Publications
Partners
- Emira Property Fund spent R16.6 million on diesel between July and December 2022.
- Some of its tenants cannot afford to pay for back-up power, thus opting to put their operations at a standstill during load shedding.
- The company says it and its tenants cannot afford to keep coughing up this much for diesel and is worried that its prices will go up because of demand.
- For more financial news, go to the News24 Business front page.
The owner of upmarket Rosebank Bolton apartments, Emira Property Fund, says it spent R16.6 million in diesel in the six months to December 2022. Although the landlord's operations in South Africa are smaller than those of its competitors like Redefine and Growthpoint, it said everyone is reeling from the negative impact of load shedding.
Its tenants are bleeding from the additional cost of keeping Emira's shopping centres, offices and apartments powered. The company recovered 80% of the amount it spent on diesel from them, while footing the bill for lighting the common areas that need to function while the power is off.
Emira has full generator backup power in 70% of its 73 properties in SA, while another 23% have partial backup power in place. Only four multi-tenant industrial parks don't have it because some tenants cannot afford the diesel costs.
"Of course, that brings additional costs to our tenants and businesses," said Emira COO Ulana van Biljon.
The company has been burning diesel because while it has solar panels installed in many of its properties, it doesn't have batteries to store that power to electrify its operations throughout load shedding.
Click here to see Emira's share price and other company information.
Emira CFO Greg Booyens said the batteries were still quite expensive, and because of the size of their property portfolio, it was still cheaper to burn diesel up to Stage 4 of load shedding.
"But at Stage 5 and 6, then it probably makes absolute sense to go that route [of solar backup batteries]," he said.
"If it continues, we'll see diesel prices increase because it does become scarce. Eskom can't continue to burn what they do. We can't continue to spend R16 million every six months," said Booyens.
Van Biljon said Emira was considering running a trial with the latest and improved batteries in the market to see whether they can change the numbers because the company can't afford to continue using generators as backup power, especially at higher stages of load shedding.
"Solar, together with batteries, will make sense in the longer term, but we are not there yet. Our solar interventions have been fantastic. They saved the grid. But during load shedding, we can only use generators … Batteries are being tested that look like they might be able to justify switching," said Emira CEO Geoff Jennett.
But outside of the load shedding woes and the costs it's levying on its business and tenants, Emira was happy with its financial performance, and upped its dividend by 17.4% in its half year to end-December.
It grew its distributable income per share by 15% to R378.8 million, amid a decline in the SA portfolio vacancies to below 5%, while rental reversions when tenants renew expired leases also improved from -15.2% to -9.4%.
The company's office portfolio, whose vacancies shrank from 15% to 11.6%, outperformed the South African Property Owners Association's average of 16.1% at the end of December 2022.
"This is despite the fact that the office sector is still under pressure. We've said before that we believe the office sector can only really improve if we've got good economic growth. We really need that. Businesses also need to understand where the economy is going because that influences their office strategies," said Van Biljon.
READ | 'We need the corporates to come back to the office', says The Bolton owner as renters ditch Rosebank
Emira's financial metrics also benefit from its 2016 move to diversify to the US. The company partnered with mall owner Reiner and together, they now own 12 grocery-anchored open-air shopping centres. Emira doesn't own a stake in Rainer, but it holds a 49% share in each of the US company's property asset, which now make up 16.7% of Emira's total assets.
The operating environment in the US is much more favourable to players like Reiner. There hasn't been much new construction, and Jennett said there's actually a shortage of shopping centres. Thanks to that, Reiner's vacancies only stood at 2.5% at the end of December. Furthermore, when it renews expired leases, it has been able to get rental reversion of more than 6.9%, while reversions in SA continue to be negative.
"This shows that the effects of the pandemic are moving out of the system in the US, and more can be expected," said Jennett.
