Real estate industry weathers pandemic, July unrest with united response
The real estate sector was able to withstand the Covid-19 pandemic and the civil unrest of July 2021 thanks to the union of the sector’s stakeholders and the creation of mechanisms guaranteeing sufficient liquidity, says the managing director of real estate finance at Nedbank Corporate and Investment Banking (CIB). Gary Garrett.
Speaking at the South African Real Estate Investment Trust (Reit) conference on February 3, he noted that the Reit industry at the start of the pandemic, as well as the unrest in July, had identified areas where blockages or Potential trouble spots could be found and then negotiated with key industry players, such as financiers, tenants or regulators to find solutions.
This united approach was key, Garrett said, saying it was a proactive approach taken by many leaders in the industry. “What was important about this is that they didn’t come together just for their own businesses” [sake]they have taken this position for the sector as a whole.
“If you think about the [Reit] sector, many of the properties are owned by REITs; but a lot of the players in the industry are very small, unlisted companies – they’re individuals, and I think some of the executives created by the real estate industry group have really helped limit some of the damage that could have happened produce and which was planned for [the Reit] industry,” he added.
“If I look back at the uncertainty that many of these management teams navigated [the] Covid-19 [pandemic]through the riots, [then] I think that was an absolutely amazing response.
“We look at how they focused on their businesses and their portfolios and made sure they were defended as well as possible, I think that stood out,” Garrett said.
As for financial institutions, he said banks have probably learned a lot about how to respond to customers in the global financial crisis, applying this during the Covid-19 pandemic.
“I think during this time the banks, ultimately, don’t want to end up owning, or [at least not some of] the biggest landlords in the market [because] properties can be better managed by REITs.
“So it was essential to think that banks were working with customers at all levels, including with the real estate sector, to ensure that there was sufficient liquidity during this period and a liquidity relief created so that the different players in the industry can get away with it,” noted Garrett.
He added that banking regulators had also “really come to the party” in this regard by allowing banks to be able to create some flexibility, to restructure facilities to provide liquidity relief throughout the period.
For Nedbank CIB, 2020 has been about plant restructuring, but not to a great extent for the Reit sector.
“We are probably ending[ed] until having to restructure nearly 1,300 facilities with our various clienteles just to create this breathing space. If we hadn’t been able to do that, there would have been a disaster, and if the regulator hadn’t allowed us to do that, we would have blown up our capital,” Garrett said.