Wrap Text
PRE-CLOSE OPERATIONAL UPDATE
EMIRA PROPERTY FUND LIMITED
Incorporated in the Republic of South Africa
(Registration number 2014/130842/06)
JSE share code: EMI ISIN: ZAE000203063
JSE Interest Rate Issuer Code: EMII
(Approved as a REIT by the JSE)
(“Emira”, “the Company” or “the Fund”)
PRE-CLOSE OPERATIONAL UPDATE
The Company wishes to provide an update to investors regarding the operational performance of its investments for
the first quarter of FY21.
As anticipated, global economies continue to be constrained by the impact of COVID-19 and the related lockdowns.
The diversified nature of Emira’s investments, both on a sectoral basis and geographically, including its offshore
exposure and its co-investment methodology, has proved defensive given that some sectors and regions have been
harder hit than others.
Emira remains focussed on the strength of its balance sheet, maintaining occupancy levels and collecting rentals,
ensuring that it comes through these trying times in the best possible position.
Direct local portfolio (78% of investments)
The effects of the pandemic and the different levels of lockdown continue to have a negative impact on the local
economy, business confidence and household spending. The full impact on tenants is still uncertain and the
environment remains challenging for them. This continues to weigh heavily on the property sector and all key
property metrics are under pressure.
Post 30 June 2020 and in line with expectations, Emira has granted a further R15,3 million of rental concessions
through to its tenants (R12,1 million to the end of September 2020). These have all been in the form of permanent
rental remissions, granted on a case-by-case basis to those tenants whose operations were particularly hard hit by
the lockdown restrictions and where the Company is satisfied with the longevity of the underlying business.
Occupancy in the portfolio has remained high with vacancies increasing slightly to 4,5% at the end of September
2020 (June 2020: 4,1%). Vacancies are anticipated to trend upwards over the balance of FY21.
For the first quarter of FY21, 52 378m2 of space came up for expiry, of which 43 473m2 was re-let, an overall renewal
success rate of 83,0%. A further 30 853 m2 of future expiries have been early renewed in the first quarter of FY21,
with the South African Local Government Association at Menlyn Corporate Park in Pretoria (7 025m2) being the
largest.
As anticipated, retaining tenants and attracting new ones has come at a cost with the weighted average total
reversions for the first quarter at an overall -10,9%, a decline from level reported at 30 June 2020 of -5,1%. While
reversions declined across all sectors, the retail sector was the highest, driven by the restructuring of Emira’s five
Edcon leases.
The Fund’s weighted average lease expiry reduced slightly from 2,7 years at 30 June 2020 to 2,5 years at 30
September 2020. The average lease period achieved for the first quarter’s lettings was 2,7 years.
Emira’s average annual lease escalations remained at 7,3% at the end of the first quarter, however these remain
under pressure and are expected to reduce. The average annual escalations achieved on the first quarter’s renewals
were 7,2%.
While monthly collections have improved post 30 June 2020, many tenants’ businesses continue to be impacted by
the pressures of COVID-19. Outstanding debtors have increased to R79,4 million at 30 September 2020 (June 2020:
R63,7million (excluding the accrual of deferred rentals not billed)). This position has improved to R73,5 million
outstanding at the end of October 2020. While it is still early days, it is pleasing to see that 77,7% of the deferred
rentals billed in the first quarter have been collected, increasing to 80,1% at the end of October 2020. The collection
of rentals remains a key focus area.
Emira’s experience on the individual sectors is as follows:
Offices:
The office sector still sees a large number of tenants, specifically larger corporates, adopting a more flexible
work model, which entails working from the office as well as working from home. Most tenants are still
following a “wait and see” approach until such time as they understand the effect on their businesses and
their future workplace requirements.
Retail
Although footfall numbers are improving, many shoppers are still cautious on visiting shopping centres, and
this has changed consumers’ buying behaviour. The change in consumer behaviour has affected retail sales,
and retailers continue to adjust their business models, improving online shopping and delivery offerings
though improved capabilities and technology.
Industrial
Industrial tenants, although somewhat more resilient, are also feeling the effect of the pandemic, specifically
the impact on the economy and the negative GDP growth. Tenants are trying to understand how their
businesses should operate in future to remain sustainable.
