Redefine knocking on the Alsi 40 door
There is a growing appetite for Redef i ne e quit i e s . The beneficiary of those chasing yields has been Redef i ne Properties, its share price having grown by around 25% since November last year. What it also means is that the company is on the threshold of the All Share Index ( Alsi) 40, c urrently number 42 on t he JSE’s recently published Alsi 40 inclusion list.
Redefine, the second-largest listed property company on the JSE by market value, is an internally managed diversified real estate investment trust (REIT) that controls a property incomeearning asset base of R56bn, which i ncreased by some R5bn during the six-month per i od t o 28 Febr ua r y. Its market capitalisation appreciated a considerable 25. 3% during t he half year to R45.6bn, of which 23% now r e p r e s e nt s international ownership, wit h notable i nvestor inf lows from Europe. That i nf l ow − a l most 14 0m units t rading i n a single day − is the consequence of Redefine being included in an international REIT, and it has resulted in significant underlying growth in the counter.
Aside f rom broader i nterest f r om i nvestors i n t he REIT sector, Redefine’s appetite likely stems from some salient features: significant liquidity, effective cost control, tight asset management, a global diversifying and growing portfolio t hat is i mproving i n quality, a tenant retention rate of 89% and improved debt metrics. “Redefine’s solid performance, and growth in distributable income for the half year of 31.4%, ref lects our enhancing acquisitions and successful s t r ateg i es,” s ays Andrew Konig, CEO of Redef i ne. The company reported distribution growth of 7.1% to 39c/share for t he half year to 28 February and Konig is confident t hat t he c ompany wi l l de l i v e r distribution growth of between 7% and 7.5% for the full 2015 year.
Despite c ha l l enging proper t y fundamentals, the JSE-listed REIT has a robust balance sheet. And it is cash f lush even after multiple acquisitions. The deployment of cash where it matters saw the company growing its portfolio signif icantly during the period. In total, Redefine Properties concluded acquisitions of R10.7bn that included 31 direct properties for a total R3bn at an initial yield of 8.5%, and the Leaf portfolio for a collective R4.7bn at an initial yield of 7.8%. Its Western Cape portfolio has been significantly enhanced by the Leaf acquisition. Of the nine properties − all offices and multi-tenanted − three are in Cape Town and make