SAREIT

Emira Property Fund today reported a final dividend of 30.26 cents per share, taking its dividend for the full year to 30 June 2020 to 104.36 cents per share.

During the first six months to end December 2019, Emira’s performance was in line with its positive market guidance despite the constrained local economy, and it declared a 74.10 cents per share half-year dividend.

However, the impact of COVID-19 and the relief that Emira and its partners provided to tenants saw a 61.4% decrease in the dividend payable for the second half of the financial year. Emira provided R119m in rental relief, in the form of discounts and deferrals, to more than 1,150 tenants to help them survive the COVID-19 lockdown.

Geoff Jennett, CEO of Emira Property Fund, comments, “As a JSE-listed REIT, Emira exists to provide a platform from which investors can access the net rental income from its underlying portfolio of diversified property investments. On this basis, and because Emira can demonstrate its ability to meet its future financial obligations, we elected to declare a final dividend to shareholders. That said, protecting our strong balance sheet and liquidity position remains our priority, so we have been very conservative in our treatment of distributions with sustainability being our foremost consideration. Emira is only distributing cash-backed net profits that it received during the period, after making provision for additional cash reserves in its US investments. As a result, our total dividend decreased by 31.0% from the previous year. The adjustment to our dividend composition this year does not change our pay-out ratio policy and has no punitive tax consequences.”

Jennett adds, “The operating context has become undeniably difficult. Emira was fortunate to enter this new environment with solid fundamentals in place after our comprehensive four-year strategic portfolio rebalancing process, which we have shared with the market at every step along the way. The timing of this re-set enabled Emira to deliver sound performance from a diversified portfolio driven by operational excellence, tight cost controls and strong partnerships with experts in specialist property sectors. Emira is realistically poised to recover ahead of the curve.”

Emira is invested in a quality, balanced portfolio of office, retail, industrial and residential properties. It has 79 directly-held South African properties valued at R10.2bn and is diversified offshore with equity investments in 10 grocery-anchored open-air convenience shopping centres in the USA.

Outperforming SAPOA’s average results, Emira closed its financial year with a low and very manageable 4.1% vacancy level, having achieved an 80% tenant retention rate.

Emira is still under contract to acquire a single property, the multitenant Northpoint Industrial Park in Cape Town, for R108m, but transfer has been delayed by the COVID-19 lockdown. It also invested R161.3m in major projects to maintain and improve its assets.

“Emira will continue its proactive asset management, and prioritise tenant retention and market-appropriate letting strategies. We remain committed to close relationships with our tenants, and also recognise that healthy, safe and efficient operating environments will improve tenant retention and support occupancy levels,” notes Jennett.

Emira kept a keen focus on containing costs. Even so, its property expenses increased 2% during the year. Mounting above-inflation electricity, water and municipal costs support Emira’s investment in alternative energy sources and acceleration of initiatives to reduce electricity and water consumption.

Emira’s The Bolton residential asset in Rosebank with co-investors the Feenstra Group contributed to income streams for a full 12-month period for the first time. Occupancy dropped from 93.6% to 80.9% in the six months to end-June 2020 as a result of COVID-19 lockdown restrictions on reletting units, and has subsequently recovered to above 90% due to easing of restrictions.

A 34.9% stake in specialist JSE Main Board listed REIT Transcend Residential Property Fund, also gives Emira indirect exposure to the residential rental property sector. Transcend’s total property portfolio is valued at R2.7bn. Emira received a dividend of R15.9m for Transcend’s six-months to end- December 2019. As announced by Transcend on 13 August 2020, Emira expects to receive R5.5m for the six months to end-June 2020, with a greater dividend expected in its full year to end-December.

Through its exposure to Enyuka Property Fund, a dedicated rural retail property venture with One Property Holdings, Emira invests indirectly in 24 lower LSM shopping centres valued at R1.7bn. Enyuka also granted rent relief to tenants whose trade was profoundly impacted by the COVID-19 lockdown, which totalled R15.4m. The slowdown in letting from March also negatively affected Enyuka’s net income, but less so because the impact on this type of retail has been less severe. Enyuka contributed R72m to Emira’s distributable income for the year.

