SAREIT

Equites Partners With Shoprite In Strategic Joint Venture Arrangement

Cape Town, 25 February 2020 – Equites Property Fund Limited (“Equites”) has concluded heads of agreement with Africa’s largest fast-moving consumer goods retail operation, Shoprite Holdings Limited (“Shoprite”), to establish a strategic joint venture which will facilitate the unlocking of significant value for both parties.

The partnership will manage a portfolio of Shoprite’s distribution centres, serve as a platform for the development of undeveloped bulk land situated at Cilmor and Centurion, and pursue future property acquisition and development opportunities.

The transaction

Shoprite will contribute its Brackenfell and Centurion distribution centres valued at R2.0 billion to the joint venture. In exchange for a majority stake, Equites will inject cash of R2.1 billion which will partially be utilised to acquire the Cilmor distribution centre and the undeveloped bulk land in Brackenfell in the Western Cape for R1.2 billion. The joint venture will manage this logistics portfolio and will undertake future property acquisition and development opportunities as they arise, with Equites as the developer.

In addition, Equites and Shoprite will conclude three, 20-year “triple net” (fully repairing and insuring) lease agreements in respect of the Brackenfell, Cilmor and Centurion distribution centres within the joint venture, with a right to renew each of the leases for three further 10-year periods on the same terms and conditions. The initial yield on the leases will be 7.5% and the rental shall escalate at a rate of 5% per year.

Strategic benefits

The establishment of the joint venture will have the following benefits to both Equites and Shoprite:

Equites, as a leading, specialist logistics REIT, will add to its existing property portfolio a high-quality portfolio of distribution centres underpinned by long term leases with Shoprite;

The release of capital for Shoprite will allow for it to optimise its return on invested capital through redeployment into higher yielding retail projects and technology while providing both operational and capital flexibility going forward;

Equites and Shoprite will have forged a strategic partnership for their mutual, long-term benefit; and

Through their strategic partnership in the JVCo, Shoprite and Equites will share in any value which may be unlocked in the JVCo through future property acquisitive and development activities.

The transaction enhances Equites’ existing competitive advantage and, in addition, further distinguishes itself through the formation of this strategic partnership. This partnership provides Equites with the following strategic benefits:

Enhanced income certainty – this portfolio would constitute approximately 19% of Equites’ property portfolio and its inclusion thereby improves the weighted average lease expiry period from 9.5 years to 11.7 years;

Diversification of tenant base – the inclusion of Shoprite, Africa’s largest food retailer, as one of Equites’ major tenants further diversifies its exposure to credit risk;

Superior quality builds – both the logistics campus and the modern distribution centres were all built to Shoprite’s exacting requirements and to institutional standards;

Low expected volatility – through the conclusion of three, 20-year leases with a predictable,

escalating cash flow profile, Equites is shielded from certain market risks which it would otherwise be exposed to; and

Cost-effective funding opportunities created – the long-dated, annuity income stream presents significant opportunities to reduce Equites’ cost of debt funding over the medium to long term.

Equites CEO, Andrea Taverna-Turisan, said the company is delighted with the transaction as it has been challenging to acquire properties within the South African context which meet Equites’ strict investment criteria and these assets represent the top segment of the market. The transaction also presents the opportunity to partner with Shoprite in this strategic joint venture which we expect to culminate in the acquisition and development of further high-quality property assets into the portfolio.

About the properties

The Cilmor and Brackenfell distribution centres are situated in Brackenfell, one of the oldest and largest industrial hubs in Cape Town. Its major access routes are the N1 and the R300, providing easy access to Cape Town International Airport, Cape Town Harbour and Container Depot and Cape Town CBD while also conveniently located in close proximity to a large labour pool.

The Cilmor distribution centre is one of the most technologically advanced distribution centres on the African continent. The warehouse consolidates deliveries from about 500 suppliers and comprises frozen, ambient and chilled sections which house a variety of Shoprite’s retail products, reducing the requirement for storage space at retail sites.

The Brackenfell distribution centre comprises two ambient distribution warehouses including office and staff facilities, a refrigeration facility including office and staff facilities, a returns centre including office and staff facilities, a flow through facility including a flow through office and a receiving office and an office park.

