SAREIT

Johannesburg, South Africa – 21 January 2020: JSE listed diversified real estate investment trust Redefine Properties is strengthening its balance sheet and enhancing its logistics platform in the fast-growing Polish market through the introduction of leading international real estate private equity firm, Madison International Realty (Madison) as an equity investor.

In terms of the deal, announced today and expected to be finalised by the end of February, Madison is acquiring a 46.5% equity stake in Redefine’s Polish logistics platform held through European Logistics Investment (ELI). As part of the transaction, Griffin Real Estate who own 5% in ELI will acquire a further 2% from Redefine on the same terms as Madison, leaving Redefine with a 46.5% equity interest. The transaction is in line with Redefine’s stated intention to introduce a high-quality international equity partner to strengthen Redefine’s balance sheet and continue to expand its Polish logistics platform.

The platform comprises 19 assets totaling around 560,000 sqm, with 80,000 sqm nearly completed and an additional development pipeline of 270,000 sqm to be started once pre-leases are secured. The completed properties are around 95% occupied and spread across the key distribution hubs of Poland in Warsaw, Lodz, Krakow, Silesia, Pomerania and Poznan regions and developed to a high technical specification.

The Polish logistics market is poised to continue to grow as a key logistics hub for international e-commerce players, as well as an increasing number of manufacturing companies establishing their operations in Poland.

As part of the transaction, Madison will provide a €150 million (approximately R2.4 billion) commitment to ELI, of which €83.7 million (approx. R1.3 billion) will be used to acquire their share of the existing assets and developments in progress while leaving a commitment of €66.3 million (approx. R1.1 billion) to expand the portfolio over the next three years. In terms of the deal Redefine will match Madison’s equity commitment of €66.3 million. Panattoni Europe, a market leading European logistic developer, is a co-manager of the platform.

Andrew Konig, CEO, Redefine Properties, says, “The deal fits perfectly with our investment strategy and provides us with an opportunity to reduce our loan to value ratio. It also means we are able to source additional, well priced capital in order to secure the exclusive priority right to development opportunities with Panattoni over the next three years.”

“The focus for 2020 firmly remains on asset quality, offshore expansion through development activity, notably through ELI and leveraging opportunities to participate in a broader, more diversified portfolio of logistics assets. We are delighted to be working with Madison in the heart of CEE’s most attractive real estate market.”

Redefine will realise €87.2 million (approx. R1.4 billion) from this transaction of which €14.7 million (approx. R235 million) will be surplus cash after reinvestment in ELI to the tune of €72.6 million (approx. R1.2 billion) – comprising the equity commitment of €66.3 million and completing existing developments in progress totaling €6.3 million (approx. R101 million).

“The JV with Madison enables Redefine to continue to benefit from the priority right development pipeline with Panattoni. By co-investing with Madison, over the next two to three years, ELI will have access to sufficient capital (€148.7 million) for its logistic platform portfolio to grow to a sizable scale (increasing from 560 000 sqm to circa 910 000 sqm in gross leasable area) and benefit from attractive development yields and low cost of European debt funding,” adds Konig.

“In attracting this level of commitment from Madison, we’re continuing our track record of speed and agility in both sourcing capital and building a diversified and significant logistics platform, improve letting and capital value appreciation, as-well-as realisation of value prospects,” says Konig.

“This transaction clearly demonstrates Redefine is on course to reduce balance sheet risk while continuing to deliver sustainable quality earnings, as well as alleviating investors’ apprehension around liquidity.”

The final closing of the transaction is targeted for end February 2020 and is conditional on Polish regulatory clearance.

Cape Town, 21 January 2020 – Equites Property Fund Limited (Equites) today announced an agreement with leading JSE-listed retailer Pepkor, to develop a 122 734 square metre logistics warehouse facility in Hammarsdale, KwaZulu-Natal. The indicative total cost of development is R1.3 billion, which includes the cost of the land of R281 million. Equites will enter into a 15-year “triple net” fully repairing and insuring lease with Pepkor on completion of the development. Pepkor will have a right to renew for three additional five-year periods. The development is expected to be completed by November 2021.

Equites CEO, Andrea Taverna-Turisan, said the company is pleased with the transaction as it meets all its investment criteria. As a specialist logistics investor and developer, Equites has successfully delivered modern and efficient logistics facilities to users both in South Africa and the United Kingdom. A transaction of this size with a client of Pepkor’s stature and exacting requirements will assist to further cement the company’s aim of being recognised as a developer of choice to the largest logistics, retail and e-commerce participants in the South African market.

