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Redefine Properties reports solid financial results for FY24

Redefine Properties reports solid financial results for FY24: A pivotal turning point for the property sector

Johannesburg, 4 November 2024 – Redefine Properties (JSE:RDF) has reported solid improvements across its key operational metrics for the financial year ending August 31, 2024. 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.

Andrew König, CEO of Redefine, stated that the decrease in political risk, along with a stable electricity supply, has boosted confidence. He noted, “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.”

Redefine has focused on preparing for a potential recovery in the property cycle. The reported enhancements in operating metrics, though starting from a low baseline, are primarily the result of strategic initiatives. These include efforts to simplify the asset base, optimise capital by restructuring R27.7 billion in local debt, develop talent, and expand sustainability initiatives like the implementation of solar PV systems to meet energy needs.

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. “Our strategy in this sector is bullish regarding capital allocation, as we have access to developable land in prime locations near key transport hubs, which should create a strong pipeline of leasing opportunities.”

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.

In Poland, EPP’s core portfolio has achieved an occupancy rate of 99.1% (FY23: 98.4%), with renewal reversions turning positive at 0.2% (FY23: -7.2%), which signals a return to market rental growth.

“The Polish economy is stabilising, and we are beginning to observe a rebound in retail spending growth due to moderating inflation and electricity costs returning to pre-energy crisis levels,” König explained. “Likewise, the logistics sector is performing well, supported by a market that favours infrastructure expansion, particularly in Western Europe and Germany.”

ELI, Redefine’s Polish logistics platform, has an occupancy rate of 93.4%, and the 62,601 sqm of developments completed during the period are fully occupied.

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 have acknowledged concerns regarding the complexity and high leverage of our joint ventures. To address these issues, we have developed a comprehensive plan and programme that will be implemented over time. Although this is not an immediate process, we have a medium-term strategy designed to tackle the challenges associated with these joint ventures, including necessary corporate actions. We are also pleased to report that institutional investment is returning to the Polish market, which supports the launch of our action plan.”

Nyawo said that the solid operational results were offset by the net finance charges increasing by 15.1% to R2.1 billion. “However, if we look at the quality of our earnings, it is pleasing that 95.8% of FY24 distributable income is recurring in nature; demonstrating the business’ ability to generate sustainable earnings in a tough operating environment.”

Nyawo stated that a major priority this year has been developing an efficient funding model to support the growth ambitions of the property platform. During the period, Redefine achieved a significant milestone with its innovative R27.7 billion common debt-security structure, which is anticipated to enhance competition among funders.

“The substantial refinancing completed in FY24 has resulted in a very low-risk debt maturity profile for us. In FY25 and FY26, no more than 10% of our group debt will be maturing, and with access to liquidity of R4.8 billion, our business is able to absorb headwinds and cease opportunities as they arise.”

He noted that the SA REIT’s loan-to-value ratio for FY24 stood at 42.3%, slightly exceeding the target range of 38% to 41%. The acquisition of the Mall of the South contributed 1.1% to this figure, which Redefine had previously communicated to the market. There are plans in place to reduce this ratio within the target range over the medium term.

“Finally, 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%.”

Looking ahead, König said that Redefine is optimistic about FY25, with expectations for distributable income per share to range between 50-53 cents. “We are aware of the geopolitical risks that could disrupt inflation trends and monetary easing. Therefore, we are committed to improving our business performance by enhancing operational efficiency, restructuring our debt, and further simplifying our asset base. This approach will enable us to achieve risk-adjusted returns throughout market cycles. We are transitioning from merely identifying opportunities to actively capitalising on them, building on the progress we’ve made over the past year and focusing on the opportunities we identified in FY24.”

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.”

 

Spear REIT reports growth and resilience for HY2025

Strength in strategy: Spear REIT reports growth and resilience for HY2025

Cape Town, 24 October 2024: Spear REIT Limited (SEA: SJ), the only regionally specialised Real Estate Investment Trust (REIT) listed on the JSE, has reported its interim results for the half-year ending on the 31st August 2024 (HY2025). With REITs experiencing varied performance due to challenging macroeconomic conditions, Spear delivered solid results, showcasing the resilience of its portfolio and its strategic focus on the Western Cape. The board of directors maintained a 95% payout ratio and announced a Distribution Per Share (DPS) of 39.53 cents for the six months ended on the 31st August 2024.

