Go­ing where op­por­tu­nity knocks

Re­de­fine Prop­er­ties’ es­tab­lish­ment of an of­fice in Europe con­firms its off­shore strat­egy, with the com­pany now look­ing par­tic­u­larly to ex­pand into lo­gis­tics prop­er­ties in Poland.

Finweek English Edition - - In Brief In The News - By Glenda Wil­liams

the JSE-listed real es­tate in­vest­ment trust (REIT) Re­de­fine Prop­er­ties re­cently an­nounced its plan to es­tab­lish an of­fice in Europe, en­tic­ing out­go­ing Hyprop CEO Pi­eter Prinsloo to head up Re­de­fine Europe. With that came the REIT’s stated in­ten­tion to ad­vance its off­shore strat­egy through di­rect in­vest­ment in Cen­tral and Eastern Europe.

Re­de­fine is tar­get­ing 25% to 30% of to­tal off­shore as­sets. And it looks to be bank­ing on Poland in the drive to reach this num­ber. In­vest­ment in Poland al­ready com­prises a hefty 13% of the REIT’s cur­rent 21% off­shore ex­po­sure, up from 19% a year ago.

In Poland, Re­de­fine is pri­mar­ily ex­posed to the re­tail sec­tor through Pol­ish-based EPP in whom it has a ma­jor­ity in­ter­est, as well as Char­iot Top Group through its 25% stake.

But it in­tends build­ing a sig­nif­i­cant lo­gis­tics plat­form and has al­ready in­vested R3.1bn in nine lo­gis­tics prop­er­ties across Poland.

The Pol­ish in­dus­trial mar­ket is ben­e­fit­ting from a sig­nif­i­cant in­crease in de­mand for lo­gis­tics space on the back of ro­bust re­tail growth.

Re­de­fine’s lo­gis­tics drive has much to do with the Pol­ish govern­ment’s re­cently in­tro­duced lim­i­ta­tions on agri­cul­tural land trades.

Ear­lier in the year, it en­tered into a five-year ex­clu­sive pri­or­ity right for a pipe­line of 24 new ware­hous­ing and lo­gis­tics de­vel­op­ments with Panat­toni, a lead­ing lo­gis­tics prop­erty de­vel­oper in Europe. Two of these devel­op­ment projects have al­ready been com­mit­ted to.

“Con­trol of agri­cul­tural land means it is be­com­ing dif­fi­cult to re­zone to in­dus­trial,” Re­de­fine CEO An­drew König tells fin­week. “We be­lieve there will be a scarcity of in­dus­trial land that will chase up prices, es­pe­cially in light of the in­creas­ing num­ber of man­u­fac­tur­ers set­ting up in Poland.”

Says 36ONE As­set Man­age­ment an­a­lyst Wes­sel Baden­horst, “Once govern­ment starts re­strict­ing ac­cess to land, then the value of the [zoned] land will in­crease in the long term.”

Re­de­fine, says Baden­horst, is more

All told, Re­de­fine’s ac­tions sug­gest that its medi­umto long-term plan is to be­come a South African and Pol­ish fund.

op­por­tunis­tic off­shore than other funds.

“Re­de­fine wants to go where the op­por­tu­ni­ties are at any given point in time,” says Baden­horst. “They seem to be less mar­ried to a spe­cific re­gion,” he says, cit­ing the REIT’s dis­in­vest­ment in both Spain and Ger­many.

And a “di­vorce” from Africa (out­side of South Africa) and the UK is wait­ing in the wings. Re­de­fine in­tends dis­pos­ing of its African (ex­clud­ing South Africa) as­sets, and no longer re­gards its in­vest­ment in the UK through RDI REIT as core.

Then there’s Aus­tralia. Re­de­fine has not ex­plic­itly voiced its Aus­tralian as­sets as non­core. But ac­tions speak louder than words. Dur­ing the year it ex­ited Cromwell and sold its 50% in­ter­est in North­point, the sales fetch­ing R5.2bn and de­ployed it into the Pol­ish lo­gis­tics plat­form.

But what of its two stu­dent ac­com­mo­da­tion de­vel­op­ments in Aus­tralia?

Says Baden­horst: “Re­de­fine is get­ting good yields on its as­sets, but is con­cerned that the mar­ket may be­come over­heated. And it is con­cerned about im­pend­ing tax changes.

“Re­de­fine says stu­dent prop­erty is over­priced and this might present an op­por­tu­nity to re­cy­cle the as­sets. It sug­gests to me that they may con­sider that as non-core as well.”

All told, Re­de­fine’s ac­tions sug­gest that its medium- to long-term plan is to be­come a South African and Pol­ish fund, adds Baden­horst.

Re­de­fine, which re­ported its re­sults for the year to 31 Au­gust 2018 re­cently, lifted full year dis­tri­bu­tion by 5.5% and grew to­tal as­sets to R98.7bn. Prop­erty as­sets con­sti­tute R91.3bn. Its loan-to-value (LTV) for the pe­riod was 40%, down from 41.1% at the pre­vi­ous re­port­ing pe­riod. Dur­ing its re­sults pre­sen­ta­tion, the group said its pri­or­i­ties for 2019 are the phas­ing out of non-re­cur­ring in­come, op­ti­mis­ing cap­i­tal (in­cludes re­cy­cling cap­i­tal and low­er­ing LTV closer to 37%), and ac­cel­er­at­ing trans­for­ma­tion. It’s fore­cast­ing dis­tri­bu­tion growth of 4% to 5% for 2019. ■ ed­i­to­[email protected]­week.co.za

An­drew König CEO of Re­de­fine

Wes­sel Baden­horst An­a­lyst at 36ONE As­set Man­age­ment

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