SAREIT

Fairvest Property Holdings annual results for the year end 30 June 2020

Fairvest’s Property Portfolio Proves Its Resilience

Features for the year to 30 June 2020

• Final distribution of 9.883 cents per share, taking the full distribution for the year to 21.038 cents per share, down 3.4%

• Like-for-like annualised net property income growth of 0.8%

• Tenant retention remaining high at 73.28%

• Average lease term up from 35 to 39 months

• Vacancies contained at 4.5% of total lettable area

• Arrears at 4.4% of revenue

• Interest cover high at 2.9 times

• Like-for-like property portfolio value increased by 1.0% to R3.49 billion

• Net asset value per share of 221.18 cents, down 3.6%

• 2021 guidance the distribution per share for the 2021 financial year to be at least in line with the current year’s distribution per share

Cape Town, 23 September 2020. Fairvest Property Holdings Limited (“Fairvest”) today announced results for the year to 30 June 2020, with total distribution for the year of 21.038 cents per share, down 3.4% decrease on the prior year. Chief Executive Officer, Darren Wilder said: “We are pleased with the resilience that our portfolio has shown, in what can only be described as an exceptionally tough environment. Fairvest’s continued satisfactory financial performance is attributable to its focus on a differentiated sector of the market. There is a perceptible shift in consumer preference towards convenience and neighbourhood shopping and this is borne out by trading density growth in the local market, which has favoured smaller retail formats. In challenging times like these, experienced management who has managed property portfolios through multiple economic cycles, also plays a central role in sustaining performance. This is reflected in our moderate vacancies and arrears, high tenant retention and solid growth in net property income.“

The company said that Fairvest was well-positioned with strong cash flows and a prudent balance sheet with an LTV of below 36.6% and a well-diversified funding profile. The defensive nature of Fairvest’s assets, together with the strategic focus on investing in grocery anchored shopping centres and the conservative historic assumptions used for the valuation of the property portfolio, resulted in asset values remaining stable compared to the prior period. On a like-for-like basis the property portfolio increased by 1.0%, despite the company’s conservative stance on exit capitalisation rates and discount rates, both of which were increased in the period.

Fairvest maintains a distinctive focus on retail assets in underserviced, high growth sub sectors . The portfolio is weighted toward non-metropolitan and rural shopping centres, as well as convenience and community shopping centres servicing the lower income market, in high-growth nodes, close to commuter networks. The Fairvest property portfolio consists of 44 properties, with 262 702m2 of lettable area and valued at R3.49 billion. The high national tenant component of 74.9% of the portfolio provides shareholders with a low-risk investment profile with national food retailers occupying 32.7% of the portfolio in terms of GLA.

In an industry that has been severely impacted by the COVID-19 pandemic, Fairvest continues to be one of the best performing property stocks in the South African market. In the latest report by the SAREIT Association, Fairvest features as a the top three-performer over 1, 3 and 5 years, underscoring its consistent performance over time.

Impact Of COVID-19

Wilder said that during the nationwide lockdown, Fairvest’s strategy was to focus on supporting its tenants, as well as on cash flow planning and liquidity management. Fairvest actively engaged with all tenants on the impact of COVID-19 on their businesses in order to find sustainable solutions. Concessions in the form of gross rental deferrals and rental credits were provided to tenants, dependant on their specific circumstances. Gross rental deferrals of April, May and June 2020 billings were provided to certain Small, Medium and Micro Enterprises (“SMME”) tenants, with repayment terms ranging from 3 to 36 months, commencing from 1 July 2020. Of the gross billings in April to June 2020, credits of 10.5% of total gross billings were conceded for 364 tenants and deferrals were provided on 10.8% of total gross billings for 216 tenants. After taking into account the concessions provided, approximately 95.8% of collectable billings were collected for these periods. Fairvest remained cash flow positive throughout the lockdown period and continues to generate positive cash flows.

Arrears increased to 4.4% at year-end. Arrears decreased in June, compared to May and continued to decrease further in July and August 2020. Total credits provided, resulted in a 6.0% reduction in distributable earnings, while the increase in the provision for expected credit losses, resulted in a further 3.4% reduction in distributable earnings.

Review Of Results

Total property revenue increased by 8.7% to R532.1 million, as a result of income growth in the historic portfolio, as well as acquisitions during the period. Net profit from property operations increased by 4.6% to R330.1 million, while efforts to contain corporate administration expenses culminated in expenses decreasing by 0.7% to R30.0 million. Distributable earnings decreased by 5.6% to R208.0 million. Gross cost to income ratio increased from 36.7% to 38.9%, mainly due to rental concessions provided to tenants, as well as a significant increase in the provision for expected credit losses on rental billed during the COVID-19 lockdown period.

