Emira Property Fund, which owns a diversified property portfolio in SA and the US, aims to reduce its exposure to the office sector with R200m in targeted disposals.
Offices make up 21.9% of the company’s portfolio, with a value of R2.9bn. With ongoing struggles in the SA office property sector, Emira saw vacancies reduce slightly to 15% at end-June from 17% previously.
“The office sector, which has been under pressure for some time now needs a growing economy to improve fundamentals,” said CEO Geoff Jennett.
Weak business confidence and rising interest rates are dampening demand for office space. In this economic environment, it is harder to conclude deals, Emira said during a media presentation of its annual results for the period ending June 2022.
Emira owns 20 office properties, of which 18 are premium and A-grade. The company plans to sell some of its sectional title buildings to owner-occupiers.
“Having a diversified portfolio of retail and industrial assets that have shown strong performance has helped to counter the strained office portfolio,” said Jennett.
Jennett said the process to exit Enyuka, its joint venture into lower-income retail with One Property Holdings, is under way and the transaction will be completed in December.
Emira is selling its stake to One Property Holdings for R638.6m and will use some of the proceeds to pay off debt. Enyuka owns 24 properties, valued at R1.72bn, and contributed R89.5m to Emira’s distributable income during the reporting period.
The company sold five buildings and focused on maintaining and improving others with the addition of solar energy, water harvesting and backup generators to attract tenants and remain relevant.
JSE-listed Emira owns a mix of 74 directly held retail, office, industrial and residential assets worth R9.8bn. It owns a 40.69% stake in Transcend Property Fund, which added R32.7m to distributable income.
In July Emira made an offer to buy the remainder of Transcend. The transaction, which is subject to competition authority approval, is under way with completion expected at end-November.
Of its asset base, 18% is equity investments in 12 grocery-anchored convenience shopping centres in the US, which provide a buffer to the low-growth SA environment. This investment added R176.7m to distributable income.
The company’s gearing at 40.5% will increase to 42% due to the Transcend offer, which will be funded by debt. However, the disposal of Enyuka and the consolidation of Transcend into Emira will reduce debt.
Emira has access to various funding sources, with R869m in undrawn facilities, including R500m allocated to the Transcend offer, and R66.7m cash.
Distributable earnings grew 3.8% to R673.9m from R649.1m in June 2021, resulting in an increase in the cash dividend to 119.79c a share. Net asset value per share increased 7.3% during the financial year to 1,628.6c.
“After six years of diligent repositioning and capital recycling to improve our portfolio quality and diversification, we are in a strong position to manage for the future,” said Jennett.
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