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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.

Stor-Age raises R575 million and announces acquisition of UK portfolio

JSE REIT Stor-Age, South Africa’s leading and largest self storage property fund, has today announced the acquisition of a regionally dominant four-property portfolio in the UK, while also successfully raising R575 million in a significantly oversubscribed accelerated bookbuild.

The bookbuild saw R575 million of equity raised at a price of R14.30 per share, representing a 0.92% discount to the 30-day volume weighted average traded price.

The capital raised will support the finalisation of the UK acquisition, while also enabling the group to continue taking advantage of development and acquisition opportunities in both South Africa and the UK. The acquisition, secured at £37.5 million and consisting of a four-property portfolio offering 12 400m² of gross lettable area (GLA), has the potential to be expanded to approximately 18 900m² on a fully fitted-out basis.

Stor-Age continues to deploy capital strategically, adding quality and scale to its high-quality portfolio of self-storage assets in both markets. Despite the tough trading conditions and the continued impact of the COVID-19 pandemic, as one of only ten publicly-traded self-storage REITs globally, the company continues to demonstrate its resilience by delivering excellent operational and financial results.

The result of the accelerated bookbuild is a strong vote of confidence in the business and its strategy. Comments Stor-Age CEO Gavin Lucas, “We are pleased with the result of today’s capital raise, which once again demonstrates both the high regard in which Stor-Age is held and the significant appetite for the company’s stock. The capital raised will allow us to successfully continue with our strategy of growing our portfolio in both South Africa and the UK, adding quality and scale in both markets.”

The company’s South African pipeline consists of 10 properties, offering an estimated 59 200m² GLA at an approximate total cost of R850 million. In the UK, the pipeline consists of 4 properties offering an estimated 20 500m² GLA at an approximate total cost of £46 million.

Add Lucas, “Stor-Age and the self storage business model have a track record of resilience in constrained economic environments. The primary drivers of demand for our product are life-changing events and / or dislocation, be they positive or negative in nature. Maintaining a strategically well-placed and conservative balance sheet remains a priority for the company. Our LTV target range of 25% to 35% allows for the consistent execution of the strategy in both South Africa and the UK.”

In a trading update for the third quarter ended 31 December 2021, Stor-Age confirmed that total occupancy in the same store portfolio increased by 10 500m² (2.6%), whilst the closing average rental rate increased by 1.6% (annualised 6.3%) and 1.5% (annualised 6.0%) in SA and the UK respectively.

The group continues to be well-positioned to benefit in the medium to long-term from the rapid acceleration of change brought about by the pandemic.

The share closed yesterday at R14.88.

Ceo Welcome Message by Joanne Solomon

The new year is upon us, and for most people and businesses, it represents an opportunity to push the reset button and start anew. However, like all things in life, one cannot look to the future without reflecting on the past.

2021 offers many lessons but, on the whole, will be remembered as a year of resilience and undying fortitude. It began with much uncertainty and trepidation, given the ongoing effects of the COVID-19 pandemic but ended in renewal and optimism.

As the year progressed and we found our footing, people and businesses began to navigate the new ways of living and doing business. For SAREIT, it was encouraging to see the sector’s commitment to improving the business environment, contributing to the betterment of South Africa’s economic situation. Between April 2020 and June 2021, REITs issued a total of R3.5 billion in rental discounts and deferrals to enable business sustainability during the pandemic. Therefore, these collective efforts reassure me that 2022 will be the long-awaited year of rebuilding and recovery.

During 2021, we experienced some significant shifts within the sector. Most of our members and the majority of the industry continued to focus on debt reduction and portfolio optimisation. The emphasis on optimising operations resulted in tenant retention and, for some, improved leasing activity. I am pleased that the efforts from all industry players have led to significant progress, reminding us of the sector’s income-yielding characteristic, which makes the property industry attractive. This positivity will aid the sector in reclaiming its position as a top-performing asset class.

With the peak of the fourth wave now passed and South Africa’s vaccination programme in full swing, we are excited to be hosting the much anticipated SA REIT Conference 2022, sponsored by Nedbank CIB. Set to take place on 3 February 2022, the specifically designed programme will highlight diverging views from the sector’s most influential players. Some of the high-profile
keynote speakers include Bart Gysens, Managing Director at Morgan Stanley London; Gina Schoeman, Managing Director at Citibank; Paul O’Flaherty, Executive Director for EY-Parthenon; Paul Badrick, Partner and Head of Public Practice at BDO South Africa; Dominique Moerenhout, Chief Executive Officer at European Public Real Estate Association (EPRA) and John Worth, Executive Vice President: Research and Investor Outreach at Nareit.

The conference will also afford us the opportunity to discuss critical issues affecting the sector. Key amongst them being: The Path to the Next Normal, Investing in SA REITs, SA Business Environment, ESG, SA REITs – An Extraordinary Journey, Transpiring Global Trends in REITs and Growth in Alternative Sectors. These robust discussions will be conducted by leaders from REITs, affiliate associations and industry bodies, asset and fund management, financial services, energy and ICT, government advisory and management consulting sectors. The diverse pool of panellists will provide an unmatched authentic and critical debate that will encourage us to challenge our current way of doing business and devise innovative ways to take our sector to the next level. To register and view the full programme, click here: https://bit.ly/3Bz80yp or follow us on Twitter @SA_REIT or LinkedIn SA REIT Association for regular updates on the conference.

Regardless of what lies ahead, I am confident that we are better equipped to navigate the year ahead.

Happy 2022 and the very best wishes to you, your loved ones and your businesses.

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