On the international front, Emira sold the balance of its units ASX-listed Growthpoint Properties Australia (GOZ) and sharpened its offshore focus on its US investment strategy with its USA-based partner, The Rainier Companies. The acquisition of its tenth US shopping centre asset took its equity investments in the US to R1.6bn (USD93.9m). Emira’s after-tax income from equity co-investment in the US totalled R171.7m of which R139.2m is distributable.

R76.8m of this income was retained in the US in order to bolster cash reserves at the property levels in these extreme times

The grocery-anchored dominant value-orientated convenience retail centres in robust markets in the US in which Emira invests, performed better than enclosed malls and lesser quality properties in the context of COVID-19. They are geared towards communities, provide essential goods and services especially with grocer anchors, focus on the popular value retail segment, have quality tenants, and offer open-air environments where people feel safe. Even so, rental relief was provided to select tenants, generally in return for lease extensions and deferred payment. Vacancies nudged up from 3.6% to 5.2%, with increased retailer bankruptcies contributing to more vacancy. However, a significant number of leases were renewed and achieved positive rental reversions of 2.6%. Importantly, the weighted average lease expiry has extended to 6.2 years which demonstrates the solid nature of the leasing activity undertaken.

“Emira’s USA strategy facilitates capital allocation into more resilient environments that can act as a buffer against South Africa’s constrained economy,” says Jennett.

Emira’s net asset value decreased 14.6% to 1 530 cents per share as a result of an increase in net derivative liabilities following decreased interest rates in both South Africa and the US and a weaker Rand. In addition, Emira’s continued its track record of realistic property valuations and decreased its portfolio value by a carefully considered 8.5% in light of deteriorating macroeconomic conditions and the poor outlook. With property values being the denominator in loan-to-value (LTV) ratios, this indicator naturally increased from 37% to 43%. Emira’s long-term LTV target remains below 40%.

Global Credit Rating Company affirmed Emira’s corporate long-term credit rating of A(ZA) and short-term rating of A1(ZA) with a stable outlook, in April 2020. The REIT continues to benefit from diversified sources of funding and has facilities across all major South African banks. It has access to undrawn facilities of R619m and cash on hand of R95m, and is finalising further facilities which will ensure an additional R450m of committed backup facilities.

During the year, Emira’s strengthened the leadership and oversight of its board. It also advanced its transformation, improving its B-BBEE rating from a Level 7 contributor to Level 5, with 50.25% verified effective black ownership. Emira has provided the market with detailed updates about the impact of COVID-19 on its business, and contributed to the national and industry response to COVID-19 as an active participant in the Property Industry Group collective. In April, May and June, Emira’s executives contributed 30% of their salaries and non-executives gave 30% of their fees to the Solidarity Fund.

“At Emira, we are committed to doing the right thing. We will continue to manage the outcomes that are within our control to protect and generate value for our stakeholders with a robust balance sheet, well-funded and sustainable operations, and a balanced portfolio of quality properties,” Jennett concludes.

Given the current uncertainty, Emira’s board resolved not to provide earnings and distribution guidance until such guidance is highly probable. However, it has disclosed that its management has a targeted KPI for distributable earnings of 119.7 cents per share for the year to 30 June 2021.

Cape Town, 26 August 2020 – Canal Walk shopping centre will become the home of the very first Starbucks in the Western Cape. The new Canal Walk Starbucks store will open in November.

In a bold move by the global brand that illustrates the confidence in the future of Cape Town’s coffee-drinking market, Starbucks has selected Canal Walk as its chosen entry point into the Western Cape market as it expands its South African footprint.

Gavin Wood, CEO of Canal Walk says, “We are proud to welcome Starbucks to Canal Walk, and thrilled that our customers will have the opportunity to enjoy the Starbucks experience right here in the Mother City. Canal Walk remains committed to providing customers with new and meaningful experiences in a safe manner, and we look forward to working with Starbucks.”

Adrian Maizey, CEO of Rand Capital Coffee, the owners of Starbucks South Africa, reveals that the global brand is taking a long-term view as it expands into the Western Cape, and is doing this with like-minded partners such as Canal Walk’s owners, Hyprop Investments Limited and Ellerine Bros. “Our strategy for 2020 and beyond is to invest and grow, and our new store in Canal Walk symbolises our big plans for the future of Starbucks in South Africa – even in the light of the devastating Covid-19 pandemic.”

