Sunday, January 16

Emira plans to increase its exposure to the US market

Publicly traded diversified property fund Emira plans to gradually increase its exposure to the US market.

Emira’s US portfolio, comprising 11 properties with a total value of $ 569.5 million (R8.5 billion), of which Emira’s stake is valued at $ 119 million, now represents 13 , 6% of total assets of Emira.


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Emira CEO Geoff Jennett said on Wednesday that the longer-term intention is definitely to increase the percentage contribution of the US portfolio to the total value of assets in the Emira portfolio “on an incremental basis agreed by agreement in the next few years. ”

“It depends on the opportunities that exist, but we have set an early target of 15% of total assets and we would look to invest and increase that in 5% increments over a long period of time.

“But it’s really subject to us finding the right assets, at the right price, in the right way,” he said.

Emira’s international investment strategy in the US with its partner, The Rainier Companies, resulted in the acquisition of its 11th shopping center asset in the US In the year to the end of June, the Newport Power Center Pavilion at the gates of the Cincinnati CBD.

“We are pleased that Emira’s strong balance sheet, with cash available to implement, has enabled us to complete this acquisition,” said Jennett.

“Our investment strategy facilitates recycling and capital allocation in more resilient environments that can act as a buffer against South Africa’s tight economy with US dollar-denominated returns.”

Jennett said that Emira’s equity investments in the US now total R1.7 billion ($ 118.9 million) and its after-tax income from equity co-investment in the US totaled R258.8 million.

Of this, R125.5 million are distributable and contributed R96 million to Emira’s distributable income for the year, he said.

Emira declared a final dividend of 66.65 cents per share on Wednesday.

This pushed the dividend for the full year to 118.65 cents per share, up 13.7% from the previous year.

Emira closed its fiscal year with a vacancy level of 6.4% in its direct portfolio, increased its tenant retention rate to 82%, achieved monthly collections of 99% of the billed rent and collected 95% of the deferred rent for the months April, May and June 2020. period.

Arrears decreased by R9.5 million during the year to R63.8 million.

Diversification key

Jennett attributed the company’s strong performance to its diversification of assets, tenants, investment methodologies and financing.

In addition to its investments in the US, Emira is invested in a portfolio of 77 directly owned office, retail, industrial and residential properties valued at R9.7 billion.

Emira also has indirect exposure to the residential rental property sector, with a 34.9% stake in the specialized real estate investment fund listed on JSE (Reit) Transcend Residential Property Fund, whose total property portfolio of R2. 5 billion contributed R37.8 million to Emira’s distributable income. For the year.

Through Enyuka Property Fund, a company dedicated to rural and low-LSM retail property with One Property Holdings, Emira has indirectly invested in 24 shopping centers valued at R1.66 billion.

Emira’s COO Ulana van Biljon said Enyuka’s portfolio continued to perform well and contributed R83.7 million to Emira’s distributable income for the year.


However, Van Biljon said there was unfortunately extensive looting at six of the 24 properties, all in KwaZulu-Natal, during the recent riots and that one of the shopping centers was also partially set on fire.

But he said that 50% of the tenants in these centers are already negotiating and most of those properties will be fully operational in the coming months.

Van Biljon added that there is full Sasria insurance coverage in Enyuka’s portfolio.


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Comparable tenant turnover in Emira’s urban retail portfolio, which comprises 38% of the total value of real estate assets and is 95.9% occupied, increased 6.4% year-on-year.

Van Biljon said his industrial properties, which are 96.5% occupied and account for 14% of Emira’s overall property portfolio, have held up well and there is an increase in demand for space with relatively favorable rents.

He said office properties, which comprise 24% of total real estate assets and are 83% occupied, have the most to go in light of changing work habits and the trend of shrinking and consolidating space. of offices.

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Future strategy

Commenting on Emira’s future strategy for its portfolio, Jennett said there is likely to be some growth in the residential portfolio because Transcend is investigating opportunities that appear to have value.

Jennett said they also see opportunities in the industrial portfolio and anticipate gradually adding to this portfolio.

Emira still has a contract to acquire Northpoint Industrial Park in Cape Town for R103 million, but the transfer has been delayed and is expected to take place in October 2021.

Jennett said that Emira is not specifically looking to acquire any retail property.

“In any case, we will seek to reduce the retail portfolio and prefer to reinvest in the existing assets that we have on our retail side,” he said.

Emira has a contract to dispose of the Epsom Downs shopping center in Sandton, Gauteng, for R68 million and envisages the sale of two other non-core retail assets for R100-200 million.

Jennett said that Emira is not looking to expand its office portfolio and will take any opportunity that presents itself to reduce its industry exposure to offices.

But he stressed that this kind of rebalancing is difficult to achieve once there has been a pandemic or crisis.


Jennett said that Emira cannot, in the current environment, provide earnings and distribution guidance.

However, it confirmed that Emira management’s key performance indicator (KPI) for distributable earnings is 114.65 cents per share for the year to the end of June 2022 and expects to continue with its policy of paying the supported portion. in cash as dividends to shareholders.

“We are confident in the strength of Emira, but our tenants need a growing economy to thrive and, until this is achieved in South Africa, rents will remain under pressure as landlords struggle to contain growing vacancies,” he said.

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Analyst point of view

Keillen Ndlovu, director of Stanlib-listed real estate funds, said the performance and earnings on Emira’s portfolio were better than expected, adding that the reduction in the value of Emira’s loan from 43% to 41% was positive.

Ndlovu said forecasting earnings in the current environment for the entire real estate sector is challenging, but Emira looks cheaper relative to the sector.

Based on management’s KPI target for distributable earnings per share of 114.65 cents for the year through the end of June 2022, a forward return of 11.7% is achieved on a distributable earnings per share basis, which is higher than the Industry average of about 10%, said.

Ndlovu said that Emira also trades at a discount to its net asset value (NAV) of 35% compared to the sector at about 25% below NAV.

Emira shares rose 1.34% on Wednesday to close at R9.83.

Hear Suren Naidoo’s interview with Emira’s COO Ulana van Biljon in this properties module (or read the highlights here):

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