Johannesburg, 8 May 2023 – Redefine Properties (JSE: RDF) continues to harness a well-diversified asset base and healthy balance sheet to deliver sustainable value. With a diversified property asset platform now valued at R94.1 billion – up from R88.9 billion in 2022 – and with the offshore component in Poland now at R34.7 billion, Redefine has lifted distributable income for the six months to 28 February 2023 by 7.2% to R1.6 billion.
CEO Andrew König says the consolidation of EPP – the largest asset manager of retail real estate located in Poland in terms of gross leasable area – contributed R272 million to distributable income, as that business has been stabilised and has resumed paying dividends.
“We are pleased with the way the integration of EPP into the Redefine family has taken place and remain confident about the potential in the Polish market. For instance, vacancies in the EPP stable remain less than 3%, indicating healthy demand despite the ongoing negative news coming out of Europe,” says König. A corporate reorganisation of EPP in March 2022 saw Redefine take a 95.5% shareholding in line with its strategy to increase exposure to the Polish retail sector.
Other highlights in the period include a restructuring of the ownership of Redefine’s 11 remaining government-tenanted office properties, strong inflows from green bond issuances, and continued expansion in the growing logistics market in Poland.
Notably, Redefine has begun building a scalable platform in the under-developed self-storage sector in Poland.
“The initial acquisition of 51% of Stokado has been concluded, which we expect to implement by the end of May. An attractive development pipeline is under consideration, which will effectively increase our equity holding to 75% in three to five years,” says König.
CFO Ntobeko Nyawo says a very healthy cash position has supported a pay-out ratio of 85%, which equates to an interim dividend of 20.32 cents per share.
“Good organic growth in our active portfolio, consistent cash collections, diversified funding, maintaining our loan-to-value ratio within our medium-term range of 38% to 41%, and the hedge against the weak Rand provided by our offshore exposure have all combined to help us navigate the current volatile external conditions,” Nyawo notes.
Redefine is reaping rewards from its leading position in the ESG space, where it was the first REIT in South Africa to be awarded a net zero carbon level 2 certification for three properties. Apart from the benefit to the environment and support to tenants, Redefine’s green investment strategy has seen R3.2 billion coming on stream through use-of-proceeds green bond issuances, which were supported by large institutional investors and the IFC.
Nyawo says Redefine now has R6 billion in committed undrawn facilities and cash on hand, while another positive in the interim period was an improvement in net asset value to 750.8 cents a share, or 4.3% growth.
COO Leon Kok says while loadshedding, inflation, rate rises, poor public infrastructure and crime pose persistent challenges, Redefine’s solid operational performance is thanks to a focus on quality and creating a defensive foundation. The tenant retention rate by gross monthly rental was reported at a healthy 96.6% from 95.2% before, and a further 160 076sqm was let across the portfolio.
“Our office portfolio, for instance, is seeing very good activity and vacancies are stabilising at lower levels. This speaks to the work we started many years ago. Through active asset management, 87% of our portfolio now comprises A Grade and Premium Grade buildings, and tenants are spoilt for choice across prime nodes at attractive rentals,” says Kok.
A solar PV rollout of 13MW this year adds to the attraction factor. “Having reliable alternative energy sources will continue to attract tenants and mitigate some of the negatives, like the high cost of diesel. This is why we are motivated and believe there are clear signs of green shoots. For instance, some high-demand areas like Rosebank and Sandton are in a position where rentals could start increasing,” says Kok.
He adds that the timely restructuring of Redefine’s broader property portfolio has ensured that its asset base is poised to benefit from the return of shoppers to malls, workers to the office, and an uptick in industrial activity.
“The doomsday scenarios predicted by many people at the height of COVID certainly has not materialised, though we need to remain astute and vigilant in the face of persistent challenges,” says Kok.
“We have done the hard work to get the basics right and focused on the variables under our control, while delivering on our purpose. We are poised for organic growth in the eventual upward market cycle,” he concludes.
