Archives for January 2020

Redefine Properties strengthens its balance sheet with value-enhancing Madison International Realty equity deal

Johannesburg, South Africa – 21 January 2020: JSE listed diversified real estate investment trust Redefine Properties is strengthening its balance sheet and enhancing its logistics platform in the fast-growing Polish market through the introduction of leading international real estate private equity firm, Madison International Realty (Madison) as an equity investor.

In terms of the deal, announced today and expected to be finalised by the end of February, Madison is acquiring a 46.5% equity stake in Redefine’s Polish logistics platform held through European Logistics Investment (ELI). As part of the transaction, Griffin Real Estate who own 5% in ELI will acquire a further 2% from Redefine on the same terms as Madison, leaving Redefine with a 46.5% equity interest. The transaction is in line with Redefine’s stated intention to introduce a high-quality international equity partner to strengthen Redefine’s balance sheet and continue to expand its Polish logistics platform.

The platform comprises 19 assets totaling around 560,000 sqm, with 80,000 sqm nearly completed and an additional development pipeline of 270,000 sqm to be started once pre-leases are secured. The completed properties are around 95% occupied and spread across the key distribution hubs of Poland in Warsaw, Lodz, Krakow, Silesia, Pomerania and Poznan regions and developed to a high technical specification.

The Polish logistics market is poised to continue to grow as a key logistics hub for international e-commerce players, as well as an increasing number of manufacturing companies establishing their operations in Poland.

As part of the transaction, Madison will provide a €150 million (approximately R2.4 billion) commitment to ELI, of which €83.7 million (approx. R1.3 billion) will be used to acquire their share of the existing assets and developments in progress while leaving a commitment of €66.3 million (approx. R1.1 billion) to expand the portfolio over the next three years. In terms of the deal Redefine will match Madison’s equity commitment of €66.3 million. Panattoni Europe, a market leading European logistic developer, is a co-manager of the platform.

Andrew Konig, CEO, Redefine Properties, says, “The deal fits perfectly with our investment strategy and provides us with an opportunity to reduce our loan to value ratio. It also means we are able to source additional, well priced capital in order to secure the exclusive priority right to development opportunities with Panattoni over the next three years.”

“The focus for 2020 firmly remains on asset quality, offshore expansion through development activity, notably through ELI and leveraging opportunities to participate in a broader, more diversified portfolio of logistics assets. We are delighted to be working with Madison in the heart of CEE’s most attractive real estate market.”

Redefine will realise €87.2 million (approx. R1.4 billion) from this transaction of which €14.7 million (approx. R235 million) will be surplus cash after reinvestment in ELI to the tune of €72.6 million (approx. R1.2 billion) – comprising the equity commitment of €66.3 million and completing existing developments in progress totaling €6.3 million (approx. R101 million).

“The JV with Madison enables Redefine to continue to benefit from the priority right development pipeline with Panattoni. By co-investing with Madison, over the next two to three years, ELI will have access to sufficient capital (€148.7 million) for its logistic platform portfolio to grow to a sizable scale (increasing from 560 000 sqm to circa 910 000 sqm in gross leasable area) and benefit from attractive development yields and low cost of European debt funding,” adds Konig.

“In attracting this level of commitment from Madison, we’re continuing our track record of speed and agility in both sourcing capital and building a diversified and significant logistics platform, improve letting and capital value appreciation, as-well-as realisation of value prospects,” says Konig.

“This transaction clearly demonstrates Redefine is on course to reduce balance sheet risk while continuing to deliver sustainable quality earnings, as well as alleviating investors’ apprehension around liquidity.”

The final closing of the transaction is targeted for end February 2020 and is conditional on Polish regulatory clearance.

Equites to develop a R1.3bn warehouse for Pepkor

Cape Town, 21 January 2020 – Equites Property Fund Limited (Equites) today announced an agreement with leading JSE-listed retailer Pepkor, to develop a 122 734 square metre logistics warehouse facility in Hammarsdale, KwaZulu-Natal. The indicative total cost of development is R1.3 billion, which includes the cost of the land of R281 million. Equites will enter into a 15-year “triple net” fully repairing and insuring lease with Pepkor on completion of the development. Pepkor will have a right to renew for three additional five-year periods. The development is expected to be completed by November 2021.

Equites CEO, Andrea Taverna-Turisan, said the company is pleased with the transaction as it meets all its investment criteria. As a specialist logistics investor and developer, Equites has successfully delivered modern and efficient logistics facilities to users both in South Africa and the United Kingdom. A transaction of this size with a client of Pepkor’s stature and exacting requirements will assist to further cement the company’s aim of being recognised as a developer of choice to the largest logistics, retail and e-commerce participants in the South African market.

The modern, state-of-the-art logistics facility will be situated in Hammersdale, a prime logistics node due to its location along the N3 national road and its proximity to the rail network linking Gauteng to the Durban port. It is also close to the inland container terminal at Cato Ridge which is expected to change the logistics landscape in KZN. Other prominent South African retailers, such as Mr Price and Ackermans, have logistics warehouse facilities close to the property, providing further evidence of the attractiveness of this node. The warehouse will boast a clear height to eaves of 15.8 metres and yard depth in excess of 45 metres. Both companies place strong emphasis on sustainability in their assets from the outset and the facilities have been designed with increased steel tolerances to accommodate the installation of photovoltaic panels.

Taverna-Turisan said: “The development will increase Equites footprint in the key logistics node of KwaZulu-Natal and create further scale in our high-quality logistics portfolio. Importantly, the developed facility will also add to the quality, defensiveness and income predictability of Equites. We are excited to welcome Pepkor as a client.”

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