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Archives for February 2023

Emira grows dividends by 17.4% per share, boosted by its US assets

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Emira Property Fund (JSE: EMI) announced a 17.4% increase in its cash-backed dividend of 66.43cps and growth in distributable income per share of 15.0% for the six-month interim period to 31 December 2022 versus the same period in 2021. Its net asset value per share increased by 4.1% to 1,694.60cps.

Geoff Jennett, CEO of Emira Property Fund, attributes this robust performance to consistent strategic delivery, unlocking the best value from investments. He also highlights the post-pandemic recovery in Emira’s US equity investments and lower South African portfolio vacancies, below 5% (4.8%).

Jennett comments, “As a stable, low-risk yet very active business with all its diversified parts working well, our higherthan- expected income and solid results extend Emira’s consistent track record of reliable performance. Our US portfolio delivered particularly pleasing outcomes during the period, confirming it has resurged from the effects of the Covid-19 pandemic that were still evident in the prior interim period. Further, in a challenging SA environment, Emira continued to reinvest in our assets, ensuring they are attractive and sustainable. The results can be seen in our leasing success and lower vacancies.”

Emira’s diversified portfolio is balanced to deliver stability and sustainability through different cycles. It is a mix of retail, office, industrial and residential assets. Investing with US-based partner The Rainier Companies, 18% of Emira’s asset base is made up of equity investments in 12 grocery-anchored open-air convenience shopping centres in the stable economy of the USA, which provide a buffer to current global uncertainty and the low-growth domestic environment.

Strategically recycling capital, Emira advanced transactions for its two major indirect investments in SA during the period. Retail property venture Enyuka Property Fund is in the process of being sold to co-investor One Property Holdings. In addition, Emira obtained control of the specialist residential REIT Transcend Property Fund and consolidated it in October 2022, boosting its exposure to the defensive residential property sector.

As a result of the Transcend transaction, Emira’s directly held portfolio increased from 74 assets to 97 worth R12.1bn, and it grew its direct residential assets from a single building, The Bolton in Rosebank, Johannesburg, to 24 properties or 16% of its total investments.

This change in Emira’s asset base has created a residential portfolio split between Gauteng’s (85% by value) and Cape Town’s (15%) high-demand areas, available at rentals from R4,500 to R8,000/pm per unit, which are popular with the low-to-middle income segment of the affordable property market. Occupancy is at 96.7%. Most of the vacancy
represents sectional title units in the process of being sold.

Emira’s direct commercial portfolio continued to benefit from diversification. It improved its vacancy rate from 5.3% to 4.8% in the six months and improved rental reversions on both renewals and new leases.

The REIT’s industrial and retail portfolios performed well. Its retail portfolio of primarily grocery-anchored neighbourhood centres showed improved trading and higher turnover from retailers. Its diversified industrial portfolio delivered marginal improvements in all metrics and remained surprisingly stable given the increased rolling power cuts. A 3.4% improvement in office vacancies to 11.6% led to a strong showing from its portfolio of mainly P- and A-grade properties, albeit off a low base. “While the office sector seems to have stabilised, its fundamentals remain depressed,” notes Jennett. Emira’s office vacancies outperformed SAPOA’s average of 16.1%.

Emira’s commercial portfolio achieved a tenant retention rate of just below 80%, an unchanged weighted average lease expiry of 2.7 years and increased monthly collections to 102.2% of rent billed.

Property expenses were reduced, and various solar projects saved electricity costs at related buildings. Emira began investing in mitigating the impacts of load shedding and renewable energy as early as 2010. These projects support Emira’s sustainability considerations, a key component of its operations and approach to creating long-term value. Prioritising carbon emissions reductions, Emira steadily increased renewable energy generation, most recently expanding its photovoltaic solar plant at Wonderpark Shopping Centre, Pretoria – its biggest retail asset of more than 91,000sqm – from an output of 1.2MWp to 3.8MWp. It also undertook various energy management and efficiency initiatives and installed backup power at five more properties to help tenants manage the impacts of load shedding.

