SAREIT

Growthpoint and Serra® achieve Gauteng’s first Green Star EBP Industrial rating

In April 2020, Growthpoint and Serra® Services achieved the first Green Star Existing Building Performance (EBP) rating for an industrial building in Gauteng, with a 5-Star certification for a 7400sqm facility in Meadowbrook, Germiston.

Situated in a mixed industrial and residential area in the east of Johannesburg, the light manufacturing building, comprising a workshop and offices on two floors, is owned by Growthpoint Properties and was leased by Serra® in 2016. An extensive process was undertaken by both landlord and tenant, in consultation with Solid Green Consulting, to achieve this Green Star EBP ‘first’.

Paul Thomaz, Group Marketing Director of Serra®, says that, as a leading hygiene service provider and washroom dispenser manufacturer, Serra is duty bound to highlight health and sustainable environmental practices as they become more relevant for everyone. “From the outset, our discussions with Growthpoint hinged on our mutual determination to regard sustainability as a joint core value. This is in keeping with Serra’s all-encompassing philosophy and long-term vision of ‘no harm’, and our commitment to applying best international practice in reducing our overall carbon footprint.

“As the first Industrial sector site to receive this recognition in Gauteng, Serra® has achieved another milestone in a history of numerous ‘firsts’ both in our industry and in the broader South African context. We are especially proud of this achievement as we are celebrating our 35th anniversary this year.”

Errol Taylor, Head of Asset Management: Industrial at Growthpoint Properties, remarks, “It is interesting to note that this small but prominent corner of Meadowbrook has become a shining example of green building in South Africa. Serra’s premises are directly adjacent to Growthpoint’s award-winning 5-Star Office Design v1 certified Grundfos development.

“The EBP certification for the building occupied by Serra is part of a pilot programme to develop an industrial EBP rating tool for the GBCSA, which can be used by everyone in the industrial property sector. Growthpoint works in close collaboration with our clients and professional teams to achieve optimal environments for occupants while ensuring that our buildings operate efficiently, sustainably and with minimal impact on the environment. We believe it is important to certify our green buildings because a recognised building rating provides an important independent verification of environmental performance.”

Dashiell Coville, Sustainable Building Consultant at Solid Green, explains that the GBCSA’s Existing Building Performance (EBP) tool focuses on the operational phase of an existing building’s lifecycle, to enable facilities management to set in place policies, plans and processes to optimise the operations and performance of the building. “The certification process for industrial buildings requires a lot more tenant engagement than for office buildings, as industrial tenants are typically in charge of all aspects of property management and cannot simply gain credit from the landlord’s green policies.”

Key features of the Meadowbrook building’s performance include energy and water efficiency. “Serra consumes in the region of 16kWh/sqm/year, which is an 85% improvement on a typical light industrial building of this scale (106kWh/sqm/year),” says Coville. “This is the ongoing targeted consumption level. Thanks to reduced consumption, as well as energy efficiency and the renewable energy initiatives implemented, the consumption in 2019 was lower than in 2018.”

A large solar photovoltaic system on the roof provides renewable energy to the facility. 130 panels, with a capacity of 25kWp, were installed as phase 1; and Thomaz advises that the aim is to install a further 110 panels for phase 2 – with capacity for 550 panels in total. He adds, “Three lithium-ion battery banks provide the office component with 24 hours of uninterrupted power. In winter – June through to end August – these are bled during peak load periods (06h00-09h00 and 16h00 to 18h00) to reduce our electricity consumption and carbon footprint.”

Thanks to the water saving initiatives implemented as well as the efficient habits of the Serra staff, the facility has demonstrated an 88% improvement in water consumption on a typical light manufacturing industrial building of this scale, and this is the ongoing targeted consumption level.

The Serra building uses cutting-edge energy and water monitoring systems to accurately report on consumption. Data is monitored via online dashboards and used to analyse trends and highlight problem areas; and the utility metering process is outsourced to a specialistcontractor who manages meter reading and processing.

Periodic audits and occupant surveys are carried out to ensure that sufficient fresh air is provided (to meet or exceed national design standards), that lighting levels are optimal, and that temperatures are comfortable. This all translates into a healthier, more productive space.

Taylor says that the current global COVID-19 pandemic has clarified the importance of work settings that have a positive impact on the health of people and the environment. “As people slowly return to their desks and workbenches after the hardest levels of the COVID-19 lockdown, the design and operation of workspaces to safeguard occupant health and wellbeing will undoubtedly become the priority for all responsible businesses. Factors such as good ventilation and air quality are going to be the defining features of healthy workspaces.