Starbucks’ choice of Canal Walk, Cape Town’s largest shopping centre, positions its first Western Cape store right at the heart of Cape Town in the Century City Precinct, which is conveniently located on the N1, and central to the CBD and surrounding suburbs. Canal Walk offers a wide variety of 400 stores and thousands of the best local and international brands, including fashion, retail, leisure and entertainment for the whole family, all under one roof.

Starbucks began in 1971 as a roaster and retailer of beans, ground coffee, tea and spices, with a single store in Seattle. Today the company connects with millions of customers every day with its own special taste and offering that has seen the company grow to more than 30,000 retail stores in 80 markets. Rand Capital Coffee bought Starbucks South Africa in November 2019, including 13 stores in Gauteng.

Johannesburg, South Africa, 24 August 2020: Managing risk through a streamlined, more focused offshore asset platform and zoning in resolutely on high quality, well-located domestic assets have helped Redefine lay the foundations for future growth when the Covid-19 uncertainty and volatility slows.

However, at the same time, CEO Andrew Konig tells investors in the pre-close briefing for the year ending 31 August that “property fundamentals are going to be challenged for the rest of 2020 and beyond” due to unprecedented and evolving market conditions.

Konig says Redefine’s asset platform has been significantly readjusted for prevailing conditions and the company is now more focused on a single external geography offshore in Poland.

“This reduces our risk profile, improves our liquidity position and eases our loan to value ratio, which has been under a lot of pressure.”

The sale of Redefine’s stake in UK fund RDI Reit for R2.3bn in June has enabled it to focus on local and East European investments. Other recent changes to streamline the business include the sale of its 90% interest in two Australian student accommodation facilities, as well as its residual interest in Cromwell Property Group. The elimination of non-recurring income also comes on stream through the acquisition of 100% of the equity value in M1 Marki from Chariot for Euro 122.8 million. Redefine owns 25% of Chariot, which will be disposed of, as part of the transaction, to settle the bulk of M1 Marki’s purchase consideration.

CFO Leon Kok tells investors that early action on balance sheet strengthening and selling non-core assets means Redefine has undrawn access to R3.8 billion in cash, while having liquidity headroom to absorb as much as a 50% rental decline and 100% dividend withholding from foreign investments.

Says Kok: “We have not yet seen a dramatic loss or material increase in lease cancellations – which is why our attitude towards rental relief has been generous. While we realise there may be short-term pain, our emphasis remains on sustainability as we would rather retain tenants for the long term.”

He says stringent liquidity and risk management practices – which were established well ahead of Covid – now stand the company in good stead. “We are fortunate to have sufficient headroom to absorb headwinds if the recovery is slow.”

He says rental relief in the second half has amounted to approximately R270m, with an increase in rental arrears of approximately R400m over the 5 months of the various levels of lockdown. Average cash collections over this period have amounted to about 82% of monthly gross billings. However, the brunt of this occurred during the hard lockdown in April and May and it has since “recovered to some extent”.

Embracing its commitment to sustainability, Redefine supported its suppliers despite not being in receipt of any or receiving limited service delivery, such as cleaning and security services, so they did not have to suffer layoffs.

“This has ensured our relationships remain entrenched and places us in a strong position to continue providing high quality services during and after the lockdown,” says Kok

However, he emphasises that the next three months “remain critical, as the economy and property market is not out of the woods yet”. The focus therefore remains on keeping liquidity levels bolstered, focusing on cutting back on non-essential expenditure, while still supporting tenants through rental relief.

Following recent news that Redefine disputed the validity of the put option exercised by property investment and development company Zenprop and RMB to sell the Mall of the South, Konig is pleased to tell investors that the parties are engaged in constructive discussions to resolve the dispute, which is expected to result in a mutually satisfactory outcome for all the parties.

Konig says the hard work done to right size the footprint of the capital base has provided space to expand development activity in the logistics sector in Poland, which is offering attractive investment opportunities in an expanding market, which is expected to yield capital growth from further yield compression.