Quintin Rossi, CEO of Spear REIT Limited, commented on the results: “Within the context of the persistently tough trading environment, we are pleased with Spear’s performance in HY2025. The interim period has established a solid foundation to build on for the remainder of the financial year. Our Western Cape-focused strategy, coupled with our hands-on asset management approach, have allowed us to continue delivering value to our stakeholders as Spear delivers a mission statement-aligned financial and operational outcome for the reporting period. We continue to be optimistic as the economic landscape shows signs of improvement, particularly since the formation of the Government of National Unity (GNU) in South Africa, the easing off of loadshedding thanks to the stabilisation of the national grid, and the commencement of the interest rate tapering cycle by the SARB, which have all positively impacted investment confidence.” According to Rossi, these are encouraging signs for the real estate market, as sovereign bond yields compress, inflation comes under control and economic expansion commences, the property market is likely to see improved occupancy rates, increased tenant activity, and stronger financial performance.

Key financial and operational highlights

  • Distributable income per share (DIPS) for HY2025: 41.61cps (up 2.05% from HY2024)
  • Dividend per share (DPS) for HY2025: 39.53cps (up 3.14% from HY2024)
  • Payout ratio: 95.08%
  • Occupancy rate: 95.08%
  • Loan-to-Value (LTV) ratio: 23.93%
  • Interest Cover Ratio (ICR): 3.01 times
  • Tangible Net Asset Value (TNAV) per share: R11.74
  • Collection rate: 98,05%

Spear achieved a 6.34% increase in group revenue excluding smoothing, driven by strong leasing activity, reducing vacancies, and maintaining in-force escalations. The net property operating profit for HY2025 saw an increase of 1.92% compared to HY2024 excluding smoothing, reflecting resilient expense management despite difficult trading conditions. Commenting on Spear’s performance, Nesi Chetty, Fund Manager and Head of Property at Stanlib, said, “Leasing fundamentals across the Spear portfolio have been strong over the last 12 months. A buoyant jobs market, scarcity of land, an increasing Business Process Outsourcing (BPO) presence in the Western Cape, along with strong asset management from the company, have contributed to the strong year-to-date occupancies and escalation rates.”

The like-for-like contractual income growth was 9.54%, and the like-for-like net property operating profit grew by 9.48%, driven by decreased vacancies and strong in-force escalations and rental reversions. During the interim period, rental reversions improved to +5.35%, indicating positive outcomes in lease renewals and relets.

At the interim period, Spear’s portfolio was valued at R4.22 billion, consisting of 27 high-quality assets, with a total gross lettable area (GLA) of 405,709m². While the period presented several challenges, including increased property operating and management expenses due to the severe impact of storms and record-breaking rainfall in Cape Town between June and August 2024, profitability was marginally impacted by the higher-than-normal repairs and maintenance interventions required.

Management remains laser focused on absorbing these additional costs in the final six months of FY2025. During the interim results presentation, Rossi commended his team for their hands-on, ‘get stuck in’ approach, which he credits as a core element of the company’s culture and a key driver of its success.

The portfolio’s occupancy rate improved by 200 basis points to 95%, with the commercial office sector being a standout performer, seeing over 9,000m² of commercial office space let during HY2025. This resulted in a 616 basis points improvement in commercial office occupancy, indicating a strong return-to-office trend within the Western Cape. The company’s aggressive marketing and leasing initiatives have contributed to these positive outcomes, as management prioritised reducing overall vacancy rates, particularly in the office portfolio.

At the end of HY2025, the overall portfolio vacancy rate had decreased to 4.92%, down from 6.88% in FY2024. This improvement is well below the national average vacancy rates recorded by IPD and SAPOA, further emphasising Spear’s effective asset management strategy.

Spear’s contractual escalations averaged 7.47%, and the weighted average lease expiry (WALE) remained steady at 26 months, providing stability to the company’s income stream.

Spear’s balance sheet remains robust, with gearing reduced to 23.93% from 31.60% in FY2024. This was largely due to the disposal of non-core assets, including the Liberty Life Building in Century City and 142 Edward Street in Tygervalley. These disposals have strengthened the company’s liquidity position and enabled management to allocate capital into strategy aligned Western Cape investment opportunities.