The Centurion campus is situated in Louwlardia, which is an established logistics hub and is home to many national distribution centres. This location also provides access to a large labour pool.

The Centurion logistics campus consists of a dry goods warehouse including a safety store and staff facilities, a refrigeration facility including office and staff facilities, a returns centre including office and staff facilities, a truck workshop and ancillary buildings, as well as an office park housing Shoprite’s Gauteng regional head office. This campus not only services the Gauteng, Free State and Northern Cape markets but is also the platform for distribution into several other African countries.

Taverna-Turisan concluded: “The joint venture will enhance Equites’ existing competitive advantage as a specialist logistics investor and developer and create further scale in our high-quality logistics portfolio. A strategic partnership with Shoprite as the premier supermarket retailer in South Africa and Africa is an important milestone in the company’s aim to be recognised as a developer of choice to the largest logistics, retail and e-commerce participants in the South African market. “

Contacts:

Andrea Taverna-Turisan Lydia du Plessis
Chief Executive Officer – Investorsense
Equites Property Fund Limited 082 491 7583
021 460 0404 or 083 444 6997 lydia@investorsense.co.za

 

About Equites Property Fund

Equites Property Fund Limited listed on the Johannesburg Securities Exchange (“JSE”) in 2014 and has established itself as a market leader in the logistics property space, with a vision of becoming a globally relevant Real Estate Investment Trust (“REIT”). The value of the fund has grown significantly from R1 billion on listing to R13.5 billion at 31 August 2019.

Equites focuses on owning and developing modern, well-located logistics properties let to A-grade tenants on long-dated leases. The fund has established itself as a leading owner and developer of high-quality logistics assets in South Africa and the United Kingdom.

Equites is the only specialist logistics REIT listed on the JSE. All the group’s assets are in proven logistics nodes near large population centres and major transport links that have predictable patterns of strong rental growth. The group focuses on premium “big-box” distribution centres, let to investment-grade tenants on long-dated” triple net” leases, built to institutional specifications. The locations of preference are Cape Town and Gauteng in South Africa and the central Midlands and “last-mile” fulfilment centres near major conurbations in the United Kingdom. While its exposure to the UK has been increasing, Equites remain a South Africa-focused fund and continues to focus on growing the South African portfolio through acquisitions and developments.

About Shoprite

The Shoprite Group operates a total of 2 842 outlets, supported by considerable distribution infrastructure and an integrated enterprise-wide information and technology system across 15 countries – a profile unmatched by any other retailer on the continent.

The Group includes four major corporate-owned and -operated food retail brands: Shoprite, Usave, Checkers and Checkers Hyper, together with operations serving the furniture, pharmacy and food services market. The Group generates the majority of its R150 billion turnover from food retailing.

Redefine set to reap rewards from disposals

Johannesburg, South Africa – 24 February 2020: While the overall risk environment has heightened since last year, a strategic focus on balance sheet management and a relentless pursuit on delivering sustained value is providing Redefine with a buffer against the economic challenges.

Weak business sentiment, ongoing load-shedding, “confidence-zapping” policies and uncertainty about prospects are combining to constrain domestic growth prospects and impact the outlook for the local property sector, says Redefine CEO Andrew Konig.

In his pre-close presentation made available to investors today, Konig said global macroeconomic and political uncertainty, the impact of the coronavirus and climate change risks, are among additional factors weighing on prospects.

“A robust balance sheet remains a critical lever to absorb the risks as weak local property fundamentals are likely to prevail in the medium term and growth prospects to remain tepid due to Eskom risks, a slow reform agenda and the weak global environment,” he says.

“We have adopted a purpose-driven strategic approach, which is highly appropriate for this environment. Redefine is on track to deliver sustained value, while ensuring it is well insulated from the storm,” emphasises Konig.

Distributable income per share for the 2020 financial year is set to be between 5% to 7% lower than 2019, given the weak global and local economic backdrop and with recycling activities having a dilutionary effect on current year earnings.

“Our emphasis on managing and improving recurring income streams continues, with non-recurring income being phased out. We have also embarked on a process to dispose non-core assets, which is a key pillar in our plan to lower our loan to value ratio,” he says.

