Acquisition-hungry Redefine Properties posts encouraging results
JSE-listed diversified real estate investment trust Redefine Properties has delivered another solid performance, after increasing its distribution by 7,5% to 44,82c per share for the six months to 28 February 2017.
Quality acquisitions and an astute, investor-driven strategy guided the company to steer through the ebbs and tides of ever-changing macro-economic conditions.
At 28 February 2017, Redefine's diversified local property portfolio was valued at R67,7 billion (FY2016: R54,7 billion) and the group's international real estate investments,were valued at R16,4 billion (FY2016: R18 billion) - growing in total by R11,4 billion during the period under review.
"These results come against the backdrop of increased uncertainty driven mainly by political issues playing out ahead of the ANC elective conference. This result predates the recent ratings downgrades, but what they show is that we are fundamentally very well positioned to weather the coming storm," says Redefine CEO Andrew Konig (pictured).
Redefine's FD Leon Kok (44), a chartered accountant, joined Redefine in 2014 from a 13-year career at Peermont Global Limited.
During the interim period, management's primary domestic portfolio focus was on protecting, expanding and improving existing well-located properties.
"What really stands out are our solid property fundamentals. We are benefiting now from a strategy adopted some six years back to upgrade the quality and efficiency, as well as extend the lease maturity profile of our local portfolio and geographically diversify into real estate markets operating in hard currency markets," says Konig.
The company is reaping the rewards of a diversified asset platform. While international investments contributed 22,7% to distributable income, international real estate investments made up 19,5% of property assets.
"Geographic diversification remains very important as we access stable revenue flows and broaden our funding sources at attractive interest rates. We have refinanced a significant portion of our international debt over the period at competitive rates, which has been a very big achievement and will stand us in good stead going forward in a very volatile environment," says Konig, who expects to see the offshore asset contribution to earnings increase even further in the future to around 25%.
Redefine broadened its international exposure through expansion into student accommodation in Australia and subsequent to the half year, into Poland by investing a further 59 million in Echo Polska Properties.
In one of the largest local property transactions of the year, Redefine acquired all of the shares in property developer and capital growth fund The Pivotal Fund Limited in a share swap transaction. The acquisition of Pivotal positions Redefine even more competitively in the commercial property sector in line with its strategic intent to become the landlord of choice in sought-after nodes in South Africa.
"This deal further diversifies our portfolio by investing in high quality assets, while the share swap conserves the use of cash and debt by Redefine," says Konig.
Thanks to this acquisition the company acquired 32 Pivotal properties valued at R10,4 billion (including developments in progress and land holdings for future development). The portfolio consists of 17 office, 10 retail and five industrial properties.
"Redefine Properties continues to build an exceptionally diversified and quality property platform. We remain focused on deliberately procuring top quality properties and opportunities across strategic geographic locations - both locally and internationally," says Konig.
"While the risk of further ratings downgrades is a real concern, our diversification strategy will continue as we purposefully seek out real estate that is best poised for sustained growth within three key sectors - office, retail and industrial," he concludes.
Redefine anticipates its distribution per share for the second half of the 2017 financial year to grow in line with the first half's performance.