Redefine hybrid strategy

Posted On Friday, 27 July 2001 03:01 Published by eProp Commercial Property News
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Hybrid property loan stock company Redefine says its business practice of combining direct property holdings and listed property instruments offers special benefits for the group.

Brian AzizollahoffHybrid property loan stock company Redefine says its business practice of combining direct property holdings and listed property instruments offers special benefits for the group, and it intends to stick with this approach.
The benefits are higher portfolio liquidity and flexibility. Listed property-instruments holdings can be modified more easily than direct holdings in property.
This liquidity enables Redefine, the only hybrid property loan stock on the JSE Securities Exchange SA, to track market trends.
The office sector recently overtook the retail sector as the best performer in terms of total returns. It will take a considerable period for an ordinary property loan stock company overexposed to the retail sector to restructure its portfolio, while Redefine can simply sell units deemed to have a retail bias in a short time.
Redefine does not have to worry much about issues of geographical and sectoral spread as these are taken care of by the variety of instruments in which it has stakes.
Following the sale of 15 properties to ApexHi for R164-million last week week, Redefines split between direct and listed property reflects a bias towards the listed instruments. Listed instruments account for 65% of total holdings while direct property stands at 35%.
CEO Peter Penhall said this bias was temporary and the group should reclaim its preferred fifty-fifty split soon. The group had earmarked R500-million for direct property acquisitions and R150-million for listed paper investments. Penhall said the sale of the 15 properties was part of a broader strategic goal.
'There are two principle benefits to Redefine, being a substantial reduction in exposure to the retail property sector and, in the medium to long term, the deal offers enhanced income flowing from the yield differential of the two asset classes,' said Penhall.
The sale deal cuts the size of Redefines retail slice from 38% of total portfolio to 17%. Penhall said the retail sector and in particular the neighbourhood shopping centre category - in which the group is overexposed - had come under pressure from a realignment in consumer shopping patterns.
The property sale was being settled through the issue of new ApexHi linked units at a combined issue price of R10 a linked unit parcel, comprising 60% A-class and 40% B-class linked units. A-class units had a first call on income at 17% yield with the balance - expected at a 26% yield - being attributed to the B-class units.
The sale deal sees Redefines holdings in ApexHi rising to R100-million or 28%. With an expected return on investment exceeding 20%, ApexHi becomes one of the top earners for Redefine, said Penhall.
Taking the ApexHi deal into account, the value of Redefines asset base stands at R1,3-billion, with market capitalisation in the order of R630-million.
For ApexHi, the Redefine deal formed part of a broader move in which the group acquired 91 properties, boosting the value of its portfolio to R1,2-billion.
ApexHi was listed on the property loan stock sector of the JSE in March this year, and focuses on investing in high-yielding properties, with quality tenants.
ApexHi joint MD Brian Azizollahoff said the recent acquisitions would significantly reduce the funds exposure to volatility in its income stream, and provide wider geographical spread.
Before the acquisitions, all ApexHis properties were in Gauteng.
The new portfolio will consist of 106 properties, with 70% situated in Gauteng, and the balance situated in Northern Province, KwaZulu-Natal, Free State, Western Cape and Northern Cape.

Last modified on Saturday, 26 April 2014 10:21

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