Redefine making headway following its announcement to acquire balance of EPP shares

Sandton, South Africa, 29 November 2021: Redefine Properties today announced that it proposes to make a share-for-share offer to acquire all the remaining shares in EPP it does not already own (excluding the shares held by IGroup). By implementing the delisting and acquiring control of EPP, Redefine will be able to procure the implementation by EPP of a reorganisation which is aimed at bolstering EPP’s balance sheet and significantly reduce the extent of its gearing to restore EPP to a dividend paying position.

The EPP Board has expressed its intention (subject to EPP’s independent expert financial advisor confirming its preliminary opinion that Redefine’s offer is fair) to recommend that the proposed delisting and Redefine offer as being in the best interests of EPP and its shareholders and that EPP shareholders approve of all required resolutions to effect the proposed transaction.

If approved, the transaction will see EPP delist from the JSE and Luxembourg Stock Exchanges and operate as a subsidiary of Redefine Properties.

“The reorganisation will resolve EPP’s liquidity issues and eliminate the potential need for EPP to undertake an equity capital raise, which given the current economic climate be value destructive to existing EPP shareholders. Redefine will also become the sole listed point of entry into EPP, differentiating Redefine’s investment proposition, thereby potentially improving the liquidity of Redefine shares,” adds Konig.

Redefine holds 45.4% of EPP with a R6.5 billion carrying value. The proposal places Redefine in a good position to benefit as retail demand improves in Poland. It will also drive diversification, with the Polish-centred offshore component of its overall portfolio likely to increase to 30%.

EPP’s high level of gearing (c.55.6%) and liquidity challenges including significant loan maturities in 2022 and 2023 has meant that EPP has not been able to pay dividends since mid-2019. Besides impacting Redefine’s distributable income, the loss of dividend income from EPP has also impacted negatively on Redefine’s interest cover ratio and corresponding loan covenant headroom.

“The EPP transaction is a compelling opportunity for us to stabilise and simplify our international investment in a portfolio of assets we know well and which are well-located in key metropolitan areas of Poland,” says Andrew Konig, CEO, Redefine.

“Given challenging market conditions some on the back of ever evolving Covid-19 situation, EPP has not been able to deliver on its asset disposal strategy required to bolster its balance sheet and to manage liquidity requirements. The transaction will strengthen EPP’s balance sheet and gives us the mandate to pursue opportunities throughout EPP’s portfolio.”

Without intervention, the prospect of EPP resuming regular dividend payments in the short to medium term are slim. This creates high potential for a longer-term dividend drought which has a material adverse impact on Redefine and is not aligned to Redefine’s REIT ‘income fund’ investment proposition.

According to Redefine, the acquisition of a controlling stake in EPP furthers its strategy to simplify its investment proposition and actively manage risks and opportunities by exiting minority investments or gaining strategic control of assets where it already has a major stake.

The Redefine offer will be made to all other EPP shareholders at a swap ratio of 2.70 Redefine shares for each EPP share held.

Should shareholders of EPP approve the transaction, Redefine will (assuming 100% acceptance of the Redefine offer) issue up to 1 135 037 043 new Redefine shares. Redefine shareholders will also need to approve a shareholder resolution giving authority to Redefine to issue these new shares.

The deal is subject to satisfaction of various conditions precedent, including the execution of transaction agreements and those agreements becoming unconditional, securing all required regulatory approvals and the approval of by a majority of EPP shareholders (other than Redefine and I Group), of the EPP delisting.

South African Reits’ Covid-19 Relief Tops R3.5 Billion

SAREIT Research Committee’s Second Report shows remarkable contribution of the listed property sector to the economy.

The SA REIT Association (“SAREIT”), a representative umbrella body for the 27 South African REIT companies focused on promoting the sector as an attractive asset class; today released the second instalment of its Research Committee’s Rental Relief Report covering the period from January to June 2021.

Combined, the reports provide comprehensive insights into the sector’s response to the crisis of its tenants following the roll-out of restrictions by the government in response to the Covid-19 pandemic. Between April and December 2020, a total of R3 billion in support had been provided by REITs, with 69% of the relief dispensed between April to August 2020. REITs issued a further R500 million between January and June 2021, bringing the total relief comprising rental discounts and deferrals to R3.5 billion.

