Emira Property Fund distribution for 2010 up 6.75%

Posted On Thursday, 19 August 2010 02:00 Published by eProp Commercial Property News
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Emira Property Fund announces a distribution of 108.08 cents per participatory interest (PI) unit for the 12 months ended 30th June 2010 – 6.75% up on the previous year

James TempletonEmira CEO, James Templeton, notes that the listed property sector in South Africa benefited from a recovery in global economic growth, which assisted letting during the period, as well as an improvement in the local inflation outlook, which resulted in the yield on government long dated bonds declining and Emira’s price rising sharply.
 
In all, Emira PI holders enjoyed a total return of 32.8% for the year, which comprised capital appreciation of 22.6% and an income return from distributions of 10.2%.  Emira’s share price appreciated ahead of the SA listed property sector index which appreciated 18.6% over the same period.
 
Templeton says the first half of the financial year proved to be quite tough with poor economic growth, rising vacancies and rentals coming under pressure. In the second half the market improved as letting activity picked up and vacancies stabilized.
 
Excluding straight line adjustments from future rental escalations, Emira’s revenue rose 8.7 % over the previous comparable period – mainly as a result of organic income growth from the existing portfolio as well as the inclusion of income from properties acquired during the year and the contribution from several capital projects completed last year and now generating income for the full year.
 
Although tenant arrears remain relatively high, the actual bad debt charge for the period declined, with leasing expenses also declining on a year-on-year basis. Property expenses for the period rose 8.1% year-on-year which was lower than the rise in gross revenue of 8.7%.
 
When compared to December 2009, vacancies at the year end in June remained stable at 9.2%. Vacancies in the industrial portfolio declined from 5.5% to 5.1%; retail vacancies declined marginally from 5.9% to 5.3% and office vacancies increased from 15.3% to 16.2% since December.
 
Emira’s management continues to improve the quality of its portfolio through the selective acquisition of new properties, the refurbishment of existing properties as well as the disposal of non-core properties.
 
Five small capital projects totaling R20m were completed during the period. They consisted of mainly extensions for existing tenants at Southern Centre; Wonderpark Shopping Centre; Ngwavuma Shopping Centre and the addition of parking at Tuinhof in Centurion.
 
A further seven projects worth R161m are still underway. They include refurbishments and extensions to Randridge Mall; the refurbishment of Rigel Office Park; an upgrade to Wesbank House in the Cape Town CBD; and extensions for Woolworths at the Market Square Centre in Plettenberg Bay.
 
Two other projects worth R292m - the demolition of Podium House in Menlyn and the reconstruction of 15 600m² of prime office space on the site and the refurbishment of the 6 745 m² FNB Heerengracht building in Cape Town – require a level of pre-letting to be reached before construction can start. However, management is confident that the required occupancies will be secured.
 
As far as new acquisitions and disposals are concerned, in June Emira, in partnership with the Eris Property Group, purchased a 50% share in a 12,500m², multi-tenanted office building, 80 Strand Street, Cape Town for R124m. The property comprises several ground floor retail units, with ten floors of offices above and has a generous parking allocation. The anticipated yield on transfer is expected to be 10.4%. Another building Cape Town building, Taylor Blinds in Montague Gardens, was acquired for R36m and several small industrial properties in Gauteng and KwaZulu Natal were disposed of.
 
Other highlights for the year included a proposed agreement to amend Emira’s Trust Deed to extend the scope of its investment policy to allow the Fund to invest in a broader class of assets and increase its borrowing capability from 30% of the value of its underlying assets to 40%. Also, it is proposed that the service charge agreement with Emira’s management company, STREM, be amended from a monthly fee based on the value of the assets under management to a monthly charge based on the actual costs of managing the Fund. This will require a once off payment of R197.4m to STREM to amend the original management contract.
 
In addition, Emira purchased 10.25m stapled securities in Growthpoint Properties Australia, representing 6.4% of the securities in issue, for R116.8m. Both these transactions are likely to be earnings enhancing and are considered to be extremely positive for Emira’s PI holders.
 
Templeton concludes: “Since the beginning of the year conditions in the commercial property market have undoubtedly improved – in line with the general global and local economic recovery. However, the pace of the recovery appears to be slower than most economists expected. It is therefore anticipated that the gradual recovery in the commercial property market will continue in the present financial year with vacancies declining moderately and rental levels recovering thereafter. Hence the level of growth in distributions from the Fund in the current year is still expected to be good.”

Last modified on Tuesday, 22 April 2014 18:27

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