Increase in Redefine distributions is below forecast

Posted On Thursday, 04 November 2010 02:00 Published by eProp Commercial Property News
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Redefine Properties Limited has declared a final distribution of 17 cents per linked unit for the three months ended 31 August 2010

Marc WainerTogether with total distributions of 49,5 cents for the nine months to 31 May 2010, this results in a total distribution of 66,5 cents per linked unit for the year under review.

The distribution of 66,5 cents represents an increase of 17,6% over the distribution of 56,55 cents for the year ended 31 August 2009, and combined with capital growth, results in a total return of 18,7% for the period (2009: 13.8%).

Redefine CEO Marc Wainer says the significant improvement in distributions is in line with the company’s latest communication to unitholders. “However, we are nevertheless disappointed that we did not achieve the 68 cents originally forecast , which was primarily due to reduced contributions from the trading operations, the yield differential on the increased investment in Redefine International and challenging general economic conditions,” he says.

Contractual rental income comprises 84% of total revenue, income from listed securities 9% and trading and fee income 7%. Notwithstanding the challenges presented by increased electricity and rates increases, operating costs have been contained at 21% of contractual rental income.

At 31 August 2010, Redefine’s South African property portfolio comprised 397 properties with a total gross lettable area of 3,65 million m2 valued at R19-billion. Vacancies increased from 8,5% to 10,4% at end August 2010, but this had already reduced to 9,3% by end October 2010.

During the year under review, Redefine acquired four properties for R514-million at an average yield of 11,2% and disposed of 11 properties for R230,3-million at an average yield of 5,7%.

Wainer says Redefine’s investment strategy is focused on improving the quality of the portfolio, which stabilises the portfolio and reduces overall risk.

In the year under review, Redefine increased its holding in Redefine International, and subsequent to year end, successfully listed Redefine International Properties Limited (RI Ltd) on the JSE.

The company increased its stake in Hyprop from 33,3% to 45,2%, and following the mandatory offer to minorities, increased its interest marginally to 45,7% at 31 August 2010.

“At the current price of around R54,25, this represents a gain of R87,6-million on 20,6-million units and positions Redefine as the shareholder of reference, holding the key to Hyprop’s future strategy. Once a decision has been made regarding the cautionary under which Hyprop is currently trading, Redefine will work out the way forward with regards to its investment in Hyprop,” says Wainer.

The company also made a strategic decision to internalise its property management function to effect direct control over operational management as landlord and owner. Management of more than 50% of the portfolio has already been internalised, and the total take on is expected by 1 March 2011. The benefits of this initiative will be realised in the second half of 2011.

Wainer says the company anticipates economic conditions remaining at levels similar to those currently being experienced with a possibility of moderate growth in the latter half of the 2011 financial year.

“Growth of around 5% is anticipated from the core property portfolio, primarily as a result of contractual rental escalations and the key investments in Hyprop and Redefine International. This recurring net income represents 95% of distributable income, and assuming fee and trading income at a level similar to that of 2010, the company is anticipating a modest increase in distributions for the year ending 31 August 2011,” says Wainer.

Last modified on Monday, 21 April 2014 15:52

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