CAPE TOWN – RDI Reit has made progress in cutting its retail property exposure and reinvested into sectors producing good returns.
The UK-based RDI, which has a secondary listing on the JSE, declared a 10 pence (R1.88) for the year to August 31, 3.5 percent lower than 13.5p last year, but the second interim dividend of 6p was well up from the 4p first interim dividend.
Revenue fell 1.6 percent to £93.5 during the period, while net operating income eased 2.8 percent to £70.3 million and headline earnings slowed 3.8 percent to 8.2p per share.
Loan to value was up marginally to 46.8 percent from 46.2 percent.
Chairperson Gavin Tipper said on a like-for-like basis, net rental income remained flat in the past year. There had been stable income returns from the London Serviced Office portfolio with occupancy at 93.6 percent. Overall group occupancy remained high at 95.9 percent.
Chief executive Mike Watters said there had been a shift in overall office occupancies in London, with large online companies now taking large spaces, while space occupied by financial services groups had already slimmed, even before the possible Brexit outcomes.
Revenue per available room in the managed hotel portfolio increased 2.9 percent to £84.9 from £82.5 at the year end in 2018.
Activity to reposition the portfolio in light of the weakening UK retail sector included the £26.3m acquisition of Southwood Business Park Industrial Estate, Farnborough.
Chief executive Mike Watters said yesterday that the group was comfortable with its positioning, confidence had returned and resources were being directed into assets that yielded value.
“We don’t see an end to the trend in retail. It is not that people are going to just stop shopping,” Watters said. “There will always be bricks and mortar shops. But these retailers need to cut costs to compete with online.”
Watters said the group spent £26m on forward funding of two distribution units at Link 9 in Bicester. He said disposals came to £121.5m, at an average premium of 2.5 percent to market value.
Retail exposure reduced to 35.3 percent from 45.6 percent, while further disposals agreed to post year-end would cut the exposure further to 31 percent.
Exposure to UK retail had fallen to 17.9 percent of the portfolio from 29 percent at the same time last year.
“Significant work has been undertaken over the past 12 months, and particularly since we set out our intentions at the half year to further reduce leverage and accelerate the re-weighting of the portfolio through the disposal of certain retail assets,” said Tipper.
“It has been a challenging year for the business… In light of the material valuation declines of the (Aviva) portfolio, material break costs associated with repayment of the facility and continued uncertainty in the retail sector, the board decided not to commit further capital to this portfolio or the financing facility.”