The fund enjoyed an active year in financial 2007, during which it acquired property loan stock company, Freestone Property Holdings Ltd, in a combined cash and exchange of linked units transaction. In addition, it grew its portfolio by acquiring properties valued at R869m.
As a result of the Freestone acquisition and the additional properties acquired, the fund’s market capitalisation has grown to roughly R5,3bn, making Emira the country’s seventh-largest property fund by market capitalisation.
The Freestone acquisition, together with new Emira participatory interest units issued to Black Economic Empowerment parties in consideration for some the of the properties acquired, has resulted in an 11,9% BEE shareholding in Emira. BEE parties currently invested in the fund include: Tiso Group; Avuka Investments, the Shalamuka Foundation, RMBP’s Broad-Based Empowerment Trust and Ben van der Ross.
During the year under review Emira participatory interest holders enjoyed a total return of 37,4% – comprising capital appreciation of 28,2% and income return of 9,2%.
Revenue rose 41,5% year-on-year, largely as a result of the inclusion of the new properties acquired, as well as additional income from the Freestone property portfolio from the effective date of 1st April 2007 to the end of June.
Some of the recently acquired properties now producing income for Emira include: Newlands Terraces office complex in Newlands; Wonderpark Shopping Centre in Pretoria; Wesbank House in Cape Town; Discovery office building in La Lucia; the RTT warehouse and industrial complex in Johannesburg; WorldWear retail centre in Fairlands and phase two and three of the Faerie Glen office development in Pretoria.
In line with the fund’s strategy of disposing of underperforming assets or realising returns from investment grade properties, a total of six properties were disposed of during the year. These were Mafikeng Game in Mafikeng; and three non-core office developments in Johannesburg: Inspectorate office complex in Ormonde and 11 Park Lane and Contact Centre in Parktown. At the same time Fourways Game in Fourways and Wierda Gables in Sandton were sold at a substantial premium to their book values.
Across the Emira portfolio vacancies are marginally up – from 4% and the end of last year to 5,9% now – but Emira CEO James Templeton says this is largely due to two large tenants vacating their premises at Lake Buena Vista in Centurion and the Dorbyl head quarters in Parktown. The Lake Buena Vista property is currently being renovated and a new tenant has already been found for the Dorbyl building.
In addition, vacancies have increased at Hurlingham Office Park and Fleetway House as a result of the refurbishments currently taking place. Active letting on these two properties has been held back in anticipation of achieving higher rentals once the refurbishments are completed.
Says Templeton:
“The integration of the Freestone property portfolio and personnel into the Emira Property Fund is now behind us and the full extent of the cost savings from this transaction are likely to be realised in the current financial year.
“Consequently, assuming the global economy and the South African commercial property market remain relatively unchanged, the fund’s management is anticipating an accelerated growth in total distribution for the current year.”
