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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
Emira.co.za

Facebook @EmiraPropertyFund
LinkedIn @EmiraPropFund
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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.

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.