SAREIT

Growthpoint Properties this morning announced that it successfully closed its sizeable R4.3bn equity raise, which opened yesterday afternoon. The placement was 2.74 times oversubscribed.

The company initially sought to raise R4bn which it increased in response to the strong demand for new Growthpoint shares.

Norbert Sasse, Group CEO of Growthpoint Properties, says, “We’re extremely pleased with the success of our accelerated bookbuild, which enjoyed robust demand particularly from offshore. Local support totalled 57% of the capital raise, with the balance coming from noteworthy international interest. It is encouraging to receive strong support from so many local and global investment institutions.”

With the capital raised in this bookbuild Growthpoint will reduce leverage and maintain balance sheet strength to support operating flexibility and undertake certain development and investment activities. This balance sheet strength will position the company well for growth opportunities that may arise in the future.

Proceeds raised from the bookbuild will in part be used to repay the debt from Growthpoint’s subscription and partial cash offer for shares in Capital & Regional in December 2019.

The capital raise is part of Growthpoint’s larger capital plan which includes cost and capital expenditure savings, partial retention of earnings through the Dividend Reinvestment Plan (DRIP) and dividend pay-out ratio of at least 75% of distributable income, which is compliant with SA REIT legislation. It also includes a non-core asset disposal programme of R1bn to R1.5bn in the current financial year.

As a result of the R4.3bn placement, Growthpoint’s loan to value (LTV) ratio, which was 43.9% at 30 June 2020, will decrease to approximately 41.5% on a pro-forma basis. Growthpoint continues to enjoy comfortable debt covenant headroom, with its strictest LTV covenant being 55%. At end-October, Growthpoint had R5.4bn of liquidity available in committed undrawn facilities and cash prior to this capital raise.

The 358,333,333 new Growthpoint shares were priced at R12.00 per share, which represents a 6.3% premium to the pre-launch 30 business day volume weighted average share price, adjusted for any cum dividend portion, of ZAR11.29 per share as at market close on 11 November 2020.

Growthpoint creates space to thrive with innovative and sustainable property solutions. It is South Africa’s largest primary JSE-listed REIT and is invested in real estate and communities across Africa, Australia, the UK and Eastern Europe.

Equites Property Fund (“Equites”), through its wholly-owned subsidiary, Equites International Ltd, has concluded an agreement with Hermes Parcelnet Limited (“Hermes”), to develop an £85 million (R1.8 billion) distribution centre in a prime location in the UK.

Hermes, an associate of Hermes Europe GmbH which is based in Germany, specialises in parcel delivery and courier services. It delivers more than 240 million parcels a year on behalf of 40% of the UK’s top 100 retailers, including Next Directory, ASOS, Tesco, John Lewis, Debenhams and Arcadia Group

The agreement provides that Equites Newlands Group Limited (“ENGL”), a company in which Equites International Ltd owns 60% of the shares with Newlands Property Development LLP (“Newlands”) owning the remaining 40%, will act as the developer of the property.

Upon completion, the modern distribution facility will be wholly-owned by Equites and will be let to Hermes on a 20-year, triple net, fully repairing and insuring lease. The lease will afford Equites with more than R80 million in annual rental income, solidifying Equites’ robust and predictable cash flow profile. The property is in the well-established Hoyland Common in South Yorkshire, which affords excellent road links, and is strategically located immediately adjacent to the J36, M1 road networks providing excellent access to the national motorway network.

The development will also serve as the latest “super-hub” for Hermes and will handle 1.3 million parcels a day, making it the largest of its kind in Europe and could create more than 1,300 jobs. Furthermore, compressed natural gas (CNG) vehicles will be based at the hub and there will be provision for electric cars, which is in line with Equites’ focus on Environmental, Social, and Corporate Governance (ESG) initiatives.

The property is expected to be 31,570 square metres in size and will be situated on an overall land area of 18.5 hectares, which translates into a low site coverage ratio of 16%. The facility will provide the tenant with a newly constructed, high specification, steel portal frame distribution warehouse with 163 dock-level loading doors and four level-access loading doors.

Andrea Taverna-Turisan, the CEO of Equites, commented:

“This development agreement is an exciting opportunity for Equites, as it is the first signed development deal to arise from the company’s strategic partnership with Newlands and is consistent with Equites’ UK investment strategy of curating a high-quality logistics portfolio, which promotes strong total returns in the medium to long term.We are also especially pleased to welcome Hermes as a long-term tenant, which is one of Europe’s largest and most successful parcel delivery businesses.”

