Redefine International full year distributable earnings up 29.9%

Redefine International CEO, Mike Watters said The overall business environment in which we operate has turned positive‚ notwithstanding ongoing concerns relating to weak economic fundamentals in the eurozone.

Rand-hedge property fund, Redefine International plc (RPL), on Thursday reported a 29.9% rise in earnings available for distribution to £39.1m in the year to August from a year ago.

The group which has a primary listing on the London Stock Exchange and a secondary on the Johannesburg Stock Exchange, said that distributable rental income was up £19.1m largely due to the acquisition of the CMC portfolio‚ Weston Favell and the restructuring of the Aviva shopping centre portfolio.

It declared basic earnings per share of 7.98p, an increase of 19.8% from the year ago. Adjusted NAV per share of 40.54p showing an increase of 4.9%.

The property counter, which owns a portfolio of hotels, offices and shopping centres in the UK, Germany and Australia, announced final dividend of 1.70p per share‚ bringing the total dividend to 3.20p‚ up 2.9% from the year-earlier period.

“The overall business environment in which we operate has turned positive‚ notwithstanding ongoing concerns relating to weak economic fundamentals in the eurozone‚ deflationary expectations and the interest rate cycle‚” CE Mike Watters said in a statement.

Watters added that Redefine International now has critical mass in the retail, commercial and hotel sectors in the UK and has taken a big step forward in building its German portfolio.

“Against this backdrop, with our strengthened financial position and the flexibility to allocate capital to those areas of our portfolio which are expected to provide the best risk-adjusted returns, we look forward to the future with confidence,” he said.

During the year, the company had been included as a component in the FTSE 250 and EPRA indices, which has placed the counter on the radar of more European fund managers. It also placed 191.7m ordinary shares to raise £86.8m.

The company also converted to the UK real estate investment trust (Reit) structure, ant the corporate structure was simplified to allow the company to relist as a secondary inward listing on the JSE.

Property values have benefited from a stronger regional investment market. The portfolio has been independently valued at £143.8m as at 31 August 2014, reflecting an increase of 8.1% for the year on a like-for-like basis.

Its occupancy increased to 98.3% (31 August 2013: 97.8%) following lettings at The Observatory, Chatham and the Crescent Centre, Bristol.

SA’s second largest REIT, Redefine Properties, has a 33% equity interest in Redefine International.

UK Commercial Market

The investment market experienced a significant increase in investor demand for secondary assets in strong locations, largely led by UK institutions.

This marked change in investor sentiment, combined with a lack of available Grade A stock, has resulted in a sharp recovery in values.  More recently, the volume of available stock has increased with a number of parties seeking to take advantage of pricing levels, particularly on shorter leased and older properties.

Rents have started to show growth in key cities, with clear signs of reduced incentives in the majority of regional centres. Overall supply of Grade A space is decreasing and headline rents of over £30 per sqft are reflecting a year-on-year increase of approximately 6.6%. This is however generally confined to established office markets.

The conversion of office space to residential has accelerated the reduction in the overall supply of secondary space, more so in areas that have witnessed a strong recovery in house prices.