rugby Stadium, with sweeping views over the suburb of Newlands and with the backdrop of Table Mountain from Devil’s Peak to Silvermine. As of 1 March 2023, CCI will be leasing 4,333.47sqm out of a total of 4,531sqm available and will take over the remaining area once existing tenants’ leases expire.

CCI will be using the premises as a BPO centre for an American airline and plans to provide a number of attractive workplace facilities for its employees. Emira will spend around R10 million on the building for CCI, including the upgrade and adaptation of the air conditioning to meet the client’s requirements.

“CCI is increasing its presence in the Western Cape due to the more stable economic environment in the Cape Town metropole. They are among several such businesses that have expressed growing interest in this market,” says Van Biljon.

The deal is good news for Emira, which will see increased occupancy percentages in its portfolio, and for the Newlands area.

“The finalisation of this lease agreement secures a stable income stream with a multi-national tenant for at least the next five years – this despite the fact that there have been some concerns about the now redundant Newlands Rugby Stadium neighbouring Newlands Terraces,” van Biljon notes. “The deal required a focused approach to demonstrate to CCI that the building could work for them and their clients. The Emira team and the broker went the extra mile to create mock-up spaces and visuals that showed what could be done with the space,” she adds.

The Newlands Terrace deal aligns with Emira’s strategy of providing great real estate – in this case a well-located, versatile office building that is able to adapt to meet the changing needs of the office user.

Emira Property Fund is a diversified, balanced REIT with a track record of delivering stability and sustainability through different cycles. It is invested in a mix of directly-held retail, office, industrial and residential assets, indirectly-held investments with specialist co-investors and has equity investments in grocery-anchored open-air convenience shopping centres in the USA.

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IFC invests in Growthpoint Properties’ green bond

To promote more sustainable and resource-efficient buildings in South Africa, IFC today announced an investment in a green bond issued by Growthpoint Properties Limited that will help the company finance energy and water efficiency improvements in its existing commercial properties.

IFC will invest 1 billion South African rand (about $54 million) in the green bond, which will fund green improvements across Growthpoint’s office, industrial and retail spaces across South Africa. The retrofitting improvements are expected to reduce CO2 emissions from the company’s portfolio by more than 18,000 tons annually.

The bond will also help Growthpoint, South Africa’s largest primary Johannesburg Stock Exchange (JSE) listed real estate investment trust (REIT), refinance its green office building located at 144 Oxford in Rosebank, Johannesburg. The building has a Green Star 5 category certification, as defined by the Green Building Council of South Africa (GBCSA).

“Growthpoint is committed to creating space to thrive with innovative and sustainable property solutions in environmentally friendly buildings while improving the social and material wellbeing of individuals and communities. This green bond supports our ESG strategy and renewable energy goals and furthers the diversification of our funding,” said Gerald Völkel, Growthpoint Group Financial Director.

“IFC is committed to accelerating access to green and sustainable buildings in South Africa to address climate change, protect the environment and support economic activity,” said Adamou Labara, IFC Country Manager for South Africa. “The green bond investment will contribute to greater climate change resilience in the country by supporting climate-smart infrastructure and reduce the private sector’s carbon footprint.”

Absa Corporate and Investment Banking (CIB) acted as bond advisors for the transaction and helped Growthpoint with the private placement of the bond on the JSE.

“This deal demonstrates Absa CIB’s commitment to supporting our clients on their ESG journey and our ability to deliver tailored solutions by linking clients’ sustainable growth strategies with their financing,” said Heidi Barends, Head of Sustainable Finance at Absa CIB.

Increased funding for green buildings is vital in South Africa, which is facing increasing power and water supply shortages. Furthermore, access to green funding remains limited in the country.

The bond aligns with Growthpoint’s ambitious sustainability strategy to certify its entire portfolio of buildings as carbon neutral by 2050. The strategy includes reducing its greenhouse gas emissions by 25 percent and increasing its renewable energy use by more than five times by 2026.

