CAPE TOWN – Redefine Properties increased its distribution for the six months ended February 28 by 4 percent to 49.2 cents in the ongoing economic and political uncertainty ahead of tomorrow’s election.
Chief executive Andrew Konig said yesterday that their market guidance was that the distribution for the full year would be similar to first-half growth of 4 percent, subject to conditions not deteriorating further.
He said in an interview that in the context of returns in previous years, 4 percent might seem low, but relative to the current environment, “where our reference points are constantly being reset… the results are pleasing”.
This was because about 79 percent of the assets were in South Africa. With an August year-end, most of the past financial year was during the run-up to the elections, through a period of very low business and consumer confidence where business decisions were being deferred due to uncertainty. Internationally held assets contributed 25.4 percent to income, with total assets under management increasing by R500 million to R99.2 billion.
Offshore expansion worth R1.9bn took place, of which R500m was invested into the Polish Logistics Platform – the logistics sector in Europe was one sector with “promise”, said Konig. The local portfolio also received a significant portion of the development spend at R1.3bn.
Konig said confidence needed to return in South Africa to encourage future growth and for the economy to begin driving demand for commercial property space again. “Confidence will return once there is improved policy certainty. If there is any benefit from the election outcome it will probably only be evident in 2020/21, as opposed to the 2019 financial year,” he said.
The active portfolio operating margin was maintained at 82 percent, with tenant retention remaining at a high at 96.6 percent of leases renewed.
Installing renewable energy interventions was an area for growth, notably to alleviate some of the pressure caused by Eskom blackouts and tariff increases. Another move to calibrate to the “new normal” was a move into flexible workspaces.
WeWork, the global community company with operations in more than 400 locations across 100 cities, would be leasing six floors at Redefine’s Rosebank Link.
This extends WeWork’s global presence to Africa – Rosebank Link is its first site on the continent.
A highlight for the group in the interim period was Moody’s reaffirmation of Redefine’s investment credit grade rating.
Chief financial officer Leon Kok said the loan-to-value ratio – the ratio of loans to property assets – increased to 42.3 percent from 40 percent and to reduce this, Redefine would be considering equity funded asset acquisitions on a non-dilutive earnings basis, while also actively managing recycling activities to fund the development pipeline.
He said interest rates were hedged on 79.2 percent of total debt and refinance terms for all near-term debt maturities had been agreed. “Responsible balance sheet management remains a top priority,” said Kok.
Highly respected Sipho Pityana, who took over as president of Business Unity South Africa in June last year, had joined Redefine this month as independent non-executive chairperson to replace Marc Wainer.
The interim income distribution was in line with guidance and followed an 11.7 percent (9.6 percent) increase in revenue and 4.8 percent (8.6 percent) increase in distributable income, over the same time last year.
The operating cost margin fell marginally to 34.7 percent (33.9 percent), of contractual income.
Redefine shares, one of the most actively traded on the JSE by volume, closed 2.53 percent higher at R10.15 on Monday.