“Our energy efficiency improvements and renewable solar power drives have accelerated into top gear in response to increased load shedding. However, generators are only intended as emergency backups, and more load shedding means they are now operating for prolonged periods, increasing business costs. This threatens tenant rentals, escalation levels, and, ultimately, tenancies. It also means buying more diesel for the backup generators at buildings in our portfolio at a high cost, not all of which can be recovered. On the plus side, these initiatives provide Emira and its tenants with better resource security and, to some extent, some protection against load shedding, the continued high increases in utility costs and general deterioration of government infrastructure,” Jennet reports.

In the US, Emira’s 12 equity investments — grocery-anchored dominant value-oriented power centres — now total R2.5bn (USD149.5m). In 2022, the US recorded total real GDP growth of 2.1%, which was 3.2% and 2.9% in the third and fourth quarters, respectively. Considering the ongoing growth in the economy, and consistently low unemployment rates below 4%, the environment remains supportive of Emira’s investment thesis for its US strategy. Its open-air centres have a high-quality tenant base focused on popular value retail and essential goods and services, especially from grocery anchors. They are in robust markets that enjoy sound property fundamentals.

US portfolio vacancies nearly halved from 4.5% to 2.5%, and the portfolio had better-than-anticipated performance to add R117.8m to Emira’s distributable income. “This shows that the effects of the pandemic are moving out of the system in the US, and more can be expected,” believes Jennett.

Emira’s loan-to-value ratio moved to 43.1%, which remains comfortably within Emira’s covenant levels, after using debt funding to gain favourable control of Transcend. It has a more than adequate 2.6x interest cover ratio, unutilised debt facilities of R486.2m and cash-on-hand of R142.3m. Emira benefits from diversified funding and has facilities across all major SA banks and access to debt capital markets.

Jennett concludes, “Emira has done well to increase dividends and continue its strategic direction through active asset management, portfolio-enhancing capital recycling and performing property fundamentals with excellence. The combined effect of Emira’s decision-making in recent years sees our metrics well aligned and places us in a strong position to manage for the future. We are also ready for value-adding opportunities that may arise.”

Emira’s change in year-end to 31 March will see its FY23 final results representing nine months instead of twelve. It will declare a final distribution for the three months ending 31 March 2023.

Released by Emira Property Fund:
Geoff Jennett, CEO
Tel: 011 028 3115
Emira.co.za

Facebook @EmiraPropertyFund
LinkedIn @EmiraPropFund
Twitter @EmiraPropfund
Instagram @EmiraPropertyFund
YouTube at @EmiraPropertyFund

The post Emira grows dividends by 17.4% per share, boosted by its US assets appeared first on Emira Property Fund.

Fairvest completes renewal of Pretoria office building, 2Twenty Madiba

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Fairvest Limited (FTA & FTB – listed on the JSE and A2X), which is a diversified REIT, has completed an aesthetic refurbishment of the landmark offices at 220 Madiba Street in central Pretoria. The upgrade of this asset secures its future relevance, appeal and competitiveness in an up-and-coming city node.

The updated 2Twenty Madiba, as the building has been renamed, combines heritage with modernity.

The 12,000 sqm building was formerly advocates’ chambers and remains an ideal position for attorneys, advocates, legal firms and paralegal professionals as tenants, with its prime location opposite the Gauteng High Court.

n addition, 2Twenty Madiba is in a well-established government node that is central to all national and municipal government offices and is proximate to the many colleges in the area.

The refurbished property features a secure, striking triple-volume reception area that welcomes tenants and guests to the 15-storey building.

Each floor spans 730sqm with cellular offices with spectacular views across the city. 2Twenty Madiba also offers a ground-floor coffee shop which includes social alfresco seating around a soothing water feature.

Alon Kirkel, FairvestChief Operating Officer, comments: “2Twenty Madiba is a great address in a well-established neighbourhood and boasting over 400 parking bays making it ideal for a government tenant.

“We’ve overhauled the asset to meet the future needs of businesses in the area, and Fairvest is excited about its new chapter. Post-refurbishment, the offices are attracting good levels of interest and enquiries from potential tenants.

“It already enjoys a sizeable tenancy with Liberty and houses a co-working and shared office tenant. We expect it to continue to draw new tenants.”

