Redefine Properties has reported solid improvements across its key operational metrics for the financial year ending August 2024.
The group reported a 57% increase in its headline earnings per share to 33 cents.
This year has marked a crucial turning point for the property sector, as easing interest rates and increasing confidence are leading to better property fundamentals and a more favourable operating environment, it said.
Andrew König, CEO of Redefine, stated that the decrease in political risk, along with a stable electricity supply, has boosted confidence.
"Advancements in strategic reforms, such as Operation Vulindlela and the Government of National Unity's emphasis on supporting local government as well as a commitment to achieving 3% economic growth, are all contributing to this increased confidence, which serves as a cost-effective form of economic stimulus. This, combined with falling interest rates, is helping to propel the property cycle upward," he said.
Redefine's COO, Leon Kok, noted that during the reporting period, most of the company’s South African operating metrics have either stabilised or improved.
"In particular, occupancy rates increased to 93.2%, up from 93.0% in FY23, with noticeable enhancements across all sectors. Tenant retention, which has become more difficult due to heightened competition from excess supply, is nearing 90%.
"This is a strong result that reflects the quality of Redefine’s portfolio and the strength of our relationships with tenants, who are eager to renew long-term leases with us."
He stated that Redefine’s retail portfolio continues to perform well, with occupancy rates for FY24 rising to 95.0% (FY23: 93.6%). “We anticipate further improvements in occupancy rates for FY25 due to positive sentiment and decreasing interest rates, which are expected to enhance consumer spending power.”
Redefine reported an overall improvement in renewal reversions, now at -5.9%, up from -6.7% in FY23, primarily driven by the retail and industrial sectors.
While the office portfolio saw negative reversions of -13.9%, Kok explained that this was due to market rentals not keeping pace with underlying rental escalations. He anticipates stabilisation as market conditions improve.
However, occupancy in the office portfolio continues to benefit from Redefine’s exposure to P- and A-grade assets. The limited demand in the office market is increasingly focused on higher-quality properties, where Redefine holds a more competitive advantage.
Redefine’s industrial portfolio remains resilient, benefiting from long leases and quality tenants, with renewal reversions increasing by 5.5% during the period. Kok noted that this result reflects both the portfolio's quality and the underlying activity supporting market rental growth.
Kok highlighted the increase in solar PV capacity as another positive result from FY24. During the year, Redefine added a further 8MW of solar capacity, with an additional 18MW currently underway. Once completed, this will bring the total installed capacity to over 60MW.
Solar PV accounts for 18% of the energy requirements for the South African retail portfolio, while Polish retail, logistics, and office sectors utilise 25%, 86%, and 100% green energy, respectively.
Redefine’s self-storage operations in that market are also growing, following the acquisition of TopBox. Along with seven new developments being considered, this could potentially increase the net lettable area by an additional 33 277 sqm.
Redefine CFO Ntobeko Nyawo said that from a financial standpoint, Redefine’s balance sheet remains strong. “We achieved distributable income per share of 50.02 cents, in line with our market guidance. Net operating income in our South African portfolio grew by 5.2% to R4.967 billion, demonstrating our ability to maintain profitability amidst challenging conditions.”
The EPP core portfolio delivered net property income of R1.3 billion, which is an improvement on last year’s R1.2 billion, and was largely driven by rental indexation and increased occupancy levels. The cash distributions from the joint ventures also increased to R612.4 million compared with R334.3 million in FY23.
“We are pleased to report that our distribution results include a payout of 22.2 cents for the second half, bringing our FY24 payout ratio to 85%. This is within our established dividend payout range of between 80-90%," said Nyawo.
He added that much of the recent improvement in Redefine’s share price can be attributed to macroeconomic factors, such as increased confidence and the downward shift in interest rates.
“Moving forward, we need to reinforce this improvement with operational results that support our share price. Our strategy emphasises organic growth, and as our share price approaches a level where the forward yield aligns with our debt pricing, we can reassess the overall debt-equity balance.
"Additionally, we will offer a dividend reinvestment plan, which seeks to conserve cash for the company and give investors the opportunity to cost effectively reinvest in Redefine’s compelling investment proposition.”
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