9% distribution growth for Emira Property Fund investors

Emira Property Fund CEO, James Templeton attributes its strong performance to the fund’s acquisitions, contractual rental escalations on the bulk of its portfolio, significant leasing progress made during the period.

Emira Property Fund today reported 9% increase in distribution growth of 64.65 cents per participatory interest (PI) for its half year results which ended 31 December 2014.

During the period, its net asset value (NAV) increased by 14% to 1650 cents per PI, while its distributable income grew 13% to R330 million. Total return for the six months was 22.2% to its investors.

Total portfolio vacancies fell to 4.9% in December 2014 from 5.1% in December 2013.

The fund’s assets comprise 148 properties valued at R12.5 billion. Its also internationally diversified through its direct interest in ASX-listed Growthpoint Properties Australia (GOZ), valued in excess of R700 million, with total assets now at R13.5 billion.

In November the JSE-listed REIT concluded debt swaps that will add some R8 million to its bottom line on an annualised basis, supporting distribution growth for shareholders.

The debt swaps, undertaken with a number of Emira’s financiers, restructure older debt taken out at higher interest rates as far back as 2008, with lower rates over a longer period at a capital cost of R31,8 million.

Templeton explains: “We’ve watched the swap curve for the best opportunities and restructured R429 million of debt, dropping the average rate of our fixed debt book by about 20bps.”

During the period, it sold and transferred four properties totalling R93,8 million at a forward yield of 8.9%. It also sold a further five buildings with a total value of R535,5 million at a forward yield of 6.9%.

According to Templeton, the sale proceeds will be reinvested in new acquisitions, capital expenditure projects or used to repay debt.

Refurbishment and extensions underway in the period totalled R819,4 million.

The most significant was the R551,3 million major upgrade and extension to Wonderpark Shopping Centre in Pretoria, increasing from 63,000sqm to 90,000sqm with practical completion achieved in October 2014.

After acquiring the R837 million diversified Integri-T portfolio, it transferred into Emira at the start of the period. The portfolio comprises eight properties – two retail centres, three offices and two industrial properties – of which six are in the Western Cape, enhancing its exposure to the province, where it has historically been under-exposed.

The fund, with a market capitalisation of R9.2 billion, also acquired a 60% undivided share in Ben Fleur Shopping Centre for R66,5 million. The centre has recently completed a R20 million upgrade to accommodate a Woolworths Food store as well as other line shops.

Income from the its listed investment in Australia increased by 16.0% due to an increase in the distribution per unit received from Growthpoint Properties Australia (GOZ) and the depreciation of the Rand against the Australian dollar.

Subsequent to year end, Redefine Properties identified the opportunity to gain a strategic foothold in Emira Property Fund.

Redefine made an investment by acquiring approximately 11% of its Participatory Interests (PIs) — a move which has made Redefine become one of Emira’s larger PI holders.

Redefine Chairman Marc Wainer said that the purchase of the participatory units, worth about R880m, was strategic. “It could become a takeover target in the future so what we have here is a strategic stake. We would have liked more than 11% but it’s a start.”

Templeton concluded that: Emira expects to achieve similar levels of distribution growth for the full financial year to the end of June 2015.

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