JSE-listed real estate investment trust (Reit) Redefine Properties has reported an increase in headline earnings a share to 84.8c for the financial year to August 31, compared with headline earnings a share of 75.94c the year before.

The Reit’s property portfolio contributed 94.2% of its R6.81-billion income, while income from listed securities contributed 5.1% and fee and trading income stood at 0.7%.

During the year, Redefine issued 297.6-million shares through accelerated bookbuilds to raise R3.1-billion in cash; issued 246.5-million shares to various vendors for the acquisition of assets totalling R2.6-billion; issued 337.1-million shares to Fountainhead’s minority investors representing R3.8-billion;
issued 300-million shares to the Redefine Empowerment Trust on loan account for R3.1-billion and conserved R1.6-billion in cash through the issue of 162.7-million shares under the distribution reinvestment alternative.

The number of shares in issue increased by 41.5% to 1.3-billion shares, representing equity of R14.2-billion.

The company expected a difficult year ahead, noting that the domestic economic outlook remained bleak.

“The manufacturing sector is in contractionary territory and confidence is low. Neither the business cycle nor structural factors are likely to provide much support to drive growth.

“There is, therefore, no compelling reason to believe that prevailing local trading conditions will change materially during the coming financial year,” the Reit said in a statement.

It added that expected interest rate hikes, a generally soft currency, a challenging leasing market and cash flow and cost pressures were factors it would have to contend with during the 2016 financial year.

“This calls for extra vigilance on risks and opportunities, as well as a relentless focus on disciplined and decisive execution of Redefine’s strategic priorities. Despite the local trading pressures, we anticipate that we will be able to leverage our geographically diversified asset base to achieve distribution growth of between 6% and 7% a share for the full 2016 year,” it highlighted.

At its results presentation in Sandton, Redefine CEO Andrew Konig added that the Reit aimed to invest into a broader portfolio, but that expanding the asset base would be challenging as it was “getting difficult to find existing assets that can add reasonable value”.

One asset class the Reit has identified as a high-return investment was student residential accommodation, as there was a shortage of around 400 000 beds. An initial R201-million investment by Redefine in developer, owner and manager of student accommodation Respublica would provide the Reit with a platform to expand.

Konig, meanwhile, highlighted that South Africa was a “unique market” as Redefine’s escalations were generally higher than inflation, but that the Reit was also focused on growing its international presence.

“International markets offer attractive initial yield spreads, but the market growth is quite slow. Our international presence and expansion is focused on geographic diversification to protect income streams,” he added.