JSE-listed real estate investment trust (Reit) Redefine Properties reported year-on-year distribution growth of 5.5% for the financial year to August 31, with full-year distribution of 97.1c apiece, compared with 92c apiece in the prior year.

The board declared a gross dividend of 49.8c apiece for the six months ended August 31, which is on the back of 8.2% growth in distributable income to R5.2-billion.

At year-end, Redefine’s diversified local property assets were valued at R72.4-billion, compared with R68.1-billion in the prior year.

The company’s international real estate investments were valued at R18.9-billion, compared with R16-billion in the prior year, and account for about 20% of the Reit’s total property assets – the international assets are situated in the UK, Poland, Australia and some African countries.

Redefine’s total revenue showed growth of 8.3% for the reporting period, compared with 17.3% growth last year, and gross distributable income showed growth of 8.2%, compared with 22.2% in the prior year.

The company’s South African property portfolio vacancy rate remained stable at 4.5% during the year, compared with 4.6% in the prior year. Leases covering 497 491 m² gross leasable area (GLA) were renewed during the year at an average rental decrease of 1.5%, while the tenant retention rate was 90.4%.

PORTFOLIO ACTIVITY

During the reporting period, Redefine acquired the remaining 50% share of 115 West Street (the Alexander Forbes building, in Gauteng), with a GLA of 20 546 m² at an average initial yield of 9.7% for R751-million.

The company completed R1.2-billion worth of new developments at an initial yield of around 8%, including an infrastructure project at Brackengate, in Gauteng, which cost R324-million.

Redefine currently has development projects in progress totalling R2.3-billion, at an initial yield of almost 9%, including infrastructure projects for the S&J, Matlosana Mall and Atlantic Hills sites.

New projects totalling R173-million, with an average initial yield of 9.4%, will start soon.

In the reporting period, Redefine disposed of 19 properties with a GLA of 303 276 m², to the value of R2.6-billion, which no longer served the company’s investment criteria.

The company also disposed of two portions of vacant land for R61.7-million.

Redefine plans to dispose of a further five properties for R429-million, with an 82 493 m² GLA, and two portions of vacant land for R57-million.

BEING SMART

During the reporting period, Redefine increased its total solar photovoltaic capacity from 7 807 kW to 22 448 kW, which will generate about 34.6 GWh/y of renewable energy.

The company installed about 2 300 smart electricity meters in 73 of its buildings and has deployed smart water metering and control devices at 66 buildings.

“Using smart metering data enables us to operate buildings efficiently and increases consumption control to minimise energy and water use.

“Additionally, we have installed back-up water solutions at 13 key properties in Cape Town. This R40-million investment reduces our consumption of potable water by 800 000 ℓ/d,” Redefine stated.

Further, the company has registered 30 office buildings for existing building performance green star ratings, which should be completed during the 2019 financial year, bringing Redefine’s total green star South Africa ratings to 73.

Meanwhile, Redefine stated that financial volatility is likely to continue for the foreseeable future as the US-led trade and geopolitical tensions flare up on an ongoing basis.

Apart from a less-supportive global backdrop, there are concerns that decisive economic policy interventions will only be taken after next year’s general elections in South Africa, which results in the domestic economic outlook and general confidence being uninspiring, translating into continued weak domestic property fundamentals.

“Given the volatile times and the economic constraints both locally and abroad, balance sheet management is critical. We placed a lot of emphasis on credit metrics and this will stand us in good stead as it is anticipated that the macroeconomic environment will remain volatile,” said Redefine FD Leon Kok.

Cost of debt reduced by 100 basis points to 6.3%, gearing and loan to value was lowered to 40% and interest rates were hedged on 81.2% of total debt for the reporting period.

Kok noted that the company’s operating cost margin had improved to 33.5% of contractual rental income, with enhanced operational efficiencies leading to a total operating margin improvement to 82.3%. International property investments contributed 24% to distributable income during the year.

“Volatility can be expected to continue against a less supportive economic backdrop. We continue to drive initiatives to foster a value-driven service culture, while embracing change and encouraging innovation. 

“We believe our strategic approach is appropriate for the environment in which we are operating – but we continue to expect the unexpected,” commented Redefine CEO Andrew Konig.

The company anticipated growth in distributable income per share for 2019 to range between 4% and 5%.