The appeal of the well-managed and -maintained building is enhanced by very competitive rentals and unusually generous parking ratios, making it ideal for people-intensive businesses, such as business process outsourcing (BPO) call centres and government enterprise

2Twenty Madiba is in a neighbourhood that is rich in amenities. The building is opposite a Pick n Pay grocery store, close to affordable accommodation, superbly served by public transport – Gautrain and SANRAL at Pretoria Station, Tshwane Bus and Gautrain Bus, minibus taxis – and nearby hotels that are geared for business travellers.

Added to this, the surrounding neighbourhood is seeing an upsurge in development and popularity, with investments and improvements rejuvenating the area and making it a safe and increasingly attractive node.

Fairvest is focused on creating long-term shareholder value with its well-managed diversified portfolio of 140-plus retail, office and industrial properties valued at R12.1 billion and indirectly-held SA REIT investments of R3.4bn.

Offices account for 38 of its properties, around a quarter of Fairvest’s directly held portfolio by both value and area. In line with market trends in a challenging business environment, its office vacancies decreased to 13% at its 30 September 2022 financial year-end.

“When Fairvest merged with Arrowhead, we took the opportunity presented by the vacancy to refresh the property because we are confident in the future of this asset and the area. The investment in 2Twenty Madiba will help to close the vacancy gap and contribute to buoying central Pretoria” adds Kirkel.

Powering SA business through load-shedding

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Growthpoint Properties is going to great lengths to ensure its buildings and tenants’ businesses remain powered up during South Africa’s electricity crisis resulting from Eskom’s more frequent and longer load-shedding outages.

With 13.5MWp of installed renewable energy generation across two dozen rooftop and carport solar plants and several MWp currently under construction, together with 332MW of generation potential from 330-plus backup generators, Growthpoint is helping to keep the lights on at nearly 3,000 South African businesses, big and small.

“At least 1,053 shops, 833 office tenants and 38 industrial tenants are in a position to continue operating through load shedding as a direct result of Growthpoint’s national energy management programme. In addition, all of the nearly 1,000 tenants of the V&A Waterfront, which Growthpoint co-owns, have full access to backup power from the precinct’s 48 generators,” reports Estienne de Klerk, Growthpoint Properties SA CEO Estienne de Klerk.

“In this way, Growthpoint is helping much of SA Inc avoid business disruption during power outages and, in the process, safeguarding businesses, jobs and livelihoods,” adds de Klerk.

Growthpoint provides generator backup power to just over 70% of its office portfolio by gross lettable area, offering standby power for a whopping 1.2 million square metres of offices with 223 generators, where state-of-the-art technology has been implemented to monitor diesel levels. It also has a supply chain of in-house capabilities and external providers working to keep them fuelled and operating.

In the remaining 30% of office space, most tenants have their own power solutions, or buildings are in areas that do not experience major load shedding, for instance, parts of Pretoria and Cape Town, near national key points. There are some office buildings without generators, and Growthpoint is reassessing these requirements.

At industrial properties, tenants generally use their own generators, however, Growthpoint provides backup power across three industrial parks in its portfolio, accommodating multiple tenants in 84,153 sqm.

Nine of Growthpoint’s malls have 100% backup power generation, with the tenth currently being added. At shopping centres, the complexity of the electrical reticulation often doesn’t allow a single source of backup power across an entire mall. Where this is the case, Growthpoint provides standby power to common areas. Larger retailers often have their own systems, and smaller tenants are encouraged to use their own battery-powered uninterrupted power supply (UPS).

“We know that fast food, sit-down restaurants, and some service tenants are particularly impacted by load-shedding. Wherever shopping centres are without 100% backup power but have additional standby capacity, to support these tenants we are adding them to shopping centres’ backups where possible,” notes de Klerk.

While this goes a long way to help address the immediate need to power thousands of businesses, it comes at a cost – a significant capital outlay, a substantial monthly diesel bill, and the toll that fossil fuels have on the environment.

Growthpoint spent just over R47 million on diesel to power all its buildings in the six months from July to December 2022. The monthly bill topped R10 million in both October and December 2022 and was just short of this figure in November. The V&A Waterfront independently spent R14.8m on diesel over the same period.