The green bond ZAR1 billion issuance was issued under Growthpoint’s existing Domestic Medium-Term Note (DMTN) programme, which is registered at the Johannesburg Stock Exchange. It aligns with IFC’s strategy to green the commercial sector in South Africa by further developing capital markets, promoting climate-smart investments, and crowding in climate-relevant private capital.

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Emira’s s embedding ESG values in the foundations of property ownership

Emira Property Fund (JSE: EMI) is making practical moves to further integrate environmental, social and governance action into its investment and operating decisions.

South Africa and its property sector face a wave of sustainability legislation, especially regulations to operate more efficiently to reduce energy, water and waste consumption. However, Emira is on the front foot, having already made significant progress in these and other key environmental, social and governance (ESG) areas over many years.

Practising sustainability in real estate was once chiefly cost-driven. “While this is certainly a great benefit, and we strive to keep our bottom line contained and our tenants’ total cost of occupancy down, Emira has a more genuine purpose of making a difference,” says Geoff Jennett, CEO of Emira.

He goes on to explain, “When sustainability initiatives are genuinely driven by the highest ESG standards, they also become an effective way to lower our cost of capital, reduce energy costs, decrease asset obsolescence, increase brand awareness and leasing attractiveness, have a positive impact on asset values and contribute to a thriving economy.”

Ulana van Biljon, COO of Emira, adds, “Given the intense operating side of our industry, we find that practical solutions that are part of everyday processes are the most effective way to get everyone on board with our sustainability efforts. Our employees share our purpose of being great in the provision of great real estate, which includes owning and operating buildings that support sustainability for communities and the built environment.”

She says, “Working together with purpose and in an ethical manner also supports employee retention and a great culture. At Emira, we also appreciate the benefits of working together with our stakeholders and industry peers to share the responsibility of contributing to a more sustainable future.”

Emira is constantly seeking ways, through its everyday business activities, to ensure that its existing sustainability initiatives are kicked into an even higher gear and introduce new ones where it can achieve meaningful impact.

Among its high-profile projects is renewable energy, which Emira began in 2015 with its first solar photovoltaic (PV) farm installation. It has since increased its installed capacity of solar photovoltaic (PV) systems and now has solar panels at nine properties, which equates to nearly 24,000 panels and over 9,000 kilowatt peak capacity. Emira owns one of the first Net-Zero Carbon buildings in South Africa. It also led the real estate sector by completing the certification of 31 of its buildings for energy performance this year.

As part of its water use and management, Emira aims to ensure that the water supply at its properties
is reliable and sustainable, considering South Africa is a water-scarce country. Its good water stewardship is expressed in various ways, including water efficiency, rainwater harvesting and storage.

Emira’s waste management plan is directed at the diversion of waste from landfill and the responsible, compliant disposal of all materials. Emira has introduced hazardous waste disposal boxes for fluorescent lighting tubes at all its properties. It also practices recycling at most of its shopping centres and intends to expand this to its industrial buildings. It also uses waste contractors that are committed to waste diversion from landfill and measure the results of these efforts.

While Emira tackles the projects for which there are relatively straightforward solutions, it doesn’t shy away from more complex challenges. It is involved in various social initiatives and lends a hand to worthy causes in communities around its properties, with projects ranging from community gardens to graduate mentoring.

“We understand that for our business to grow, our economy must grow, and so we do our part in advancing economic inclusion and promoting a flourishing economy,” says Jennett.

Meaningful transformation in South Africa benefits from the difference Emira makes as a business, and it is proud to have achieved a B-BBEE Level 2 Contributor status.

For the past nine years, Emira’s graduate programme has enhanced its business and attracted and nurtured talent for the industry and the country. Emira ensures that around 8% of its employees at any time are young graduates whose careers it can launch by providing experience at one of South Africa’s foremost JSE-listed REITs.

The one-year programme is exclusive to black, Indian and coloured graduates who have completed a four-year Bachelor of Science Property Studies university degree. Graduates are exposed to the many aspects of property ownership and management and gain experience and mentorship from across all areas of Emira’s business. Graduates who have come through Emira’s mentorship programme have gone on to hold key industry positions.

“We believe that acting on our environmental commitment and pursuing a purposeful programme of meaningful social investment is crucial as a differentiator for Emira,” says Jennett.