Joanne Solomon, CEO of the SAREIT, commented: “We estimate that in total, SA REITs provided over R3.5 billion in rental relief to their tenants over only 15 months. This is a material number in any environment, particularly in the face of already pressurised earnings and weak macroeconomic fundamentals. The tremendous collective effort that our members made to enable business sustainability during the pandemic is a clear demonstration of their continuing role as a key player in the economy.”

The REITs’ relief measures played a key stabilising role in the overall economy by supporting all its tenants, especially SMMEs, which are a critical segment of the economy. 80% of the relief came through in the form of unrecoverable discounts intended to sustain tenants’ cashflows and curb business failures, with the remaining 20% as deferrals on rental payments.

Amelia Beattie, Chairman of the Research Committee and CEO of Liberty Two Degrees said: “The rental relief reports offer a clear look into the role we have played in ensuring business sustainability during the worst of the pandemic, and also throughout the moves across various lockdown levels. Given SA’s shift to lockdown Level 1 in October 2021, we anticipate that rental relief provisions will be reduced even further, enabling our sector to move fully towards a recovery phase.”

As part of SAREIT’s repositioning process in 2020, the Association formed the Research Committee aimed at generating and providing access to high quality, independent research related to the listed property sector in South Africa and other relevant markets, as well as act as a trusted research hub for members and the industry at large.

Solomon commented: “The establishment of the SAREIT Research Committee was a critical element of our renewed strategy, and we are pleased to have seen the high level of collaboration from our members to deliver such an important set of inaugural reports. We look forward to delivering more insights on material topics affecting the South African listed property sector.”
This report’s contributors are Pranita Daya, Ndivhuho Netshitenzhe, and Phil Barttram.

Read the full report

SAREIT 2022 Conference Once Again the Place for The Sector’s Best Insights

12 October – The SAREIT Association (SAREIT), a representative umbrella body for South African REITs, today opened registration for its highly anticipated SA REIT Conference 2022 set to take place through a hybrid model on 3 February 2022.

Following the success of its previous conferences, and after a break due to COVID-19, the SAREIT Conference is ready to roll out unmatched opportunities once again to hear from REIT executives first-hand, learn from leaders in the real estate investment community, and take part in candid conversations with peers and industry shapers regarding local and international trends shaping our industry.

The conference attracts executives and senior management representatives, property and retail analysts, institutional investors, banks, entrepreneurs, corporate sponsors, and accounting and legal entities operating in the dynamic property world.
Sponsored by Nedbank CIB, the conference will take place on 3 February 2022 at Houghton Hotel, Lloys Ellis Avenue, Houghton Estate, Johannesburg, 2198. In addition, an on-line platform will be provided for virtual delegates.

“These are unprecedented times, and this conference provides the perfect opportunity to reflect on our experiences and share views with our peers across the sector. We are delighted to be part of the conference again as we all continue to build this critical segment of the economy.” says Gary Garrett, Managing Executive of Property Finance at Nedbank CIB”.

Industry thought leaders will discuss pertinent issues for investors and capital providers, including the policy and the business environment impacting REITs, ESG, advocacy and emerging trends for the sector locally and abroad.

Much has changed since the last time South Africa’s REIT industry and its partners gathered for our last conference. The intervening two years will go down as the most challenging of years in recent times, marked by enormous uncertainty from a human and social perspective, requiring unprecedented adjustments to the way we live, work and play.

“With this in mind, the SA REIT Conference 2022 is specifically designed to highlight the different and diverging views about our sector. It’s all about authentic, critical debate,” says Taverna-Turisan, SA REIT Association’s Marketing Committee Chairman.

The programme provides direct access to the most influential players in the local and international REIT sector. Through high-profile keynote speakers and several panel discussions, the programme will offer multifaceted perspectives on REITs’ latest pressures and innovations.

CEO of the SA REIT Association, Joanne Solomon, says: “While the pandemic exacerbated South Africa’s underlying economic weakness, and much rests on an improvement in economic conditions, it is encouraging to witness how SA’s REITs – which are a key contributor across the whole South African economic value chain – have demonstrated a commitment to the country and fully assume their role in ensuring that we rebuild our future together.”

The SA REIT Conference 2022 is a significant opportunity to examine the forces shaping the sector and consider the contribution it is being compelled to make in the broader issues affecting the country.

Register now