The weighted average contractual escalation for the portfolio remained within target of 7.1%. Gross rentals across the portfolio trended upwards, with an 5.7% increase in the weighted average rental to

R128.61/m2 at 30 June 2020 (2019: R121.64/m2). This was due to contractual escalations, increases in rental achieved on new leases, and a 3.0% weighted average rental increase achieved on renewals.

The net asset value decreased by 7.2% to R2.17 billion, mainly due to the treasury shares acquired during the period. On a per share basis, this equates to a net asset value per share of 221.18 cents per share, down 3.6% on the prior year.

Property Portfolio

The Fairvest property portfolio consists of 44 properties, with 262 702m2 of lettable area. The historic portfolio increased by 1.0% on a like-for-like basis. During the year, Fairvest acquired Nonkqubela Mall and Qumbu Plaza to the value of R162.8 million and R54.0 million, respectively. Capital expenditure was incurred of R17.7 million and R45.3 million was spent on solar installations and this resulted in a 10.5% increase in the value of the property portfolio to R3.49 billion. Asset quality continues to improve, with the average value per property increasing by 5.4% to R79.3 million, and the average value per square metre increased by 2.2% to R13 288/m2.

As part of Fairvest’s sustainability initiatives we commenced the installation of photovoltaic rooftop solar systems on 17 of our properties. Ten sites have been completed and are generating within expectation, with the installations at all other sites expected to be completed by the second quarter of the 2021. The estimated annual energy generation will be 10 964 117 kWh.

Fairvest utilises independent external valuers to value at least one third of the portfolio each year with the remainder being valued by the directors. Of the 44 properties in the portfolio, 15 properties equating to 37.8% by value, were valued by independent valuers, DDP Valuers, De Leeuw Valuers and Broll Valuers during the year. Fairvest manages its portfolio valuations particularly conservatively and, given the uncertainty in the current market, an even more prudent approach was taken by increasing the weighted average exit capitalisation rate used from 10.1% to 10.3%, and the weighted average discount rate from 14.6% in the prior year to 14.8%. During the year, Fairvest concluded the disposal of Tokai Junction for R180 million. The disposal price represents a 10.5% premium to the 30 June 2019 valuation of the property, again underscoring Fairvest’s conservative portfolio valuation.

Portfolio Composition, Letting And Vacancies

The portfolio remains well diversified across South Africa, with the four largest provinces, KwaZulu-Natal, Western Cape, Free State and Gauteng contributing 76.6% of revenue.

Vacancies increased modestly from 4.0% to 4.5% or 11 836m2 during the period, with positive letting of vacancies after year-end resulting in vacancies decreasing to 3.2%. Fairvest expects an increase in vacancies in the short-term, with some tenant groupings under pressure due to their inability to trade at full capacity under lockdown restrictions and have provided for a 4% vacancy factor (R16 million), up from 1% in the previous year.

Capital And Borrowings

Fairvest’s positive cash flows and conservative balance sheet supported the conclusion of one new debt facility and the refinancing of two existing debt facilities during the lockdown period. After year-end, another debt facility was refinanced early and the group now has no expiring debt facilities in the next 12 months. The weighted average all-in cost of funding decreased to 7.57% (2019: 9.29%), due to the cumulative 3.00% interest rate decreases in recent months. The weighted average maturity of debt decreased marginally from 24 months to 23 months.

The loan to value (LTV) ratio increased to 36.2% (2019: 27.9%), due to the acquisitions and the treasury shares acquired during the period. After the settlement of the Tokai Junction disposal, the LTV is expected to decrease to 31.0%. Of the debt, 63.1% was fixed through interest rate swaps as at 30 June 2020, with a weighted average expiry for the fixed debt of 40 months.

Prospects

Fairvest will continue to monitor the long-term impact of the pandemic on the economy and the operations of the group. Economic recovery is however expected to be protracted.

Fairvest is well positioned, with its niched assets proving more resilient during the COVID-19 pandemic The focus for the next 12 months will be on maintaining viable tenancies and letting of vacancies, as well as a strong focus on the collection of arrears. The balance sheet remains conservative, with R132.8 million of undrawn debt facilities available to consider opportunistic yield accretive acquisitions.