“The costs are substantial, but the burden is mostly shared, with tenants paying for their own additional diesel consumption costs,” confirms de Klerk.

A big concern is the environmental impact of load-shedding, which is forcing businesses to burn diesel at unprecedented rates. As with other businesses, this weighs on Growthpoint’s strategy to be carbon neutral by 2050 and counteracts its environmental goals.

Growthpoint launched an innovative programme of green building and green energy well over a decade ago. To replace electricity generated by fossil fuels with renewable energy in its portfolio, Growthpoint has already invested in 13.5MWp of solar generation capacity and plans to double this by June 2023.

“Our investment in solar power reduces our reliance on the national grid. There is a great need for this right now and amping up our investment in solar makes perfect sense for our strategic, operational and environmental, social and governance (ESG) goals,” says de Klerk.

Of its 24 solar installations, half are at office and mixed-use properties, nine at shopping centres and three at industrial buildings. However, retail installations represent the highest capacity by far, accounting for a combined 9.4MWp.

Growthpoint’s largest solar installation undertaken this year is the 2.5MWp plant at Paarl Mall in the Western Cape, which is paired with a 4.5MWh battery system to form a hybrid renewable energy and storage system. This is the first battery system of its size to be used at a shopping centre in South Africa, and Growthpoint is currently evaluating battery backup for other properties in its portfolio.

With 13.9MWp of solar projects in various phases of construction, Growthpoint is on track to achieve its target of 27.4MWp of installed solar by its 30 June 2023 financial year end and by adding potential solar projects to this list on an ongoing basis, Growthpoint is helping to chart the way forward for renewable energy in commercial real estate in South Africa and its tenants.

Read more about our commitment to sustainability here, or get a full ESG snapshot

The post Powering SA business through load-shedding appeared first on Growthpoint Properties.

Solomon talks about measuring real (estate) impact

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The global focus on corporate accountability will only gain more prominence in 2023 as we increasingly hold businesses responsible for the impact of their actions on society and the environment.

The good news is that there is a growing wave of businesses, and even entire economic sectors, holding themselves to higher ethical standards for their environmental, social and governance (ESG) impacts.

Take the real estate sector, which has historically and globally lacked focus on sustainability considerations. It is estimated that real estate now contributes almost 40% of the world’s carbon emissions.

But the tide is turning.

Successful property investment relies on local prosperity

Driving this is the very nature of commercial real estate itself. This long-term asset class invests predominantly in malls, office buildings, factories and distribution warehouses. These properties cannot be moved elsewhere. They are inextricably linked to their surroundings.

For investment properties to perform, they must be in thriving communities and environments. This has led to real estate becoming one of the most active, engaged and enthusiastic sectors striving to meet the needs of the present without compromising future requirements and ensuring the country’s sustainable future.

Developing human capital and saving non-renewable resources

As a significant employer, the property industry is reaping the advantages of skills and talent emerging from its investment in education, bursary, graduate and entrepreneur development programmes. SA’s real estate companies already see the financial benefits of renewable energy integrated with capital allocation decision-making. Local property companies are managing their water risks as water security grows increasingly tenuous and promoting safety, inclusion and well-being, which are becoming a top priority for their tenants.

Delivering better outcomes

The real challenge lies in ensuring that these well-intended actions lead to genuinely needed, measurable, comparable impacts.

Why is this important? When we work for, partner with, buy from and invest in companies with more significant positive impacts, we make our world a better place.

So, how can our property industry have the most significant impacts, consistently measure and compare them, and ensure they are aligned with real value?

Empowering sustainable decisions

Global sustainability disclosure frameworks are a starting point, but several address different sustainability elements. The result is inconsistent reporting and methodologies for sustainability disclosure and clumsy attempts at ticking global boxes that don’t always fit. For instance, an international decarbonisation disclosure framework won’t reflect that many major local municipalities don’t currently allow energy wheeling to take place or can take years to issue water-use licenses. Load shedding and our vast social needs also set us apart.

So, while critical global goals can only be achieved if we all work together, each country and economic sector has different sustainability risks and the capacity for different impacts.

