Linkedin-in
Twitter Linkedin-in

QUICK
LINKS

reit_sthe

Nurturing broker-tenant-landlord relationships for shared long-term value

by

IN CONVERSATION WITH: Ulana van Biljon, COO, Emira Property Fund

For everybody — and certainly those in the property industry — the past two pandemic-fuelled years have been one big question mark.

The situation has had an immense impact on brokers, in particular. After Covid-19 first spread in South Africa, commercial leasing held its breath, and waited and watched the pandemic’s progress without much activity for several months.

Leasing has since resumed, but as we move towards recovery from the steps taken to manage the effects of Covid-19, commercial real estate remains a somewhat uncertain and nuanced landscape. The good news is that a return to some semblance of normalcy is likely to continue, albeit at an uneven pace in different sectors, each with its unique driving forces.

But there are still lingering effects from the pandemic. Social distancing has changed the way people interact and how businesses inhabit physical space. The market is also being driven by a deep recession from which South Africa has not yet fully emerged. These factors have softened demand for office space, increased supply and fuelled an extremely competitive environment. Doing business has become much tougher for brokers.

With this in mind, at Emira, we have spent much of the pandemic period redoubling our efforts to show the broking community that we value them and to find new ways to reward them for their hard work. Watching our broker relationships endure and flourish during the most challenging times has been an absolute highlight.

The broker community is extremely important to Emira as most new letting is done through external brokers. Our brokers provide us with the opportunity to meet, understand the space requirements and forge a genuine connection with prospective clients. We recognise the hard work, dedication and loyalty of these external stakeholders and nurture the landlord-tenant-broker relationship to create shared long-term business value.

Emira ensures regular interaction with brokers through our website, vacancy portal, social media, personal interaction, building visits and well-established annual broker incentive programme. We have had to reinvent our broker incentives in this new environment. Instead of travel rewards, made impossible by restrictions, we began acknowledging outstanding broker performance by delivering incentives such as coffee machines, printers, comfortable office chairs and shopping vouchers. We were pleased to find new Covid-safe ways to engage and extend our thanks to our brokers for their commitment, attitude and excellent work.

As a culture-centred business, we believe that our relationships with the broker community should be emblematic of our tenant relationships – in fact, all our relationships. We believe in acting with integrity, respect and trust. Brokers are an extension of our business. They are part of our team.

When it comes to our brokers, we are there to assist whatever needs they have, as is the Emira way. Our structure includes in-house broker consultants who maintain key relationships with the broking community and facilitate new leasing in the portfolio and ensure that it runs seamlessly from day one. Essentially it is a concierge platform where brokers can plug into our business, and which guides them and prospective tenants through the leasing process.

We have looked at the touchpoints in the leasing journey and tried to make each one straightforward and effortless. It’s all about considering how we can help brokers and tenants in ways other than simply signing a deal -from helping to match a business with a suitable building and space to FICA requirements and lease administration. Emira’s leadership also helps to provide highly targeted and tenant-specific decisions. We understand that many businesses are unique and go beyond a one-action-fits-all-tenants approach.

Our broker relationships have come through this challenging period stronger than ever, and we are operating together at a whole new level. Our focus on building great broker relationships has enhanced the flow of market intelligence to Emira. Our brokers give us access to a world of market knowledge and are a valuable source of information about trends and rentals and consult us on new solutions to improve the experience at our properties.

I am fortunate to enjoy good, long-lasting relationships with many members of the broking community and am looking forward to connecting more personally with them once again. While Emira’s purpose is providing great real estate, we also do business with great people, and we enjoy and appreciate working together.

The post Nurturing broker-tenant-landlord relationships for shared long-term value appeared first on Emira Property Fund.

Emira agrees to sell Enyuka shareholding to One in R637 million transaction

by

Emira Property Fund (JSE: EMI) has, subject to financing conditions precedent normal for this sort of transaction, agreed to sell its entire 49.9% stake in Enyuka Property Holdings, its rural and lower LSM retail property joint venture with One Property Holdings, to its venture partner for R637m, representing a small premium to book value.

Exiting Enyuka is a natural next step for Emira, which in 2016 contributed 15 rural retail assets from its direct portfolio into the Enyuka portfolio in exchange for the 49.9% shareholding. It teamed up with experts in this specialist area of retail property, One, to collectively derive more value and greater growth from the portfolio.

In the six years since, the jointly managed portfolio has achieved its objective of creating value for Emira shareholders, growing from 15 assets valued at R575m to 24 assets valued at R1.67bn. The original five-year plan for Enyuka included options to extend the agreement and for a partner buy-out. It was extended twice, for a year each time.

Geoff Jennett, CEO of Emira, says, “The Enyuka joint venture has worked well – so well that our partners offered to buy us out. This is an attractive exit from a non-core investment for Emira at a good price in a single transaction. We weren’t actively looking to sell our Enyuka stake, but the offer from One has presented us with a great opportunity that is well-aligned with our stated strategies. The cash realisation enables us to redeploy the capital into our core strategies. It provides Emira with optionality in its capital allocation and agility to respond to clear and attractive market opportunities.”

