Redefine Properties cushions against volatility

May 08 2017 16:19
Lameez Omarjee
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Johannesburg – Redefine Properties’ net profit for the six months ended February 28 2017 increased 250% compared to the previous period.

The bottomline of the listed Real Estate Investment Trust’s (REIT) more than doubled from R1bn reported in 2016 to over R3.5bn, according to the unaudited interim results released on Monday.

The group reported revenue generation of R3.6bn for the six months, up 8.4% compared to the same period in 2016. Operating profit increased 11.2% from R2bn to over R2.3bn. An interim dividend of 44.82c was declared, which is up 7.5%.

In light of the “political issues” ahead of the ANC elective conference later this year as well as the recent ratings downgrades, chief executive Andrew Konig said the results show the REIT is well positioned to “weather the coming storm”.

The results show that Redefine’s local property portfolio, which is diversified, is valued at R67.7bn. Its international investments are valued at R16.4bn. The international investments contributed 22.7% to shareholder value. International real estate investments contributed 19.5% of property assets, the group reported.

“Geographic diversification remains very important as we access stable revenue flows and broaden our funding sources at attractive interest rates,” Konig said in a statement. He expects offshore assets' contribution to earnings to increase to around 25%.

Management’s focus over the period was to protect, expand and improve existing properties.

“We are benefiting now from a strategy adopted some six years back to upgrade the quality and efficiency, as well as  extend the lease maturity profile of our local portfolio and geographically diversify into real estate markets operating in hard currency markets,” explained Konig.

The group expanded into student accommodation in Australia and invested a further €59m (about R874m) for JSE-listed Polish group Echo Polska Properties.

READ: A pioneer of the REIT sector

Redefine reported a net cash inflow of R683m, an improvement on the cash flow of R165m for the previous interim period. Its financing activities reported an outflow of R2.5bn, compared to the inflow of R292m for the previous period.

Konig explained that a “significant portion” of international debt was refinanced over the period. He said this is a “very big achievement” and will stand Redefine in “good stead” given the volatile environment ahead.

In January Redefine acquired all of the shares in The Pivotal Fund Limited as part of a strategy to position the group competitively in the commercial sector. As a result the group acquired 32 Pivotal properties worth R10.4bn. 

Further acquisitions include an 11.8% stake in pan-African income property fund Mara Delta Property Holdings, which is dual-listed on the JSE and the Mauritian stock exchange. It also acquired a 37.1% interest in Nigerian-based Oando Wings Development.

“While the risk of further ratings downgrades is a real concern, our diversification strategy will continue,” said Konig. He added that the group will “purposefully seek out” real estate poised  for sustained growth.

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