Redefine nets a stake in Emira
“This is not a fund we want 100% of” – Redefine.
JOHANNESBURG – Redefine Properties has made a bid for an 11% stake in the Emira Property Fund (Emira) worth more than R800 million, signalling further consolidation in the listed property sector.
Redefine – the second biggest JSE-listed property company by market capitalisation (R32 billion) – has effectively become one of the biggest shareholders in Emira.
“Emira has been a fund that has been struggling for a while, but they have been making progress across their property portfolio,” Redefine executive chairman Marc Weiner (pictured) tells Moneyweb.
Describing the bid as “strategic”, Weiner says that Redefine originally made a bid for 15%. “This is not a fund we want 100% of. Their earnings will continue to grow and the share price will appreciate overtime.”
Redefine is buying into the property fund’s growth story. Emira’s drive to reduce vacancies across its property portfolio and to contain operational costs has helped the company enjoy a full year distribution growth of 7.5% ended June 2014.
Emira, with a market capitalisation of R7.8 billion, has 141 properties in the retail, office and industrial sectors valued at R10.8 billion. The fund reported a dip in overall vacancies from 5.6% to 4.5%.
The company has a dominant exposure to the office sector which makes up 50% of value in its portfolio. Emira’s industrial sector, which makes up 16% of its overall portfolio, has contributed most to the decrease in vacancies, achieving vacancies of 1% – with fully-let properties in KwaZulu-Natal and the Western Cape.
Some of Emira’s retail centres include Wonderpark Shopping Centre in Pretoria, Cresta Corner in Johannesburg, Granada Square in Durban and Market Square in Plettenberg Bay.
The company has also acquired retail, industrial and office assets. Some of the acquisitions include the R614 million Menlyn Corporate Park office development, Ben Fleur Shopping Centre in Emalahleni and Steelpark Industrial.
Despite the fact that the office sector is feeling the pressure, due to high vacancies and rental rates, Weiner says that Emira has improved the quality of its office portfolio.
Emira CEO James Templeton says the fund’s turnaround strategy has been successful in the past three years and “is well positioned for future performance.”
“This has created a keener demand for Emira’s participatory interest (PI) from a variety of investors in the market,” Templeton says in a statement.
“Emira will remain focused on excellent operational performance and growing our diversified portfolio of office, retail and industrial properties with high-quality assets.”
The listed property sector has seen a number of listings over the past two years, bringing the number of listed property counters in excess of 50. The sector has also seen consolidation. “With consolidation in the sector, Emira could be a target,” says Weiner.
“There is nothing in the sector [for Redefine]. Nothing that we are really looking at. Opportunities must be A-Grade properties and in line with our strategy,” he explains.
Redefine has recently concluded an equity raise exercise of R1.36 billion by placing approximately 148.4 million shares to the market. The proceeds, Weiner says, will be used to fund its R2.7 billion acquisition of Macsteel’s 28 industrial properties with a 12-year triple net lease.