Redefine Properties has published its interim results for the six months ended February 2023, reporting a 7.2% increase in its distributable income to R1.6 billion from R1.5 billion during HY2022, declaring an interim dividend of 20.32 cents per share (a payout ratio of 85%).
The REIT attributes its latest distributable income declared mainly due to the consolidation of EPP N.V which contributed R0.3 billion following a corporate re-organisation of EPP in March 2022 which saw Redefine take a 95.5% shareholding in line with its strategy to increase exposure to the Polish retail sector.
“We are pleased with the way the integration of EPP into the Redefine family has taken place and we remain confident about the potential in the Polish market,” commented Redefine CEO, Andrew König. “For instance, vacancies in the EPP stable remain less than 3%, indicating healthy demand despite the ongoing negative news coming out of Europe.”
The REIT’s local net operating income remained largely flat compared to HY22 due to the disposal of non-core assets. On a like-for-like basis, its net operating income for its active property portfolio grew by 3% compared to HY22 which was achieved on the back of marginal revenue growth of 1.6% and cost control which reduced by 4.4% when compared to HY22, resulting in an improved operating margin of 82.4% (HY22: 81.3%).
The company’s South African active portfolio’s vacancy rate increased during the period to 7.5% (FY2022: 6.7%) with leases covering 270 392m2 (FY2022: 267 557m2) renewed during the period at an average rental reversion of 7.5% (HY2022: 12.3%) while its tenant retention rate by gross monthly rental (GMR) sits at a healthy 96.6% (HY2022: 95.2%). A further 160 076m2 (HY2022: 218 164m2) was let to new tenants across its portfolio. Net arrears amounted to R71 million (FY2022: R52.8 million), representing 9.5% (FY2022: 7.5%) of gross monthly rentals with collections averaging 99% (FY2022: 102%) of billings during the period.
Its retail portfolio showed improved trading densities and good letting activity underpinned by a general movement in operating metrics with 4.4% vacancies during the period, however, load shedding and related costs are expected to impact on retail performance in the short term.
Redefine’s office portfolio continues to benefit from the demand for well-located Premium Grade assets, but rental levels continue to remain under pressure given the competitive landscape and oversupply in the market with 14.4% vacancies during the period.
Its industrial portfolio continues to provide a defensive element to its asset platform, with an improvement in most of its operating metrics (4.9% vacancies).
The company’s SA REIT loan-to-value (LTV) increased to 40.9% (FY2022: 40.2%) with its SA REIT Net Asset Value per share increasing to 750.76 cents (FY2022: 720.8 cents).