Emira says focus on tenant retention is paying off

Emira Property Fund, which has a retail-dominant portfolio, says its focus on retaining tenants is paying off in a tough SA property market. But this comes at a cost, resulting in punitive rental reversions so far in its 2022 year.

Vacancies across the group’s SA portfolio fell to 5.5% at the end of May from 6.1% at the end of December, but average total reversions stand at -12.8%, the firm said in an update for the first 11 months of its 2022 year.

Rental reversions have improved from -14.5% as of December, its half-year, with Emira reporting that it has managed to retain 82%, by revenue, of maturing leases for the full year so far.

CEO Geoff Jennett said the property firm had met its own expectations, despite severe challenges, such as KwaZuluNatal’s riots and then flooding in the same province.

“First and foremost its because of our strategy in terms of being diversified, but importantly, Emira is a solid and experienced team. We have got experts in our team that have all been pulling together in the same direction for the last number of years,” he said.

Emira listed on the JSE in 2003 and had an SA portfolio of 77 properties worth R9.8bn as of December, just under half of which comprises retail assets, 30% is office, and 17% industrial.

The group has equityaccounted investments that were worth R1.9bn in the US, where it is co-invested in 11 grocery-anchored open-air convenience shopping centres.

Emira COO Ulana van Biljon said on Wednesday the group was seeing positive signs across its portfolio, although office remained under particular pressure, the group felt it turned in a decent result.

“The oversupply, the incentive from other landlords, it is making it so much more difficult, but it is not just Emira that is seeing that, it is everyone,” she said during a pre-close investor call.

Collections vs billings for the period under review for normal debtors were a strong 99.8%, while activity continues to pick up, with retail tenants reporting increased turnover and footfall, and vacancies falling to 3.3%, from 3.6% at its half-year.

Office vacancies dropped to 16.6%, from 18.2% at the end of December, and there were positive signs starting to emerge, with increased enquiries for space, partly driven by most tenants having now returned to their offices on either a full time or rotational basis.

Industrial vacancies decreased to 1.9% to end-May, from 2.6% five months previously, and this part of its business, split between single-tenant light industrial and warehouse facilities, as well as multi-tenant industrial parks, continues to perform well in spite of recurring power blackouts.

The US continues to perform in line with expectations, and vacancies across the 11 properties at the end of December have improved from 5.3% from 7.1%. A twelfth asset was transferred in May, at a total cost to Emira of $18.45m (R296m) for a 49.5% equity interest.

The group’s loan-to value ratio, a measure of indebtedness, increased marginally to 42% at the end of May, and is anticipated to remain at a similar level at the end of June, but is dependent on the completion of the yearend property valuations and the closing rand to dollar exchange rate.

In morning trade on Wednesday, Emira’s shares were down 1.25% to R9.46, having fallen 0.42% so far in 2022, a period in which the JSE’s real estate investment trust index lost 13.2%.