Archives for January 2022

Hyprop to Acquire the Remaining Properties Within the Hystead Portfolio

Hyprop Investments Limited (Hyprop) is pleased to announce it has concluded an agreement with Hystead to acquire the remaining four assets within the Hystead Eastern European (EE) portfolio. These core assets include, Skopje City Mall in North Macedonia; City Center One East and City Center One West in Croatia; and the Mall of Sofia in Bulgaria. Hystead’s fifth property, Delta City Podgorica in Montenegro, is in the process of being sold and Hyprop will retain its existing €45 million interest in the asset, representing 60% of the value, until the sale is complete.

Hyprop currently owns 60% of Hystead, with PDI Investment Holdings owning the other 40%.

The Hystead acquisition properties accord with Hyprop’s strategy for its EE portfolio of premium retail properties in their respective jurisdictions and have the potential for future growth through active asset management and development initiatives, drawing on Hyprop’s South African expertise.

The transaction will enable Hyprop to take full control of the Hystead acquisition properties, with the following impact:

  • an increase in Hyprop’s effective interest in the Group’s EE portfolio;
  • an alignment of Hyprop’s economic interest in the Hystead properties being acquired and mitigation of its risk exposure;
  • the optimisation of Hystead’s capital structure and the Group’s borrowings and gearing profile;
  • the consolidation of the Hystead acquisition properties in Hyprop’s financial statements, providing greater disclosure and transparency; and
  • retention of the experienced Hystead asset management team, ensuring management continuity, and positioning Hyprop to grow its EE portfolio in the long-term.

Morné Wilken, Hyprop CEO, said: “The transaction is in line with our strategy to further diversify our exposure into Eastern Europe, mitigating the company’s risk to a weaker South African economy and will address some concerns previously raised by shareholders.

Hyprop remains focused on creating safe environments and opportunities for people to connect and have authentic and meaningful experiences, thereby creating long-term sustainable value for all stakeholders.”

Hyprop is confident that the Group’s strategy and key priorities remain relevant, even in a prolonged Covid-19 environment and the focus for the EE portfolio remains to retaining the dominance of the malls through active asset management initiatives and strategic redevelopments, leveraging the Group’s SA expertise and know-how, securing rights for further mall extensions to satisfy tenant demand and completing the refinancing or settlement of the equity debt.

Once the transaction is concluded and Delta City Podgorica is sold, the intention is to wind up Hystead in an orderly manner. This will include settling all Hystead’s outstanding debt and releasing Hyprop and PDI from all guarantees in the shareholders’ agreement.

Hyprop shareholders are advised to exercise caution in their dealings until a further announcement is made.

Growthpoint Student REIT launches with high-quality R2bn portfolio

Growthpoint Properties (JSE: GRT) has launched South Africa’s first unlisted purpose-built student accommodation real estate investment trust (REIT), the Growthpoint Student REIT – the third specialist, unlisted alternative real estate investment opportunity to be launched under Growthpoint’s funds management business. The Student REIT has acquired a R2bn seed portfolio with 5,000 modern beds.

Globally, the thriving purpose-built student accommodation sector is giving rise to the growth of specialist REITs. They are attracting record capital inflows by outperforming based on consistently high occupancies and rental growth.

Locally, the launch of Growthpoint Student REIT has opened up focused investor access into this defensive alternative asset class, with its strong fundamentals and proven resilience.

The introduction of the purpose-built student accommodation REIT received strong market interest. Its first close exceeded expectations, attracting third-party capital commitments of some R1.1bn and around R1.5bn in total, including the capital commitments from Growthpoint as well as Feenstra Group, one of the largest seed portfolio vendors.

Growthpoint’s R240m investment represents a 16% shareholding in the unlisted REIT and is in line with its co-investment philosophy underpinning its funds management business. It will remain a core investor in the fund, owning between 5% and 20% of the equity in the REIT in future. Feenstra’s R160m gives it an 11% holding, with a three-year “lock-in” commitment.

