Emira concludes portfolio rebalancing with BEE deal, acquisition of Transcend stake
Emira Property Fund is selling a sizeable R1.8-billion portfolio of 25 office assets to a new majority black-owned entity, Shankly Property Investments, which was specifically set up for this purpose.
This concludes the diversified real estate investment trust’s (Reit’s) programme of rebalancing its portfolio out of offices and releases capital for its strategic reinvestment.
The disposal represents a yield of 10.47% for Emira, which will use the proceeds to fund its offshore expansion and to reduce its local debt levels.
Shankly is 51% majority owned by Zungu Investment Company, a 98% black-owned, Level 1 broad-based black economic empowerment entity.
Boyno Trade and Invest, a subsidiary of ONE Property Holdings, Emira’s partner in the lower living standards measure retail property fund Enyuka Property Holdings, holds a 29% stake in the new business.
Emira holds 20% of Shankly.
Shankly will settle R1.48-billion of the acquisition consideration in cash on a property-by-property basis as each one transfers. The final transfers will take place by no later than September 2019.
The payment of the remaining R319.8-million, for which Emira will earn a 1% capital raising fee, will be deferred for five years on condition that Shankly remains at least 51% black-owned.
Shankly’s sizeable seed portfolio is mainly located in Gauteng, as well as in KwaZulu-Natal and the Free State. It includes offices in major nodes including Woodmead, Bryanston, Rivonia, Centurion and Pretoria, with the largest asset being the R232-million Corobay Corner P-grade offices in Menlyn.
“We are pleased to conclude our portfolio rebalancing with an innovative deal that supports transformation and contributes positively to the South African economy.
“Having a 51% black-owned entity as the acquirer in this transaction was always a prerequisite for Emira. It was important to find the right parties, structure and mechanism to transfer the assets in a way that ensures the very best chances of success,” says Emira CEO Geoff Jennett.
STAKING A CLAIM
Transcend has announced its plan to issue new equity to fund the R1.27-billion acquisition of eight properties, which will effectively double its portfolio value to R2.5-billion, taking it from 13 properties to 21 properties, and increasing its residential units from 2 472 to 4 631. At the same time, it will realign its capital structure.
As part of Transcend’s plan, Emira has provided an immediate R45.9-million equity injection into Transcend, resulting in a 9.9% holding of Transcend’s total shares in issue.
In addition, Emira has committed to advance between R290-million and R395-million of funding for Transcend’s planned property acquisitions in the next 18 months and has signed an irrevocable commitment for between 25.1% and 34.9% of Transcend’s total shares in issue, effectively underwriting Transcend’s portfolio acquisition.
Transcend currently owns 2 472 units in secure estates mainly in Gauteng, as well as in the Western Cape and Mpumalanga.
With its Transcend transaction, Emira’s residential property exposure is now 3.5% of its total investment portfolio. It plans to increase this to between 5% and 10% of its total assets over time.