Emira’s intelligent strategies drive the phased redevelopment of Knightsbridge
RElTs in South Africa are required to pay at least 75% of their taxable earnings available for distribution to their investors each year. Many payout even more. So, how does a REIT fund its growth, especially when embarking on a large transaction or development?The short answer is: cleverly.
Emira is a medium-cap, diversified, JSE-listed RET invested in a quality balanced portfolio of office, retail and industrial properties. Its assets comprise 142 properties valued at R13.3 billion. Emira is also internationally diversified through its direct interest in ASX-listed GOZ valued at R940.4million.
Funding dictates a transaction ‘s yields. Managing the best sources and rates of funding is as crucial to the successful performance of a REIT as managing its property assets.
Emira Property Fund continues to show its flair for intelligent funding solutions with its development roll-out strategy for its R820 million total redevelopment of the former Knightsbridge Manor in Bryanston, Gauteng. The redevelopment will increaseKnightsbridge by a massive 19,334m?, tripling its size from its current9,884m’.It will be upgraded from B-grade offices to a quality P-grade, green-rated office park. This sizeable project called for a low-risk approach to its funding and development. Geoff Jennett, CEO of Emira, explains that adopting a phased approach was key to meeting this objective.
“The redevelopment of Knightsbridge is taking place in three phases,which spreads letting risk.This also ensures as much of the property as possible continues to produce income throughout the development process. In fact,with the first phase under development, 64% of the original park was still generating income,” says Jennett.”A phased development approach also allows us to manage future phasesbased on market conditions.”
In addition, a suitable level of pre-letting is required prior to commencing each phase, adding to Emira’s prudent development strategy. Jennett adds that the initial development has been financed through Emira’s existing debt capacity and that these un-utilised debt facilities are already in place. Emira enjoys excellent access to debt from a wide spread of funders, based on its good relationships with all the country’s major banks.
“Future phases will be funded through a combination of debt and proceeds from the disposal of non-core properties, as Emira continues the strategic rebalancing of our portfolio,” reports Jennett.
This is in line with Emira’s astute approach to funding. Emira funds its capital investments centrally versus raising capital for specific projects.The combined impacts of the tactical, phased, redevelopment increase Knightsbridge’s value, attractiveness and competitiveness.
Originally built in the mid-1980s, Emira acquired Knightsbridge Manor in 2003. Despite cosmetic refurbishments, the park’s will buildings have dated and are attracting B-grade rentals in an area characterised by higher grade offices.
Jennett explains: “Although Emira initially consider ed an upgrade for the park, it quickly became clear its complete demolition and redevelopment would be a much better option to boost its value and performance.”
The market is responding enthusiastically to this decision and the development of the first and only P-grade development in Bryanston, which is also designed to boast a minimum 4-Star Green Star SA Design rating from the Green Building Council of South Africa (GBCSA).
Emira has signed an agreement with WSP|Parsons Brinckerhoff for headquarters of approximately 5,800m’ at Knightsbridge. WSPJ Parsons Brinckerhoff’s head office was the first of the seven buildings to begin development at the park. It is part of the first phase of the development, comprising three buildings. Its construction began in January 2016,andWSP|Parsons Brinckerhoff will begin working from its smart new address from September 2017. Emira has also a concluded a transaction which will see both KFC’s and Pizza Hut’s head offices in Africa housed in 3,150m’ at Knightsbridge, which kick started the second phase of the development. Emira started work on the fourth building in Knightsbridge to undergo redevelopment earlier this year, from which KFC and Pizza Hut will start operating from June2018.
Meet the new generation, Knightsbridge business park.
- P-grade offices defined by quality design, materials and finishes
- Shared services that support lower occupancy costs
- A minimum 4-Star Green StarSA Design rating from the GBCSA
- Security, accesscontrol and CCTV
- Great position on Sloane Street, opposite The Campus, with the N1 highway quickly accessible
- Improved accesswith upgrades to roads at Sloane Street intersection and a new lane to William Nicol Drive
- Generous parking
- Resource-efficient state-of-the-art mechanical and electrical installations
- Extensive themed landscaping and roof gardens with inspiring views on every building
- Rainwater harvesting for irrigation
- Standby generators and backup water supply.
- Restaurant and central meeting facilities.
The Bryanston business node.
Driving Emira’s decision to invest in the major redevelopment of Knightsbridge is the growing prominence of the Bryanston business node. Bryanston has become a preferred alternative hub for blue chip businesses and large, high quality office users.Within its office mix, Knightsbridge isa market leader with its stand out green P grade offices.