Archives for November 2019

Vukile boosts transformation

Vukile Property Fund today announced that it is disposing of all its remaining non-retail property assets to Mbako Property Fund in a deal that achieves economic and gender transformation in the South African property sector.

Mbako is a new black-women-owned and -managed unlisted property fund led by AWCA Investment Holdings (AIH) as its founding shareholder, which will be managed by a new joint venture between AIH and Vukile. Mbako, meaning “to build”, embodies its co-founders’ vision of working together to build a sustainable South African property fund.

Laurence Rapp, CEO of Vukile, says, “We are extremely proud of this innovative deal that not only realises Vukile’s strategic vision of a directly held portfolio made up exclusively of retail property in South Africa but more significantly is positive for economic and gender transformation. In Mbako’s hands, these assets are a platform for growth and wealth creation. There is no better partner to unlock this potential with than the respected executives and leaders of AIH.”

Sindi Mabaso-Koyana, Executive Chairperson of AIH, says, “AIH is turning its attention to accelerating transformation in the property sector through Mbako Property Fund. We are thrilled to have a like-minded management company partner in Vukile and the financial backing of RMB.”

RMB financed Mbako’s R700 million initial property portfolio acquisition from Vukile. RMB’s Sashen Naidoo says, “In funding the Mbako transaction, RMB is furthering its commitment to economic transformation by facilitating the creation of a high-impact transformative investment vehicle. Mbako will benefit from the management of experienced professionals with impeccable credentials and a proven return on investment track record for investors.”

AIH was founded and funded in 2008 by black women Chartered Accountants. It has 54 shareholders as well as NPO African Women Charted Accountants (AWCA) as a 10% beneficiary. The 1,500-member strong AWCA is premised on the mutual support, personal and professional development of African Women CAs. AIH is an investment vehicle that creates wealth and gender transformation through investments in multiple sectors. It has made a total of 14 investments to date, with two exited so far at returns above 30%.

Vukile is a JSE-listed, high-quality, low-risk retail REIT with half of its c. R35bn property investments in South Africa and the other half focused in Spain through its subsidiary Castellana Properties Socimi SA. Vukile has a 15-year unbroken track record of distribution growth for its shareholders and has delivered a compound annual growth rate of nearly 20% since listing in 2004. Known for its active hands-on asset management, prudent financial management and strong corporate governance, it has a proven track record of establishing and rapidly growing new investment platforms.

A dedicated management company has been formed by AIH (70%) and Vukile (30%) for the asset management of Mbako and potentially other assets. The manco benefits from the experienced financial and business management of AIH with strong governance, while Vukile contributes its proven property and asset management expertise, as well as its skill in successfully managing third-party portfolios and corporate structures. The result is a powerful combination of skills and experience that deliberately includes a four-year programme of property expertise transfer from Vukile into Mbako, allowing it to transition into a fully independent fund.

Mabaso-Koyana adds, “We are thrilled to introduce Mbako Property Fund, which is structured to achieve superior returns and transformation through successful property investment. It is a diversified multi-asset property fund with an initial stable income-generating R700 million portfolio of investment-grade properties and backed by the highest calibre property asset management. As an unlisted fund, we believe Mbako is coming to market at the right time to attract funding and deal flow to take advantage of the depressed listed property market with opportunistic and value-add transactions.”

Mbako’s portfolio approach will balance a stable core portfolio with a value-added component that leverages the active asset management expertise of its manco. It is well placed to take advantage of distressed sales where it doesn’t pay for vacant space but can unlock value-add opportunities. It also sees opportunity in sale-and-leaseback agreements that help businesses unlock cash on their balance sheets. Mbako will continue to raise equity and funding to pursue its well-defined growth strategy.

The sizeable Mbako seed portfolio includes nine office and industrial properties, eight in the country’s commercial hub of Gauteng and one in Pinetown, KwaZulu-Natal. The biggest property is Allandale Industrial in Midrand, stretching over 21,300sqm of gross lettable area on a 12ha site with 60 tenants.

Liberty Two Degrees #Bethechange movement is in full motion

The “Be The Change” campaign aims to educate and inspire a change in attitude towards making a meaningful and sustainable difference to preserving the environment for future generations

With a vision to be the leading South African precinct focused, retail-centred REIT, Liberty Two Degrees (L2D) has already made bold commitments to changing some of its business operations that will support accelerated and positive changes by reducing carbon emissions, water use and waste generation at its malls across the country.

A number of initiatives that support these commitments have already been implemented, among these is the installation of a substantial solar photo voltaic system at Liberty Midlands Mall, smart energy and water metering across the L2D co-owned malls as well as a multitude of energy efficiency projects.

The goal of playing a significant role in removing single use plastics out of landfills has given rise to the implementation of a policy which will see the removal of plastic straws and non-biodegradable balloons as well as replacing single-use plastic shopping bags with sustainable alternatives from the company’s co-owned malls by 1 January 2020.

A bank of reverse vending machines, which were first installed in Sandton City in November 2019, offers customers the option to “sell” their recyclable waste while making recycling a part of their daily routine. L2D co-owned malls all feature state of the art recycling and waste management facilities that will play a significant role in contributing towards achieving the commitment of NetZero waste to landfill by the end of 2020.

