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EMIRA PROPERTY FUND LIMITED - FURTHER UPDATE ON THE IMPACT OF COVID 19 ON EMIRAS BUSINESS, TRADING STATEMENT AND APPOINTMENT OF DIRECTORS

Release Date: 25/06/2020 11:30
Code(s): EMI     PDF:  
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FURTHER UPDATE ON THE IMPACT OF COVID 19 ON EMIRA’S BUSINESS, TRADING STATEMENT AND APPOINTMENT OF DIRECTORS

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” or “the Company”)


FURTHER UPDATE ON THE IMPACT OF COVID 19 ON EMIRA’S BUSINESS, TRADING STATEMENT AND
APPOINTMENT OF DIRECTORS

Further to the announcement released on SENS on 25 March 2020, the Company wishes to update
shareholders regarding the impact of COVID-19 on its South African and United States of America (“USA”)
operations, together with other relevant information, prior to its year-end on 30 June 2020 when it will
enter a closed period.

Operational update

Direct portfolio

As is well known, the impact of COVID-19 on the South African economy is severe, with the ultimate
effects on the overall commercial and trading impact still to be determined. The current operating
environment is extraordinary and fluid, changing constantly.

Constraints on consumer spending will have a direct effect on retailers’ trading numbers, which could
potentially push national and regional retailers to reduce their number of shops and/or trading areas.
Consumers’ shopping patterns, including the frequency of their visits to shopping centres, may take some
time to return to pre-COVID-19 levels. Businesses are also improving online and delivery technology to
complement/improve their sales.

Demand for commercial office space and tenants’ requirements may change, not only due to the risk of
business failures, but also with more employees working from home. That said, social distancing could
potentially increase space requirements of office tenants.

Emira has taken a long-term view when assessing the type and level of rent relief provided to tenants.
Tenant sustainability has been at the forefront of our considerations, to ensure that as many tenants as
possible survive this period. A considerable amount of time has been spent engaging with tenants, both
directly and through collective industry initiatives, to understand the impact of the COVID-19 related
lockdown on their businesses.

Emira has shared the burden by aiding most of its tenants, with a particular focus on those tenants hardest
hit by the lockdown, specifically those unable to trade and Small, Medium and Micro Enterprises
(“SMMEs”). Concessions in the form of gross rental deferrals and/or rental remissions have been provided
to tenants, depending on their specific circumstances, for the months of April, May and June 2020 and
certain negotiations are still underway.
The rent deferrals provided have payment terms ranging from three to nine months, with the majority of
deferred rentals being payable in nine equal instalments, commencing October 2020. From a commercial
perspective, it is more efficient for Emira to invoice the deferred portion of rentals only when payable,
hence the applicable deferred rental portions have been credited in April, May and June 2020,
respectively.

The table below illustrates the extent of relief given for April, May and June 2020, expressed as a
percentage of the original contractual rental, together with the rental collected as a % of both the
contractual rental billed and the contractual rental billed adjusted for rent relief.

April 2020:

                                                                  Retail     Office   Industrial Residential     Total

Rental collection before relief (% of billings)                    56.3%      76.5%       50.0%        97.9%     61.7%

Relief given to tenants (% of billings)                            29.9%      24.6%       25.0%         0.0%     26.9%

 Remissions                                                        29.1%      22.8%       24.5%         0.0%     25.9%

 Deferments                                                         0.8%       1.8%        0.5%         0.0%      1.0%

Deals under negotiation/arrears outstanding (% of billings)        13.8%     -1.1%*       25.0%         2.1%     11.4%

                                                                  100.0%    100.0%       100.0%       100.0%    100.0%

Rental collection after rent relief (% of billings)                80.3%    101.4%*       66.7%        97.9%     84.4%



May 2020:

                                                                  Retail     Office   Industrial Residential     Total

Rental collection before relief (% of billings)                    60.9%      65.9%       64.7%        97.3%     63.8%
  
Relief given to tenants (% of billings)                            33.9%      34.6%       54.4%         0.0%     37.7%

Remissions                                                         29.1%      10.3%        3.2%         0.0%     17.6%

Deferments                                                          4.8%      24.3%       51.2%         0.0%     20.1%

Deals under negotiation/arrears outstanding (% of billings)         5.2%     -0.5%*     -19.1%*         2.7%     -1.5%*

Total                                                             100.0%    100.0%       100.0%       100.0%    100.0%

Rental collection after rent relief (% of billings)                92.1%    100.8%*     141.9%*        97.3%    102.5%*
June 2020:**

                                                                  Retail    Office   Industrial  Residential     Total

Rental collection before relief (% of billings)                    75.0%     52.7%       65.6%         93.9%     65.4%

Relief given to tenants (% of billings)                            16.2%      9.2%       23.0%          0.0%     14.6%