Total as at 30
Urban Retail Office Industrial Residential Total June 2020
Vacancy 4.1% 7.5% 3.5% 6.0% 4.5% 4.1%
Tenant Retention
% of gross rental 80.8% 91.4% 76.9% - 83.2% 80.0%
% of GLA 82.9% 89.7% 79.5% - 83.0% 78.2%
% of number of leases 76.8% 72.7% 66.7% - 74.5% 69.5%
Rent reversions-total (gross rentals) -16.1% -1.7% -6.8% - -10.9% -5.1%
Weighted average lease expiry 3.2 years 2.2 years 2.2 years - 2.5 years 2.7 years
Contractual escalations 7.0% 7.6% 7.3% - 7.3% 7.3%
Total Arrears 26 192 522 42 725 514 10 472 011 93 866 79 483 913 63 668 845
Arrears 25 442 450 41 881 459 10 457 233 93 866 77 875 008 63 668 845
Deferrals not yet recovered 750 072 844 055 14 777 - 1 608 904 -
Collections: April 2020 - June 2020 136 042 084 86 747 494 53 995 688 6 751 964 283 537 230
Billings net of discounts: April 2020 - June 2020 157 078 483 119 864 395 73 504 212 6 889 796 357 336 886
Collections: April 2020 - June 2020* 86.6% 72.4% 73.5% 98.0% 79.3%
Collections - total: July 2020 - September 2020 168 720 265 111 646 022 82 361 946 6 210 925 368 939 158
Collections - normal: July 2020 - September 2020 166 811 720 110 807 086 79 495 668 6 210 925 363 325 398
Collections - deferrals: July 2020 - September 2020 1 908 545 838 936 2 866 278 - 5 613 760
Billings net of discounts - total: July 2020 - September 2020 191 640 642 131 318 664 89 247 593 6 356 976 418 563 875
Billings net of discounts - normal: July 2020 - September 2020 188 982 025 129 635 673 86 366 537 6 356 976 411 341 211
Billings net of discounts - deferrals: July 2020 - September 2020 2 658 617 1 682 991 2 881 056 - 7 222 664
Collections - total: July 2020 - September 2020 88.0% 85.0% 92.3% 97.7% 88.1%
Collections - normal: July 2020 - September 2020 88.3% 85.5% 92.0% 97.7% 88.3%
Collections - deferrals: July 2020 - September 2020 71.8% 49.8% 99.5% - 77.7%
Collections: September 2020 month only 57 035 321 36 341 858 28 151 308 2 181 898 123 710 385
Billings net of discounts: September 2020 month only 65 542 486 43 177 730 30 389 755 2 220 877 141 330 848
Collections: September 2020 month only 87.0% 84.2% 92.6% 98.2% 87.5%
COVID-19 Rental discounts granted: 1 July 2020 - 30 September
2020 10 267 129 1 536 288 339 033 - 12 142 450 69 923 405
COVID-19 Rental deferrals granted: 1 July 2020 - 30 September
2020 - - - - - 48 682 648
*Collection rates restated based on a change to the calculation
methodology
Enyuka (5% of investments)
The Enyuka portfolio, comprising 24 lower LSM retail properties, continues to perform in line with expectations,
demonstrating the resilience of this retail sector in a challenging environment. While vacancies have increased to
5,2% as at 30 September 2020 (June 2020: 4,6%), lease terms are being finalised for most of those first quarter
expiries not retained.
Transcend (5% of investments)
The investment into Transcend continues to weather the current economic conditions, demonstrating the defensive
nature of value-orientated quality residential assets managed by a seasoned and well qualified team.
USA (12% of investments)
The US portfolio, comprising of 10 equity investments into grocery anchored, value orientated, open air power
centres continues to perform in line with expectations. Vacancies edged slightly higher, ending the quarter at 5.6%
of the total portfolio. In the short term, vacancies are expected to rise due to the bankruptcies and non-renewals of
certain tenants, before stabilising (at around 8.5 – 9%) in early 2021. However, interest and demand for space at the
centres remains high, and the vacancy rate is expected to reduce in the 2nd half of 2021. Interventions by our on the
ground co-investment partners and additional leasing activities are progressing well, with new leasing and renewals
concluded in these three months seeing slight upward reversions on average. The majority of assets in the portfolio
have, or are expected to, resume paying dividends in the current financial year. Whilst certain COVID-related
concession deals agreed to in the period from April – June 2020 may still apply until early 2021, at this stage, no
further significant COVID-related concessions have been agreed to or are contemplated, with the exception of an
anticipated continuance for AMC Theatres at Woodland Square. Collections on aggregate across the portfolio have
been very much in line with payment terms of existing leases and concession agreements where applicable.
Capital management and liquidity
Emira’s balance sheet remains robust with sufficient cash reserves and unutilised debt facilities to cover the Fund’s
business commitments as they fall due.
The weighted average duration to expiry of Emira’s debt facilities at 30 September 2020 is 1,9 years (June 2020: 2,1
years).
Emira has to date refinanced R441 million and settled R103 million of the R1,7 billion debt maturing in FY21. A new
R200 million 4-year term facility has been put in place increasing the Fund’s undrawn backup facilities and cash-on-
hand to R671 million at the end of November 2020. A further new facility of R250 million is being finalised which will
bolster the Fund’s liquidity even further.
The average all-in cost of Emira funding at 30 September 2020, including CCIRS, is 7,37% (June 2020: 7,45%) and
interest rates are hedged for 86,4% (June 2020: 83,0%) of Emira’s drawn interest-bearing borrowings for a weighted
average duration of 2,9 years (June 2020: 3,2 years).
There has been no material change to the loan-to-value ratio reported at 30 June 2020 of 43.0% (including derivative
liabilities) and all funding covenants continue to be met.
Outlook
An increase in tenant failures and vacancies is inevitable in the months ahead as the true effects of the restrictive
lockdown continue to unfold. Given the high levels of uncertainty, low investor and consumer confidence and a
contracting economy, Emira’s focus will be to maintain balance sheet strength, retain existing tenants and keep
vacancies at lower than industry levels. The diversified nature of Emira’s assets and sticking with the core
fundamentals that Emira implements in all of its investments will ensure that it comes through these challenging
times in the best possible position.
Bryanston
26 November 2020
Sponsor
Questco Corporate Advisory Proprietary Limited
Debt Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 26-11-2020 09:51:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
