Emira Property Fund (JSE: EMI) has finalised the sale of its entire 49.9% stake in Enyuka Property Holdings, the rural and lower-income retail property fund. The stake was purchased by their partner, One Property Holdings, which offered to buy Emira out for a total of R641.5 million.
Exiting Enyuka was always one of the potential options for Emira. In 2016, Emira contributed 15 rural retail properties from its direct portfolio for its shareholding in the Enyuka portfolio, partnering with lower-income retail property specialists, One, with the aim of deriving scale with more value and greater growth from the portfolio.
Enyuka has been a good investment for both Emira and One. Enyuka launched with an R575m portfolio in 2016 and has earned an average 13.5% cash yield over the period. Emira exited its investment at R641m, realising net cash proceeds of R511.5m after the vendor loan of R130m provided by Emira to One.
Geoff Jennett, CEO of Emira Property Fund, comments, “Emira has successfully exited an indirect investment at a favourable price in a single deal aligned with our objectives. The proceeds will be reinvested into core strategies for Emira. Meanwhile, the cash has been used to reduce debt, lowering LTV to around the 42% level.”
Jennett adds, “The transaction timing was ideal for Emira as we intend to use the funds elsewhere. It also suits One as they intend to take Enyuka to their next stage. We are grateful for our successful partnership with One and know that Enyuka will be well looked after.”
Chris van Reenen, CEO of One that acquired the Emira stake, said: “This transaction was the ultimate conclusion of a longer-term joint strategy with Emira in this sector of retail in South Africa and, as much as we are sad to end our close association with Emira, we are delighted to take Enyuka further by improving and growing the asset base”.
Jennett remains convinced that Enyuka’s assets require a different, specialised approach and confirms that Emira isn’t likely to invest directly in this kind of asset again. As part of its diversified portfolio, Emira retains direct investment in 17 larger, urban retail assets with an overall value of some R5bn, with Wonderpark Shopping Centre in Karenpark, Pretoria, being the biggest.
The Enyuka sale is one of several transactions that Emira is progressing, including its sectionalisation and sale of apartments at The Bolton in Rosebank, Johannesburg, which was a joint venture with the residential specialist the Feenstra Group, and has fulfilled its expectations. Emira has also secured control of Transcend Residential Property Fund and is in the process of finalising a scheme of arrangement, which will see Transcend become wholly owned by Emira and delist from the JSE.
“As Emira becomes more mature in each of the diverse sectors in which we invest, it is a natural progression for us to move up the curve towards having greater control of our partnerships. Nevertheless, we remain fully supportive of co-investing when embarking in a new area of real estate that requires specialist skills,” notes Jennett.
The Enyuka disposal confirms Emira’s skill in recycling assets well and recognises the advantages of trading assets in certain instances. “This transaction follows through on our ultimate intention to recycle out of assets in Enyuka’s specialist sub-sector with a good realisation of cash, after creating value through a mutually rewarding partnership with One.”
Emira Property Fund is a diversified, balanced REIT with a track record of delivering stability and sustainability through different cycles. It is invested in a mix of directly-held retail, office, industrial and residential assets, indirectly-held investments with specialist co-investors and has equity investments in grocery-anchored open-air convenience shopping centres in the USA.