Remissions                                                          0.0%      0.0%        0.0%          0.0%      0.0%

Deferments                                                         16.2%      9.2%       23.0%          0.0%     14.6%

Deals under negotiation/arrears outstanding (% of billings)         8.8%     38.1%       11.4%          6.1%     20.0%

Total                                                             100.0%    100.0%      100.0%        100.0%    100.0%

Rental collection after rent relief (% of billings)                89.5%     58.0%       85.3%         93.9%     76.5%

* negative/above 100% relates to tenants who paid that
portion of rent which was granted as relief

** as at 18 June 2020


The extent of the rental concessions granted to the 1 152 SMME tenants across Emira’s direct portfolio
totals approximately R74.9 million and demonstrates the extent and focus we have on sharing the burden
with the tenants that are hardest hit by this pandemic.

Collection rates are expected to increase as the lockdown eases and tenants’ trading improves.

Enyuka

A similar approach was adopted with the Enyuka portfolio in respect of rent relief granted to tenants.

The table below illustrates the extent of relief given for April, May and June 2020, expressed as a
percentage of the original contractual rental, together with the rental collected as a % of both the
contractual rental billed and the rental billed adjusted for rent relief.

                                                                                         Apr-20      May-20    Jun-20*

Rental collection before relief (% of billings)                                           51.3%       75.3%     73.2%

Relief given to tenants (% of billings)                                                   25.0%       26.7%     11.0%

Remissions                                                                                25.0%       21.5%     11.0%

Deferments                                                                                 0.0%         5.2%     0.0%

Deals under negotiation/arrears outstanding (% of billings)                               23.7%       -2.0%*    15.8%

Total billings before relief                                                             100.0%      100.0%    100.0%

Rental collection after discounts and deferment (% of billings)                           68.4%     102.7%*     82.2%

* as at 18 June 2020
** negative/above 100% relates to tenants who paid that portion of rent which was
granted as relief



USA

In the USA, Emira’s portfolio of ten co-owned power centres have fared moderately in the wake of the
COVID-19 pandemic. The properties are located in seven states (Florida, Georgia, Indiana, Missouri, Ohio,
Oklahoma and Texas), each of which has applied their own level of restrictions on businesses, travel and
“stay-at-home” orders. Most states applied restrictions from as early as March, with the earliest easing of
restrictions commencing in May. Currently, few restrictions remain, relating mostly to capacity restrictions
in restaurants, bars, etc. and places of entertainment. Nonetheless, the restrictions seen in the USA were
far less stringent than those seen in South Africa, with most businesses being allowed to trade if they
adhered to certain regulations. This saw many of the portfolio’s tenants utilise e-commerce to supplement
normal trade, coupled with delivery or “kerb-side” pick up of products, and most restaurants were able
to provide take out services. Smaller tenants were able to access significant federal funding through the
CARES Act. Despite this, overall retail sales were estimated by the US Census Bureau to have dropped
some 14.7% from March to April, and then improved by approximately 17.7% from April to May.

Considering the open-air nature of Emira’s centres, the fact they are shadow anchored by major grocer
retailers and the high credit quality and value offering focus of the medium-sized to larger tenants, trading
at these properties has been far less impacted compared to traditional enclosed malls. To date, collections
and assistance given to tenants is as follows:


                                                                   Apr-20           May-20          Jun-20*
 Rental collected (% of billings)                                   61.1%            53.5%            53.5%
 Relief given to tenants in the form of                             34.1%            35.5%            24.7%
 deferments and abatements (% of billings)
 Arrears outstanding (% of billings)                                 4.8%            11.1%            16.3%
                                                                   100.0%            100.0%          100.0%

 To date, negotiations have been concluded or are in advanced stages with tenants representing approximately
 73% of total rental income.

 *Reflective of collections as at 18 June 2020


Owing to the credit quality of our US tenants, relief has generally taken the form of deferments of a varying
portion of rentals for April, May and June, typically with expense recoveries not being deferred. In the
uncommon instances of rental abatements being given, the landlord generally received equal economic
benefit through various means, including lease extensions and/or reduction in future tenant installation
commitments. Although May and June trading has increased as restrictions have eased and illustrated the
benefit of the value offering of many of the US portfolio’s tenants, the pandemic has put significant
pressure on many retailers that were in difficult positions prior to the pandemic. The Company is confident
that the US portfolio will continue to attract and retain retailers that are able to weather the crisis and
trade successfully into the foreseeable future.
GOZ

The Company completed the disposal of the balance of its GOZ shares in June 2020. The proceeds received
have been used to reduce debt and the corresponding Australian Dollar cross currency interest rate swaps
were settled in full.