Growthpoint is the fund manager and assumes overall responsibility for the success of the Student REIT, while Feenstra will be the property manager. The Student REIT leverages the entrepreneurial vision and skill of Growthpoint’s management team and the proven student accommodation property management capability of the Feenstra Group in order to create value for investors.

The Growthpoint Student REIT’s R2bn seed portfolio comprises seven high-quality purpose-built student accommodation properties acquired from a group of vendors led by Feenstra. A two-year rental underpin, to mitigate against short-term impacts of Covid-19, was included in the deal. After the conclusion of the acquisition, the Student REIT launched in December 2021.

The Student REIT is unlisted – giving investors exposure to direct real estate that tends to be driven by long-term fundamentals rather than listed real estate volatility driven by short-term sentiment. However, JSE-listed Growthpoint’s control ensures excellent governance oversight frameworks, extensive dedicated environmental, corporate social investment and sustainability resources, and regular investment income from the Student REIT’s six-monthly dividend payment policy.

Growthpoint’s fund management business seeks to identify investment opportunities in sectors that are underpinned by strong fundamentals and that have the potential to be built to scale. It aims to grow the new Student REIT towards R12bn in assets and a stock exchange listing within seven years.

A focused investment mandate in purpose-built student accommodation differentiates the Growthpoint Student REIT. This type of accommodation is built specifically for university students by private developers and is designed to be student-centred.

Head of Corporate Finance at Growthpoint, George Muchanya, explains, “The demand for specialised student accommodation in South Africa far outstrips supply, making it an attractive investment. Given the constrained fiscal budget, to address the shortfall, the Government and Universities have shifted student accommodation provision from universities to partnerships with the private sector. This is a very positive step for all stakeholders and will contribute towards job creation as new developments are rolled out. This growing market remains disaggregated, and as SA’s first unlisted REIT investing in this asset class, Growthpoint Student REIT is poised to become the institutional player of reference in the sector that is likely to re-rate in the next decade.”

 The massive demand for quality student accommodation in South Africa is driven, in part, by the demographics of a young population. Education accounts for a significant share of public and family budgets, and Government’s commitment to tertiary education supports purpose-built student accommodation.

“An investment in the Growthpoint Student REIT is also an opportunity to invest for positive social and economic impact. Education is a major social need in South Africa. Around 60% of students in the fund’s initial portfolio are from low-income households and supported by the National Students Financial Aid Scheme (NSFAS). Their student accommodation provides them with a conducive learning and living environment, improving education outcomes,” adds Muchanya.

The REIT’s NSFAS-approved, Gauteng-based portfolio is geographically split between Pretoria (71%) and Johannesburg. Each property is only a short walk from the University of Pretoria or the University of Johannesburg campuses. All have a history of high occupancy levels and rental growth, notwithstanding the disruption to education, and the ability to attend lectures in person, experienced since the onset of the Covid-19 pandemic.

The Growthpoint Student REIT has several acquisition and development opportunities on the horizon, including an immediate growth portfolio of two development projects currently underway and opening in time for the 2023 academic year, a further acquisition of a Feenstra property under development, and another asset which will commence construction later this year.

With significant growth expected to come from new development, the Growthpoint Student REIT has access to large and complex projects by leveraging Growthpoint’s exceptional property development expertise and Feenstra’s experience as one of the largest private developers in the country. New developments expand Growthpoint Student REIT’s positive impacts beyond education outcomes alone as investing in development boosts job opportunities, municipal revenues and communities.

With extensive deal flow in place for this specialist REIT, investors will have an ongoing opportunity to invest in this high impact social investment.

The Growthpoint Student REIT furthers Growthpoint’s strategy to introduce new co-investment opportunities that leverage its management strength. Growthpoint’s funds management business is now actively managing three funds. It first commenced Lango (formerly Growthpoint Investec African Properties) in 2018. Lango’s assets have since grown to USD650m with over USD300m third-party funding raised, and it has emerged as a leader in the African real estate market. Growthpoint Healthcare Property Holdings launched later in 2018 and as SA’s first unlisted REIT focused exclusively on healthcare property investment, has now grown its assets to R3.2bn and raised over R2bn of third-party funding.

