Redefine Properties has reported a stabilised earnings outlook despite a challenging operating context.
The REIT published its pre-close investor update for the half-year ended 28th February 2025, reporting that its South African portfolio achieved a net operating profit margin of 77.8% while EPP, its directly owned Polish retail property platform, improved its margin from 66.4% to 71.7%, leading to a consolidated group net operating profit margin of 75.9%.
Its South African portfolio demonstrated a solid performance, particularly in the industrial and retail sectors, which has driven a 1% increase in overall occupancy since August 2024. Additionally, 80% of lease renewals were completed at stable or increased rental terms.
Redefine’s industrial portfolio’s occupancy rose to 97.6% alongside positive rental reversions. “The industrial market continues to be one of our strongest performers and we see potential for further growth if capital availability allows us to expand,” comments Leon Kok, Redefine’s COO.
Conversely, the office sector remains challenged by excess supply and limited demand except in select nodes. A significant lease renewal resulted in a -17% renewal reversion during the period however, the Company mitigated this impact through strong leasing activity in other locations such as the Western Cape and Sandton.
While South Africa faces ongoing challenges, Poland’s economic growth has benefited from European interest rate cuts and social grants which have boosted household spending and retail conditions.
EPP’s core assets have seen occupancy levels of 99.3% with rental reversions rising from 0.2% to 1.5%. The rent-to-sales ratio remains well below 9% indicating healthy tenant affordability.
The REIT says it is pursuing a strategy of selling non-core assets and to restructure its JVs in Poland. “We are exploring options to simplify our joint ventures to either exit or fully own them,” notes Redefine CEO Andrew König.
The Company has a liquidity profile of R6.4 billion as of November 2024, having proactively managed its debt profile including the FY2025 maturities that are progressing well on the back of improved liquidity levels in the capital markets. As of February 2025, Redefine’s weighted average cost of debt decreased to 7.2%.
“Our focus continues to be on generating organic growth from our existing portfolio, maintaining a strong balance sheet, and weathering the current economic cycle. We are positioning the company to capture opportunities in high-quality assets, while ensuring strong cash generation to support our dividend payouts,” says Ntobeko Nyawo, CFO of Redefine.
The Company is maintaining its earnings guidance for FY2025, with distributable income per share expected to be between 50 and 53 cents.
