Redefine unit falters

• Real estate group is concerned by underperforming offshore arm, says CEO

Diversified real estate investment trust (Reit) Redefine Properties says its investment in Redefine International is underperforming. Redefine International focuses on the UK and Germany.

Redefine Properties CEO Andrew Konig told investors on Tuesday that the company, which was launched as an offshore arm of Redefine, had battled recently. “We are concerned,” he said.

Redefine International said earlier it would pay a lower proportion of its income as dividends to serve the demands of its UK shareholders, who are seeking capital growth. This means Redefine Properties will receive lower investment income from it.

Redefine’s holding in Redefine International is worth about R3.19bn. It also owns significant stakes in Australia’s Cromwell and Poland’s Echo Polska Properties. Its market capitalisation is worth about R62.9bn and its direct local property portfolio is worth more than R53bn.

Redefine International has a market capitalisation of about R10.6bn. Redefine owns about 30.1% of the company.

In 2017 to date, Redefine International’s share price has slumped about 11%. It returned -38.60% last year, including capital and income returns, said Stanlib head of listed property funds Keillen Ndlovu.

UK-focused property stocks were battered in 2016 and remained under pressure as a result of continuing uncertainty about the UK’s planned exit from the EU. Property stock prices fell drastically after the June 23 Brexit vote, recovering only slightly since then.

Management has decided to move to a European Public Real Estate Association (Epra) distribution metric as a method of paying out a lower proportion of income as dividends.

“We want to be more fiscally conservative in a low-growth UK environment,” deputy CE Stephen Oakenfull said earlier.

“The company will be moving to an industry standard Epra-based earnings metric.

Adopting this earnings measure, adjusted only for necessary company-specific adjustments, allows for a closer alignment between earnings and operating cash flow.

“To facilitate our leverage objectives and to provide greater financial flexibility, a mediumterm dividend pay-out ratio within the range of 90% to 95% of our rebased earnings measure will be targeted. In the short term, some degree of flexibility in the pay-out ratio may be required to smooth distributions to shareholders following the transition to the Epra-based earnings metric,” he said. The amount Redefine Properties’ market capitalisation is worth. The group owns about 30.1% of Redefine International. The holding in the unit is worth about R3.19bn.