Norbert Sasse, Group CEO of Growthpoint, says: “Funds management provides Growthpoint and our co-investors with access to alternative opportunities in the unlisted and co-invested environment. We are pleased that our funds management platform has gained even stronger momentum with the launch of the Growthpoint Student REIT and continues to attract third-party capital successfully. Growthpoint remains committed to adding depth to the real estate market for the broader investment community. Ultimately, growing our funds management further diversifies our assets and harnesses new opportunities to create sustainable value.”

Redefine’s flagship Alice Lane development supporting Johannesburg “Be Kind”

Redefine’s popular Alice Lane development, which sets the benchmark for mixed use development, is embracing the Johannesburg-wide “Be Kind” artwork initiative.

“Be Kind” relates to a series of 18 art installations around the streets of Johannesburg, the brainchild of Rabbi David Masinter. The aim is to spread positive thinking and upliftment after a difficult two Covid-19 years.

Redefine’s National office asset manager, Pieter Strydom, says Alice Lane is giving new meaning to mixed use office space in the Sandton hub and sets the benchmark for developments in the future, which is why partnering on “Be Kind” is seen as an important and relevant partnership for Redefine.

“Alice Lane offers a safe, relaxing, and stunning business environment for those who expect only the best. It is therefore a perfect fit as a partner for the ‘Be Kind’’ initiative and we are proud to associate ourselves with a move to lift the spirits of people visiting Sandton and also more broadly, Johannesburg.”

Rabbi Masinter is a firm believer in humanity and compassion of people – especially South Africans. The “Be Kind” project aims to embrace the beauty around them and share positivity with everyone in the City of Gold.

Alice Lane lives up to these very ideals as it seamlessly integrates state-of-the-art building systems with easy accessibility and convenience. It’s also a sustainable, environmentally friendly development, created with non-toxic materials and built to a 4 Star Green Star status, the first Green Star-rated precinct in the area.

Redefine picks Roodepoort for its latest retail venture Kwena Square

Sandton, South Africa: The construction on Redefine Properties’ Kwena Square on the West Rand is progressing well and is expected to be completed on schedule during May 2022. The JSE listed diversified real estate investment trust intends to open the shopping centre to the public during mid-2022. Located centrally in Little Falls, Roodepoort, it features over 10 000m2 of convenience shopping space.

The centre gets its name from the Sotho meaning for crocodile, koena (kwena) which accentuates the abundant natural beauty within the Little Falls, Strubens Valley and surrounding areas. The Crocodile River also has its source in the Witwatersrand Mountain range, originating in Constantia Kloof, Roodepoort, which is near the current site.

Developed at a cost of R210 million, Kwena Square will house 23 stores anchored by national retailers like Checkers, Checkers Liquor, Clicks and boasts one of the country’s first drive-thru RocoMamas besides other restaurants and coffee shops. Parking bays to accommodate 407 cars at any time have been provided. Already over 60% of the centre has been pre-let to tenants who represent a diverse line of local and national brands.

An array of rooftop solar panels will generate as much as 25% of the electricity required by the centre, a key feature which will reduce the load on the main grid.

Redefine recently unveiled its Moonshot Strategy setting a target to deliver the smartest and most sustainable spaces by the end of this decade and has since been focusing on energy efficiency and renewable energy to help it to reach its goal. In 2022, Redefine will focus on executing its strategic priorities having introduced a climate resilience framework, striving for more sustainability interventions across its operating environment and investing strategically.

Leon Kok, COO, Redefine Properties says, “We are ready to put the efforts in towards meeting our commitment to convert all buildings in our portfolio to net zero carbon, water and waste by 2050. The process has begun with our newer projects and demonstrates our ongoing focus to reduce our carbon footprint. We have an overarching ambition to be a force for good.”

A new study by MSCI shows that some areas of retail like convenience shopping centres are seeing a rise in sales and visitors with trading densities exceeding pre-Covid levels. Thanks to time-pressed consumers juggling work-from-home and making quick stops for groceries to avoid crowds, the need for convenience became paramount during Covid-19.

