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.