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Redefine results positive despite securities loss.

Posted On Friday, 04 October 2002 02:00 Published by
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Property loan stock firm's strategy pays off.
Property loan stock company Redefine suffered a setback of R84m in the value of its listed securities portfolio in the year ended August, because of the negative rerating experienced by the listed property sector in the past few months.

The only hybrid property loan stock company on the JSE Securities Exchange SA, Redefine commands more than R1bn exposure to other property loan stock companies plus a R807,7m exposure to direct property holdings.

Released yesterday, Redefine's financial results nevertheless showed growth in key indicators.

Turnover improved 16% to R248,8m from R214,2m while headline earnings a share rose 5,7% to 37c from 35c.

The group expanded its assets by about 40% during the review period.

Quoted at R902m in August last year, Redefine's listed property investments rose to just above R1bn in August this year, thanks to new acquisitions.

Directly held property rose from R447,9m to R807,7m. Despite this growth, directly held property's contribution to turnover dropped slightly from R107,2m to R106,6m. Listed property contribution to turnover improved from R106,9m to R142,1m.

CEO Peter Penhall said he was satisfied with this performance, achieved under difficult trading conditions. The commercial property sector came under pressure with rising vacancies, especially in decentralised office markets.

Penhall said the results flowed from investment strategies that resulted in total investment asset growth of 40% funded by a combination of debt and the issue of additional linked unit capital.

He also attributed the performance to benefits of being a hybrid income fund. 'Within this model, we had the flexibility to take quick advantage of opportunities that arose through either property acquisitions or by way of capital realignment within the listed securities in which we are invested,' said Penhall.

Redefine sold three properties which were seen as noncore and acquired 23, for a net consideration of R353m during the review period.

Penhall said the additions mainly well-located A-grade commercial and retail properties with quality tenants on long leases had further enhanced the lease and risk profile.

The group's property portfolio carries vacancies of 6,8% to total lettable area.

The directly held portfolio is set for growth as Redefine is in talks which might deliver 27 properties from another property loan stock company, Rand Leases Properties. Penhall said these negotiations were at an advanced stage.

Redefine's list of listed property holdings comprise 12 property funds.

The holdings include recently acquired linked units in SA Retail, Sycom, Hyprop, ApexHi, Grayprop, Growthpoint and Rand Leases.

Penhall said hedging mechanisms introduced in the prior financial year had shielded Redefine's distributable income. He said the group had achieved an average annual blended cost of longterm borrowings of 13,8% by entering into a series of interest rate hedges and linking the cost of long-term finance to long bond yields.

'Subject to volatility in interest rates, we anticipate growth in distributions to linked unit holders going forward,' Penhall said.

Business Day

Publisher: Business Day
Source: Business Day
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