Solid progress has been made to date on disposals and most transactions are expected to be implemented before year end. This process will also simplify and streamline the investment property asset platform, allowing for enhanced management focus.

Total non-core asset sales across the total portfolio are targeted at R8 billion.

The transfer of local property assets for sale, the disposal of a 48.5% interest in European Logistics Platform, and the disposal of interests in student accommodation are among the major sales of non-core assets currently on the agenda.

Redefine FD Leon Kok says while Redefine’s loan-to-value ratio was 43.9% at the end of August last year, the disposal activities will see this drop to below 40%, with head room to absorb potential adverse loan-to-value triggers.

“We are focusing on what matters most to deliver sustained value to all our stakeholders,” he says.

Kok also points out that the recent move to adopt a dividend payout policy ratio to fund operational capital expenditure resulted in R200 million of the 2019 distributable income being retained.

Redefine’s commercial portfolio, meanwhile, remains firmly focused on retaining existing tenants and reducing vacancies through continued leasing campaigns, direct canvassing and relationship building with broker houses.

While Redefine is concerned about the trading performance and valuations of regional and small regional shopping centres, its retail unit is focusing on several strategic initiatives to stay a step ahead. These include tenant retention and vacancy reduction in order to counter the impact of rental reductions, a further reduction of space with Edcon, driving sales growth to support rentals, innovative entertainment offerings and the roll-out of minor capex refurbishment projects.

Among positives, Rosebank Link – reached full occupancy in January 2020 and WeWork at 155 West Street opened in December 2019, with two floors already occupied

“In this challenging trading environment, it is important to get the basics right, while limiting speculative capital expenditure, and this is exactly what we are doing. We will continue to target organic growth and take advantage of opportunities as they arise, we are also focusing on delivering sustained value while ensuring we weather the economic storm,” concludes Konig.

Spear REIT appoints first female Executive

Cape Town, 20 February 2020: JSE listed Spear REIT Limited (SEA:SJ) has today announced the appointment of Mrs. Kim Pfaff-Karg as Chief Investment Officer who will join the business on the 1st of March 2020. Kim will become the first female member of the Spear Executive Committee. Kim has in excess of 15 years’ experience in the listed and non-listed real estate sector.

Kim’s Qualifications:

  • BSc (Hons) Property Studies (UCT)
  • Certificate in Lease Negotiation (University of Pretoria)
  • Member of the Royal Institute of Chartered Surveyors (MRICS)
  • Registered Valuer of Royal Institute of Chartered Surveyors (RICS
  • Professional Valuer (SACPVP)

Kim will perform a strategic role across the business with a focus on acquisition, disposals, portfolio valuations and other corporate business requirements

Spear is the only regionally specialised REIT listed on the JSE with a diversified property portfolio of Commercial, Industrial, Retail, Hospitality and Residential assets in excess of 437 000m2 situated in the Western Cape. Spears currently owns R 4,1 billion of real estate with a market capitalisation of R 2 billion. Spear has consistently shown itself as a reliable income growing fund as its Western Cape focus pays dividends to its shareholders.

CEO of Spear REIT Limited, Mr. Quintin Rossi extended a warm welcome and his best wishes to Pfaff-Karg on behalf of the Board of Directors and all staff.

Emira’s delivers half-year dividend growth

Emira’s delivers half-year dividend growth and sustainability from a solid business platform

Emira Property Fund today reported a 1.7% year-on-year increase in distributions for its half-year ended 31 December 2019, in line with its positive market guidance.

The results also highlight an improvement in Emira’s already low vacancy rate, which now stands at 3% and is a testament to the good quality, well-priced real estate in Emira’s portfolio. In addition, it reports a reduced loan-to-value ratio of 35.1%, which supports its strong credit profile.

Geoff Jennett, CEO of Emira Property Fund, says Emira’s rebalanced portfolio and its allocation of capital into more resilient economies underpins the diversified JSE-listed SA REIT’s ability to maintain distribution growth, even within South Africa’s constrained economy.