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Hyprop reports improved trading across SA, EE retail portfolios

Monday, 5 December 2022. All of Hyprop’s dominant retail centres in South Africa (SA) and Eastern Europe (EE) have continued to enjoy more buoyant trading conditions over the last few months. These favourable trading conditions, together with the group’s strong balance sheet, should help it to tackle challenges such as rising inflation, higher interest rates, increased energy costs and socio-political changes, says CEO Morné Wilken.

“Risk in the current economic environment remains elevated and fluid, requiring caution and conservatism in our approach and strategy,” Wilken says. “We continue to focus on generating sustainable total returns for shareholders, reducing debt, and allocating capital prudently to diversify risk and optimise returns.”

In a pre-close operational update, Hyprop reported that it held R2.4 billion of unutilised revolving credit facilities and R814 million in cash at 31 October 2022. The loan-to-value (LTV) ratio was 38.2%, after paying the dividend for the 2022 financial year and implementing a dividend reinvestment plan (DRIP), which raised R500 million in new equity and was supported by 84.4% of shareholders.

Hyprop has continued ensuring its portfolios remain relevant in line with its repositioning strategies whilst driving initiatives related to recycling materials, reducing waste, managing assets to be more energy- and water-efficient, and reducing carbon emissions in line with its environmental strategy. Specific initiatives include installing solar PV at all Gauteng centres as well as Propelair toilets (which are more water-efficient) at three sites, to be rolled out in most local centres over time and employing various organic waste management technologies.

South African portfolio 

Foot count through the South African centres continued recent positive trends, with a 7.1% increase in the four months to end-October 2022 over the same period in 2021. Foot count on Black Friday was 8% higher than in 2021, and tenant turnover for the four-month period grew by 16.9%. Demand for retail space remains robust and many retailers are trading better than they were before the pandemic. Retail vacancies remained low at 1.3%.

Some of the new store openings across the portfolio include Scape Goat Gallery, George’s Grill House and Versailles Luxury at Hyde Park Corner; Huawei, Cosmic Comics and Freedom of Movement at Clearwater Mall; and at Canal Walk, South Africa’s first Nike Live store as well as the Western Cape’s first Xaomi and SPCC stores.

The centres are well-positioned for the approaching festive season.

Eastern European portfolio

Tenant turnover, trading density and foot count have improved significantly since the lifting of Covid-19 restrictions in Eastern Europe earlier this year. Vacancies remain low at 0.5%, confirming the dominance of the centres.

The centres performed very well over the Black Friday weekend, with foot count up 19.6% on the Friday and 23.1% on the Saturday compared with the previous year.

Highlights include various store renovations by tenants. Six new stores have opened at The Mall in Sofia and the planned revamp of H&M in 2023 will incorporate Bulgaria’s first H&M Home. At Skopje City Mall, the first Kiko Milano in North Macedonia has been launched. City Center one East’s tenant mix was improved Ghetaldus Optika was relocated to the upper level to create an optometrist cluster on this floor.

Increased costs of electricity, fuel and gas are driving inflation in EE, which impacts tenant occupancy costs.

“We are closely monitoring tenant performance on a monthly basis and have granted temporary rent relief to some tenants in exchange for future rental escalations and longer lease tenure,” Wilken says.

Sub-Saharan Africa (ex-SA) portfolio

At Ikeja City Mall in Nigeria, trading at the new Nike store has exceeded expectations since its opening in August 2022. The centre is performing well, with one vacancy of 166m². Hyprop is working with Actis to implement the sale of Ikeja and considering various options, including a partial sale of our investment.

In Ghana, turnover and trading density have been hit by the 144% depreciation of the Ghanaian cedi against the US dollar since January 2022. However, vacancies have reduced to 12.7% in October from 13.4% in June as a result of focused asset management. Accra Mall, West Hills Mall and Kumasi City Mall are all celebrating new store openings. An exit agreement was concluded with Game in Ghana and there is good progress in re-letting their space.

Release of interim results

Hyprop’s interim results for the six months ended 31 December 2022 are scheduled to be released in March 2023.