Redefine Properties interim income grows 4%

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Redefine Properties CEO Andrew Konig says business and consumer confidence are low and this places strain in certain areas, such as the office and retail markets. Redefine Properties CEO Andrew Konig says business and consumer confidence are low and this places strain in certain areas, such as the office and retail markets.

Redefine Properties (JSE: RDF) which said last week that Sipho Pityana had replaced Marc Wainer as its chair, today reported that it had increased its interim distribution below inflation by 4 per cent to 49.2 cents

But its rival and the largest listed real estate group on the JSE, Growthpoint Properties, reported 5.9% dividend growth for the six months to December.

For six months which ended 28 February 2019, Redefine's internationally held assets contributed 25.4% to income during the period, with total assets under management increasing by R500m to R99.2 billion.

Offshore expansion of R1.9 billion was achieved, of which R500 million was invested into the Polish logistics platform. The local portfolio also received a significant portion of the development spend at R1.3 billion.

In South Africa, the vacancy rate rose to 5.7% from 4.5% as vacancies rose in the student accommodation portfolio.

While the build-up to South Africa's election on Wednesday "has been quite smooth", Konig says confidence needs to return in SA to encourage future growth.

"Business and consumer confidence are low and this places strain in certain areas, such as the office and retail markets. Confidence will return once there is improved policy certainty. However, if there is any benefit from the election outcome it will probably only be evident in 2020/21 as opposed to the 2019 financial year," says Redefine CEO Andrew Konig.

Redefine's market guidance is that the distribution for the full year will be similar to first half growth of 4% subject to conditions not deteriorating any further than they already have.

"Maintaining operating margins is challenging in current conditions and improving quality of earnings is an ongoing theme. However, we managed to maintain our active portfolio margin at 82% in very competitive trading conditions, with tenant retention remaining at a high at 96.6% of leases renewed," says Konig.

CFO Leon Kok says the loan to value ratio - the ratio of its loans to property related assets - increased to 42.3% in the first half and in order to reduce this, Redefine will be considering equity funded asset acquisitions on a nondilutive earnings basis, while also actively managing recycling activities to fund the development pipeline.

He says interest rates were hedged on 79.2% of total debt and refinance terms for all near- term debt maturities had been agreed. "Our funding strategy has focused on protecting our balance sheet and optimising cost of capital. Responsible balance sheet management remains a top priority," says Kok.

In a move to bolster corporate governance and enhance diversity, the highly respected Sipho Pityana joins the Redefine board as independent non-executive chairman to replace Marc Wainer.

"We have been working on a smooth transition and succession plan for more than a year and are truly delighted to welcome someone of Sipho's caliber to our board. At the same time, we are fortunate to retain Marc Wainer as an executive director as we continue to tap into his vast knowledge, having been through a number of property cycles, and his deal-making skills," says Konig.

Head of research at Anchor Stockbrokers Craig Smith said Redefine’s dividend growth rate was at the lower end of its guidance, but that was expected given tough conditions in SA.

“Overall, it’s more or less in line with guidance but does again highlight the weak local property fundamentals. Their offshore investments have definitely contributed positively to performance, especially EPP NV in Poland,” Smith said.

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Listed Property / REITs  |  Growthpoint Properties  |  Redefine Properties  |  Marc Wainer  |  Andrew Konig  |  Sipho Pityana