Redefine keeps targets in check

• Property group reports solid performance on strong tenant retention, with annual distribution increasing 7%

Redefine Properties has done well to meet its income growth targets in the toughest operating environment faced by the listed property sector since the 2008-09 recession, according to commentators.

Redefine Properties has done well to meet its income growth targets within the toughest operating environment faced by the listed property sector since the 2008-09 recession, according to commentators.

Few property stocks are expected to beat their distribution payout forecasts during this results season.

Redefine CEO Andrew Konig said on Monday the group had reported a solid performance for the year to end-August 2017, after lifting its full-year distribution 7% to 92c per share.

“Our diversified asset platform has been structured to cope in an environment of prolonged uncertainty and low growth. Reducing leasing risk is very important in the current climate and we have also been investing strategically in what has been a busy year,” he said.

Evan Robins, listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said Redefine’s results were acceptable given it was operating in a slow growth economic environment coupled with weak consumer and business confidence.

“These results reflected the tough environment and there were no positive surprises. Nonetheless distribution growth exceeded inflation and should be around inflation in the coming financial year,” said Robins.

Domestically, Redefine was one of the most active real estate firms during the reporting period. “Locally, developments have been our primary focus in order to expand, protect and improve existing assets that are well located, with projects totalling R3.2bn completed during the year,” said Konig.

Tenant retention was 92.6% during the year, from 91.8% during the same period the previous year. Leases covering 536,310m² were renewed, compared with the 2016 financial year’s 492,126m² at an average rental rise of 2.9%. This was 3.3% in the comparable 2016 year.

Redefine chief operating officer David Rice said the average had fallen because one tenant’s rental had not been revised upward in order for it to be retained. As only a small portion of tenants’ leases came up for renewal each year, the average rental increase in renewals could fluctuate each period.

“In a very competitive market, tenant retention ranks supreme. High retention rates are absolutely critical in this environment,” said Konig.

Domestically, Redefine has a R5.2bn pipeline in progress. This includes a mixed-use development of which Redefine owns 50% in Loftus, Pretoria; Kyalami Corner Shopping Centre; and two land holdings that are being built into industrial sites, Atlantic Hills and S&J Industrial.

Redefine has diversified into Poland, Australia and the UK in the past few years. During the reporting period, its rand hedge earnings were bolstered by it maintaining its 39.5% stake in Poland-focused Echo Polska Properties by investing R860m in its €50m equity raise.

REDUCING LEASING RISK IS VERY IMPORTANT … AND WE HAVE ALSO BEEN INVESTING STRATEGICALLY