The real estate industry was able to weather the Covid-19 pandemic and July 2021 civil unrest owing to industry stakeholders uniting and creating mechanisms that ensured sufficient liquidity, says Nedbank Corporate and Investment Banking (CIB) property finance managing executive Gary Garrett.
Speaking at the South African Real Estate Investment Trust (Reit) conference on February 3, he noted that the Reit industry early on in the pandemic, as well as the July unrest, identified areas where potential blockages or hotspots could be, and then negotiated with key stakeholders in the sector, such as financiers, tenants or regulators to find solutions.
This united approach was critical, said Garrett, saying it proved to be a proactive approach that was taken by many leaders in the sector. “What was important about that is that they did not come together just for their own companies’ [sake], they took this stance for the sector as a whole.”
“If you think about the [Reit] sector, many of the properties are held by the Reits; but a large proportion of the players in the sector are really small, unlisted businesses – they are individuals, and I think some of the frameworks created by the property sector industry group, really were instrumental in limiting some of the damage that could have happened and which was predicted for [the Reit] sector,” he added.
“If I look back at the uncertainty that many of these management teams navigated through [the] Covid-19 [pandemic], through the riots, [then] I think it was an absolutely incredible response.
“We look at how they just focussed on their businesses and their portfolios and made sure those were defended as well as was possible, I think that stood out,” said Garrett.
As for financial institutions, he said the banks probably learnt a lot about how to respond to clients in the global financial crisis, applying this during the Covid-19 pandemic.
“I think through this period, banks, ultimately, do not want to end up being property owners, or [at least not some of] the biggest property owners in the market [because] properties can be managed best by the Reits.
“So it was critical to think that banks worked with clients across the board, including with the property sector to make sure there was sufficient liquidity through that period and liquidity relief created for different players in the sector to be able to manage their way through it,” noted Garrett.
He added that the banking sector regulators also “really came to the party” in this regard by enabling banks to be able to create some flexibility, to restructure facilities to grant liquidity relief through the period.
For Nedbank CIB, 2020 was about restructuring facilities, but not to a great extent for the Reit sector.
“We probably end[ed] up having to restructure close on 1 300 facilities with our different client base just to create that breathing space. If we were not able to do that there would have been a disaster, and if the regulator had not allowed us to do that we would have blown our capital,” said Garrett.