Johannesburg - Emira, the listed property fund, is planning to combine its portfolio of 15 rural retail assets valued at R575 million with the development pipeline of an unlisted property fund to enable these assets to grow faster and at a better rate.
Geoff Jennett, the chief executive of Emira, said yesterday that the fund was close to signing an agreement on this and anticipated making an announcement soon.
Jennett said the unlisted property fund had a development pipeline valued at between R400m and R500m. He said the rationale for doing this was that they believed together they could achieve more.
“They (the unlisted property fund) are operators in the lower living standards measure rural retail market and eat, sleep and breathe that stuff all the time.
“What is quite exciting about this is that we have got our R575m in rural retail assets and if you add on R500m in assets in the next 12 to 18 months then you are at R1bn.
“Now all of sudden more opportunities present themselves. If we can increase that to R1.5bn to R2bn then we have got different opportunities.
“Maybe the right thing then is to spin it off as a separate fund because investors would rate that it is better by itself and it’s a more specialty-focused fund whereas with Emira’s rural retails assets at R575m I can’t do anything with it.”
Jennett said the unlisted property fund was willing to spin the assets off as a separate fund and also wanted to grow the assets to get to that stage.
He added that Emira planned to increase the percentage of retail in its overall portfolio from 41 percent currently to 50 percent and reduce its exposure to the office market.
Portfolio
The office portfolio by value currently accounts for 44 percent of the fund total portfolio value of R12.9bn.
Yesterday, Emira reported an 8.8 percent growth in distributions to 146.10c in the year to June from 134.27c in the previous year. Revenue increased by 5.6 percent to R1.79bn from R1.95bn.
Jennett attributed this growth to the effect of past acquisitions and organic portfolio growth.
Income from Emira’s listed investment in Growthpoint Properties Australia (GOZ) grew 22 percent because of increased distributions from GOZ, the lower dividend withholding tax and the depreciation of the rand against the Australian dollar.
Overall vacancies increased to 5.3 percent from 4 percent, with the fund’s office vacancies on par with the SA Property Owners’ Association (Sapoa) national level of 10.5 percent. Acquisitions valued at R244.5m and disposals worth R284.5m were made during the year.
Jennett attributed the solid performance in the year to contractual escalations across most of its portfolio, benchmark-surpassing occupancy levels, tight cost controls, effective recycling of capital and Emira’s strong balance sheet.
Emira is forecasting a 2 percent decline in distributions a share to 143c for its current financial year, a 3c a share reduction from this reporting period.
Jennett said this was a result of increased vacancies in its office portfolio, the oversupply of offices in the market and expected negative rental reversions resulting from the weak macroeconomic environment.
Emira shares dropped 2.27 percent yesterday to close at R14.65.
BUSINESS REPORT