Jennett comments: “By doing the right things consistently over the past four years, we have shifted and repositioned our portfolio with a long-term view. Emira’s excellent operational performance, fair valued assets, responsible management and strong credit profile place us in a solid position to face the headwinds of a low-growth, uncertain environment.”

Emira has confirmed that it expects similar growth in dividends for the second half of its financial year. Jennett explains that this guidance takes a realistic view of the market conditions, vacancy profiles and expected rental revisions, as well as anticipated opportunities. “We will continue to fine-tune our portfolio and business for sustainable performance and results.”

Emira is invested in a quality, balanced portfolio of office, retail, industrial and residential properties. It is invested in 79 directly held South African properties, valued at R10.9bn. At the close of its half-year, Emira held 10% of its investments offshore with its equity investments in nine grocery-anchored open-air convenience shopping centres in the USA with a combined value of USD75.9m through its USA subsidiary, and its holding in ASX-listed Growthpoint Properties Australia (GOZ) valued at R234m.

Emira improved the vacancies in its directly held portfolio from 3.6% to 3.0% during the half-year. Tenant retention is a strategic priority for Emira, especially with the tough operating environment putting businesses under increased pressure. With innovative leasing strategies, 82% of expiring tenants, by revenue, were renewed by Emira during the period. Jennett notes, “While rental reversions are inevitable in this market, this is certainly easier to digest when your buildings are full.”

The final property of 25 in Emira’s R1.8bn portfolio disposal to B-BBEE entity Inani Prop Holdings transferred on 20 December 2019. “The finalisation of this transaction has achieved its strategic outcome of fundamentally rebalancing our portfolio. We couldn’t be more pleased with the results, including significantly less office exposure and higher-quality remaining properties.”

Emira tightened its administration costs during the period. However, its gross cost-to-income ratio increased from 37.3% to 39.2% during this six-month period, showing that expenses increased at a higher rate than income, mainly driven by soaring electricity costs and higher municipal rates charges.

In light of this, and in line with its environmental commitment, Emira continued to invest in alternative energy sources and initiatives to reduce electricity and water consumption. It already has nine solar farms, as well as various water harvesting and waste recycling projects in place. Nearly 60% of its portfolio offers back-up electricity and a growing percentage has back-up water facilities.

Emira invested R95.3m in major projects to strengthen its asset base and unlock value from its properties. Highlights include the modernisation of Hyde Park Lane Office Park in Joburg, an update of Granada Square in Umhlanga, as well as three new solar farms and adding more water harvesting across the portfolio.

Emira’s The Bolton residential conversion in Rosebank with co-investors the Feenstra Group closed the period 94% let, with only 18 of 282 units vacant. The development was completed in mid-2019.

Emira also has indirect exposure to the residential rental property sector through Transcend Residential Property Fund, in which it has a 34.9% holding. Transcend’s total property portfolio is valued at R2.8bn. Earlier this month, Transcend’s listing moved from the JSE’s AltX to its Main Board and the company announced that it had grown its dividend per share by 0.70% for its financial year to 31 December 2019. It made a positive R23.5m contribution to Emira’s total distributable income.

Through its exposure to Enyuka Property Fund, a rural retail property venture with One Property Holdings, Emira’s also invests indirectly in 24 lower LSM shopping centres valued at R1.7bn. Enyuka contributed R39.0m to Emira’s distributable income for the half-year.

In the US, Emira acquired its tenth property with its US-based partner, The Rainier Companies, on 3 February 2020, after the close of its half-year. This takes US assets to 7.9% of Emira’s total assets or USD89.2m. Emira invested a total USD13.3m for 49.8% equity interest in Dawson Marketplace open-air shopping centre in Dawsonville, Georgia, at an expected equity yield of 11.09%. Emira’s after-tax income from co-investment in the equity of grocery-anchored dominant value-orientated convenience retail centres in robust markets in the US totalled R64.7m for this six-month period.

Emira continued to take advantage of robust investor demand for Growthpoint Properties Australia (GOZ), which is enjoying all-time-high share prices, and disposed of a further 12,885,956 of its shares during the period. It intends to trade out of the balance of its 5,752,491 units, with a total value of R234.3m. While GOZ’s distribution per share increased period-on-period by 3.5%, Emira’s reduced holding saw its income from GOZ decrease by 43.4% to R15.3m.

