Redefine announced an interest distribution of 10.6 cents per linked unit for the third quarter ended 31 May 2006 which, together with an interim distribution of 10.6 cents per linked unit for the quarter ended 28 February 2006 and 10.3 cents per linked unit for the quarter ended 30 November 2005, amounts to a total interest distribution for the six months ended 28 February 2006 of 32.5 cents per linked unit.

“This distribution corresponds with the forecast and we anticipate that the distribution per linked unit for the third quarter will at least be maintained for the final quarter of the current financial year,” notes Redefine Income Fund CEO Brian Azizollahoff.

Azizollahoff explains that income from property funds is not highly sensitive to interest rate fluctuations as a consequence of lease income being determined by leases and borrowings being subject to fixed rates. “Consequentially the value offered by listed property in the current market is excellent. Yields have soared since income has not declined and yields remain well above cash and bonds,” explains Azizollahoff.  By way of example, at the end of June 2006, Redefine’s forward yield had moved from around 7,25% to 8,95%.

Redefine will also benefit from the weaker Rand due to its 18% stake in CIREF Limited, Corovest International’s property fund listed on the London Stock Exchange’s AIM (Alternative Investment Market, the fastest growing junior market in the world), which will pay its distributions in GBP.

Azizollahoff notes however that property is a cyclical investment, which is why it is a long-term investment rather than speculative.  Shifts in international economic factors will affect the property cycle in South Africa.

Redefine will continue to grow of its portfolio through strategic acquisition at income enhancing yields. In the current economic context Azizollahoff believes that there could be numerous smaller direct property owners seeking to dispose of properties that were purchased at low interest rates and inflated prices who will now be paying more for their borrowings. This increased gearing may result in these speculative investors selling their properties, creating buying opportunity for listed funds.

However, Azizollhaoff stresses that the cyclical opportunities presented by this market will only continue for a limited period. “Once the market stabilizes, firstly overseas investors who have divested from emerging markets due to the inherent higher risks will return and secondly, flows of retail investments that have been withdrawn from the unit trust funds offering property related investment products will flow back and yields in the listed property sector will again rerate,” says Azizollahoff.

The distribution will be paid to Redefine linked unitholders on Monday, 31 July 2006.

Publisher: Redefine Income Fund
Source: Redefine Income Fund