The company has no immediate debt refinancing obligations, thanks to its proactive management of the debt portfolio, ensuring well-staggered refinancing terms and a defensive expiry schedule across its funding partners.

Spear’s rental collections remained strong, with a collection rate of 98.05% for HY2025, reflecting once again, effective tenant management and operational oversight.

In closing, Chetty added, “From a valuation perspective, Spear is trading at an attractive forward dividend yield, while still reflecting a notable discount to its latest reported NAV. The company maintains a robust pipeline of value-creating opportunities, including planned brownfield redevelopments. Spear is steadily becoming a core holding in many property funds, particularly within the small to mid-cap segment.”

 Outlook for FY2025

Looking ahead, management is optimistic about the prospects for the remainder of FY2025 as it integrates the newly acquired real estate portfolio, valued at R1.146 billion, from Emira Property Fund. This follows the announcement via SENS on 23 October 2024, confirming the successful implementation of the transaction. Following this acquisition, Spear’s total portfolio value has increased to R5.36 billion, with a market capitalisation of R3.2 billion.

Rossi added: “We remain focused on executing our strategic priorities for FY2025. With our high-quality portfolio, strong tenant relationships, and active asset management approach, this is an exciting time for the real estate sector and Spear is well-positioned to continue delivering value to our shareholders and stakeholders in the months ahead.”

Rossi concluded the interim results’ presentation by providing full-year distribution guidance, forecasting DIPS growth of between 2% – 4% compared to FY2024, with the payout ratio maintained at 95%. This outlook is supported by key assumptions, including no load-shedding for the remainder of FY2025, reduced vacancies, successful lease renewals, and stable tenant performance in absorbing rising utility and municipal costs.

“Our full-year guidance reflects the strength of our team and portfolio,” said Rossi. “We are confident that, with these positive indicators, we can continue to achieve our strategic objectives for the year.”

 

Redefine restructuring of R27.7 billion secured evergreen funding

 

Redefine Properties launches an industry leading structure with R27.7 billion evergreen secured funding arrangement

 

Johannesburg, 15 October 2024 – Redefine Properties has achieved a major milestone with the successful restructuring of a R27.7 billion secured funding arrangement. This transaction, the largest of its kind in the South African listed property sector, marks a significant shift in how Redefine manages its funding. The innovative structure, designed as an evergreen arrangement, has streamlined business processes and set a new benchmark within the sector.

Redefine previously entered into bilateral loan agreements with funders, who were each given a segregated pool of security with a portfolio of assets. These facilities have now been restructured to allow for all funders to participate in a common shared security pool, which is governed by a common terms agreement upon which all funders can base their terms.

The portfolio of assets that will be used as the common security pool, comprises of 127 properties valued at R46.3 billion, is which represents 72% of Redefine’s direct South African property portfolio.

“By taking the assets that we believe are the core cash generation backbone of our business for the foreseeable future and putting that on equal footing to all of our funders, we are leveraging the strength of our well-diversified investment portfolio, giving us flexibility to price our debt sustainably throughout market cycles,” said Ntobeko Nyawo, CFO of Redefine.

Underlying flexibility agreements for the common security pool will give us the ability to maintain market relevant commercial agreements. Unlike other security structures of a similar nature, Redefine has chosen not to have a single clearing pricing point, giving the company the flexibility to manage concentration risk over time and throughout market cycles when refinancing maturities.

There are 11 funders including the big four SA banks and the typically large institutional investors in the secured lending space. However, the beauty of the structure is its evergreen nature without any lifetime limitations and will thus allow lenders to come and go over time seamlessly.

The new structure will govern Redefine’s lending going into the future with the terms agreed to applying to Redefine’s secured lending going forward. “Essentially, the common security pool structure will be the single market access point for any lender to offer secured debt to Redefine, giving it the flexibility to supply debt on an end-to-end basis,” Nyawo explained.

A simplified, efficient channel for raising debt

The benefit for Redefine is to ease the operational administration of its funding arrangements as the new structure materially simplifies the ways in which the business brings in funders of secured debt due to referencing a single security pool while enabling a channel to secure that debt in an efficient manner.

“One of the key benefits of bringing funders into a singular, common collateral pool is that it will enhance Redefine’s secured debt market appetite,” Nyawo said. “By ringfencing the funding to a single lender, the bilateral funding left little room for competition”.

