- Emira Property Fund says it is focusing on small industrial properties, residential buildings and its US operations as the lockdown continues to hurt retail and office tenants.
- The residential sector has recovered the most in terms of vacancy rates.
- The company could be expanding both its local residential exposure and its US operations.
With its retail tenants still battling the Covid-19 business flu, office tenants weighing their options on whether to keep all their existing space, Emira Property Fund is choosing to focus on the residential corner of the market and the US.
The listed property group said during the presentation of its 2020 annual financial results this week that as it continues to "recycle" assets it won't hesitate to grab opportunities to expand its industrial and residential portfolios. It is also actively looking to continue with its US expansion this year.
Asset recycling, explained the firm, is an ongoing process at Emira at the moment, which includes the disposal of non-core and older assets and replacing those with new assets allowing it to switch between sectors when it wants to increase its expose on one part of the property market.
The Bolton, which provides upmarket rental apartments in Rosebank, was Emira's first and remains its only directly owned residential property asset. But Emira also holds a 34.9% stake in Transcend, another local real estate investment trust (REIT) which is focused on the residential sector. Transcend owns apartment blocks, estates and villages.
While its direct residential exposure makes up only 2% of the company's total portfolio, its shareholding in Transcend has already pushed its residential property exposure to almost 5% locally. Transcend is also in its own asset recycle drive. It is disposing off some units and is working on large portfolio acquisition.
The residential portfolio is recovering much faster than other assets in Emira's book. The Bolton's vacancy rate stood at 2.5% at the end of December 2020, the lowest among all sectors.
"On the residential space, it reduced to 2.5% and the reason for this is the easing of the different levels of lockdown. We see that tenants are returning to work," said Emira's chief operating officer, Ulana van Biljon, adding that the trend whereby retrenched people move in with friends and family members was reversing.
Emira CEO Geoff Jennett said the company was comfortable with that level of exposure to residential assets, but it will consider committing further capital to Transcend if it makes sense or look for other opportunities to hold residential property directly.
"As and when we see an opportunity on the residential side that makes a lot of sense, we will look to continue to pursue that, whether that's through our stake in Transcend or it's accessing it directly, that will be a function of what the particular deal is," he said.
Jennett added that the company has "appetite" on the value residential segment while in the industrial sector, it was interested in smaller industrial properties.
Bullish about the US
The US operations are also heavily geared towards residential property. Emira's operating partner in the US, Rainier Properties, manages multi-family apartment communities and only four commercial buildings.
As far as its US commercial exposure is concerned, the company focuses on open air, grocery-anchored, value-orientated centres which Jennett said continued to hold their own during the trying Covid-19 times.
The US makes up 11.3% of Emira's total assets. So far, it has ten properties with a portfolio value of around US$489.6 million or roughly R7.1 billion. Emira's exposure since it is a minority investor is around R1.4 billion.
All the US properties were acquired indirectly through Emira's own private REIT there with Rainier as the majority co-investor. But it has big ambitions to expand its US portfolio. Jennett said Rainier is already looking at some interesting opportunities. Emira is yet to decide if it will participate on those opportunities.
"We certainly do enjoy the US economy and our particular chosen sub-sector in the US market. As and when opportunities present themselves that we think will fit our investment criteria and are an excellent investment, we will look to continue that extension plan," said Jennett.