It’s all happening at Emira
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.