The lasting impact of the COVID-19 pandemic on the economy remain uncertain, making distribution forecasts exceedingly challenging. Given the uncertainty, the board expects the distribution per share for the 2021 financial year to be at least in line with the current year’s distribution per share. Whilst it is broadly anticipated that industry pay-out ratios may be revised downwards over time, the Fairvest board has resolved to maintain the current dividend pay-out ratio of 100% of distributable earnings as a dividend.

Fairvest 2020 year end results booklet 

Contacts

Darren Wilder, Chief Executive Officer – Fairvest Property Holdings Limited, Office 021 276 0800

For more details or to set up a media interview, please contact:

Lydia du Plessis, Investorsense, Cell: 082 491 7583, e-mail lydia@investorsense.co.za

Growthpoint grants R436m rental relief to struggling tenants, impacting its full-year distributable income which was down 14.8%

Growthpoint Properties Limited (JSE: GRT) delivered 5.4% growth in revenue and R5.5bn in distributable income for its full-year to 30 June 2020.

Taking additional new shares issued during the period into account, this translates to distributable income per share of 183.1 cents per share, which is 16.0% lower than the prior financial year. Growthpoint declared a 106 cents per share dividend for its half-year and has yet to announce its second-half dividend.

Norbert Sasse, Growthpoint Properties Group CEO, comments, “We at all times seek to strike a balance between a conservatively managed and sustainable business and the interest of our investors in optimising distributions. While no final dividend has been declared for FY20, subject to there being no material regulatory changes or market disruptions which may have a substantially negative impact on our overall financial position between the date of publication of our results, and the date of declaration of the final dividend for FY20, the Growthpoint Board is considering declaring a final dividend based on a pay-out ratio of not less than 75% of distributable income for FY20 which will ensure compliance with current REIT legislation.”

This is the first time in 16 years that Growthpoint has been unable to deliver a growing dividend to its shareholders, in a period where results were negatively impacted by the COVID-19 lockdown restrictions under the national state of emergency in response to the global pandemic. The lockdown severely impacted the SA economy, which was already in recession due to low growth.

Sasse adds, “Never before has Growthpoint experienced such a challenging operating environment. Following a detailed strategic review of short and long-term strategies, the Growthpoint Board of Directors is prioritising liquidity and balance sheet strength in the short term, considering the weak property fundamentals in SA in particular, and the current cycle of falling asset values and rising gearing levels. This will enable us to continue to pursue our strategic initiatives of internationalisation, optimising and streamlining our SA portfolio and introducing new revenue streams through third-party trading and development as well as funds management, which all remain relevant for our business.”

Growthpoint creates value through innovative and sustainable property solutions that provide space to thrive. It is the most liquid and tradable way to own commercial property in SA. Growthpoint is a FTSE/JSE Top 40 Index company and a constituent of the FTSE EPRA/NAREIT Emerging Index. It has also been included in the FTSE4Good Emerging Index for the third successive year and in the FTSE/JSE Responsible Investment Index for its tenth year.

Growthpoint owns and manages a diversified portfolio of 440 property assets across SA valued at R73.4bn and a 50% interest in the V&A Waterfront, Cape Town, valued at R9.4bn. Growthpoint owns 58 properties in Australia valued at R51.8bn through a 62.2% holding in ASX-listed Growthpoint Properties Australia (GOZ). This year Growthpoint acquired a 52.1% investment in LSE-listed UK REIT Capital & Regional, which has a secondary listing on the JSE and owns a portfolio of seven community shopping centres valued at R14.8bn. Through its 29.4% investment in LSE AIM-listed, Globalworth Real Estate Investments (GWI) it owns an interest in 62 properties in Romania and Poland, of which Growthpoint’s share is valued at R17.2bn.

Growthpoint’s consolidated SA REIT loan-to-value (LTV) increased during the year to 43.9%. The higher figure is partly due to Growthpoint’s early adoption of the second edition of the SA REIT Best Practice Reporting guidelines, which includes a new standard calculation for SA REIT LTV that increases this number for Growthpoint by 1.7%. Using the previous calculation basis, Growthpoint’s LTV is 42.2%. Debt owing in SA increased by R8.1bn, including R1.8bn relating to the translation of Rand balances of EUR, GBP and USD loans, given the weaker domestic currency. The balance was due to Growthpoint’s further investment of R600m in Growthpoint Investec African Properties (GIAP), R1.3bn in Globalworth, its new R2.9bn investment in Capital

& Regional, and development and maintenance capital expenditure of R2.0bn in its SA portfolio, all of which were mainly funded by debt.

