Emira Property Fund plays to its strengths as a medium-cap diversified REIT
Emira Property Fund is strongly positioned for responsible growth, notwithstanding the adverse economic environment in South Africa.
Emira CEO, Geoff Jennett, confirms the JSE-listed SA REIT (real estate investment trust) has refined its strategy to make the most of opportunities in this market, generate distribution growth, gain in size and create value for its shareholders.
Emira has a diversified portfolio of South African commercial real estate, and an offshore investment in Growthpoint Properties Australia (GOZ). Right now, GOZ comprises around 7% of Emira’s assets.
Jennett says that while many listed property funds are targeting all their growth offshore in the current market, Emira will take a more cautious approach to growing its international investments.
As a company with its sights set on growth, Emira has targeted growth in both the local and international markets.
For its offshore investment, Emira is aiming for the progressive growth of its international property holdings up to around 10% of its asset value. However, Jennett stresses the importance of specific market knowledge for offshore investment.
“Our exposure to GOZ, an investment that has done tremendously well for Emira over the years since our initial investment in 2011, has given us excellent insight into the Australian market. We believe we are now in a position to consider direct investment in this market, should suitable opportunities present themselves,” says Jennett. “We like this model of gaining quality knowledge about international markets, and will consider extending this into other geographies as we aim to grow our portfolio of international investments from 7% to roughly 10% of total assets.”
As a balanced REIT, Emira’s South African portfolio comprises 45% office, 40% retail and 15% industrial assets – a mix it is confident is within optimum levels.
“There are still opportunities in the local market for a company of our size,” says Jennett.
It makes good sense for Emira to focus its investment growth in local markets. The company is led by a skilled group of South Africans with intimate knowledge of domestic property and funding. In this way, Emira is matching its asset base with its skills base.
“We believe there is up to 5% room to move in each sector, allowing growth across the various asset classes at different paces in response to market opportunities, availability, preference and performance,” says Jennett.
He adds that Emira’s strategy also provides the ability to take a stake of up to 5% in alternative asset classes, beyond the traditional mainstay property subsectors. These could include assets such as developments, residential property, student accommodation, frail care, petrol stations and storage, though it has plans to start to with a small co-investment in the residential sector.
“This potential asset allocation creates a low-risk opportunity to explore alternative subsectors for suitability and performance, to optimise value for shareholders,” says Jennett.
Quality, size and income returns are important factors for Emira. Over the past five years, Emira has undertaken a portfolio clean-out and its disposal programme is now nearly complete. It has achieved a solid core portfolio of properties that offer good performance and potential.
Jennett reports: “Our portfolio is looking great. Our assets match our investment criteria well. Now, we are entering a responsible growth phase to ensure Emira enhances its status as a meaningful player in the mid-cap REIT space.”
Emira has targeted 90% of its growth in South Africa. Jennett believes there are several ways the REIT will grow. Its growth will be organic, by maximising opportunities in its existing portfolio, as well as through acquisitions, developments, strategic partnerships and corporate actions.
“Even in this tough environment there are opportunities to grow. We’re committed to keeping pace and even outgrowing the sector,” says Jennett.
Its responsible growth strategy also targets other benefits. A larger portfolio of properties create greater economies of scale, increases liquidity and improves share price rating. It will also, in turn, expose Emira to bigger deals, giving it scope to compete on new levels.
Jennett says: “Our strategy plays to our strengths and will distinguish Emira as a growing, diversified, mid-cap SA REIT.”