Redefine Properties shares rise 3.5% after results

Redefine Properties CEO Marc Wainer said plans for a full merger with Fountainhead were on track‚ with Redefine likely to make an offer to Fountainhead shareholders “within the next two to three weeks once necessary regulatory approvals are in place’’.

Shares in Redefine Properties (RDF) were up 3.5% on Thursday in early trade following the group's announcement of 8% increase in distribution to shareholders for the six months which ended February 2014.

The company’s interim results were boosted by exchange rate gains from its rapidly growing offshore portfolio and improved utility cost recoveries.

Redefine’s offshore interests have swelled threefold over the past year to R6.6bn (15% of total assets)‚ comprising a 50% interest in North Sydney landmark office tower Northpoint‚ a 12.8% stake in Australian Stock Exchange listed Cromwell Property Group and a 32.9% stake in Redefine International.

The latter‚ which owns an R18bn portfolio across the UK‚ Germany‚ Switzerland and Australia‚ is listed on both the London Stock Exchange and the JSE.

Keillen Ndlovu‚ head of listed property funds at Stanlib‚ said the results reflected the restructuring management embarked on two and a half years ago to improve the quality of the portfolio. The change in strategy has seen the average property value in the portfolio rise from less than R70m in August 2011 to about R92m.

Management has also been active on the merger and acquisition front‚ total assets growing by R14.54bn to R51.3bn in the year to February. Most of the growth related to acquiring a 66% stake in Fountainhead Property Trust‚ which owns an R11.8bn portfolio of shopping centres including Centurion Mall‚ Blue Route Mall in Cape Town and Benmore Shopping Centre in Sandton.

“Investors are no doubt pleased with the new investment strategy and clear direction that management has adopted‚ ’’ said Mr Ndlovu.

Redefine CEO Marc Wainer said plans for a full merger with Fountainhead were on track‚ with Redefine likely to make an offer to Fountainhead shareholders “within the next two to three weeks once necessary regulatory approvals are in place’’.

Mr Wainer said the target was to have the merger completed by August. For the merger to go ahead‚ 75% of all remaining Fountainhead shareholders must vote in favour of a takeover.

Besides the proposed takeover of the 34% of Fountainhead it does not yet own‚ Redefine is also involved in other corporate action deals to the value of R7.6bn including a R3.5bn pipeline of new developments and the conclusion of the R2.1bn takeover of Annuity Properties announced earlier this year.

Mr Wainer is also keen to grow Redefine’s offshore portfolio. “Currently‚ property investment potential in some international territories is looking attractive relative to many local opportunities. If the right deals come along at the right price we will be happy to grow our offshore exposure to 20%-25% of total assets.’’

One sector of the local property market that Redefine will not be looking to increase its exposure to is government-tenanted offices. Mr Wainer said the plan was to sell off most of the company’s 25 government-tenanted office blocks over the next three years.

The R3bn portfolio‚ which makes up about 6% of Redefine’s assets‚ is mostly located in the Pretoria and Johannesburg central business districts.

“My wish is still not to have government as a tenant on our books as the Department of Public Works is always behind on its rental payments.’’