“The European logistics platform is expected to grow significantly through exciting new opportunities on our doorstep, funded through our equity partnership with Madison.” Two recent completed developments in Poland of over 40,000 square metres add to an exciting further pipeline of 7 projects of just over 189,000 square metres, which are 75% pre-let at an average income yield of 7.1%, and all funded via proceeds from the Madison transaction.

Konig points out that Redefine has “done very well at working from home”, leveraging off its IT platform and instilling a culture of innovation and learning.

“Our early commitment to refreshing our values, culture and focusing on our people has seen us make great strides in facing and overcoming this crisis together,” he says.

“Our purpose remains to create and manage spaces in a way that changes lives and we have, for instance heightened our focus on ESG initiatives to further protect property values,” says Konig.

Renewable energy remains a key strategic focus, with capacity expanded to 25.9 kw peaks during the period. “We will carry on ensuring the rollout of green energy and at the end of this financial year will have 100 office properties that are green star rated,” says Konig.

“Covid-19 has intensified and sharpened pre-existing challenges. But we have done the hard yards and now stand in good stead as we prepare to enter into recovery,” he concludes.

Lakeside Mall, Benoni, has introduced two new anchor tenants in the form of Pick n Pay and Dis-Chem to its 130-strong retailer mix and concluded the final phase of a three-year, R135-million upgrade programme.

Pick n Pay opened at Lakeside Mall in a 2,500sqm store and Dis-Chem in a 1,400sqm store at the end of July 2020, amid the COVID-19 national lockdown. Pick n Pay Liquor will open in a 130sqm premises when it is permitted to do so in terms of lockdown regulations.

Placing these popular national retail brands side-by-side has created a powerful anchor that balances and complements the weighty combined appeal of Lakeside Mall’s Woolworths, Shoprite and Clicks on the opposite side of the 67,000sqm regional shopping centre.

The reconfigured space represents 4,900sqm of gross lettable retail area. There is only one 790sqm high-profile position remaining in the new configuration, and it has a brand-new external-facing shopfront on the mall’s prominent west facade, overlooking Bunyan Street. The mall is being highly selective in handpicking a tenant for this area, to add to the strength of the new retail mix.

The redevelopment concludes Growthpoint’s three-year, multimillion-rand programme of investment and improvement at Lakeside Mall. In 2018, it began upgrading the mall’s interior to achieve a beautiful modernised aesthetic. This refurbishment created a clean, contemporary look with new entrances, ceilings, tiles, columns, handrails, upgraded ablution facilities and energy-efficient lighting. All these elements add to its quality experience and ease of shopping.

Rudolf Pienaar, Chief Development and Investment Officer at Growthpoint, comments, “Our experienced in-house development team and specialised retail property team worked hand-in-hand to find the best ways to optimise the value and appeal of Lakeside Mall. We are genuinely thrilled at the result of its refurbishment, reconfiguration and re-tenanting, and the phenomenally positive impact that this project is already having for the mall overall.”

The recent upgrades, alternations and additions refreshed and enhanced the unique features of Lakeside Mall including its 160-metre long steamboat that appears to be floating on Benoni’s Civic Lake and its town square surrounded by the facades of buildings within the mall’s building.

The addition of the latest leading retailer names to the mall has been a long-time in the making. In 2014, Lakeside Mall’s 5,000sqm 13-cinema complex closed and remained empty.

Mark Langley, Retail: Head of Development at Growthpoint Properties, reveals, “The reconfiguration and introduction of Pick n Pay and Dis-Chem to Lakeside Mall was made possible by Shoprite waiving the exclusivity clause in its lease for the benefit of the shopping centre and its customers, which is commendable indeed. We are incredibly proud of this redevelopment, which fundamentally improves Lakeside Mall as a whole.”

To restructure the former cinema space for retail purposes, Lakeside Mall’s owner, Growthpoint Properties, invested R75-million in its redevelopment. The major project proved to be quite a challenge, with demolition and construction work taking place within a busy, trading mall. The mall area in question was initially built for specialised cinemas, which are very different structurally from shops with large trading floors. Removing the internal structural pillars was a particularly challenging element of the project.