“Certified green buildings are certainly among those best positioned to provide superior healthy working environments. In addition, energy and water savings translate to valuable cost savings, which will be more important than ever to businesses as they focus on recovering from the impacts of the COVID-19 crisis.”

Serra is constantly reviewing its approach to recycling within the building in order to improve its waste management practices. The goal is to integrate recycling both at a manufacturing and operations level. Recycling bins for paper, glass, plastics and aluminium cans will be situated within the office space as well as the warehouse waste storage area and collected weekly by the waste management contractor. Thomaz explains that the 3R principle has been implemented. For example, all bonded paper is reused or repurposed where possible in printers, and then recycled after shredding as product bulk packaging. And all stainless-steel offcuts are either repurposed or recycled (if not fit for purpose) – resulting in a wastage factor of less than 2%.

An extensive Building User’s Guide was developed for the facility’s ongoing operations, which includes recommendations around several factors to provide the most efficient, healthy and enjoyable working environment. These include indoor emissions; choice of materials and finishes; and design considerations such as thermal comfort, ventilation, daylight, internal noise levels, and the provision of quiet spaces.

Marloes Reinink, director at Solid Green Consulting, notes that it has long been widely acknowledged that the management of buildings is critical to enhancing users’ health and wellbeing – both in terms of productivity, and mitigating disease and absenteeism. She emphasises, “As the links between sustainable practices and public health become more apparent, building professionals and their clients will need to be proactive in navigating the way forward. We must work together towards creating sustainable buildings that are enablers of health.”

With its recent EBP certification, Serra® has set a new benchmark for owners and users of Africa’s existing industrial building stock – proving that a more efficient and responsible way of operating is both possible and necessary.

Vukile reports robust full-year performance and an encouraging return to mall shopping

Vukile Property Fund today reported its annual results with 3.2% growth in distributable earnings per share for its financial year to 31 March 2020

Laurence Rapp, CEO of Vukile Property Fund, notes Vukile achieved strong performance in both its South African and Spanish portfolios. Its defensive portfolio of nodally dominant shopping centres continues to fare well, and Vukile’s strongly cash-generative assets position it favourably for the future.

Rapp comments, “Vukile had a very strong year and has delivered a stand-out set of results. Operationally, our portfolios in both Spain and SA are in excellent shape and achieved all key targets and metrics.”

JSE-listed SA retail REIT Vukile has 52% of its assets in Spain through its 82.5% held subsidiary Castellana Properties SOCIMI SA. Castellana reported an impressive retail performance with vacancies contained at a low 1.8%, a
10.8% growth in rentals on renewals and new lets, and a 99% rental collection rate. Castellana has a blue-chip tenant mix with 93% of its rentals coming from international and national tenants.

The SA portfolio delivered another solid performance, with Vukile’s asset management core competency adding value against the backdrop of a worsening economy. Like-for-like trading density growth of 3.4% was boosted to 5.1% with asset management interventions, specifically the successful redevelopment and launch of the Pine Crest and Maluti Crescent centres. Vukile’s SA retail vacancies were a low 2.9%. It achieved an impressive 84% retail tenant retention with positive reversions of 1.1%, and 6% like-for-like net income growth from its retail centres.

With the advent of COVID-19, Vukile took a disciplined approach with its primary focus being the health, wellbeing and safety of customers, tenants and staff. Leading virologist Professor Barry Schoub was appointed as a special advisor to Vukile to develop hygiene protocols for its retail centres in SA and Spain resulting in immediate, high-impact interventions that make its shopping centres safe and welcoming.

In line with new COVID-19 curbing protocols, both Vukile and Castellana increased spending on cleaning, sanitising, PPE, staff training, signage, social distancing markers and awareness campaigns to ensure the operational excellence necessary to create sanitised, comfortable and conducive environments for tenants and customers alike.

Vukile adopted a cooperative approach in working with tenants to manage the impact of the lockdown. Rapp comments, “Now is the time for responsible corporate leadership and working together in a cooperative way to stabilise the industry and economy.” In SA, Vukile played a leadership role in the Property Industry Group and adopted its relief guidelines. It offered R108m in relief to tenants for the three months from April to June, of which a considerable R49m is helping to sustain small, medium and micro-enterprises, which make up only 20% of the portfolio. Vukile has already concluded deals with all but one of its top 20 tenants, representing some 56% of its rental income, which will all be paying full rentals from June.

In April, during the hard lockdown in SA, Vukile’s shopping centre footfalls were around 32% of the prior year’s number and increased to 70% in June. Township, commuter, rural and value centres, which comprise 81% of Vukile’s SA portfolio, have outperformed their urban counterparts and are leading the country’s retail recovery. By the end of May, trading densities were ahead of May 2019. Castellana successfully re-opened its shopping centres in Spain in the final week of May and the centres indicate trading at about 65% of their pre-COVID-19 footfalls, but customer conversion rates and spend per head seem to be increasing, pointing to a relatively lighter impact on sales.

