It’s all hap­pen­ing at Emira

Finweek English Edition - - IN THE NEWS - BY GLENDA WIL­LIAMS

It has been a busy year for Emira Prop­erty Fund. The JSE-listed c om­pany c on­ver t e d f r om a Prop­erty Unit Trust (PUT) to a real es­tate in­vest­ment trust (REIT), demon­strated ex­cep­tional op­er­at­ing per­for­mance, its share price reached an all-time high and it sig­nif­i­cantly grew its port­fo­lio - i nvest­ing i n around R1.4bn worth of stock.

But it’s not just about per­for­mance and change in struc­ture. CEO James Tem­ple­ton depa r t s f r om Emira to pur­sue per­sonal i nter­ests, with re­place­ment Ge­off Jen­nett, Emira’s cur­rent CFO, tak­ing the reins from 1 Septem­ber. Emira ex­ec­u­tive di­rec­tor Ulana van Biljon’s re­spon­si­bil­i­ties will also in­clude that of COO while a new CFO is yet to be an­nounced.

Out­per­form­ing its peers, Emira de­liv­ered dis­tri­bu­tion growth per par­tic­i­pa­tory in­ter­est ( PI) of 9% for its full year to 30 June. That’s close to dou­ble the inf la­tion rate of 5%. Net as­set value ( NAV) per share growth in­creased an im­pres­sive 15.9% to 1 751 cents per PI, while to­tal distributable in­come also grew 14% to R685.5m.

Tem­ple­ton at­tributes the com­pany’s mean­ing­ful in­crease in dis­tri­bu­tion to the fund’s ac­quis­i­tive growth, the con­trac­tual rental es­ca­la­tions on most of it s port­fo­lio, i mproved l eas­ing and r i gorous cost con­trols as well as in­creased re­cov­er­ies of mu­nic­i­pal ex­penses.

Emi r a a s s e t s c o mpr i s e 14 8 prop­er­ties (of­fice, re­tail and in­dus­trial) val­ued at R12.7bn, 41% of which is re­tail, their best per­former over the past four years.

It is also in­ter­na­tion­ally diver­si­fied through its di­rect in­ter­est in ASX-listed Growth­point Prop­er­ties Aus­tralia (GOZ), val­ued in ex­cess of R796m, with to­tal as­sets now at R13.6bn. In­come from Emira’s GOZ in­vest­ment in­creased by 7.2% due to an in­crease in the dis­tri­bu­tion per unit re­ceived from GOZ and the de­pre­ci­a­tion of the rand against the Aus­tralian dol­lar.

“We went over to Aus­tralia re­cently with the in­ten­tion of in­creas­ing our ex­po­sure there. But be­cause prices have run so high, what we will prob­a­bly do is re­place lo­cal debt with Aussie debt,” says Tem­ple­ton.

The REIT con­ver­sion will hugely benef it Emira by al­low­ing them to gear up against their off­shore ex­po­sure, some­thing they were un­able to do as a PUT. “We can raise Aus$25m (around R250m) on a f loat­ing ba­sis at a rate of 2.1%, com­pared to the 6.3% Jibar here,” says Jen­nett. That is a not-too-shabby 4% dif­fer­en­tial, and a R10m ben­e­fit for switch­ing rand-based bor­row­ings to Aus­tra l i a n- based bor­row­ings. One down­side has been i ncreased with­hold­ing tax on the distributable por tion ef­fec­tively in­creas­ing with­hold­ing tax from 6% to 8%. R13.6bn: To­tal as­sets 148: Num­ber of prop­er­ties 15.9%: NAV per share growth 76%: Ten­ant re­ten­tion 33.4%: LTV ra­tio of debt fund­ing R1.375bn: Ac­qui­si­tions R681m: Dis­pos­als R186m: Capex projects R2.3bn: De­vel­op­ment pipeline Much has been made about Emira’s B-grade space but in the past three years the com­pany has sold R1.4bn worth of stock at what Tem­ple­ton terms “fan­tas­tic prices”. Dis­posal of non-core prop­er­ties has en­abled the com­pany to rein­vest t he pro­ceeds i n ac­qui­si­tions and i mprove­ments. That’s around R186.4m in projects to mod­ernise, ex­tend and ren­o­vate 19 build­ings, t he most sig­nif icant of these be­ing the R57.8m spend on Kramerville Cor­ner, con­vert­ing of­fice space into re­tail show­rooms.

Po­ten­tial capex projects worth R2.3bn in­clude the tripling of off ice space in Knights­bridge, Bryanston, ef­fec­tively turn­ing an R85m B-grade build­ing into an R800m P-grade fourstar Green­Star build­ing com­mand­ing gross rentals of R200/m2 against the cur­rent R90-odd/m2.

Achiev­ing sim­i­lar growth in the com­ing f inan­cial year could prove a dif­fi­cult task given wors­en­ing eco­nomic con­di­tions, jit­tery in­vestors and a new CEO at the helm. Jen­nett, though, is un­likely to de­vi­ate from com­pany strat­egy or the way the 22-strong team has been led in the past.

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