JSE-listed Emira Property Fund has joined forces with retail property specialist ONE Property Holdings to grow their retail assets and create a larger, lower living standards measure (LSM) retail portfolio.
For this venture, Emira and ONE will launch a specialised fund – the Enyuka Property Fund.
Emira will contribute its 15-asset rural retail portfolio to that of the new associate business, which is dedicated to growing a significant retail portfolio. These properties will deliver returns to Emira at the same income yield they achieve in the group’s current portfolio, together with yearly escalations up to a preset level.
Meanwhile, ONE will contribute its development pipeline of similar LSM retail assets.
The Enyuka Property Fund is,therefore starting out with Emira’s R575-million portfolio of retail properties, a R50-million cash contribution and a gearing cap of 50%, which creates a war chest for immediate acquisitions and developments up to a further R625-million.
There is a current pipeline of R400-million of similar assets and further development opportunities of up to R500-million.
In addition, Enyuka has first right on lower LSM retail opportunities that come from both ONE and Emira.
“We’re excited about this strategic partnership, which enables us to expand our retail assets. This relationship brings together two strong players, in the form of 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,” says Emira CEO Geoff Jennett.
Once its transaction with ONE is complete, Emira will hold a 49.9% share of the ordinary equity in the businesses, with ONE holding the remaining 50.1% stake. Both companies will be hands-on when making decisions about the portfolio.
ONE will be chiefly responsible for Enyuka’s portfolio growth through acquisitions and developments and, together with Emira, it will also undertake the asset management operations within preset limits.
Further, all material and shareholder decisions will need the approval of both parties.
Enyuka’s portfolio is expected to grow in critical mass within the next five years, which will open additional opportunities. At this point, its future will be assessed, with options including, but not limited to, a separate listing or reincorporation into Emira.
Emira noted that it would hold first right on the initial 15 properties it committed to the venture.
The transaction between Emira and ONE is subject to normal suspensive conditions, including Competition Commission approval, which is expected to be forthcoming in the near future.