LTV was also impacted by the 8.8% (R7.1bn) devaluation of Growthpoint’s SA portfolio. Its retail portfolio value decreased by 11.3%, offices 8.9% and industrial 5.8%. Growthpoint’s SA business’ SA REIT LTV increased to 39.8% from 31.8%.

Growthpoint’s net property income (NPI) from its SA business dropped by 8.7% (R559m) of which 93.0% was directly due to the impact of COVID-19 in the final quarter of its financial year, including R277m of discounts granted to those tenants most severely impacted by the lockdown between April and June. Arrears increased in all sectors to an unprecedented high of R511m. Expenses surged with a R236m provision for bad debts, including a 25% provision on the R141m of rental deferments Growthpoint offered to tenants and R7.0m of extra COVID-19-specific costs.

In SA, Growthpoint let more than one million square meters of space during the year. All SA portfolio fundamentals weakened, with vacancies rising from 6.8% to 9.5%, renewal success rates decreasing to 66.4% from 70.1%, and average rental reversions moving deeper into negative territory from -5.3% to -6.7%.

Growthpoint completed developments and capital expenditure projects worth R2.0bn. While it has scaled back on all non-essential capital projects, Growthpoint remains committed to a further R634.4m. It earned third-party development fees of R11m and R30m of development rental income in the year. Growthpoint successfully disposed of R581.8m of non-core assets and made R274.6m of strategic acquisitions to optimise and streamline its SA portfolio.

Sasse notes, “Growthpoint’s trading and development expertise continued to give us a competitive advantage, but in line with market conditions it is likely that the scale of activity will decrease and we have suspended speculative development for now.”

SA retail property portfolio vacancies edged up slightly but remained a low 3.7% excluding offices and space under development. Growthpoint concluded a transaction with the various acquirers of the Edcon brands which will see 90% of the related 88,680sqm of space in Growthpoint’s portfolio remain let at new market rentals. A further leasing triumph saw the previously mothballed vacancy at Lakeside Mall, Benoni, leased to two new anchor tenants, Pick n Pay and Dis-Chem as part of a spectacular upgrade to the mall.

Growthpoint’s SA office portfolio enjoyed numerous successes during the year, including fully letting its new development at 144 Oxford Road in Rosebank, Johannesburg, to blue-chip clients including anchor tenant Anglo American. However, with business failures increasing, letting slowed. Office portfolio vacancies rose 5% to 15.4% during the financial year, which has improved with

a further 20,000sqm of letting since year-end. The ex-Deloitte space of 39,800sqm at Woodmead Office Park in Sandton was successfully re-let on long-lease terms to Altron and DRA Global well in advance of becoming available, but the lockdown delayed occupation which is now expected before 2021.

Growthpoint’s industrial portfolio held up relatively well. New and in-force escalations in the industrial portfolio are around the 8% mark. Growthpoint targeted and successfully increased its portfolio presence in the Cape Town and Durban metros. The final phase of the 38,000sqm Mill Road Industrial Park, Cape Town, was completed as was the 20,000sqm Trade Park industrial park development in Mount Edgecombe, KwaZulu-Natal. The weak economy and COVID-19, however, slowed leasing take-up at these developments.

“SA has a difficult recovery ahead with a more than 10% contraction in GDP expected this year amid a global recession. A sharp deterioration in already stressed property fundamentals will exert profound pressure on the sector. An increase in business failures will be a major factor. It is too early to understand the full extent of the structural changes taking place in the office and retail sectors. Still, we know that this environment definitely won’t be easy,” remarks Sasse.

The V&A Waterfront, which was severely impacted by the COVID-19 national lockdown due to its heavy reliance on local and international tourism and its higher exposure to hospitality, leisure and high-end fashion retail delivered R606m, which amounts to 10.6% less in investment income to Growthpoint than last year. Visitor numbers are increasing substantially, but remain at about 40% of levels this time last year. Its new office development for Deloitte remains on track and is due to welcome the tenant in November.

“We are cautiously optimistic about the V&A Waterfront in 2021. It is a strong asset with solid property fundamentals, but much will rely on the return of international and local tourism,” explains Sasse.

Growthpoint’s funds management strategy allows it to access alternative investment opportunities and leverage its management strength in the unlisted and co-invested environment. Growthpoint now has around R10bn of assets under management and is focused on building its first two funds. Income from the funds management business grew by 6.3% (R2m) to R34m.

Sasse explains, “The co-investment and co-management model is proving effective and is particularly attractive in the current environment. Growthpoint will continue to pursue innovative partnerships and ways of investing.”