Emira maintained a strong balance sheet and its financial position again improved during the period. It enjoys access to diversified sources of funding and banking facilities. Proceeds from its GOZ disposal and Inani sale were used to reduce its debt. Emira closed the period with 86.6% of its debt fixed for a weighted average term to expiry of three years. Its gearing ratio decreased from 36.1% to 35.1%, and its group interest cover ratio was a healthy 3.2 times

The period saw Emira’s corporate long-term credit rating of A(ZA) and short-term credit rating of A1(ZA) affirmed by GCR Ratings with a stable outlook.

Redefine announces the transition of Leon Kok from FD to COO

Johannesburg, South Africa – 18 February 2020: JSE listed diversified real estate investment trust Redefine Properties’ today announced that Leon Kok will transition from his current role as financial director to chief operating officer when incumbent David Rice retires from the company on 31 August 2020.

In the interim, Leon will continue in his current role responsible for all aspects of finance, legal, information technology, human resources and regulatory compliance and support the CEO’s office in corporate activities. The succession, which will take effect 01 September 2020, will see Leon step down from the board of directors as well as the financial director role.

Speaking on the appointment, Andrew Konig, CEO, Redefine Properties says, “Leon’s depth of business knowledge and industry experience makes him an outstanding choice to take over the COO’s role. Given the environment in which we are operating, Leon is the right person at the right time to succeed David.”

“The appointment was strategic as it allows us to retain institutional experience and ensure a seamless handover to a trusted pair of hands with a deep understanding of Redefine’s strategic priorities.”

“With the economy in a low growth trap and many market indicators at their lowest level in several years, his contribution in his new role should prove to be invaluable as we stay on course to fulfil our commitment to building a quality, diversified portfolio to ensure sustained value creation for all our stakeholders.”

In his new role, Leon will be responsible for all aspects of asset and property management and general administration of the property portfolio.

“I am looking forward to working with the team and supporting and shaping the next stage of our growth,” says Leon.

“The biggest issue right now is the downshift in global markets from geopolitical issues and the impending elections in the US. The prospects of any rebound are being dampened by the unfortunate outbreak of the Coronavirus and should cast a long shadow over the local economy. We have a job to do and that is to execute against our value creation strategy.”

Redefine will commence with the recruitment process of a new FD in due course. According to Konig, filling the role of the FD is a strategic opportunity to further address diversity at executive level. Already, Redefine has one of the most transformed, diverse and empowered boards in the property sector.

“Leon has been an important voice on our leadership team over the years. Given his background, the board has full confidence that he will strategically balance the operational and financial needs of the business,” says Konig in conclusion.

Vukile places oversubscribed R500 million unsecured bond

Vukile Property Fund today issued R500 million senior unsecured corporate bonds with three and five-year maturities.

The issue was significantly oversubscribed with demand exceeding the maximum offer by 4.2 times. It drew orders from 15 different investors and attracted bids worth more than R2 billion. The three-year bonds were placed at a favourable margin of a 141bps, which was below guidance.

“We are delighted with the strong support received. The success of the auction shows strong support for Vukile and has further diversified our debt capital market investors,” says Laurence Rapp, CEO of Vukile.

The capital raised will increase Vukile’s split of unsecured debt and be used to redeem secured notes that are expiring in June and July 2020. As the proceeds of the issuance will be used to repay existing debt, the issuance is neutral for the company’s loan-to-value (LTV) ratio.

Acting as sole lead arranger, Absa Corporate and Investment Banking applauded the success of Vukile’s bond issue. “The auction received wide institutional support based on the high quality of Vukile’s credit profile, balance sheet and underlying business strategy,” says Marcus Veller from Absa Debt Capital Markets.

GCR Ratings recently upgraded Vukile’s national scale issuer ratings to AA-(ZA) and A1+(ZA) for the long and short term respectively, with a stable outlook.

JSE-listed Vukile is a leading South African retail REIT with R35bn of property assets of which 48% are in Spain through its 82.5% held subsidiary Castellana Properties SOCIMI SA.

X