Redefine Properties has released its annual results for the year ended August 2021 with a surprise announcement that it has submitted a non-binding proposal to Polish REIT, EPP, which, if approved, will constitute EPP as an unlisted subsidiary of Redefine.
Redefine will make an offer to EPP shareholders to swap their EPP shares for Redefine shares at an independently verified fair swap ratio.
Redefine holds 45.4% of EPP with a R6.5 billion carrying value and this proposal will place Redefine in a good position to benefit as retail demand increases in Poland. It will also drive diversification with the Polish-centred offshore component of its overall portfolio which is likely to increase to 30%.
Redefine declared a dividend of 60.12 cents. This shortly follows its board resolving not to pay a dividend in 2020 to preserve liquidity.
“We are living in an age of intersecting crises, but our careful management of reducing balance sheet risk and focused strategy to diversify and improve the quality of our asset platform places us in a strong position to deliver sustained value” commented Redefine CEO, Andrew Konig.
The declared dividend will reduce the taxable income of the REIT to a nominal amount which avoids further shareholder value leakage. Its distributable income per share for the year amounted to 52.96 cents from 51.50 cents the prior year.
Its sustained focus on de-risking its balance sheet and bolstering liquidity has resulted in R5.8 billion in cash and committed access facilities currently on hand, compared to the R2.8 billion during the last reporting period.
Redefine’s loan-to-value reduced by 6.3% to 41.6% with its net asset value per share improving to 733.24c from 714.58c. Its active portfolio occupancy increased to 92.9% versus 92.7%.
“We realised R5 billion from disposals, which plays into the reduction of our loan-to-value, but in addition, we have transactions at an advanced stage of a further R6.2 billion” commented CFO, Ntobeko Nyawo.
Nyawo says while the prior year’s revenue was impacted by local lockdowns and the deconsolidation of ELI, the current year was also impacted by the sale of Leicester Street and non-core local properties which led to a decline of 5% in revenue.
“Our focus has been on tenant retention and remaining relevant and we were pleased to see a significant amount of letting activity being concluded during the reporting period, with retail, for instance, seeing a marked improvement in trading metrics”, commented COO of Redefine, Leon Kok.
While the office sector is under significant pressure due to muted economic activity and rising levels of unemployment, Kok says ‘doomsday scenarios’ have not played out. Office vacancies were reported at 12.9% from 13.8% a year ago. He notes some areas and assets are performing better than others, and in an environment characterised by oversupply and limited demand there will be a flight to quality.
“The key to the turnaround will be when real GDP growth makes inroads into unemployment. But our active asset management activities over the last number of years will stand us in good stead as 87% of our office portfolio is in Premium and A grade space, which for us tend to experience the highest occupancy levels.”
On the industrial front, vacancies are below 5%. “We are very pleased with this sector which proved defensive in a relatively volatile environment,” said Kok.
Subdued property fundamentals and low growth are here to stay for the medium term but with its focused approach on its strategy, Redefine believes it is well positioned for eventual recovery.
“We have reset every aspect of what we do. This includes adopting smarter business processes and refreshing our engagement strategy for each stakeholder with an eye on being totally focused on inclusivity going forward. We are proud of where we are in a very challenging environment and look forward to harnessing our strengths to deliver even more value in the year ahead,” concluded Konig.