“We need to stop acting as though we can buy ourselves out of the climate crisis, or that we can wait for someone else to do it – we need to believe that what we do matters. That’s the importance of our individual actions. It’s not that our mall composting or our no plastic bag policy will empty landfills of food waste, it is about the changed minds and hearts that may spark positive action so that we could meaningfully make a positive difference on purpose,” says Amelia Beattie, Chief Executive of Liberty Two Degrees.

L2D malls are ecosystems that provide enabling environments for some of the world’s most iconic and most demanding brands, L2D therefore understands that partnerships with stakeholders is crucial in accelerating climate positive impact.

In line with its Good Spaces strategic building block that aims to create resilient spaces that are agile, adaptable and aligned to Sustainability Development Goals, L2D has implemented its “Be The Change campaign aimed at educating, inspiring and appealing to all stakeholders to change and join the movement – adopting climate positive practices in their everyday lives.“Be The Change” has been rolled out across all of L2D’s co-owned malls, with extensive initiatives in place to educate the public about the importance of recycling and resource saving.

This is just the beginning of L2D’s “Be The Change” movement – 2020 will see the full execution of the campaign which will host a line-up of sustainability events and other marketing and operational related features.

Lead the Change. Be the Change. See the Difference.

Redefine lifts full year distribution per share by 4%

Johannesburg, South Africa – 04 November 2019: Listed real estate investment trust (REIT) Redefine Properties (JSE: RDF) has lifted its full year distributable income by 4% to 101 cents per share for the year ended 31 August 2019, with total group assets exceeding R100 billion for the first time. It is also the first time that full year distribution per share has breached the R1 level.

Redefine continues to benefit from a well-diversified portfolio and expansive geographic footprint, with the contribution from international property investments rising to 26.8% this financial year from 24.0% of distributable income last year.

The company, which manages a diversified property asset platform of local and international investments, expanded property assets under management to R95.4 billion from R91.3 billion during the previous year, while international real estate investments now make up 23.7% of the portfolio, from 20.7% before.

Redefine expects property fundamentals to remain weak over the medium term, with risk events like load shedding adding to the uncertainty.

“Interesting and volatile times are here to stay, and we need to make the most of the resultant opportunities. We are living in a world of costly capital and Redefine is therefore focusing on reducing balance sheet risk while still delivering sustainable quality earnings,” says Redefine Chief Executive Officer Andrew Konig.

During the year, Redefine managed to improve total tenant retention to 93.3% from 90.4% in 2018, while its active portfolio occupancy was maintained at 94.9%.

According to Konig, the focus for 2020 will be on asset quality, offshore expansion through development activity – notably through expanding the group’s European Logistics Platform – while taking action to restore the value of under-performing assets.

“We have to still grow where we see opportunities and not halt investment. However, we need to be more discerning and selective with our capital allocation and pro-actively seek out recycling opportunities for our non-core assets,” he says.

In a move to build a sustainable capital structure, Redefine has introduced a dividend pay-out policy to add another source of funding, which aligns to international REIT best practice and is pitched at a level that poses no tax leakage.

With a 6-month dividend of 48.1 cents a share being declared, the pay-out policy amounts to 93% of distributable income, which is a retention of around R200 million in cash to fund operational capital expenditure.

“This goes to the heart of sustainability as there is no distress on the business and the cash will fund capital expenditure to maintain operations, giving us an efficient additional source of funding, while also preventing potential tax leakage which could occur in the hands of shareholders if this amount was rather declared as part of the dividend and re-invested as equity,” explains Redefine Financial Director Leon Kok.

During the year, R6.9 billion was deployed into property assets, with local development activity totalling R2.4 billion. Offshore expansion totalled R4.3 billion, with R3.6 billion invested in Poland. At the same time, 17 properties with gross leasable area of 160 076sqm, which no longer served Redefine’s investment criteria, were disposed of to various buyers for an aggregate consideration of R1.0 billion, at an average yield of 8.2%.

According to Kok, the average cost of debt is now 5.8% from 6.3% a year ago, while interest rates are hedged on 87.3% (FY18: 81.2%) of total borrowings for an average period of 2.9 years.

Environmental impact remains a key theme, and during the year carbon emissions savings from Redefine’s solar installations equated to taking around 6,300 passenger cars off the road.

Despite the challenging trading environment, Redefine expects to deliver distributable income per share similar to that of 2019 for the 2020 financial year, and anticipates the pay-out policy to be maintained at a similar level.

While Redefine’s legendary founder Marc Wainer retired in August, Redefine has also zeroed in on improving board independence, with the appointment of Daisy Naidoo as an independent non-executive director adding to its diversity and skills base. 50% of the board is now female and 88% of the non-executive directors are independent.

“We are living our values to protect and grow our reputation in pursuit of living our purpose to create and manage spaces in a way that changes lives. We continue to place people at heart of everything we do, which will stand us in good stead when the cycle does turn,” concludes Konig.

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