The proceeds, equal to about 5% of Emira’s total asset base, will be temporarily deployed to reduce Emira’s gearing but be immediately available for other capital re-investment opportunities

Jennett adds, “The Enyuka assets will remain in good hands with One, for which rural and lower LSM retail property investment and management is a core specialisation. One has been instrumental in the asset management and expansion of the portfolio since the inception of the JV.  They remain passionate about rural retail and are well positioned to take the portfolio forward and to further grow the asset base. We look forward to continuing our good relationship with One as part of the Inani Property Holdings consortium.”

Emira is a leading diversified REIT invested in a quality, balanced portfolio of retail, office, industrial and residential properties. Should the transaction proceed, it will have total assets of R12.6bn, including 77 directly-held properties valued at R9.8bn in South Africa. A 17% portion of its total asset base is international, made up of equity investments in 12 grocery-anchored open-air convenience shopping centres in the USA.

The transaction remains subject to several conditions being fulfilled.

Emira grows its US investment to a dozen dominant power centres

by

Emira Property Fund (JSE: EMI) has acquired its twelfth grocery-anchored open-air shopping centre in the USA. Always investing together with its in-country US investment partners, the Rainier Group of Companies, Emira has now invested a further USD18.45m into the equity of a 542,000sqf super-regional, open-air shopping and dining power centre. The highly attractive Summit Woods Crossing in the growing suburb of Lee’s Summit in Kansas City, Missouri, is Emira’s biggest and highest value single US investment to date.

In almost five years since it began investing in thriving states in the world’s largest economy in 2017, Emira has grown its equity investments in the US on an incremental deal-by-deal basis into a sizeable 350,000sqm portfolio of a dozen dominant open-air power centres. The portfolio’s value is a substantial US$660m, of which Emira’s equity investment is R2.2bn (US$140m).

Total offshore equity investments in the US now represent a meaningful 17% of Emira’s total asset base, further strengthening its diversification, which is a key strategic philosophy for Emira.

Geoff Jennett, CEO of Emira, says: “Our US equity investments have become a critical and core strategy. They enhance Emira’s diversification by geography, tenant and economy. We have established a track record and built good relationships in the US market with our partners, which enabled us to access this great investment at an approximately 10% annual cash on cash return in US$ per year. However, we anticipate a much higher total return from our investment in US$.”

This is the first time Emira has made an investment in the US with the express aim of undertaking a significant asset management initiative to create a capital value uplift while still satisfying its yield requirements. It intends to add a second grocer anchor to reinforce the centre’s dominance and unlock further value from the property.

“This transaction is positive for Emira’s balance sheet and income statement,” reports Jennett. Supporting the investment, the debt for the acquisition was raised in the US at property level before US interest rates increased substantially. Emira has recycled capital from certain disposals together with using existing debt on its balance sheet to fund its investment, which was locked in before some of the recent devaluation of the ZAR against the US$.

The large, best-in-class, grocery-anchored Summit Woods Crossing aligns strongly with all measures of Emira’s US investment strategy. It has grocer Target as a shadow anchor with tenants including hardware giant Lowes, Kohl’s, BestBuy and TJ Maxx. The centre is 98% let and over 90% occupied by national tenants with a high credit quality underpin. It has an excellent 5.6-year weighted average lease expiry (WALE).

Jennett adds, “Our international strategy enables capital recycling and allocation into more resilient environments than South Africa’s constrained economy, and provides US$-denominated returns. Subject to the right opportunities being found, we intend to continue on this investment path, taking an opportunity-by-opportunity approach with our American partners, staying focused on our chosen segment of retail property and delivering on value for our shareholders.”

Emira is a leading diversified REIT invested in a quality, balanced portfolio of retail, office, industrial and residential properties. It has total assets of R12.6bn, including 77 directly-held properties valued at R9.8bn in South Africa, various other associate equity investments in SA as well as its equity investments in grocery-anchored open-air convenience shopping centres in the USA.

The post Emira grows its US investment to a dozen dominant power centres appeared first on Emira Property Fund.

Emira takes transfer of modern Northpoint Industrial midi-unit park in Cape Town

by

Emira Property Fund (JSE: EMI) has taken transfer of Northpoint Industrial Park, which it acquired for R103 million, funded through recycling capital from the disposal of two older industrial assets. Northpoint transferred to Emira last month (March 2022) after it signed the agreement to acquire the property in 2020, but the Covid-19 lockdowns delayed its transfer.

Northpoint is a recently developed midi-unit industrial park in Brackenfell in Cape Town’s northern suburbs. It spans 16,415sqm of gross lettable area in 10 units ranging in size from 1,300sqm to 2,366sqm. It is 100% let, and its tenants include leading national names such as PEP, Van Schaik and Storage King.