“Kwena Square entrenches the trend we first identified on the re-emergence of convenience centres, a shopping format most favoured during the pandemic for its ease of use and open ventilation enhancing safety. The completion of the project during a pandemic reflects our commitment and our tenants’ confidence in the project and the neighbourhood,” adds Kok.

“A convenience centre like Kwena Square addresses changing shopping habits and is positioned to efficiently meet evolving demands of shoppers.”

‘Moonshot’ strategy will accelerate our ESG momentum, says Redefine

Sandton, South Africa: Redefine Properties says young innovators in the business are informing its perspective on how to solve complex issues facing the industry, while positively shaping the built environment. As part of its Moonshot strategy, Redefine, aims to build the smartest and most sustainable buildings the world has ever known in the regions in which it operates over the next decade.

Redefine recently presented the strategy and its impact as one of 32 companies selected globally to showcase their commitment to ESG at the UN Global Compact’s Young SDG Innovator Summit in September 2021.

Redefine is SA’s first REIT to become a signatory to the UN Global Compact, a voluntary initiative based on CEO commitments to implement universal sustainability principles and support UN goals. The compact is the world’s largest corporate sustainability initiative of its kind with 13 000 corporate participants.

The chasm between all strata of society was harshly exposed during the height of the Covid-19 pandemic. The hard lockdown held the mirror to the archaic idea of pursuing profits at all costs, thus forcing many businesses to revaluate their core purpose. The link between ESG, business strategy and risks has never been clearer than during Covid-19.

Redefine’s ESG strategy is a step towards strengthening its long-term Moonshot strategy and has the full support of the board, who have sight of the company’s ESG frameworks and compliance.

The Moonshot strategy rests on five pathways, one of the critical ones “being a force for good”. Investors, tenants and increasingly communities, are beginning to see commercial properties through different lenses. It is no longer enough for the buildings to be sustainable and be efficient, they also need to contribute to promoting tenant and community health and well-being.

With two years already shaved off the decade long timeline for the fulfilment of the Moonshot strategy, Redefine has set itself targets across its portfolio to reduce reliance on grid energy, water consumption, waste-to-landfill as well as fast-tracking green energy projects, especially solar. In the new normal, Redefine sees opportunities in creating ‘liveable’ environments and contributing to better life experiences through sustainable building design principles.

“The age-old proverb – if you want to go fast, go alone and if you want to go far, go together, holds valuable lessons in the built environment. While Redefine has a good handle on how to design, build and operate sustainable buildings, the shell or infrastructure represents only a portion of the building’s energy profile. What happens in the tenant space also has a huge impact on the environment,” adds Keke.

“Green leases are catching on and we are keen for key tenants to work with us in this regard. These leases encourage tenants to identify and implement alternatives in their own spaces in areas such as energy efficiency, recycling and other environmental priorities etc. We are also walking the talk by digitising all tenant leases, saving as many as 250 pages per lease.”

Keke notes the guidance provided by the Green Building Council of South Africa to ensure the “E” in ESG remains front and centre in the built environment as well as the progressive work being done by South African Property Owners Association as well as SAREIT.

“Our long-term vision is to help coordinate actions with industry groupings and continue leading the industry by further embedding ESG across the company, in and through how we invest, operate and manage our assets.”

According to Bloomberg Green, the global sustainability bond market has performed exceedingly well. The first six months in 2021, saw more ESG-related bonds issued than during all of 2020. And while the sector still represents a fraction of the overall bond market, it is quickly gaining ground, with sovereign investors and others required to account for a certain percentage of their funds going into green bonds.

“SA needs more examples of successful sustainable bond issuances so that the sector can benefit from reduced cost of capital,” says Keke.

“Redefine’s Moonshot is to ensure that its ESG efforts benefit both the planet and people and encourages the use of its spaces in a way that changes lives. Our scale allows us to implement our innovative approach across a large number of our existing properties and new projects and believe that if we keep the momentum going, we will have a significant positive impact on spaces, people, communities and climate which all makes good business sense.”

