16% distribution growth for Redefine Income Fund investors

Posted On Tuesday, 10 October 2006 02:00 Published by eProp Commercial Property News
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Redefine Income Fund today announced a 16% increase in total distributions for the year ended 31 August 2006 of 42.7 cents per linked unit. This represents a total income and capital growth of 41% and a total return of 35%.


Marc Wainer

Redefine's non-current assets at 31 August 2006 increased by 53.5% to R6 billion while its net asset value (NAV) per linked unit increased by 32.6% to R5.66 (2005:R4.27). The company's operating costs as a percentage of contractual rental income have decreased to 19.1% in 2006 from 23.3% in 2005.

Redefine CEO Brian Azizollahoff explains that this robust set of results can be attributed to the strong performance of Redefine's property and listed securities portfolios together with the lower cost of debt financing secured through the restructuring of a significant portion of the company's debt.
"It was also an exciting year for Redefine with the company undertaking its first offshore listed property investment and launching a BEE enterprise development initiative," notes Azizollahoff.

Redefine is one of the most liquid counters in the listed property sector with 66% of its weighted average number of linked units having traded during the year.

"Growth in Redefine's interest distributions per linked unit for the year ending 31 August 2007 will continue to outperform the sector average of 10%," says Azizollahoff.

Redefine's property portfolio represents 42.2% (2005: 52.4%) of total non-current assets and, at 31 August 2006, 97,3% of the property portfolio was leased. During the year 30,151m2 of vacant space was leased and leases in respect of 37,486m2 were renewed. As a result Redefine's lease expiry profile has continued to outperform the sector average with 54.6% of leases expiring in 2010 and beyond.

During the year under review the company acquired an industrial property in Isando, Gauteng for R16,1 million and disposed of 8 commercial properties in Gauteng for R53,8 million. The net effect of the acquisition and disposals during the year reduced the number of properties from 73 to 66. Redefine's sectoral spread by revenue comprises 61% offices, 23% retail and 16% industrial.

The value of the property portfolio increased by R448 million during the year, as appraised by independent external valuers, increasing net asset value by 19% or 80 cents per linked unit, before deferred taxation.

Redefine's listed securities portfolio increased in value by R1.60 billion (86.5%) after acquisitions of R1,24 billion and disposals of R33,76 million. In addition Hyprop units valued at R413,7 million were acquired at a cost of R294,62 million in exchange for SA Retail units and ApexHi units valued at R370,4 million were acquired at a cost of R188,43 million in exchange for Prima units.

Redefine also invested R111 million for 18.1% of CIREF, a property investment company listed on the London Stock Exchange's AIM and managed by Corovest International. "This niche fund has huge upside potential and the benefits of this sound Pound-backed investment present an unparalleled opportunity," Azizollahoff explains.

During the year Redefine issued 28,3 million units in terms of a rights issue and 27,8 million units in exchange for 22,7 million units in Paramount Property Fund Limited.

R871 million of Redefine's debt was refinanced through a debt capital market finance arrangement achieving a saving of 0.55% per annum thereon. Redefine's effective cost of financing is 9.99%, a noteworthy reduction from 10.05% in 2005, and 71.2% of borrowings are fixed for periods of three, five, seven and ten years.

In accordance with the strategy to maintain gearing below 45% Redefine's borrowings of R2,46 billion represents a gearing ratio of 41%.

Redefine demonstrated its commitment to the Property Transformation Charter and Department of Trade and Industry's BBBEE Codes of Good Practice by undertaking an enterprise development initiative, Dipula Property Fund (Pty) Ltd ("Dipula"). This has been established with Dijalo Property Services (Pty) Ltd.
Dipula is owned 51% by Dijalo and 49% by Redefine. The asset management of Dipula is conducted by Dipula Asset Management Trust, a 50/50 joint venture between Dijalo and Madison. Redefine will, on fulfillment of all conditions precedent, dispose of 12 properties to Dipula for R153 million at an initial yield of 10.5%. Dijalo will introduce a portfolio of similar value to establish an initial portfolio of R300 million.

"The intention is to focus on skills transfer and to assist Dipula to reach critical mass, at which point it can list," notes Azizollahoff.

Motown Central, a motor showroom with mini industrial units, has been sold for R65 million and Fontainebleau Village, a retail centre, has been sold for R18 million. Transfer of both properties has been registered.

Redefine has already seen an active start to its new financial year and has made an offer to all unitholders of Spearhead Property Group Limited to acquire 100% of Spearhead linked units to be settled by the issue of 6.18 Redefine linked units or R31.00 in cash for each 1 Spearhead linked unit held provided that in aggregate the cash consideration will be limited to 50% of the total consideration payable. The transaction is subject to Redefine and Spearhead unitholder approval and regulatory approvals.

Redefine has also purchased a superbly located retail centre in Makhado (formerly Louis Trichardt) for R95 million. This 13,500m2 centre with Pick 'n Pay as the anchor tenant will open in November 2006. A 1,7 hectare tract of vacant land in Isando has also been acquired for R5,7 million on which development of industrial premises will commence after transfer has been registered.

Payment of interest distribution of 11.2 cents per linked unit for the quarter ended 31 August 2006 will be made to linked unitholders on Monday 30 October 2006.

Last modified on Monday, 05 May 2014 08:57

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