Orion Real Estate (Pty) Ltd lists on ZAR X, regains REIT status
23 April 2020
Johannesburg, 23 April 2020 – Despite the economic and social impact of COVID-19 in South Africa, local stock exchange ZAR X and Orion Real Estate Ltd have embraced digital technology to adapt and respond to the challenging market conditions and forge ahead with a planned listing.
The listing will restore Orion’s real estate investment trust (REIT) status, which the company lost in 2019 prior to its delisting from the Johannesburg Stock Exchange (JSE) and will enable Orion to reverse the provision for deferred tax on Capital Gains, which will further strengthen the balance sheet.
“The past two years have been tumultuous for our group after we experienced a credit crunch. This resulted in various drastic decisions and actions, including the loss of our REIT status,” explains Orion CEO, Franz Gmeiner.
While market commentators may question the timing of the listing given the current state of the property market, with REITs particularly hard hit by the COVID-19 market sell-off, Gmeiner believes that it is an important step in the company’s revival following its credit crunch.
“We embarked on a significant restructuring initiative that included refinancing our Commercial Property portfolio, which was successfully concluded in December 2019, and the sale of various assets. A large portion of the net proceeds were applied to reducing debt,” elaborates Gmeiner.
The disposals, together with the refinancing activities have reduced Orion’s loan to value (LTV) on its commercial properties to around 15%.
“Via further disposals and increases in values of certain properties, we plan to reduce our LTVs even further. The net result will be much-reduced funding costs, more flexibility for additional funding and consequential capital for acquisitions and developments.”
And the listing will seek to add additional capital to help fund these potential strategic acquisitions and projects. Via merger and acquisition activities Orion plans to grow substantially over the next few years. Its core competency of “doing more with less” will now truly play out in the post COVID-19 era. “What we thought were solid and safe business models will become obsolete. We pride ourselves in flexibility and innovation which will stand us in good stead in the years to come.’
“The listing will put Orion in a good position to take advantage of opportunities that will likely emerge from the COVID-19 economic fallout as other fund managers sell distressed assets or restructure their portfolios,” explains Gmeiner.
According to Gmeiner, Orion offers investors good value as its listing price of 50c per share is a significant discount to NAV of 40%.
Orion has also created a more defensive portfolio following the restructuring. Its resultant retail property portfolio predominantly caters to lower- to mid-income earners, which should enjoy support from high-volume trading when government lifts lockdown restrictions and it is not exposed to major retailer anchor tenants, which are in difficulties due to the lockdown’s impact.
The company now also has lower gearing relative to the sector’s average. Orion has also entered into numerous Black Economic Empowerment (BEE) initiatives, which should position the company favourably for growth once the market turns.
Gmeiner believes that the ability to transact with paper as a REIT in a market ripe for good value acquisitions offers potential benefits that outweigh the possible perils.
“In addition, ZAR X doesn’t allow uncovered short selling, which helps to reduce any possible future impact from speculative investor activity in the current volatile market.”
This was also a key factor in Orion’s decision to join a different stock exchange.
“After extensive discussions and deliberations by our board in conjunction with our corporate advisors, we chose to join ZAR X instead of remaining listed on the JSE, which decision was supported by our minority shareholders” continues Gmeiner.
Furthermore, as a technology-enabled fintech platform, ZAR X has been able to trade throughout the lockdown.
“As an essential service, we’ve been trading normally, and have sought ways to use digital platforms to operate on a business-as-usual basis. We are excited to put this innovative new model to the test with our first virtual listing, together with Orion,” continues Wellsted.
“We are excited by the opportunities that regaining our REIT status will unlock and would like to thank ZAR X for the team’s tireless efforts to make this a reality, particularly during this challenging period. Given their innovative approach and pioneering mindset, we’re confident that we’re partnering with the right exchange,” concludes Gmeiner.
Get in Touch
|Johan van Belkum
Chief Operating Officer
Orion Real Estate
Tel: +27 11 718 6452
Cell: +27 82 789 8019
Chief Executive Officer
Orion Real Estate
Tel: +27 11 718 6452