The COVID-19 lockdowns have accelerated inevitable changes in the retail landscape and fast-tracked the rate of change in the physical shopping experience. Vukile is embracing the many opportunities offered by this evolution. “As a value-add partner for retailers, besides providing leading dominant shopping centres with extremely strong trading environments, we have also increased our customer analytics capacity to add further value to our tenants,” notes Rapp.

Vukile has run various detailed scenarios focused on solvency and liquidity, and all confirm the underlying health of its balance sheet and business. It can comfortably meet all its debt requirements in SA and Spain, with an interest cover ratio of 5.8 times. Vukile benefits from diversified funding sources and has engaged actively and transparently with funders during the COVID-19 crisis and has already refinanced 77% of debt maturing in FY21.

Rapp points out that the current crisis and extreme volatility in REIT share prices has highlighted the disconnect between the long-term and more stable nature of fixed property as an asset class and the performance of REITs as financial instruments. This has led to unhealthy short-termism in the sector. “We are resolved that Vukile’s future will be distinguished by excellent bricks-and-mortar fundamentals, our passion for retail, a strong balance sheet, lower and more prudent dividend pay-out ratios and continued emphasis on long-term sustainability.”

The remainder of 2020 is likely to be very challenging for business in general. However, 2021 is forecast to bring a strong retail rebound in Spain. The return of shoppers and sales with the lifting of the hard lockdown in both SA and Spain is outperforming initial expectations, which is encouraging.

Vukile has deferred the declaration of a final dividend for FY20, pending the outcome of industry-wide consultation with the JSE and National Treasury. “Further, given the material uncertainty in the market, it is too early for Vukile to provide dividend guidance for FY21 or commit to paying an interim dividend for FY21,” reports Rapp. “Vukile is in good shape operationally, financially and as a sustainable long-term going concern. Our diversified portfolios in SA and Spain with strong, dominant shopping centre assets and compelling trading metrics are the cornerstone of our strength and favourable market position”.

Redefine strengthens its balance sheet and simplifies its asset platform with R2.3 billion divestment of RDI

Johannesburg, South Africa, 29 June 2020 – Redefine Properties (JSE: RDF) continues to advance its strategic priority of strengthening its balance sheet to offset the ongoing uncertainty and negative effects of the COVID-19 pandemic.

In a move to drive the business forward in the face of challenging property fundamentals locally and internationally, today it concluded a deal that will see global private investment firm Starwood Capital Group acquire its 111.9 million shares in UK-based RDI REIT for 95 pence per share. The deal represents a 20.9% premium to the ruling share price.

The disposal generates Redefine GBP106.3 million, which translates, at the current exchange rate, to R2.3 billion.

Given that a portion (49.8 million RDI shares) of Redefine’s investment in RDI is encumbered by an exchangeable bond it issued in September 2016, Redefine today made a tender offer to the holders of the outstanding EUR150 000 000
1.50% Secured Exchangeable Bonds due September 2021 exchangeable into the ordinary shares of RDI, of which EUR117.2 million are presently outstanding.

Undertakings from bondholders in support of the tender offer totalling 77.1% of the amount outstanding has been received.

Redefine financial director Leon Kok says that the disposal of the RDI shares and the settlement of the bonds (assuming all bonds are redeemed) will reduce Redefine’s loan-to-value ratio by approximately 1.1%.

Following the disposal, which is denominated in pound sterling, and the redemption of bonds pursuant to the tender offer, which is denominated in euro, Redefine will restructure its pound sterling debt portfolio.

Redefine’s chief executive officer Andrew Konig says the exit out of RDI substantially advances Redefine’s stated intention of simplifying and solidifying its asset platform, as well as eliminating multiple entry points for South African equity investors into the same investment opportunities. Furthermore, it also improves the company’s risk profile through eliminating a risk universe over which it has no direct management influence.

Konig says that Redefine’s strategic intent to strengthen its balance sheet, recycle non-core assets and boost liquidity continues to place the company in a strong position to withstand the risks and challenges of the current uncertain operating environment.

The disposal will also allow Redefine to re-strategise and re-allocate its financial and capital resources to position the company for sustained value creation in a post COVID-19 environment.

“In the prevailing environment, the knowns are outweighed by evolving unknowns. Our intention is to ensure we can manage the variables under our control while being extremely well placed to benefit once conditions improve,” concludes Konig.

