reit_sthe

JSE REIT Stor-Age, South Africa’s leading and largest self storage property fund, has today announced the acquisition of a regionally dominant four-property portfolio in the UK, while also successfully raising R575 million in a significantly oversubscribed accelerated bookbuild.

The bookbuild saw R575 million of equity raised at a price of R14.30 per share, representing a 0.92% discount to the 30-day volume weighted average traded price.

The capital raised will support the finalisation of the UK acquisition, while also enabling the group to continue taking advantage of development and acquisition opportunities in both South Africa and the UK. The acquisition, secured at £37.5 million and consisting of a four-property portfolio offering 12 400m² of gross lettable area (GLA), has the potential to be expanded to approximately 18 900m² on a fully fitted-out basis.

Stor-Age continues to deploy capital strategically, adding quality and scale to its high-quality portfolio of self-storage assets in both markets. Despite the tough trading conditions and the continued impact of the COVID-19 pandemic, as one of only ten publicly-traded self-storage REITs globally, the company continues to demonstrate its resilience by delivering excellent operational and financial results.

The result of the accelerated bookbuild is a strong vote of confidence in the business and its strategy. Comments Stor-Age CEO Gavin Lucas, “We are pleased with the result of today’s capital raise, which once again demonstrates both the high regard in which Stor-Age is held and the significant appetite for the company’s stock. The capital raised will allow us to successfully continue with our strategy of growing our portfolio in both South Africa and the UK, adding quality and scale in both markets.”

The company’s South African pipeline consists of 10 properties, offering an estimated 59 200m² GLA at an approximate total cost of R850 million. In the UK, the pipeline consists of 4 properties offering an estimated 20 500m² GLA at an approximate total cost of £46 million.

Add Lucas, “Stor-Age and the self storage business model have a track record of resilience in constrained economic environments. The primary drivers of demand for our product are life-changing events and / or dislocation, be they positive or negative in nature. Maintaining a strategically well-placed and conservative balance sheet remains a priority for the company. Our LTV target range of 25% to 35% allows for the consistent execution of the strategy in both South Africa and the UK.”

In a trading update for the third quarter ended 31 December 2021, Stor-Age confirmed that total occupancy in the same store portfolio increased by 10 500m² (2.6%), whilst the closing average rental rate increased by 1.6% (annualised 6.3%) and 1.5% (annualised 6.0%) in SA and the UK respectively.

The group continues to be well-positioned to benefit in the medium to long-term from the rapid acceleration of change brought about by the pandemic.

The share closed yesterday at R14.88.

Hyprop, owner of premier retail properties in South Africa, Eastern Europe and the rest of Africa, has strengthened its balance sheet post its year-end, 30 June 2021, as a result of asset sales and shareholder reinvestments. It currently holds R1.6 billion of cash and R900 million of unutilised revolving credit facilities.

The strong liquidity position reflects the completion of the sales of Atterbury Value Mart in South Africa and Delta City Mall in Belgrade, Serbia, as well as R876 million received through an 85% uptake by shareholders of the share reinvestment alternative. As a result, Hyprop’s loan to value (LTV) ratio has firmed to 34%, on a like-for-like basis, from 37.2% at year-end.

In a financial and operating pre-close update for the four months to 31 October 2021, the Group warned that the emergence of a new variant of Covid-19 was likely to have an impact on most jurisdictions where Hyprop operates.

“We are confident that the Group’s strategy and key priorities remain relevant, even in a prolonged Covid-19 environment,” CEO Morné Wilken said. “Our priorities over the next months are to complete negotiations on the Hystead liquidity event, continue strengthening the balance sheet, reposition the South African portfolio for future growth, increase the dominance of the Eastern European properties in our overall portfolio, and pursue our non-tangible asset strategy.”

Operational performance

Hyprop was pleased to report a 4.6% increase in visitors to its South African malls and a 6.7% increase in Eastern Europe in the four months to end-October 2021 compared with the same period in 2020.

However, in both areas footfall has not yet reverted to pre-Covid levels. In Eastern Europe, the various restrictions imposed by governments to control the fourth wave of infections have had a negative effect on operations.

In South Africa, the group plans to launch its digital mall application in some of its malls in 2022. This will enhance its ability to communicate with shoppers and offer a range of unique services. There has been a visible improvement in the performance of travel and entertainment tenants, as well as luggage and jewellery. Only a few smaller tenants and cinemas are still receiving assistance.

Hyprop’s retail vacancies in South Africa were 2.6% in October, having shown a steady month-on-month improvement since end-June.