Redefine Properties In Prime Position To Benefit From Increased Exposure To The Polish Retail Sector After Receiving R7.2 Billion EPP Re-Organisation Green Light

Johannesburg, 24 January 2022 – Redefine Properties (JSE: RDF) has received the green light from shareholders to finalise the delisting and takeover of EPP (JSE: EPP), Poland’s largest retail landlord.

The deal, which is still subject to finalisation of outstanding conditions precedent and regulatory requirements, amounts to an estimated R7.2 billion in additional equity for Redefine and adds around R19.7 billion of total assets onto its balance sheet.

On Friday last week, the key step to finalisation of this significant transaction was completed when the proposal received overwhelming support from both Redefine and EPP shareholders. It entails a share-for-share offer by Redefine to acquire all the remaining shares in EPP it does not already own upon delisting thereof.

This will take place at a swap ratio of 2.70 Redefine shares for each EPP share held, to a maximum of 1.1 billion if everyone converts to Redefine shares. Redefine currently holds 45.4% in EPP and on completion of the transaction, the Polish-centred offshore component of its overall portfolio is likely to increase to 30%.

“I was very pleased and encouraged by the high level of Redefine’s shareholder support, with an approval of 78.3% being achieved,” says Redefine CEO Andrew Konig.

He says the support reflects the fact that the transaction ticks several strategic boxes. These include reducing risk, simplifying Redefine’s investment and asset platform and eliminating exposure to a listed investment where Redefine as a minority shareholder had limited input over funding or liquidity management. It also opens the door to exciting retail market opportunities in the Polish market as it accelerates its recovery from the Covid-19 pandemic.

“We have always been bullish on the Polish retail market and all indications are the Polish economy will grow in excess of 4% this year. Retail sales are on the rise and we are excited to now have a single entry point into this market via Redefine,” he says.

‘’I am glad that our investors supported EPP delisting and restructuring proposals with a large majority. It was not an easy decision to make. I believe that once the company’s reorganisation is completed, EPP will be in a position to return to the growth path, as well as to regularly deliver dividends to its shareholders,” said Tomasz Trzósło, CEO of EPP. “I also would like to thank the EPP team who put a lot of work into completing this project within a very tight deadline.”

Konig says the deal protects Redefine’s carrying value in EPP from dilutive value destruction and fits perfectly with moves to a more sustainable funding model in which debt is matched to stable assets, rather than underlying listed shares, that are subject to the vagaries of financial markets.

With EPP unable to pay dividends for the past two years and facing significant loan maturities in 2022 and 2023, the deal’s core objective is to significantly reduce EPP’s debt through a liquidity generating restructure, which will restore it to a dividend paying position.

EPP has a loan to value (LTV) of approximately 57% and Konig says it was therefore important to solve the liquidity challenge it was facing, without in any way impacting Redefine’s own LTV ratio.

“Redefine wanted to avoid these liquidity challenges to impact negatively on our own LTV of 41.6%, which we have worked hard to achieve,” explains Konig. As a consequence of the restructure, EPP’s LTV reduces to well below 35% and as a consequence there is a marginal effect on Redefine.

“A lower LTV for EPP bodes very well for its ability to access liquid and well-priced Eurobond markets and open up new sources of funding. This gives us a lot of financial flexibility offshore,” explains Konig.

Redefine’s credit metrics also improve, with its interest cover ratio moving from 2.5 times to beyond 3 times.

Konig explains that as the controlling shareholder of EPP, Redefine will be in a stronger position to drive initiatives to return EPP to a dividend paying position in the short term, thereby delivering improved distributions to Redefine shareholders.

“Redefine’s shareholders will obtain additional exposure to prime Polish retail assets directly held through EPP and there will no longer be two listed entry points to EPP, providing Redefine with a differentiated investment proposition on the JSE and potentially enhanced liquidity. This is a win-win and I believe this is why the results of the shareholder votes were so overwhelming,” he concludes.

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