Emira bumps dividend as US operations boost earnings

JSE-listed real estate investment trust (Reit) Emira Property Fund’s US-based investments have shielded it from the effects of global uncertainty and the low-growth domestic environment, boosting interim earnings and dividends for the group.

The Reit says its US operations – which it has in partnership with The Rainer Companies – contributed R117.8 million to its distributable income. The US performance was supported by the region’s active economy which is characterised by stable growth and low unemployment.

Emira’s distributable earnings for the six months ended December 2022 grew 15% to R378.7 million, resulting in a 17.4% bump to the group’s interim dividend – declared at 66.43 cents per share.

Emira’s US exposure makes up 18% of the group’s asset base, which constitutes 12 grocery-anchored open-air convenience shopping centres.

Vacancies in the US portfolio dropped by almost half, from 4.5% in the previous period to 2.5% – a sign, according to Emira CEO Geoff Jennett, that the US operations have moved past the pandemic’s impacts.

“As a stable, low-risk yet very active business with all its diversified parts working well, our higher-than-expected income and solid results extend Emira’s consistent track record of reliable performance,” he says.

“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.”

Read: GEPF plans to acquire 30% shareholding in Waterfall City owner, for R2.8bn

SA office space

Back home – where Emira owns a diverse mix of residential, retail, industrial and office properties – the office segment continues to reel from the impacts of the pandemic.

Although an improvement from 2021 figures, vacancies in this segment at 11.6% continue to be significantly higher than the group’s other segments, with retail and industrial reporting vacancies of 3.4% and 2.6% respectively.

According to the Reit, the segment’s performance should be understood in the context of low business confidence and a weak economic environment, which have repelled businesses from new investments and also led to businesses rethinking their spatial needs.

“A 3.4% improvement in office vacancies to 11.6% led to a strong showing from [this segment’s] portfolio of mainly P- and A-grade properties, albeit off a low base,” says Jennett.

“While the office sector seems to have stabilised, its fundamentals remain depressed.”

Read: Emira continues to report rent reversion pressures

Load shedding threat to rentals

The group says it has increased its renewable energy generation capacity recently, expanding its photovoltaic solar plant at Wonderpark Shopping Centre in Pretoria from an output of 1.2MWp (megawatt peak) to 3.8MWp. Backup power was also installed at an additional five properties to help tenants cope with the blackouts.

Despite these efforts, the Reit warns that increased frequency of power cuts due to the country’s energy generation crisis, may still usher in higher tenant rentals.

So far, South Africa has seen the implementation of more than 100 consecutive days of load shedding, with power cuts intensifying to extreme levels in 2023, lasting between 10 to 12 hours a day.

This intensification of power outages is weighing on the group as generators are kept running for much longer than intended, driving operating costs up and eating away at the bottom line.

“Our energy efficiency improvements and renewable solar power drives have accelerated into top gear in response to increased load shedding,” says Jennett.

“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,” he adds.

“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.”

Listen: Emira Property Fund CEO Geoff Jennett discusses its interim results 

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