Capital management and liquidity

Emira entered the COVID-19 lockdown with a strong balance sheet, given its lower debt levels and prudent
approach to valuing assets. As at Tuesday, 23 June 2020, the Company had a total of approximately
R680 million available in cash and undrawn debt facilities.

Emira has a diversified funding base. On 20 May 2020, a new two-year R200 million debt facility was put
in place with a local bank. On 12 June 2020, Emira repaid the maturing R200 million three-year bond,
EPF012, using available debt and cash.

Emira has R509 million of debt maturing in the six months ended 31 December 2020 and a further R1.2
billion that matures in the six months ended 30 June 2021, all of which are anticipated to be refinanced.

The Company is in advanced stages of finalising two new facilities to further bolster its liquidity and has
R2.6 billion of unencumbered, directly held properties available for security.

While base interest rates have declined over recent months, margins have increased in this uncertain
environment and this trend is expected to continue. Approximately 84% of Emira’s debt is fixed at an
average fixed rate of 6.1%. The weighted average duration of Emira’s interest rate hedges is 3.0 years,
with the US Dollar cross currency interest rate component, on a stand-alone basis, being 4.5 years.

At 31 December 2019, Emira reported a loan-to-value ratio of 35.1% (as measured by the majority of the
Company’s lender banks) and an interest cover ratio of 3.2 times. Whilst the rent relief given to tenants
since the start of the COVID-19 lockdown will result in a reduction of the Emira’s profit for the 2020
financial year, and property valuations are likely to be negatively impacted going forward, all bank
covenants are expected to be met for this reporting period and thereafter.

Donations

In line with the donations announced by President Cyril Ramaphosa and the South African Cabinet to the
Solidarity Fund on 13 April 2020, all Emira’s directors, both executive and non-executive, sacrificed 30%
of their April, May and June salaries or fees in favour of the Solidarity Fund, resulting in a total contribution
of R1 million.

Change in directorate

Shareholders are advised that Ms Berlina Moroole has been appointed to the board of directors of Emira
("Board") as an independent non-executive director with effect from 1 July 2020.

Berlina will be joining Rand Mutual Assurance as Chief Risk Officer. Prior to joining Rand Mutual Assurance
she was an independent non-executive board member, chairperson of the audit committee and social
and ethics committee as well as a member of the risk committee at Assupol. She has held several other
senior management roles at different companies, including Chief Internal Audit, Risk and Sustainability
Officer of the Motus Corporation as well as Group Chief Risk Officer and Group Executive for Group
Internal Audit Services at Liberty Holdings Limited, and was a partner at Deloitte & Touche. Berlina is a
qualified Chartered Accountant.

Shareholders are further advised that Mr James Templeton has been appointed to the Board of directors
of Emira as a non-executive director with effect from 1 July 2020.

James is a representative of the iGroup, a Cape Town based property investment and development group,
which owns circa 33% of Emira shares in issue. Further, he is the CEO of Castleview Property Fund and the
former Chief Executive Officer of Emira.

The Board welcomes Berlina and James and looks forward to their contribution to the Company.

Trading statement

Emira uses distribution per share (“DPS”) as its relevant measure of financial performance. In terms of the
JSE Listings Requirements, the Company is required to publish a trading statement as soon as it becomes
reasonably certain that the DPS for the next period to be reported on will differ by at least 15% from that
of the prior corresponding period.

Shareholders are referred to the announcement released by Emira on SENS on 25 March 2020, wherein
the Company advised that it had withdrawn the dividend guidance it gave on 19 February 2020 for the
six-month period ending 30 June 2020, as a result of the uncertainty surrounding the financial impact of
the COVID-19 pandemic on Emira.

Shareholders are now advised that, because of the rental concessions, including remissions and
deferments, provided to its tenants for the months of April, May and June 2020 in response to the COVID-
19 lockdown, Emira expects its distributable earnings for the current financial year, on which its DPS is
based, to decrease by at least 15% (R118 million) when compared to the distributable earnings for the
financial year ended 30 June 2019.

Given the uncertainty regarding the future effects of COVID-19 on global economies, and the impact
thereof on Emira’s future financial performance and position, the Board will revisit Emira’s distribution
policy, which is currently to pay out 100% of distributable earnings. This, however, will only be formally
considered at the Board meeting scheduled for the end of August 2020 and will take into account Emira’s
financial position and liquidity forecast at that date.

A further announcement will be made once the Company has greater clarity regarding the range within
which it expects its DPS for the current financial year to fall.

Year end results announcement

The Company is scheduled to release its results on Monday, 29 August 2020.

The contents of this announcement and the financial information on which it has been based have not
been reviewed, audited or reported on by the Company’s auditors.
Bryanston

25 June 2020



Sponsor
Questco Corporate Advisory Proprietary Limited

Date: 25-06-2020 11:30:00
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