JOHANNESBURG - Listed property fund Emira has said that it planned to continue reducing its exposure to the South African office sector to prioritise further investment on its offshore and residential portfolio.
Emira chief executive Geoff Jennett said yesterday that the group had earmarked 26 properties at end-June for disposal to the value of R1.9 billion, of which R1.8bn were office properties, in line with the fund’s strategy to rebalance its portfolio.
Jennett said Emira sold 13 properties, including seven office properties, that were either deemed non-core, under-performing or posing excessive risk for a total of R530.6 million in the year to June.
He said these disposals reduced Emira’s office exposure to 35.7 percent from 38.7 percent of the total assets, with the disposal proceeds recycled into the fund’s international investment strategy.
The properties were sold at a combined premium to book value of 14.8 percent.
Exposure
Emira closed the year with 104 directly held South African properties valued at R12.5bn, with its international exposure increasing to 10percent, of which its new US investment venture represented 3percent.
Jennett said Emira liked the residential sector. “It is a great diversifier for our portfolio and we are actively pursuing opportunities to co-invest with sector specialists that cater for the lower middle-class rental residential property markets.
“We will also consider other residential conversions, should suitable opportunities arise,” he said.
Jennett added that Emira aimed to grow residential property to between 5 and 10 percent of its total portfolio.
Last year, Emira commenced with the R240m conversion of its B-grade offices in Rosebank, which were previously occupied by Sasol, into a contemporary residential apartment development.
Called The Bolton, the development was being undertaken with the Feenstra Group, a specialist partner and 25 percent co-investor.
Jennett said the project was converting 10 000m² of office space into 280 residential units, with the first units coming on stream this month. The project was scheduled to be completed by January next year.
Emira announced in October last year that it had embarked on an investment strategy into the US together with its partners, the Rainier Group of Companies. This resulted in Emira acquiring four grocery-anchored convenience retail centres in the US through its US subsidiary together with the Rainier Group.
Emira yesterday reported a 2.5 percent increase in distributions to 146.80cents in the year to June from 143.18c in the previous year.
Jennett said that there had been a meaningful reduction in vacancies in the past year, which was the main contributor to the company returning to positive distribution growth.
Vacancies in Emira’s overall portfolio reduced to 3.4 percent at end-June from 5.7 percent in the previous year, with office sector vacancies decreasing to 7.1 percent from 12.5 percent.
Growth
Jennett said despite the positive distribution growth, the ongoing oversupply of offices had necessitated a further reduction in rentals and an increase in tenant incentivisation for Emira to remain competitive.
Revenue reduced year on year by 2.6 percent to R1.7bn from R1.8bn.
This was attributed primarily to the disposal of 13 properties during the year and the deconsolidation effective from July last year of Enyuka Property Fund, Emira’s lower living standard measure retail property venture with One Property Holdings.
Distributable income of R94.6m from equity accounted investments included income of R72m from Enyuka and R22.6m from the investments made into the US.
Jennett said Emira expected to improve on its current distribution growth in the coming year.
Shares in Emira rose 1.74 percent on the JSE yesterday to close at R15.75.