Redefine Properties rallies 3.7% after 7% growth in distributions

Posted On Monday, 06 May 2013 07:59 Published by Commercial Property News
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Redefine Properties linked unit price rallied 3.7% to close at R11.20 on Thursday after the company reported growth of 7% in distributions to 33.7c per linked unit for the six months to the end of February.

Marc Wainer Redefine PropertiesCEO Marc Wainer said Redefine’s "substantially improved" property portfolio had contributed to the solid performance, which was achieved during a period of restructuring.

He said Redefine changed its strategy about 18 months ago to focus on selling certain noncore assets while improving the quality of its portfolio.

During the period, Redefine’s holding in Redefine Properties International decreased to slightly below 50%, allowing it to account for Redefine Properties International as an associate company rather than a subsidiary.

With its associate no longer consolidated on its balance sheet, Redefine’s net asset value grew by 10.6% to R8.31 per linked unit.

It concluded acquisitions and developments of R3.1bn during the period, and current developments are valued at R3.1bn.

After the end of the period, Redefine acquired 45.6% of Fountainhead Property Trust, in line with its intention to acquire a meaningful stake to align interests if its bid for Fountainhead’s assets was not completed. Redefine owns Fountainhead’s management company.

The units cost R5bn and consist of Hyprop Investments units, cash and Redefine units.

"We are exiting our Hyprop investment, which we consider mature, and have invested in Fountainhead where we believe there is greater upside."

Redefine disposed of 11 noncore properties in the period, and Mr Wainer said it intended to sell 24 government-tenanted office properties to a black economic empowerment group for R2.5bn.

The period saw more leases coming up for renewal than in 2014 and 2015 combined, and the company’s lease expiry profile had improved significantly by the end of the period, Mr Wainer said.

Financial director Andrew Konig said Redefine, which had "deepened" its presence in debt capital markets, had reduced its average cost of borrowing by 30 basis points, and funding costs were expected to decline further.

Electus investment analyst Gregory Cort said the interim performance was "broadly in line with our expectations". The firm was going "in the right direction" with its property portfolio, while its listed securities changes — including disinvesting from Hyprop and increasing its stake in Fountainhead — had been driven largely by corporate action.

However, Mr Cort said that while Hyprop was the listed sector’s best quality portfolio, "there is more potential upside in Fountainhead if they get it right — there’s work to be done there".

Redefine expects distribution growth in the second half to echo the first-half performance.

Last modified on Saturday, 18 May 2013 23:53

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