RDI looking for more industrial logistics assets

RDI, the listed income-focused real estate investment trust (Reit) previously known as Redefine International, aims to continue reducing its exposure to retail and increase its exposure to commercial and industrial logistics assets.

RDI chief executive Mike Watters, the chief executive of RDI, said yesterday that the big increase in Internet shopping had depressed the demand for physical retail, with distribution gaining.

Watters said RDI, for example, had let one of its very large distribution units near Gatwick Airport to Royal Mail, which was really moving into the modern world in terms of packaging distribution.

“Letters and smaller items have dropped significantly, because everybody emails and they don’t post letters. But parcel delivery for retail and commercial has gone up and up and up.

“Those are the type of users we are pinpointing and we want to have units of the size that the likes of the Royal Mail of the world want to rent. We have another big unit let to DHL. That’s the type of investments we are looking for,” he said.

Debenhams, the British multinational retailer operating under a department store format in the UK and Ireland, yesterday reported a record loss and plans to close 50 stores.

Watters said Debenhams was under pressure and looking to reduce its footprint in the UK and very much likes the Edcon group in South Africa.

He said RDI had exposure to Debenhams in its shopping centres, which accounted for 16 percent of the company’s total portfolio.

Watters said RDI would like to reduce its shopping centre exposure “as quickly as we can” but the market was quite weak at the moment and it was difficult to sell them.

“But over time we would see our retail exposure reduce further and we would continue increasing our exposure to commercial and industrial logistics side,” he said.

RDI reduced its overall retail exposure from 60 percent in August last year to 45.3 percent at end-February and now to 16 percent.

But Watters said RDI would not be reducing its exposure to retail parks, where the demand remained strong.

He said that flexible office space was also definitely a growth sector but it would not compete with WeWork, which provides co-working space.

Watters said that traditionally in London companies used to sign 10- to 15-year leases, which in turn gave them very little flexibility, but the trend with smaller companies that used 500m² to 1 000m² were increasingly now taking up flexible space where they signed a lease for a year or two and had the ability to expand or to shrink.

Shares in RDI dropped 0.32 percent on the JSE yesterday to close at R6.18.