Enhancing sustainability reporting

2022 saw two standout advancements in sustainability reporting. Internationally, the draft IFRS ISSB Standard became the global banner under which many disparate disclosure frameworks are starting to converge. Locally, the JSE Sustainability Disclosure Guidance referenced the global frameworks and standards in a single localised sustainability disclosure framework. Both help link global sustainability imperatives that transcend geographies and industries.

2023 will bring another welcome advancement. Industry leaders in sustainability reporting are compiling a guideline specifically for SA’s REIT (real estate investment trust) sector and its property peers – listed and unlisted, big and small.

Introducing hyper-relevant impact measurement

The SA REIT ESG framework guidance won’t duplicate other efforts but rather help local property businesses (and their stakeholders) navigate these frameworks. It will consider the big picture, the local operating environment and the real estate context. It aims to present a complete picture of property companies’ sustainability performance, establish an ESG performance baseline and track changes to enable you to make informed decisions about which businesses you support and invest in.

Importantly, it will help hold property companies accountable for their sustainability commitments.

Joanne Solomon is the Chief Executive Officer of the SA REIT Association. She holds a Bachelor in Economics and is a seasoned marketer with 24 years of experience, including working in one of the largest financial institutions in South Africa. Joanne currently serves on the boards of the Green Building Council and the Property Sector Charter Council.

Emira’s signs major deal with international contact centre at Newlands Terraces

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Office occupancies in Cape Town and Durban could well be seeing an upswing – welcome news in markets that have suffered from rising vacancies in the wake of corporate downsizing and restructuring in the wake of the COVID-19 pandemic.

According to Ulana van Biljon, COO of Emira Property Fund (JSE: EMI), there has been an increase in enquiries, demand for and take-up of office space by business process outsourcing (BPO) call centres in both the Cape Town and Durban markets recently.

Emira has just concluded a deal worth approximately R44 million with CCI South Africa, the largest international contact centre in South Africa, for just over 4,300sqm of office space at Newlands Terraces in Cape Town.

Newlands is a mixed-use suburb situated at the foot of Table Mountain and is home to upmarket single residential homes, apartment buildings, and student accommodation for the University of Cape Town. It is well known for the Newlands Rugby and Cricket Grounds as well as Newlands Brewery. The location is ideal for CCI, which was looking for a large standalone office building in the southern suburbs of Cape Town.

Newlands Terrace is an A-grade, multi-storey office building located adjacent to the Newlands Rugby Stadium, with sweeping views over the suburb of Newlands and with the backdrop of Table Mountain from Devil’s Peak to Silvermine. As of 1 March 2023, CCI will be leasing 4,333.47sqm out of a total of 4,531sqm available and will take over the remaining area once existing tenants’ leases expire.

CCI will be using the premises as a BPO centre for an American airline and plans to provide a number of attractive workplace facilities for its employees. Emira will spend around R10 million on the building for CCI, including the upgrade and adaptation of the air conditioning to meet the client’s requirements.

“CCI is increasing its presence in the Western Cape due to the more stable economic environment in the Cape Town metropole. They are among several such businesses that have expressed growing interest in this market,” says Van Biljon.

The deal is good news for Emira, which will see increased occupancy percentages in its portfolio, and for the Newlands area.

“The finalisation of this lease agreement secures a stable income stream with a multi-national tenant for at least the next five years – this despite the fact that there have been some concerns about the now redundant Newlands Rugby Stadium neighbouring Newlands Terraces,” van Biljon notes. “The deal required a focused approach to demonstrate to CCI that the building could work for them and their clients. The Emira team and the broker went the extra mile to create mock-up spaces and visuals that showed what could be done with the space,” she adds.

The Newlands Terrace deal aligns with Emira’s strategy of providing great real estate – in this case a well-located, versatile office building that is able to adapt to meet the changing needs of the office user.

Emira Property Fund is a diversified, balanced REIT with a track record of delivering stability and sustainability through different cycles. It is invested in a mix of directly-held retail, office, industrial and residential assets, indirectly-held investments with specialist co-investors and has equity investments in grocery-anchored open-air convenience shopping centres in the USA.