In Eastern Europe, tenant vacancies remained low at 0.2%, and the seven stores vacated by Inditex were successfully re-let – proof of the dominance of Hyprop’s malls in the region. Refurbishments of Skopje City Mall and the Mall Sofia are progressing well.

As the roll-out of vaccines in Eastern Europe advances, Hyprop is optimistic that restrictions will be further relaxed, and footfall will recover further in the first quarter of 2022.

In the sub-Saharan Africa (excluding South Africa) portfolio, most metrics are tracking above the same period last year. In Ghana, footfall is almost back to pre-Covid levels.Hyprop continues to pursue an exit from the sub-Saharan assets, while actively managing them to create value. Because of the US dollar liquidity crisis in Nigeria, it has been impossible to close out the sale of Ikeja City Mall, but progress is being made in disposing of the remaining three malls in Ghana.

Hyprop is pursuing a number of sustainability initiatives, including improving recycling, reducing waste, becoming more water- and energy-efficient and reducing carbon emissions in line with national targets. It has completed its waste audits and is finalising its energy audits.

“This data will aid us in ensuring that we manage our malls in the most effective way,” said Wilken.

“We remain committed to creating safe environments and opportunities for people to connect and have authentic and meaningful experiences, by owning and managing dominant retail centres in mixed-use precincts in key economic nodes in South Africa and Eastern Europe,” Wilken closed.

Sandton, South Africa, 29 November 2021: Redefine Properties today announced that it proposes to make a share-for-share offer to acquire all the remaining shares in EPP it does not already own (excluding the shares held by IGroup). By implementing the delisting and acquiring control of EPP, Redefine will be able to procure the implementation by EPP of a reorganisation which is aimed at bolstering EPP’s balance sheet and significantly reduce the extent of its gearing to restore EPP to a dividend paying position.

The EPP Board has expressed its intention (subject to EPP’s independent expert financial advisor confirming its preliminary opinion that Redefine’s offer is fair) to recommend that the proposed delisting and Redefine offer as being in the best interests of EPP and its shareholders and that EPP shareholders approve of all required resolutions to effect the proposed transaction.

If approved, the transaction will see EPP delist from the JSE and Luxembourg Stock Exchanges and operate as a subsidiary of Redefine Properties.

“The reorganisation will resolve EPP’s liquidity issues and eliminate the potential need for EPP to undertake an equity capital raise, which given the current economic climate be value destructive to existing EPP shareholders. Redefine will also become the sole listed point of entry into EPP, differentiating Redefine’s investment proposition, thereby potentially improving the liquidity of Redefine shares,” adds Konig.

Redefine holds 45.4% of EPP with a R6.5 billion carrying value. The proposal places Redefine in a good position to benefit as retail demand improves in Poland. It will also drive diversification, with the Polish-centred offshore component of its overall portfolio likely to increase to 30%.

EPP’s high level of gearing (c.55.6%) and liquidity challenges including significant loan maturities in 2022 and 2023 has meant that EPP has not been able to pay dividends since mid-2019. Besides impacting Redefine’s distributable income, the loss of dividend income from EPP has also impacted negatively on Redefine’s interest cover ratio and corresponding loan covenant headroom.

“The EPP transaction is a compelling opportunity for us to stabilise and simplify our international investment in a portfolio of assets we know well and which are well-located in key metropolitan areas of Poland,” says Andrew Konig, CEO, Redefine.

“Given challenging market conditions some on the back of ever evolving Covid-19 situation, EPP has not been able to deliver on its asset disposal strategy required to bolster its balance sheet and to manage liquidity requirements. The transaction will strengthen EPP’s balance sheet and gives us the mandate to pursue opportunities throughout EPP’s portfolio.”

Without intervention, the prospect of EPP resuming regular dividend payments in the short to medium term are slim. This creates high potential for a longer-term dividend drought which has a material adverse impact on Redefine and is not aligned to Redefine’s REIT ‘income fund’ investment proposition.

According to Redefine, the acquisition of a controlling stake in EPP furthers its strategy to simplify its investment proposition and actively manage risks and opportunities by exiting minority investments or gaining strategic control of assets where it already has a major stake.

The Redefine offer will be made to all other EPP shareholders at a swap ratio of 2.70 Redefine shares for each EPP share held.

Should shareholders of EPP approve the transaction, Redefine will (assuming 100% acceptance of the Redefine offer) issue up to 1 135 037 043 new Redefine shares. Redefine shareholders will also need to approve a shareholder resolution giving authority to Redefine to issue these new shares.

The deal is subject to satisfaction of various conditions precedent, including the execution of transaction agreements and those agreements becoming unconditional, securing all required regulatory approvals and the approval of by a majority of EPP shareholders (other than Redefine and I Group), of the EPP delisting.