Emira launches strategic venture with ONE to boost its rural retail investments
Emira Property Fund has joined forces with retail property specialists ONE Property Holdings to grow their retail assets together and create a larger low LSM retail portfolio.
For this venture, Emira and ONE will launch a specialised fund called Enyuka Property Fund – Enyuka is the Zulu word for ascend.
Emira will contribute its 15-asset rural retail portfolio to the new associate business, which is dedicated to growing a significant retail portfolio. ONE will contribute its development pipeline of similar lower LSM retail assets. The transaction is subject to normal suspensive conditions including Competition Commission approval, and this is expected to be forthcoming in the near future.
Housed in the new associate business, these properties will deliver returns to Emira at the same income yield they currently achieve in its portfolio, together with annual escalations up to a pre-set level. The excess above the set benchmarks are shared within the venture. What’s more, Emira will get the added benefit of returns from the development pipeline above a lower level target benchmark together with a meaningful participation in an actively-managed and growing base of rural retail assets.
The Enuyka Property Fund is starting out with Emira’s R575 million portfolio of retail properties, a R50m cash contribution and a gearing cap of 50 percent, which creates a war chest for immediate acquisitions and developments up to a further R625m. There is a current pipeline of R400m of similar assets, and further development opportunities of up to R500m. In addition, Enyuka has first right on opportunities for lower LSM retail coming from both ONE and Emira.
With all this behind it, the strategic focused relationship is set to grow Emira’s low LSM retail portfolio at a faster and better rate than that currently achievable within its existing structures.
After completion of the transactions, Emira will hold a 49.9 percent share of the ordinary equity in the businesses, and ONE a 50.1 percent stake. Both will be hands-on in deciding for the portfolio with a 50/50 asset management joint venture.
Optimising its core strength, ONE will be chiefly responsible for the Enyuka portfolio’s growth through acquisitions and developments, and together with Emira it will also undertake the asset management operations, within pre-set limits. Material and shareholder decisions need the approval of both parties. The new venture has first right on opportunities for lower LSM retail coming from both ONE and Emira.
The portfolio is expected to grow within the next five years, which will open new opportunities. At this point, its future will be assessed, with options including, but not limited to, a separate listing or reincorporation into Emira. Emira always holds first right on the initial 15 properties it committed to the venture.
Emira chief executive, Geoff Jennett, says: “This strategic partnership enables us to expand our retail assets. This relationship brings together two strong players – an investment property fund and a capital growth property fund – which creates a synergy with a shared vision for growth from lower LSM retail property. By venturing with ONE, we will enjoy added benefits and transactions. We will grow our lower LSM retail assets at an accelerated pace, retain exposure to our portfolio of retail assets, enjoy access to otherwise more remote transactions, and effectively use our assets to fund growth.”
Emira is a medium-cap diversified JSE-listed REIT, invested in a balanced portfolio of office, retail and industrial properties. Its assets comprise 144 properties valued at R12.9 billion. Emira is also internationally diversified through its direct interest in ASX-listed GOZ valued at R940m.
ONE is represented by chairman Selwyn Smith and chief executive, Chris van Reenen. ONE Property Holdings is an unlisted capital growth fund with an existing retail property portfolio. The group has invested in a portfolio of nine shopping centres, with more than 120 000 m2 of retail space and an approximate value of R1.2bn and a pipeline of a further R1bn.