Emira continues strong earnings momentum
In the listed property sector, investors usually have a bias towards companies with bigger size, quality portfolio and attractive income payouts.
And mid-cap property counter Emira Property Fund seems to be delivering on all these fronts, as it continues to become popular among income-chasing investors.
Over the last four years, Emira’s turnaround strategy of reducing its exposure from the ailing office sector to improve the quality of its property portfolio is starting to pay off.
For the six months to December 2015, Emira grew its property portfolio of office, retail and industrial properties to R13 billion.
Emira, who owns the Wonderpark Shopping Centre and Lynnridge Mall in Pretoria, has been reducing its B-grade office exposure, opting for prime office and retail properties.
Disposing office properties, building scale through acquisitions and redeveloping existing assets over the years has boosted Emira’s performance, says CEO Geoff Jennett.
“Emira’s performance is driven by a solid core portfolio of properties…We’re heading for even tougher times, but Emira is well positioned with a strong portfolio, good strategy and skilled team. We’re sticking to solid fundamentals and targeting opportunities which present themselves for prudent growth that supports shareholder value,” says Jennett, who delivered his first set of results as CEO since his appointment in August.
Emira’s efforts have seen vacancies drop from 5.1% in December 2013 to 4.7% for the period under review. The office sector has the highest vacancy rate in the portfolio of 9.3%, followed by the retail and industrial sector with 3% and 1.7% respectively. About 82% of its gross lettable area of expiring tenants was renewed during the period under review.
Jennett, Emira’s former chief financial officer, replaces James Templeton, who built a strong reputation for transforming the property counter. However, Jennett’s appointment has been positively accepted by the market as he is expected to bring fresh ideas to the fund, with a market capitalisation of R8.1 billion.
Although Emira’s results were in line with expectations, it is still too early for the results to be impacted by the change in management, says listed property manager of Old Mutual Investment Group’s MacroSolutions boutique Evan Robins.
Emira continues to recycle capital as part of its turnaround, with the disposal of largely non-core office properties nearing completion. It entered into agreements to dispose of R421 million worth of properties during its half year and acquired properties to the value of R240 million.
Its acquisitions include a 50% undivided share in Mitchells Plain Shopping Centre in the Western Cape for R75.3 million; a 50% undivided share in five buildings comprising Summit Place; and a commercial development in Menlyn, Pretoria worth R403 million.
Meago Asset Managers director Jay Padayachi, says management continues to be active in the market by recycling its lower-end properties “with the objective of enhancing the overall quality and defensiveness thereof”.
It also has property redevelopments and extensions worth R515.1 million currently underway, chief among them, Kramerville Corner in Sandton and Knightsbridge Manor office park in Bryanston.
Says Padayachi: “I am a bit concerned about the Knightsbridge development in Bryanston, which has recently kicked off, as it is slightly off the main drag (William Nicol and Main Road) and uncertainty whether the right client profile will be attracted to it.”
With the rand depreciating against major currencies as a result of SA’s worrying state of the economy, Emira’s income from Growthpoint Properties Australia (GOZ) put it in good stead. Emira’s 4.9% stake in GOZ was valued at R942.7 million (during the period under review) and its income from this investment increased by 21.8%.
Emira investors have been awarded an 8.8% growth in income dividend payouts to 70.34 cents per share.