“Spear has declared an interim distribution of 29.34 cents per share for the 6 months ending 31 August 2020. Operating in one of the most challenging modern-day trading environments Spear has successfully executed on its short term Covid-19 strategic objectives. Income statement consistency has been maintained with strong rental collections during the period of 96.9% of revenue billed. The leasing and property management team have achieved good results on renewals & relets for the period resulting in a 91.2% tenant retention rate. Spear’s regional focus and hands-on asset management approach has remained one of our competitive advantages as managements proximity to its assets & tenants have allowed for speedy engagements and crisis resolution in a mutually acceptable manner. During the interim period the core portfolio has remained resilient underscoring the deep value proposition that the Spear portfolio presents.”– CEO Quintin Rossi

Salient details for the FY21 interim period ended 31 August 2020:

• Interim distribution declared of 29.34 cents per share
• Payout ratio of 80%
• Collected 96% of revenue billed for the interim period
• 25% average in force escalation
• Portfolio value R 4.46 billion
• 54% increase in asset value
• TNAV per share R 11.75 per share
• Average property value R 138 million
• Portfolio occupancy 91.2%
• Average cost of debt 7.56% (69.90% hedged)

Cape Town, 30 October 2020: Spear REIT Limited (SEA:SJ), the only regionally specialised Real Estate Investment Trust (REIT) listed on the JSE, reported its interim financial results today, declaring a 29.34 cents per share distribution based upon an adjusted payout ratio of 80% of its funds from operations, amidst some of the toughest trading conditions in recent years for the South African listed real estate sector.

CEO Quintin Rossi has praised his management team and staff for their unwavering commitment and sacrifices during the interim period that gave Spear the momentum it needed to navigate these very challenging times. Rossi further notes that Spear’s hands-on management philosophy and regional focus has enabled the team to focus 100% of their attention and resources solely on the Western Cape.

Spear’s Western Cape real estate portfolio consists of 32 properties with a GLA of 453 016m2. The average property value has increased to R138 million compared to the previous reporting period of R130million. Spear began the FY21 with 130 000m2 due for renewal or re-let during the year, excellent progress has been made with 101 125m2 finalised during the interim period. Spear’s lease expiry profile remains defensive with a WALE of 28 months.

Spear’s Covid-19 operating environment

Spear has successfully adapted to a Covid-19 operating environment. All the necessary and required health & safety measures have been implemented across its business and portfolio to best safeguard staff, tenants and service providers.

Year to date rental collections under the circumstances have been satisfactory and in line with the high road scenario plan set out to the market in May 2020. Spear has reported the following FY2021 year to date rental collection percentages:

Rental collections vs revenue billed = 96.90%

Rental collections vs original budget (set in Dec 2019 and assumes no pandemic) = 86.13%

Management remains optimistic that it can maintain its robust collection momentum for the remainder of FY21 (in the absence of any significant tenant failure) as 100% of Spear’s tenants are legally able to operate from their premises and the lions shares of economic activity has recommenced across South Africa. During the interim period management has provided 192 of its 442 tenants with Covid-19 related relief.

The hospitality portfolio has been most severely impacted YTD as a result of Covid-19, associated lockdowns and travel restrictions. No income has been forecasted from any hospitality assets during FY21 irrespective of low levels of revenue being generated post the interim period. Spear has further announced that it has accepted a cash offer to dispose of 15 on Orange Hotel in Cape Town for a sum of R 280m. The proposed disposal is subject to a due diligence period & Competition Commission approval. Management has advised that it will exit the remainder of its hospitality assets in an orderly manner over the next 12-24 months. All disposal proceeds will be utilised to settle debt and support managements LTV reduction roadmap to achieve a targeted LTV band of 38% – 43%.

Spear remains sufficiently capitalised with no going concern risks as solvency and liquidity ratio tests remained positive. Regular cashflow analysis is conducted to stress test cashflow on a rolling 12-month basis. This includes a range of scenarios of tenant collections and creditor requirements.

Management’s focus and energy remains on rental preservation and business continuity throughout the pandemic, associated lockdowns and beyond. Spear will not be issuing any distribution guidance for the second half of FY21. Management will provide a trading update and guidance of a final distribution per share in a pre-close presentation prior to year-end.

Rossi concludes that it remains difficult to fully predict the economic outcomes of the pandemic on the Real Estate sector, and on Spear as South Africa navigates its way through the aftermath of the Covid-19 pandemic and the severely negative economic consequences left in its wake. With the exception of a second wave of Covid-19 infections, significant market or tenant failure or another government-imposed lockdown, management is confident that cashflow generation will be maintained and that Spear will continue to operate within its high road scenario set out to the market during its May 2020 presentation.