Redefine announces sale of non-core assets in Australia for AUS459 million

Johannesburg, South Africa, 26 June 2020 – Redefine Properties (JSE: RDF) announced today that its competitive bidding process to sell its interest in Journal’s two student properties in Australia has been concluded at AUS459 million. The disposal of its interests, comprising 1,391 beds is part of Redefine’s portfolio refinement and loan-to-value improvement strategy.

During 2017, Redefine had acquired a 90% beneficial interest in Journal Student Accommodation Fund and during the following year Journal Swanston Sub Trust to develop the properties in Melbourne, Australia as purpose-built student accommodation and associated retail. Development of Leicester Street, an 804-bed facility, was completed in 2018 while the development of the 587 bed Swanston Street was completed in May 2020.

Redefine financial director Leon Kok says, a portion of the proceeds from the disposal will be used to settle the Australian loan facilities on the properties amounting to around AUS132 million and the remaining proceeds will be utilised to reduce Redefine’s other interest-bearing borrowings and enhance its liquidity.

This transaction forms an integral part of Redefine’s loan-to-value improvement plan, which includes the disposal of approximately R8 billion of non-core assets across Redefine’s property asset platform, explains Kok.

The transaction will also secure the release of 60 million Cromwell Property Group shares from an encumbrance with Redefine’s intention that such Cromwell shares be sold on the open market to further advance Redefine’s stated intention to strengthen its balance sheet and bolster liquidity.

Redefine’s chief executive officer Andrew Konig says the transformation of the property asset platform is necessary to withstand the impact of the pandemic whose trajectory is still evolving. Recycling out of non-core assets at the top end of their capital value will enable us to strengthen our balance sheet and crystallise the benefits of net proceeds.

We have consistently said our plan is to recycle capital into core markets where there is scope for scale, by disposing assets that no longer fit our long-term value creation strategy.

Redefine’s European logistics platform set to expand its footprint in Poland

JSE listed diversified real estate investment trust Redefine Properties (JSE: RDF) along with equity partners Madison International Realty and Griffin Real Estate in European Logistics Investment BV and in joint venture with its strategic development partner Panattoni Europe, will commence construction on a 50 000 sqm build-to-suit (BTS) manufacturing and warehouse facility for Weber-Stephen Products in Zabrze within the Upper Silesian metropolitan area in Poland. Weber is a privately held US manufacturer of charcoal, gas and electric outdoor grills and related accessories.

The building is planned with over 5 000 sqm earmarked for office space. The site is provisioned for an additional 30 000 sqm if Weber’s growth exceeds expectations.

The project will be Weber’s first manufacturing facility in Europe and when complete will employ approximately 450 people. The construction will begin in August 2020 and will be ready for occupation during the second half of 2021. The BTS facility will serve as Weber’s primary distribution operation for Europe, Asia and Africa.

Zabrze’s proximity to three international airports (Katowice, Krakow, Ostrava) and easy access to the A1 motorway (Gdańsk – Łódź – Czechia – Austria), and the intersection of the A1 and A4 (Germany – Wrocław – Krakow) serve Weber’s interests well.

The logistics real estate sector is proving to be more resilient than other real estate classes during Covid-19. According to Savills, the pandemic has had no significant impact on occupier demand in Poland in the first quarter of the year. The leasing volumes during Q1 2020 have been on a par with the same period last year (1.1 million sqm) with a notable increase in demand for temporary space.

Poland’s total warehouse and the industrial stock reached 19.0 million sqm at the end of March 2020, with the largest markets being Warsaw (4.4 million sqm), Upper Silesia (3.2 million sqm) and Central Poland (3.1 million sqm).

According to Andrew Konig, CEO, Redefine Properties, the coronavirus pandemic is expected to intensify the demand for warehousing as supply chains are restructured and to meet the growth in online spending. The growth in e-commerce is benefitting logistics especially the development of “last mile” delivery facilities.

“Our strategy in Poland is centred around creating a leading logistics platform and Zabrze located in Upper Silesia, one of the most attractive logistics locations in the country was a natural choice for Weber”, says Pieter Prinsloo, CEO of Redefine Europe.

The sustained investments in improving road infrastructure has enabled easy access to other parts of the country, as well as to the rest of Europe making Upper Silesia a popular region among international companies looking for high-quality warehouses in good locations. The facility to be developed in Zabrze is our next investment in the region, following the development of the warehouses and logistic parks located in Ruda Śląska, Sosnowiec and Bielsko-Biała.

ELI’s portfolio includes 16 assets with a total gross lettable area of circa 480 000 sqm and approximately 120 000 sqm under construction. In the next three to four years, ELI plans to expand by about 2 million sqm through development activity.

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