Redefine Properties ups stake in Fountainhead Property Trust

SA's second-largest property fund listed on the JSE, Redefine Properties increased its stake ownership in Fountainhead Property Trust from 49.6% to 61.9% in return for Hyprop units, the company said on Monday.

Earlier in October Redefine advised it proposed acquiring up to an additional 250-million Fountainhead units in return for 110 Hyprop units for every 1‚000 Fountainhead units acquired by Redefine.

The stake hike in which Mr Marc Wainer CEO of Redefine Properties said it paved the way to achieve the goal of a full takeover of Fountainhead’s R11 billion property portfolio.

Redefine’s attempt to buy out Fountainhead’s assets was derailed by sector rival Growthpoint Properties, which in October last year entered a competing bid for Fountainhead’s assets.

The battle dragged on for six months. In the end, both offers were withdrawn but Redefine, which at the time already owned Fountainhead’s management company, acquired 49.6% of Fountainhead’s units instead.

Yesterday Redefine reported company results for the year ended 31 August 2013, with distribution of 68.7 cents per linked unit, up 7.3% compared to the previous year.

The company said this was ahead of market guidance and showed year-on-year growth.

Rand weakness also lifted returns from the company’s offshore interests through its 32.3% stake in Redefine International — listed on both the JSE and London Stock Exchange — and 12.4% holding in Australian-listed Cromwell Property Group.

Mr Wainer said on Thursday the restructuring of the core portfolio has been achieved though R366m of disposals, an increased stake in Fountainhead Property Trust and various other acquisitions worth R1,3bn, the most significant a 50% stake in the East Rand Mall for R1.12bn. Total assets under management are valued at R41bn.

They also reflected the consolidation of Fountainhead from March 27 2013‚ following Redefine’s acquisition of a controlling interest.

Contractual rental income for the year comprised 89% compared with 2012’s 81% of total revenue‚ income from listed securities was 9% from 17% the previous year‚ and trading and fee income was unchanged at 2%.

Operating costs represented 20% of total revenue due to a strict focus on costs and the internalisation of electricity recoveries.

The local operations contributed 89% to distributable income.

The group said a subdued trading environment‚ disproportionate increases in rates and taxes‚ and continued financial market volatility were recurring themes for the coming financial year.

It said it is well focused on managing the variables within its control and the restructured property asset base was strongly positioned to absorb continued improvement of the portfolio without materially diluting income.

Coronation Fund Managers property analyst Anton de Goede said it is positive that the market is for the first time starting to see the benefits of Redefine’s restructuring.

Redefine’s share price has been up 15% over the past two months, which analysts ascribed to the fact that lingering uncertainty over the fight with Growthpoint for Fountainhead’s assets is finally over.

Redefine expected growth in distributable income per linked unit for 2014 at a rate similar to what had been achieved in 2013.