Redefine Properties, the real estate investment trust, delivered distributable income of R1.5 billion for the interim period to February 28, a growth of 5.9 percent with its local property portfolio performance driven by the easing of Covid-19 pandemic restrictions and boosted by its Polish exposure.
And despite a very constrained local economy the company still managed to deliver an interim dividend of 23.69 cents a share to its shareholders.
By 12pm the share was up 0.47 percent to R4.28, with the share down 56.49 percent amid the tough Covid-19 disruption.
“The local property portfolio performance was driven by the easing of Covid-19 pandemic restrictions, with the return of shoppers to the malls under Redefine management, a welcome development,” said the firm, which has a diversified property asset platform worth R71 billion.
Redefine said it had also expanded its exposure to the Polish retail sector through the takeover of EPP during March and received a capital boost from ongoing demand for its growing pipeline of Polish logistics developments.
CEO Andrew König said: “Our results a year ago were in the face of one of the most challenging times in living memory and while green shoots started appearing recently, along came the war in the Ukraine. If we have learnt anything it is that we can continue to expect the unexpected. For our stakeholders, though, our integrated approach to making strategic choices, managing risks and focusing on quality has ensured we continue to sustain value creation.”
König said he expected the challenging global economic environment to persist “for the medium term at least”, but South Africa did have an opportunity to benefit from growing demand for natural resource exports.
Redefine said the war in Ukraine, however, was having indirect global impacts in the form of higher inflation, exacerbating the risk of more aggressive interest rate hikes.
During this volatility and uncertainty, Redefine said it was focusing on its strategic priorities.
With the recovery to pre-pandemic levels proceeding well, an average collection rate of 101.3 percent was recorded, backed by very stable credit metrics – the loan-to-value ratio was a healthy 41.9 percent and interest cover at 2.7 times.
However, in its local portfolio, which forms 83.8 percent of its total portfolio, was under pressure.
Active vacancies increased to 8.3 percent from 7.1 percent the corresponding prior period in 2021. While the vacancies in its office portfolio remained unchanged at 16.4 percent, its retail vacancies ballooned to 6.4 percent from 5.9 percent, while industrial vacancies rose to 5.1 percent from 4.4 percent.
Its total local letting decreased from 485 721m² square metres to 490 671m2.
Locally, the focus remained on driving organic growth in a difficult macro-environment.
Chief operation officer Leon Kok said: “While demand for office space is generally limited, we are noting a flight to quality as enquiries for high-quality well-located offices are growing.
“Our office portfolio now consists of 88 percent premium and A-grade buildings thanks to following a disciplined asset management approach of recycling out of secondary assets and reinvesting in our well-located quality assets over the last number of years.”
Total tenant retention by GLA improved to 95.6 percent in the reporting period.
Total group revenue, excluding straight-line rental income, decreased by 2.1 percent due to negative rental reversions,an increase in office vacancies and disposal activities.
The operating cost, including the expected credit losses-trade receivables, to income ratio increased by 0.9 percent to 39 percent primarily due to the negative revenue growth, which continued to put pressure on operating margins. Net of electricity costs and utility recoveries, operating costs increased by 0.5 percent to 17.7 percent of contractual rental income.
However, Redefine said with international real estate investments valued at R11.5 billion representing 16.2 percent of its total property assets, the property company saw blue skies ahead, especially for logistics and the recently expanded retail exposure.
“The Ukraine war is not directly impacting our Polish operations and the logistics sector continues to attract significant investor and tenant demand,” said König. He says Redefine realised R1 billion from the disposal of six non-core properties in Poland, which would be redeployed.
BUSINESS REPORT