With a focus on derisking its balance sheet and bolstering liquidity, JSE-listed real estate investment trust Redefine Properties has increased its cash and committed access facilities from R2.8-billion in the 2020 financial year, to R5.8-billion for the financial year ended August 31.
As such, the company declared a dividend of 60.12c a share for the year, on the back of Redefine’s board resolving not to pay a dividend in 2020 after the ongoing Covid-19 uncertainty and its impact on the company’s liquidity.
Distributable income a share for the year amounted to 52.96c, up from 51.50c on the year before.
CEO Andrew Konig says society is living in an age of intersecting crises, but that Redefine’s “careful management” of reducing balance sheet risk and focused strategy to diversify and improve the quality of its asset platform places it in a “strong position to deliver sustained value”.
The dividend will reduce the taxable income of Redefine to a nominal amount which avoids further shareholder value leakage.
In addition, CFO Ntobeko Nyawo reports improvements across all key indicators, with the company’s loan-to-value (LTV) having reduced to 41.6%; while its net asset value per share improved to 733.24c from 714.85c in the corresponding period of 2020.
“We realised R5-billion from disposals, which plays into the reduction of LTV, but, in addition, we have transactions at an advanced stage of a further R6.2-billion,” says Nyawo.
He adds that, while 2020’s revenue was impacted by local lockdowns and the deconsolidation of ELI, the current year was also impacted by the sale of Leicester Street and noncore local properties which led to a decline of 5% in revenue.
OCCUPANCY
In terms of occupancy levels, he says Redefine’s active portfolio occupancy increased to 92.9%, slightly up from the 92.7% of the year prior.
COO Leon Kok says collaboration and a focus on the variables under Redefine’s control have been emphasised. “Our focus has been on tenant retention and remaining relevant and we were pleased to see a significant amount of letting activity being concluded during the reporting period, with retail, for instance, seeing a marked improvement in trading metrics.”
However, although the office sector is under significant pressure as a result of muted economic activity and rising levels of unemployment, he says “doomsday scenarios” have not played out.
Office vacancies were reported at 12.9% during the reporting period, from 13.8% a year ago.
Nonetheless, Kok says some areas and assets are performing better than others, and in an environment characterised by oversupply and limited demand, there will be a flight to quality.
“The key to the turnaround will be when real gross domestic product growth makes inroads into unemployment. But our active asset management activities over the last number of years will stand us in good stead as 87% of our office portfolio is in premium and A-grade space, which for us tend to experience the highest occupancy levels,” he says.
Kok adds that, on the industrial front, vacancies are below 5%. “We are very pleased with this sector which proved defensive in a relatively volatile environment.”
As for positive movements in the market, Konig says Redefine is noticing that e-commerce and logistics chains are continuing to grow in the post-pandemic environment.
Notwithstanding subdued property fundamentals and low growth environment, which are expected to persist for the medium term, Redefine says in a statement its focused approach on its strategy and purpose means it is well positioned for an eventual recovery.
Going forward, Redefine is firmly focused on executing its strategic priorities further in the 2022 financial year, introducing a climate resilience framework, striving for more sustainability interventions across its operating environment and investing strategically.
Significant progress has been made in derisking and simplifying the asset platform to ensure sustained value creation for all stakeholders.