Redefine to fall out of the top 40
• SA’s second-largest property company will drop out of premier cluster
Redefine Properties is set to exit the JSE’s top 40 index at the end of May, leaving the country’s largest real estate company, Growthpoint Properties, and the biggest East European landlord, Nepi Rockcastle, as the only property groups in the esteemed cluster. Redefine, the secondlargest listed property company, first joined the bourse’s top cluster in September 2015.
Redefine Properties is set to exit the JSE’s top 40 index at the end of May, leaving the country’s largest real estate company, Growthpoint Properties, and the biggest East European landlord, Nepi Rockcastle, as the only property groups in the esteemed cluster.
Redefine, the second-largest listed property company, first joined the bourse’s top cluster in September 2015.
Redefine, which is led by CEO Andrew Konig, owns the high-end office buildings Redefine Towers, 90 Grayston and Centurion Mall.
Its share is down 71% year to date and it lost 7.5% to end at R2.22 on Friday.
The top 40 index is designed to be an accurate reflection of the SA stock market as a whole and represents more than 80% of the total market capitalisation of all JSE companies.
It includes the 40 largest, most liquid stocks of the about 400 shares listed on the main bourse of the JSE.
The listed property index has been the worst asset class in SA in 2020, losing 45.7% year to date. The R320bn sector has been pummelled by challenges. In 2018, the SA listed property index lost about 25% after a scandal around the former Resilient group of companies, which were later cleared of any wrongdoing. The sector marginally rebounded by 1.92% in 2019 but still fell short of other asset classes.
WEAK ECONOMY
Landlords have also been battling to raise their rentals in a weak economy, with numerous tenants battling to grow their businesses. The lockdown, which followed the Covid-19 pandemic reaching SA earlier this year, has made things even tougher. Some tenants have not been allowed to trade because they provide non-essential services, leading to some seeking rent relief.
Real estate investment trusts (Reits) are trying to decrease their debt levels but are unable to sell assets as potential buyers struggle to raise financing in a locked-down economy that is in recession. Reits by definition focus on providing income to shareholders. They are supposed to pay 75% of their distributable income as dividends each financial year.
Punters hoped listed property would recover strongly in 2020.
Keillen Ndlovu, head of listed property funds at Stanlib, said listed property was going through its toughest period on record.
“There has been a gradual decline in the property sector’s significance on the JSE after it fell 25% in 2018. It’s been the worstperforming asset class since then. This has been worsened by Covid-19, which has affected the property sector far more than other asset classes or sectors,” he said.
“Redefine’s exclusion from the top 40 doesn’t come as a surprise given the circumstances. Its share price fell further ahead of the speculation,” said Ndlovu. “However, its higher loan-to-value ratio, more exposure to the domestic medium-term note bond market as well as cross currency interest rate swaps and paying some non-sustainable income made it suffer more than other property stocks. Despite all this, Redefine appears to be oversold.”
Investec will also fall out of the top 40. New entrants include mining group Harmony and financial services group Quilter.
Quilter, formerly known as Old Mutual Wealth Management, is a financial services firm formed to take over the UK wealth management business of life group Old Mutual after its separation of businesses.
Growthpoint, with a market capitalisation of R38bn, and Nepi Rockcastle, with a market capitalisation of R51.7bn, will remain in the top 40. Growthpoint’s share price has collapsed 43.6% year to date while Nepi Rockcastle’s has lost 31.49%.