UPSIDE IN M&A DRIVE
BIGGER MAY NOT ALWAYS be better, but as the listed property sector’s consolidation drive hots up, size is becoming an important consideration for property punters. After all, bigger funds tend to offer more diversification and liquidity than do their smaller counterparts.
Emira Property Fund, in the RMB Properties stable, is one of a number of real estate counters now going the merger & acquisition route with the proposed buyout of sister fund Freestone Property Holdings. The merger will see the size of its portfolio swell from R3,5bn to more than R5bn and will no doubt see Emira appear more regularly on fund managers’ buying lists. OPPORTUNITIES • The Freestone merger is likely to create more demand
for Emira scrip, supporting further share price growth. • The opportunity to lower debt funding costs through its participation in Freestone’s existing commercial mortgage-backed securitisation programme. Relationship with RMB Properties and Momentum creates ongoing deal flow opportunities: R850m worth of property was already injected into Emira via those two sources last year. • Some 26% of Emira’s leases are up for renewal this year,
creating scope to sign new tenants at higher rentals. RISKS Still battling with downward rental reversions on a few industrial properties. Recent acquisitions have diluted earnings somewhat, placing short-term pressure on distribution growth. Like other real estate funds, Emira is exposed to the risk of further interest rate hikes.