JSE-listed real estate investment trust Redefine Properties reported a 7.4% year-on-year increase in distributable income for the six months ended February 28.

This prompted it to increase the guidance for distributable income growth for the full 2026 financial year to end August 31 to between 6% and 7%, compared with the 5% to 6% previously guided.

It also increased its occupancy rate across all its retail, logistics and office portfolios, with occupancy in its South African retail portfolio increasing to 95%, with positive rental reversions of 3% during the period.

Office occupancy increased to 88.9%, with 96% tenant retention, and rental reversions have become less negative at -15.8%, compared with -20% in the comparable half-year period to February 28, 2025.

Its industrial assets performed strongly, with occupancy at 97.2%, and positive rental reversions of 4%. This performance also highlights this segment's role as the anchor for Redefine's South Africa portfolio, the company said.

“The momentum, which started in the 2025 financial year and continues in the current year, was chiefly driven by lower interest rates and better occupancy levels,” said Redefine CEO Andrew König.

For Redefine, this momentum was outpacing the cyclical nature of the market, as well as trigger events, such as the war between the US and Israel against Iran, and has revealed Redefine's resilience, he said on May 11.

The improvement in the company's property values during the period was driven by stronger income performance rather than valuation yield compression. Valuation assumptions have remained relatively stable, with the uplift in property values largely supported by improved income performance, said Redefine COO Leon Kok.

Further, the company's net asset value declined by 33c a share.

“If the rand had been flat, [Polish subsidiary] EPP's performance would have translated to closer to 7% growth,” said Redefine CFO Ntobeko Nyawo.

Inflation and interest rate expectations are increasingly volatile amid geopolitical tensions, and Redefine's hedging strategy and refinancing have materially strengthened the group’s defensive positioning.

About 85% of the group’s debt is currently hedged, while its recently concluded refinancing activity extended the weighted average debt maturity profile to 3.7 years.

Redefine refinanced R6.2-billion of EPP core debt during the period, extending debt maturities and achieving significant margin compression, while also securing sub-100 basis point pricing on three-year debt in the domestic debt capital market.

Strong liquidity conditions in debt capital markets had supported Redefine’s refinancing activity, even as volatility in global equity markets intensified, Nyawo said.

The group’s loan-to-value ratio improved to 40.3%, while interest cover ratio increased to 2.3-times, he added.

Further, Poland emerged as a major contributor to earnings momentum during the period, with strong operating performance across its retail, logistics and self-storage platforms, despite the translation impact of a stronger rand, König said.

The group's Polish platform had been deliberately positioned around consumer-led sectors including retail, logistics and self-storage, which continued benefiting from resilient consumer demand and improving operating fundamentals.

Occupancy in the Polish EPP retail portfolio remained exceptionally strong at 99.2%, while its logistics occupancy in its Polish ELI subsidiary rose to 98.7%, as market rentals continued strengthening amid constrained speculative development activity.

Underlying performance in Poland strengthened despite the currency drag, supported by dominant retail centres, improving logistics fundamentals and ongoing efforts to simplify joint venture structures and reduce leverage.

Additionally, the Polish logistics platform had now reached a level of scale and stability that provided the group with options, either as a long-term income platform or a potential source of strategic disposals and capital recycling.

The group is further expanding its institutional grade self-storage platform in Poland, which is expected to double in size by 2027 through ongoing development activity, he noted.

However, the improved earnings trajectory remained closely linked to the direction of interest rates, with oil price volatility and inflation risks emerging as key threats to the sector’s recent re-rating, said König.

“Pushing against this momentum is the cyclical Middle East conflict. The key uncertainty is how long the conflict and its aftershocks will persist.”

Despite the uncertain macroeconomic backdrop, Redefine expected the operational momentum built up in the first half to continue supporting earnings growth through the remainder of the financial year.

“We believe the property fundamentals remain structurally intact and, over the medium term, those fundamentals will outpace cyclical shocks brought on by geopolitical events. Despite the current volatility, we still believe firmly in the upside of us,” König said.