Redefine Properties has declared a distribution of 31.50 cents per linked unit for the six months ended 29 February 2012.  On a comparable recurring income basis, the total distribution is 6.6% ahead of the prior period, after excluding from the prior period the contribution from the properties unbundled with Arrowhead Properties Limited (Arrowhead), as well as non-recurring fee income from the current and prior year’s distributions of 0.7 cents and 0.1 cents per linked unit respectively.

On a geographic basis, South Africa generated 91% of distributable income over 243 properties valued at R20 billion. Contractual rental income comprised 81% of total revenue; income from listed securities valued at R5 billion acounted for 10%; hotel income 7% and trading and fee income 2%. Operating costs represent 25.6% (31 August 2011:26.5%) of contractual rental income, mainly reflecting the full period efficiencies arising from the internalisation of property management. 

The Redefine portfolio is further geographically diversified by 206 offshore properties and listed securities valued at R12 billion held through Redefine Properties International Limited (“RIN”) and its 70% owned subsidiary Redefine International PLC (“RI”), listed on the JSE and London Stock Exchange respectively. 

Redefine International Properties Limited (RIN), along with Redefine International Fund Managers Limited (RIFM), the fund manager of Redefine International P.L.C. (RI), contributed 3 cents per linked unit to the distribution for the period.

Redefine CEO, Marc Wainer says the Group has made significant progress in implementing its strategy of restructuring and improving the quality of its core property portfolio.  The value of the Group’s properties declined by 1.7% in the review period.  The South African portfolio valuation increased by R260 million, while the offshore portfolio valuation declined by R719 million, arising mainly from the Wichford legacy assets. The investment in South African listed securities increased in value by R11 million.  The balance mainly relates to the mark to market of the group’s interest rate swaps.

During the review period, leases covering 384,436 m2 were renewed at an average rental increase of 4.2%. A further  123,609 m2 was let across the portfolio and,  together with vacancies from properties disposed of, the total vacancy level  after adjusting for unlettable space, reduced marginally by 0.3% to 6.6% (31 August 2011: 6.9%).  

Five properties were acquired and transferred during the review period for an aggregate purchase price of R1.3 billion with a GLA of 110 147 m² at an initial yield of 9.1%. Guarantees totalling R585 million were in issue at the period end for properties in the process of being transferred.  Agreements concluded with a number of vendors for the acquisition of properties for an aggregate consideration of R775 million, are subject to Competition Commission approval.

Disposals during the period, excluding the unbundled Arrowhead portfolio, include 15 properties with a GLA of 98,938 m² which were sold to various buyers for an aggregate consideration of R520 million at an average yield of 10.5%.

In December 2011, Arrowhead was successfully listed and unbundled to linked unit holders, facilitating a fast track basis to dispose of 89 properties that no longer fitted Redefine’s investment criteria.

In March 2012, an agreement was concluded to acquire the Fountainhead Management Company for an aggregate consideration of R660 million. The acquisition is conditional on all required regulatory approvals, including approval of the Registrar of Collective Investment Schemes, the Competition Authorities and the South African Reserve Bank. Following the conclusion of this transaction, Redefine intends making an offer to acquire all of the assets of Fountainhead Property Trust in return for new units in Redefine and existing Hyprop units held by Redefine.

“We envisage pricing the offer at a level that, on the distribution of the consideration units, would result in a Fountainhead unit holder receiving Hyprop and Redefine units with a value at or about the current ‘clean’ price at which Fountainhead units are trading,” says Wainer.

The company made its debut in the local bond market in September 2011 with an issue of R250 million 90 day Commercial Paper under a R5 billion Domestic Medium Term Note Programme. This issue has been rolled twice since the initial issue, achieving an all-in rate of 5.88% in the March 2012 issue. Towards the end of March, Redefine also issued a R500 million three year bond, which was priced at an all-in rate of 7%. 

FINANCIAL HIGHLIGHTS:
• Redefine distribution  of  31.50c  in line with forecast
• Total Assets under management exceed R37 billion
• Comparable Recurring Income  6,6%  ahead of prior period
• Significant progress in enhancing quality of core portfolio
• Increased international diversification through participation in capital raise by Australian Property Trust, Cromwell
• Broadening funding sources to  debt capital market
• R660 million agreement to acquire Fountainhead Management Company concluded

Redefine increased its international diversification during the review period. The group participated in a capital raise by Cromwell, the listed Australian Property Trust,  in which the group has a strategic interest, resulting in Redefine taking a direct 3.9% interest in Cromwell and Redefine International increasing its holding to 23,2%.

Salient features of the Redefine International P.L.C. results for the period ended 29 February 2012 are the following:

• Earnings available for distribution of £8.98 million (February 2011: £6.79 million), an increase of 32.16%
• Interim distribution per linked unit of 2.09 pence (February 2011: 2.02 pence), an increase of 3.5%
• Strong performance from Cromwell and the Hotel portfolio, justifying the company’s diversification strategy
• Secure cashflows delivered from the UK Stable Income and European portfolios despite further valuation declines, principally from the former Wichford portfolio
• Detailed negotiations on refinancing in progress
• Progress on the disposal of legacy Wichford assets
• Additional investment in Cromwell, securing the Group’s strategic shareholder position

Commenting on the Group’s international exposure, Wainer says this remains a core part of the strategy going forward and said he was pleased with the progress of both Redefine International and Cromwell. “We will continue to support both of these companies financially and strategically to ensure that they take advantage of the exceptional opportunities that they come across from time to time.  For Redefine International the remainder of the financial year will be focussed on the expiring debt facilities, the consequent capital raising and the disposal of certain Wichford legacy assets.

On prospects for the full year, Wainer says that despite ongoing challenging market conditions affecting the office property sector in particular, Redefine’s core property portfolio is anticipated to achieve continued growth. The anticipated distribution for the full year is in line with forecast.