The healthcare fund, Growthpoint Healthcare Property Holdings (GHPH), grew its distribution per share by 5.8% to 77.45 per share. The fund has a R2.6bn portfolio of four hospitals and a medical chamber, and it completed the 52-bed extension of its Busamed Hillcrest hospital asset during the year. The opening of the Cintocare Head and Neck Private Hospital developed by Growthpoint in Pretoria is now scheduled for January 2021. The acquisition of 51% of the 100-bed Busamed Paardevlei Hospital in Somerset West was also delayed by COVID-19. The R288m disposal of 11% of GHPH to Kagiso was finalised during the year. With R973m of capital raised from third parties, Growthpoint’s shareholding in the healthcare fund was diluted to 61.8%. An USD80m equity and convertible debt package from the International Finance Corporation is also in the final stages of negotiation.

The Africa fund, GIAP, is emerging as a leader in the African real estate market. It has built a quality portfolio of income-producing assets to attain meaningful scale and relevance. The fund has grown its net asset value to USD301m and now manages USD638m of income-producing commercial property assets in Ghana, Nigeria and Zambia. It has attracted more than 20 local and international investors and is in advanced discussions to raise more capital.

Growthpoint invested a further R4.2bn offshore during the year, and its international investments are now 40.8% of property assets by book value and 28.2% of earnings before interest and tax. It intends to refine its approach to international investments in the year ahead.

GOZ, with its defensive portfolio of quality office and industrial assets with strong tenancies, outperformed its pre-COVID-19 guidance. With 97% of its tenant base being big corporates and government, and having no retail assets, COVID-19 had little impact on GOZ’s performance and its earnings were not materially impacted. During the year, its asset values increased, while its cost of debt reduced and gearing levels decreased to a low 32.2% with good liquidity. Its portfolio occupancy was 97%, excluding its new Botanicca 3 development which was completed in late 2019 and is in the process of being let.

GOZ continued to make a positive contribution to Growthpoint with NPI increasing by 8.6% to R2.5bn while its operating expenses increased by 8.5% to R153m. GOZ adopted a conservative approach to its dividends to preserve cash in the business amid ongoing uncertainty. Growthpoint’s dividend income from GOZ in FY20 was R1.010bn compared to R1.071bn in FY19, due to an overall dividend decrease of 5.2% from AUD23.0 cents per share to AUD21.8 cents per share, and increased Australian withholding tax, partially offset by an exchange rate that favoured Growthpoint shareholders.

“GOZ is a core investment for Growthpoint. It enjoys strong property fundamentals, a great liquidity position and has the means to pursue growth,” reports Sasse. GOZ has guided a distribution of AUD20.0 cents per share for its 2021 financial year.

Growthpoint’s new investment in the UK, Capital & Regional, was included in its results for the first time. Capital & Regional found itself in a challenging space with its pure retail portfolio exposed to the existing negative impacts of Brexit and the country’s shift to online retail, which were exacerbated by COVID-19. Three months of disruption to shopping centres led to a deterioration in rent payments as many shops couldn’t trade, and a decline in property values across the industry was accelerated. Now 96% of Capital & Regional’s tenants are open and trading, it has a robust 95% occupancy rate and its cash reserves of some GBP80.0m stand it in good stead to protect its liquidity position. Capital

& Regional’s community centre strategy, with a high proportion of non-discretionary retail, positions it to emerge ahead of the curve in its market.

Capital & Regional contributed R380m to NPI. The maiden dividend from C&R totalled GBP11.0 pence per share which converted into R107m and, to preserve cash in the business, was paid to Growthpoint in shares via a scrip dividend.

“It is too early to quantify the full impacts of COVID-19 and the accelerating structural shifts in the retail industry on Capital & Regional’s operations, but there is no doubt that it is going to be a long road to recovery,” says Sasse.

Growthpoint’s Central and Eastern European investment platform Globalworth mainly comprises office and industrial assets, with limited exposure to retail property, which stood it in good stead to withstand the impacts of the strict COVID-19 measures imposed in Poland and Romania. The Globalworth portfolio held and increased its value with six acquisitions and one major new development completed, while its gearing remained conservative. Its portfolio occupancy was a solid 94.2% including options at year-end.

Emira declares full-year distributable earnings of 128.36 cents per share off a solid portfolio and sound liquidity base

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.

Canal Walk welcomes the Western Cape’s first Starbucks

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.

Redefine makes significant strides in refocusing offshore property platform after remaining true to its risk diversification strategy

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.

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