The modern, state-of-the-art logistics facility will be situated in Hammersdale, a prime logistics node due to its location along the N3 national road and its proximity to the rail network linking Gauteng to the Durban port. It is also close to the inland container terminal at Cato Ridge which is expected to change the logistics landscape in KZN. Other prominent South African retailers, such as Mr Price and Ackermans, have logistics warehouse facilities close to the property, providing further evidence of the attractiveness of this node. The warehouse will boast a clear height to eaves of 15.8 metres and yard depth in excess of 45 metres. Both companies place strong emphasis on sustainability in their assets from the outset and the facilities have been designed with increased steel tolerances to accommodate the installation of photovoltaic panels.

Taverna-Turisan said: “The development will increase Equites footprint in the key logistics node of KwaZulu-Natal and create further scale in our high-quality logistics portfolio. Importantly, the developed facility will also add to the quality, defensiveness and income predictability of Equites. We are excited to welcome Pepkor as a client.”

Vukile Property Fund today reported 3.5% growth in dividends to 80.84 cents per share for its half-year to 30 September 2019 in line with its market guidance.

Vukile is a leading South African retail REIT with R35bn of property assets of which 48% are in Spain through its 82.5% held subsidiary Castellana Properties SOCIMI SA. Its unique investment proposition in the South African market is providing stable, predictable and growing Rand-denominated income streams for shareholders generated from property assets in one of Europe’s strongest economies.

Laurence Rapp, CEO of Vukile Property Fund, notes that the half-year results reflect an incredibly strong performance from its Spanish portfolio together with a continued solid showing from its South African shopping centres even in a stalled economy. Vukile’s half-year results extend its track record of unbroken growth in dividends for investors into its sixteenth year.

Rapp comments, “Vukile’s clear strategy, retail sector specialisation and strong operational emphasis is paying off, and the positive outcome can clearly be seen in this standout set of results”

The robustness of Vukile’s funding, financial, and business models was affirmed by GCR Ratings upgrading the national scale issuer ratings for Vukile to AA-(ZA) and A1+(ZA) for the long and short term respectively, with a stable outlook.

Vukile’s inbuilt diversification means its assets and future earnings are split almost equally between Southern Africa and Spain. With its employment growth and an A-grade credit rating with stable outlook, Spain is contra-cyclic to SA. This makes Vukile a solid Rand-hedge property company.

Now the eighth biggest REIT in Spain by market capitalisation and seventh largest retail landlord by gross lettable area, Castellana is well established as a substantial player in the Spanish market. Castellana increased its EPRA NAV by 3.1% and saw good deal flow and growth opportunities. Its proven business model continues to grow base rentals and scale up value in an environment that isn’t over-retailed.

Castellana is consolidating Spain’s fragmented retail property market. Its assets topped EUR1bn after the accretive acquisition of the 30,000sqm dominant, modern Puerta Europa shopping centre in Algeciras, Cadiz. It also invested EUR37m in El Corte Ingles big-box units and is redeveloping them. The 12-month project at Los Arcos, Bahía Sur and El Faro shopping centres is already over 80% pre-let and should be completed in September 2020. It will further add to the dominance and the value of the centres.

A strong operational performance in Spain reduced vacancies to 1.4%, with positive rental reversions up 6.7%, and 21% rental growth on new leases. Portfolio retail sales increased by 3.1%, double the 1.4% national benchmark. Similarly, shopper numbers grew 5.3%, well above the national index of -1.2%.

Vukile’s Southern African portfolio of shopping centres delivered another strong performance despite a distressed operating environment. “The defensive nature of our grocery-anchored shopping centres, which mostly sell everyday goods to everyday South Africans and have a mix of retailers that offer necessities and value-driven items, is serving us well,” confirms Rapp.

Operationally, Vukile’s tight focus and new internal structures helped to buck the trend and reduce vacancies to 2.8%, retain 82% of retail tenants and gain impressive like-for-like net property income growth of 6.1%. It’s internalised leasing team is building closer relationships with retailers and, actively engaging second-tier nationals, it introduced 92 new brands to the portfolio in six-months thereby enhancing the overall customer experience through expanded choice.

By providing profitable trading space for retailers, like-for-like trading densities increased 3.5% in the portfolio, well ahead of national averages, and with the Vukile team’s asset management interventions making a significant contribution, trading density growth improved by nearly 5%. It lowered its rent-to-sales ratio to 5.9%, which supports the ability to attract the best retail tenants for its shopping centres.

