Redefine Properties, a listed Real Estate Investment Trust (REIT), said in its pre-close investor update for the half-year ending February 2025 that its earnings outlook has stabilised despite a challenging operating context.
The company reported that its South African portfolio achieved a net operating profit margin of 77.8%, while EPP, its directly owned Polish retail property platform, improved its margin from 66.4% to 71.7%. This led to a consolidated group net operating profit margin of 75.9%.
Redefine CEO Andrew König said that the global path to economic normalisation has been disrupted by changes in US policy under president Donald Trump, which introduced uncertainty around interest rates and inflation. “The stage is now set for a shallow easing cycle, and rates may not reach the levels we previously expected.
“While European interest rates continue to trend downward, escalating geoeconomic tensions cloud the 2025 outlook. To sustain growth in valuations, we cannot rely solely on interest rate movements. Our strategic focus remains on organic income growth, as this will drive value creation in the current market.”
Looking ahead, Redefine said its strategy is focused on disciplined capital allocation, the sale of non-core assets to reduce its loan-to-value ratio, restructuring joint ventures to enhance visibility of income streams, whilst delivering income growth.
König noted that commercial real estate transactional activity is on the rise, which will support the company’s plans to offload non-core assets, with growing interest in the market.
Despite the disruption caused by the delayed national budget speech, König pointed to two promising initiatives from the National Treasury: efforts to remove South Africa from the greylist by October and the restoration of the country’s investment-grade credit rating.
Despite the disruption caused by the delayed national budget speech, König pointed to two promising initiatives from the National Treasury: efforts to remove South Africa from the greylist by October and the restoration of the country’s investment-grade credit rating.
Redefine’s South African portfolio has demonstrated solid performance, particularly in the industrial and retail sectors, which drove a 1% increase in overall occupancy since August 2024.
Additionally, 80% of renewals were completed at stable or increased rental terms, a positive indicator of growth.
The industrial sector has proven especially resilient, with occupancy rising to 97.6%, alongside positive rental reversions in a competitive market.
“The industrial sector continues to be one of our strongest performers, and we see potential for further growth if capital availability allows us to expand,” said Leon Kok, Redefine’s COO.
Conversely, the office sector remains challenged by excess supply and limited demand, except in select nodes. A significant lease renewal resulted in a -17% renewal reversion during the period.
However, Redefine mitigated this impact through strong leasing activity in other locations, such as the Western Cape and Sandton, which benefit from proximity to the Gautrain.
“Demand is focused on high-quality assets, and our active asset management ensures our portfolio remains well-positioned to attract this limited demand,” Kok added.
Growth in Poland
While South Africa faces ongoing challenges, Poland’s economic growth has benefited from European interest rate cuts and social grants that have boosted household spending and retail conditions.
EPP’s core properties have seen impressive occupancy levels of 99.3%, with rental reversions rising from 0.2% to 1.5%. The rent-to-sales ratio remains well below 9%, indicating healthy tenant affordability.
Redefine is pursuing a strategy of selling non-core assets and restructuring joint ventures in Poland to reduce complexity and lower the see-through LTV. “We are exploring options to simplify our joint ventures to either exit or fully own them,” König explained.
Strong cash generation
Redefine’s financial position remains strong, with a liquidity profile of R6.4 billion as of November 2024. The company has also proactively managed its debt profile, including the FY25 maturities that are progressing well on the back of improved liquidity levels in the capital markets.
As of February 2025, Redefine’s weighted average cost of debt decreased to 7.2%, providing some relief amid global inflationary pressures.
Ntobeko Nyawo, Redefine’s CFO, said: “Our focus continues to be on generating organic growth from our existing portfolio, maintaining a strong balance sheet, and weathering the current economic cycle. We are positioning the company to capture opportunities in high-quality assets, while ensuring strong cash generation to support our dividend payouts.”
Redefine enters 2025 with a focus on “living the upside,” aiming for sustainable, long-term value creation. “While some macroeconomic factors, including US policy shifts, remain unpredictable, we are confident in our ability to create our own upside and deliver on our strategic goals,” König said.
Despite macroeconomic challenges, the company is maintaining its earnings guidance for FY25, with distributable income per share expected to be between 50 and 53 cents.
Redefine is the second-largest domestic Reit on the JSE after Growthpoint Properties (R44.5bn), with a market cap of R32 billion.
Shares in Redefine are flat in the year to date but are up around 8% over the past 52 weeks.
