Redefine banks on Poland for fresh growth
REDEFINE Properties is banking on logistics growth in Poland after hard lockdown restrictions locally and dividends withheld by offshore investments dampened results for the year to August 31.
Tough trading conditions locally and overseas from Covid-19 saw distributable income per share fall 49 percent to 51.50 cents, from 101 cents last year.
Revenue, however, fell only marginally by 0.1 percent and signs of green shoots had begun to appear, chief executive Andrew Konig said on tuesday.
Collections from tenants increased to 96 percent and 97 percent of billings in September and October, after averaging only 84 percent during the worst of the Covid-19 crisis.
He said a strategy to streamline assets and strengthen the balance sheet to withstand ongoing uncertainty would continue.
An offshore asset base valued at R15.6 billion (2019: R22.6bn) – compared with local property assets of R65.4bn (2019:R72.8bn), provided geographic diversification.
And while the Australian market was being exited, a pipeline of opportunities in the Polish logistics space was being built.
“We are leveraging off operational efficiencies, making inroads in reducing our loan-to-value ratio (LTV), being ruthless rather than reckless in right-sizing our asset footprint, and are set to benefit from growth in Poland,” said Konig.
He said leasable area of 527 000 square metres in Poland had been expanded by 160 000 square metres, and there were plans to take this to well over a million square metres over a year or two.
This would be funded with the 163 million euro (R3.2 billion) sourced from the introduction of an equity investor into European Logistics Investment.
In the past year R1.3bn was spent on offshore expansion, R700m of which was in Poland.
“We see a lot of opportunity in logistics in Poland, based on the impetus by the government on infrastructure investment, but also from growing demand for warehouse space as more people move to e-commerce,” he said.
The group was liquid – disposals in the year amounted to R13.4bn, of which only R7.1bn was banked in 2020.
Local property disposals realised R894m, the exit from RDI REIT raised 106.3m pounds (R2.3bn), and a residual investment in Cromwell was sold for AU$53.3m (R674.6m).
Chief financial officer Leon Kok said Redefine's priority during the year was to address the LTV. However, LTV had increased to 47.9 percent from 43.9 percent.
“Our LTV improvement initiatives – which included being the first SA REIT to implement a dividend payout policy and exit non-core investments in the UK and Australia – yielded an LTV reduction of 5.7 percent,” he said.
However, the destructive impact of Covid-19 had the opposite effect on asset values, lifting LTV 7.8 percent and negating the improvement initiatives, he said.
Further initiatives would be required to get LTV below 40 percent by August 2021, he said.
These included further optimisation of property assets, limiting cash outflow from dividends, as well as completing the sale of Redefine's interest in Journal's two student accommodation properties in Australia, he said.
A decision to declare a dividend was deferred until February 2021. A mechanism was being developed to ensure there was no adverse impact on LTV from the payment of a dividend.
Kok said rental relief packages to support tenants amounted to R318.5m, while credit loss provisions increased by R310.4m.
The active portfolio vacancy rate increased to 7.4 percent from 5.1 percent in the same period last year, while the tenant retention rate was 90.8 percent, from 92.2 percent. Local office vacancies were at 13.9 percent.
Redefine shares closed 1.27 percent higher at R2.40 yesterday.