Emira Property Fund says it has cleared the way for a return to positive growth in distributions, but will not announce a forecast for the 2018 financial year.
The company declared a total dividend of 143.18c a share for the year to June, 2% down compared with the year to June 2016. It was in line with Emira CEO Geoff Jennett’s warning in 2016 the dividend would be affected negatively.
"It was a challenging year. Nevertheless, we delivered results consistent with our market guidance. Emira produced solid metrics and made pleasing advances with several initiatives and innovations that have positioned Emira to renew its positive distribution growth trajectory," he said on Wednesday.
"The South African operating environment has worsened and is set to remain tough, but Emira is now on a much better footing to move forward and increase its performance for investors."
At year-end, Emira had substantially improved vacancies across its portfolio to 5.3%, from 7% at its December half-year. It also renewed 77% of expiring space during the year. "Our substantial leasing progress took a lot of hard work. We introduced several new solutions that respond well to the fiercely competitive market. Filling vacancies and retaining tenants is a top priority," Jennett said.
Emira sold 11 noncore properties, or about 4% of its portfolio, at a 1.1% average premium to book value. "This shows that our assets are valued realistically and that Emira’s net asset value underpin is fair and reasonable," Jennett said.
A further 16 properties have been held for sale.
At its year-end, Emira was invested in 135 properties valued at R13.3bn that make up a balanced portfolio of office, retail and industrial assets.
It lowered its office exposure from 44% to 41% during the year. Urban and rural retail property rose to 44% of its portfolio, including its stake in Enyuka Property Fund. Industrial properties remained constant at 15% of its assets.
Emira is globally diversified through its direct interest in Australia Stock Exchange-listed Growthpoint Properties Australia (GOZ), into which it increased its investment during the year. Emira holds 4.5% of GOZ’s units in issue. This is valued at R901.4m compared with the initial cost price of R416.8m, which represented a 116.3% increase in investment.
Emira’s income from GOZ during the year increased 0.8%.
Investec Asset Management, portfolio manager Neil Stuart-Findlay said Emira had positioned itself for a moderate improvement in its 2018 financial year to June.
"The result is indicative of the challenging economic backdrop and the tough supply-demand dynamic in the office subsector in particular. It’s an environment in which office landlords are having to offer meaningful incentives to both retain and attract tenants.
"While Emira’s office vacancies remain high at 12.5%, they did successfully reduce vacant space in the second half through a combination of letting activity and asset sales," he said.