28 Feb 2013
The historic yield of the South African listed property sector ended January at 6.60 percent (6.56 percent in December 2012) while the SA Equities recorded the highest total return (+ 3.23 percent) of the four traditional asset classes for January, according to Catalyst Fund Managers.
SA Listed Property (+ 0.99 percent) and SA Cash (+ 0.43 percent) were the next best performing asset classes for the month.
For the last 12 months SA Listed Property, as an asset class, has recorded the highest total return (31.00 percent), followed by SA Equities (23.68 percent), SA Bonds (13.73 percent) and Cash (5.50 percent).
They point out that the traditional drivers for total property returns remain intact and the current income yield plus prospect of income growth will drive the total return over the long term.
Meanwhile, Emira Property Fund posted distribution growth of 3.5 percent for the six month period ended 31 December 2012.
Its total return to investors was 19 percent for the period, during which Emira’s net asset value increased by 4.4 percent to 1 249 cents per participatory interest (PI).
James Templeton, chief executive officer of Emira, says its thanks to among other things, improved leasing, with portfolio occupancy levels over 92 percent for the first time since 2009.
He also notes savings on property management fees and lower funding costs supported by restructured debt among Emira’s other performance boosting achievements for the period.
“We improved our property portfolio composition, enhanced our buildings and delivered superior management efficiencies with tight cost and credit controls, which contributed positively to performance,” he says.
Templeton says they are confident that Emira’s distributions for the full year will grow at similar levels to that achieved for the half year.
Emira has a diversified portfolio of office, retail and industrial properties of 146 properties valued at R9.1 billion with a market capitalisation of R7.3 billion.
It is also diversified internationally through its direct interest in ASX-listed Growthpoint Properties Australia (GOZ), valued at R482 million at December 2012.
Templeton explains that they acquired an A-grade office development for R311.5 million and sold three non-core properties for R85.9 million, which helped to improve portfolio vacancies from 10.2 percent to 7.8 percent.
Furthermore, they invested close to R600 million in refurbishments and extensions, the largest of which is at Wonderpark Shopping Centre, north of Pretoria.
Income from Emira’s investment in GOZ grew with increased distributions and the depreciating ZAR against the AU$.
He says they took advantage of lower interest rates in the debt capital market to reduce the costs of borrowing issuing R400 million of three-month unsecured commercial paper in August 2012 and a one-year unsecured commercial paper for R450 million in November 2012.
Emira also restructured its debt swap profile in December 2012.
Templeton says this should benefit the fund’s distributions by R4.5 million a year pointing out that Emira closed the period moderately geared with a debt to total asset ratio of 28.4 percent.
He says property expenses dropped by 0.3 percent over the comparable half-year period, resulting in its property expense to revenue ratio improving from 39.8 percent to 37.9 percent.
To unlock further value with property management, Emira appointed Broll Property Group as specialist manager of most its retail property portfolio, comprising 26 percent by lettable area and 47 percent by leases, from January 2013.
Templeton adds that they will continue to identify and pursue revenue enhancing opportunities which support sustainable, growing income for Emira’s investors. – Denise Mhlanga
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