Geoff Jennett, CEO of Emira Property Fund, says, “We are pleased to acquire this fully-let property at an accretive yield. Emira’s industrial portfolio is divided between single-tenant light industrial and warehouse facilities and multi-tenant midi- and mini-unit industrial parks. This property aligns well with Emira’s strategy to invest in well-located, modern, multi-tenant parks.”

Emira favours investing in midi-unit industrial properties because they support a broad tenant base, which adds to portfolio diversification and reduces single counterparty risk.

Ulana van Biljon, COO of Emira Property Fund, says the industrial sub-sector has remained resilient with low vacancies, and demand for space is on the rise.

She adds, “In Emira’s experience, midi-unit industrial premises of between 1,000sqm and 5,000sqm attract a more established tenant profile, which equates to stronger and longer lease covenants. They also require less intensive management than similar-sized properties with mini-units. The Emira team is well skilled in managing this asset class.”

The secure Northpoint Industrial Park features access control and 24-hour on-site security supported by off-site CCTV monitoring. It also has power backups for the park’s common areas and smoke extraction. Each unit is 12m to eaves and has full sprinkler system coverage to SANS 10287 requirements, with backup tanks and pumps, plus additional capacity for tenants to add on to meet ASIB specific requirements. While the Northpoint site is fully developed, each unit has the capacity to add a full mezzanine level to its warehouse.

As is the Emira way, it invests in assets that consider the environment. To this end, Northpoint has a rainwater catchment system, solar lighting for parking, and heat pumps for hot water supply. The office component of the property is also served by inverter-based air conditioning.

Centrally located in Brackenfell Industrial and easily accessed from the N1 via the Okavango offramp, Northpoint will benefit from even more convenient access in future with the planned extension of Okavango Road, which will run directly past the park.

The post Emira takes transfer of modern Northpoint Industrial midi-unit park in Cape Town appeared first on Emira Property Fund.

Global Credit Ratings (GCR) Upgrades Dipula’s Credit Ratings to BBB+(ZA)/A2(ZA) on Solid Performance and Improved Financial Flexibility

by

  • Ratings reflect continued resilient performance and maintenance of solid credit protection metrics
    • LTV ratio remained between 37% and 40% for the period
    • Debt to EBITDA improved gradually from 4.8x in FY18 to 4.2x at H1 FY22
    • Net interest cover improved to 3.1x at FY21 and at H1 FY22
  • Credit protection metrics are projected to trend at current levels at year-end FY22 and FY23.
  • Financial flexibility improved through restructuring of dual share structure and easing of financial covenants
  • GCR believes that although Dipula’s portfolio is considered of moderate size, the portfolio’s diversity supports a lower risk profile
  • The stable outlook reflects GCR’s view that Dipula should continue to display earnings resilience and that credit protection metrics will be consistent with expectations for the rating level

Friday, 12 August 2022 – South-African focused JSE-listed diversified REIT, Dipula Income Fund, today announced that its long- and short-term credit ratings were upgraded by GCR to BBB+(ZA) and A2(ZA) respectively, with a “stable” outlook. In terms of GCR’s international scale rating, the improved long- and short-term ratings reflect high certainty of timely payment of short-term obligations and average credit quality relative to other issuers or obligations in the same country.

GCR noted that the upgrade to Dipula’s ratings reflects the Group’s continued resilient performance, which has allowed it to maintain solid credit protection metrics, whilst financial flexibility has been improved through the restructuring of its dual share structure and the easing of financial covenants.

On 07 April 2022, Dipula received overwhelming support from its shareholders to simplify its dual share capital structure into a single class of ordinary shares.

Izak Petersen, CEO of Dipula commented: “We are very pleased with the ratings upgrade. The simplification of our capital structure has paved the way to eliminate misalignment of interests between shareholders, which will allow Dipula to act on growth opportunities subject to sensible cost of capital relative to the return profile of the opportunities.”

In addition to the simplified share structure, Dipula’s improved credit rating was because of its solid operational performance and generation of stable operating profits throughout the Covid-19 pandemic.

The Group’s operating margin has widened to 63.5% at 1H FY22, from around 62% during the pandemic, due to tight control over property and administrative costs. Looking ahead, GCR expects operating profit to gradually increase, despite inflationary pressures, with the operating margin remaining between 62% to 65%.
Key credit protection metrics were maintained at moderate levels, with the LTV ratio remaining between 37% and 40% over the review period (1H FY22: 38%). Debt to EBITDA has improved gradually from 4.8x FY18 to 4.2x at 1H FY22, whilst net interest cover improved to 3.1x at FY21 and 1H FY22. Credit protection metrics are projected to trend at current levels at year-end FY22 and FY23.

“Our hands on approach and the defensiveness of especially our retail portfolio is the reason for our solid performance over the years.” Petersen noted.

According to GCR, further positive ratings could arise if Dipula successfully diversifies its funding sources and lengthens its debt maturity further, whilst securing, larger unutilised facilities to mitigate liquidity pressure.