The net cost-to-property revenue ratio tightened to 16.9%. Vukile cares for its properties to ensure they are efficient, compliant and enjoyable for its customers and tenants. Sustainable energy and water management is a significant factor in this. Adding science to the building maintenance process, Vukile completed a comprehensive portfolio-wide building assessment to produce a five-year capital expenditure plan that will see it investing some R70m per annum in maintaining its SA assets.

Vukile’s R516m acquisition of Mdantsane Mall in the Eastern Cape, which transferred in November, extends its geographical footprint and its foothold in South Africa’s high-density township retail market with another dominant asset.

Vukile collaborates with retailers to provide exceptional experiences for the people who shop at its nodally dominant centres. Understanding customers is at the heart of this. Vukile has invested heavily in installing fibre at its centres and has various customer-centric pilot programmes in both South Africa and Spain, which enables it to understand customers better. “This insight helps us to manage our shopping centres better, which leads to better customer experiences, retailer trading and results for our shareholders,” notes Rapp.

With this in mind, a strategic priority for Vukile is investing in skills around customer-centricity. Developing these capabilities internally is a key success factor for its shopping centres going forward.

Transformation is at the forefront of Vukile’s business sustainability. In another real commitment to transforming the property sector, Vukile has partnered with AWCA Investment Holdings (AIH) to form a black-women-owned and -managed property asset management company, which will start by managing Mbako Property Fund. Mbako has acquired Vukile’s R700m remaining non-retail property assets as its initial portfolio.

Rapp concludes that Vukile will maintain its position as a high-quality low-risk retail REIT invested in defensive low- and mid-income retail centres in SA while capitalising on Castellana’s strong and growing market share in Spain. “Vukile is in a confident position as a well-diversified business with strong cash flows that offer predictability and ongoing growth for its shareholders.”

Vukile reaffirmed its guidance of between 3% and 5% dividend growth in FY20.

Growthpoint Investec African Properties (GIAP), the pan-African real estate investment business managed by Growthpoint Investec African Property Management, has significantly advanced the execution of its strategy to aggregate a quality portfolio of prime income-producing commercial assets in select cities across Africa.

GIAP, initially established as a joint venture between Growthpoint Properties and Investec Asset Management, announced today that it has successfully concluded the acquisition of 100% of RMB Westport Real Estate Development Fund Limited (RMB Westport), the entity which houses the assets developed and owned by RMB Westport’s inaugural property development fund.

This transaction follows the recently announced GIAP acquisitions of Achimota Retail Centre in Ghana and Manda Hill Shopping Centre in Zambia, which were acquired in June and July respectively of this year. The acquisition of the RMB Westport portfolio of assets is a significant leap for the business and gives GIAP an asset base of approximately US$500 million and a presence across a number of Sub-Saharan African countries with the majority of exposure in key cities in Ghana, Nigeria and Zambia.

GIAP expects to announce progress regarding further acquisitions in due course.

In 2018, GIAP secured capital commitments of more than US$212 million from several large institutional and international investors. The acquisition of RMB Westport has resulted in GIAP’s initial commitments being fully invested, with the existing RMB Westport investors additionally having agreed to invest into GIAP as part of the transaction, further boosting the market capitalisation of the business.

Thomas Reilly, MD of Growthpoint Investec African Properties, says, “GIAP has successfully concluded the acquisition of RMB Westport, which marks a significant leap in GIAP’s evolution and undoubtedly positions it as one of the leading Sub-Saharan African firms in the industry. GIAP now owns 11 assets across four countries, with arguably some of the best performing landmark assets across both the retail and office sectors in the cities we are focussing on. These assets are predominantly well-matured and allows GIAP a significant amount of relevance in these markets, however they still have capacity to allow GIAP to enhance and extract growth from assets with a high degree of resilience to differing market cycles.”

Reilly adds, “We are excited to once again take advantage of a highly attractive entry-point in the cycle, adding quality yielding assets in select cities to our asset base at competitive prices, which we believe have the potential to offer strong growth prospects. The business continues to enjoy significant momentum, and we expect this to aid in the delivery of sustainable long-term investor returns.”

GIAP is expected to support the development of capital markets for real estate as an asset class across the countries in which it operates, thereby contributing to the wide-ranging developmental impact which the real estate sector can have in such markets.