CFO Leon Kok says Redefine’s top priority during the period was to address its loan-to-value ratio.
Redefine Properties’ results for the year ended 31 August 2020 showed how trading conditions locally and overseas were impacted by Covid-19. While distributable income per share decreased by 49 percent, total revenue only showed a marginal decline of 0.1 percent.
“Redefine’s top priority during the year under review was to address the group’s loan-to-value (LTV) ratio,” says CFO Leon Kok. “Our LTV improvement initiatives yielded an LTD reduction of 5.7 percent. However, the destructive impact of Covid-19 had the opposite effect on asset values, increasing the LTV by 7.8 percent, negating the improvement initiatives.”
He says that work on the LTV is therefore not yet done, and to achieve a sub-40 percent LTV by August 20201 will require further initiatives. “A clear pathway has been set to achieving this target, involving further optimisation of the property asset base, limiting the cash outflow from dividends, as well as the completion of the sale of our interest in Journal’s two student accommodation properties in Australia,” he says.
CEO Andrew König points out that Redefine is not distressed from a cash point of view and has “a lot of liquidity to come our way, having concluded disposals totalling R13.4 billion, of which only R7.1 billion was banked in 2020”.
However, this does not detract from the stark reality that Redefine’s local property portfolio performance was heavily affected by the restrictions imposed by the government to curb the spread of Covid-19. Leon says rental relief packages to support the sustainability of tenants amounted to R318.5 million, while the provision of credit losses has increased by R310.4 million.
He adds that the active portfolio vacancy rate increased during the period to 7.4 percent from 5.1 percent in the same period last year while the tenant retention rate was 90.8 percent from 92.2 percent a year ago.
The company says that collections from tenants increased to 96 percent and 97 percent of billings during September and October after averaging only 84 percent during the worst of the Covid-19 crisis.
“Redefine continues to streamline its asset platform and strengthen its balance sheet to withstand ongoing volatility and uncertainty, at the same time ensuring it is poised to benefit when conditions improve,” says CEO, Andrew. “We are focusing on liquidity and cash flow management, but remain mindful of the opportunities that are presenting themselves.”