As a consequence of the lending structure referencing a far more diversified security pool, funders gain cross-sector exposure that enhances their diversification, reducing concentration risk for lenders and thereby improving the credit profile.

It also makes it possible for Redefine to more effectively add potential differentiated funders like a Development Finance Institution (DFI) to the mix of secured funders, whereas in the past Redefine was unable add a DFI to another lender’s portfolio.

Importantly, the structure is underpinned by a mechanism, which has been clearly defined and agreed to by the common terms arrangement, that allows for the release of assets from this pool to support Redefine’s active asset management strategy.

“Through this restructure, Redefine has created a sustainable, diversified funding model that reduces market shadowing of debt and enables the execution of strategic priorities including the efficient sourcing of capital and diversify our funding base,” Nyawo said.

Sourcing capital efficiently throughout market cycles

“Creating a sustainable funding vehicle is central to our business model,” he added. “Since our company primarily depends on gearing, it is essential that we source capital efficiently through market cycles, which we have accomplished with this transaction. When funding pools were dispersed in the past, Redefine was beholden to the incumbent lender’s risk and pricing considerations as opposed to market clearing gearing and pricing. In contrast, a common security pool should support our earnings over time much more when market cycles are turning in our favour. Equally so, when the cycles turn against us, we will be much more adept at managing the challenges brought on by the rising cost of debt.”

Nyawo said that the extensive collaboration with the 11 key funders was instrumental to concluding this transaction, which is the largest common security structure the market has ever seen. “This extremely complex transaction was completed in less than six months, which is a testament to the tremendous work and commitment of the team leads of our partner lenders and advisors.

RMB was the mandated lead arranged for Redefine and Webber Wentzel acted as lenders counsel.

He added that the restructuring coincided with a time when fundamentals required for listed property re-rating, such as economic growth, which the new government of national unity is targeting at 3.3%, are encouraging and resulting in increased confidence in the sector. This, combined with the ability to raise capital efficiently, means Redefine is better positioned to fund both organic and inorganic growth opportunities, he said.

“The common funding pool’s evergreen structure we believe is fundamental to our long-term balance sheet management and truly supports our strategic ambitions of building a simplified, diversified cash accretive listed property investment portfolio,” Nyawo concludes.

ENDS

 

 

Growsmart Celebrates Top Learners at 2024 Finals

Growsmart Educational Programme Celebrates Western Cape’s Top Learners at 2024 Finals

Cape Town, 09 October 2024 — The Growsmart Educational Programme, an initiative by Growthpoint Properties, celebrated the brightest young minds in the Western Cape at the pinnacle of its annual competition season. The final event took place at The Lookout, V&A Waterfront, where top-performing learners in literacy, mathematics, and story writing were honoured.

Launched in 2010, Growsmart is a nationally and internationally recognised initiative fully endorsed by various Education Departments and serves as the flagship programme of the Western Cape Department of Education. This impactful programme aims to enhance educational outcomes in underperforming schools by engaging learners in grades 4, 5, and 6 through a dynamic, curriculum-based competition. Focusing on literacy, mathematics, and story writing, Growsmart helps intermediate learners improve critical academic skills while fostering creativity and problem-solving abilities.

2024 Western Cape Competition

The 2024 competition kicked off in April, with schools from districts including Cape Metro and West Coast District participating. Following multiple rounds and semi-finals, the best 15 learners in literacy and mathematics and 10 learners in story writing advanced to the final competition.

In the Literacy Competition, the 15 finalists were selected from 327 participants and tested on their ability to spell, define, and use words in sentences, alongside their understanding of verbs, nouns, idioms, and adjectives. The winners are:

  • 1st Place: Delft South Primary School
  • 2nd Place: Teske Primary School
  • 3rd Place: Dagbreek Primary School

This marks Delft South Primary School’s second consecutive win, earning the school an iPad Lab valued at R350,000, further enhancing its learning resources.

In the Mathematics Competition, 15 finalists out of the 321 participants tackled questions ranging from BODMAS to problem-solving and mental maths. The winners are:

1st Place         Idasvallei Primary School

2nd Place        Diazville Primary School

3rd Place        Eikendal Primary School

The Story Writing Competition is a project-based, mentor-led event in which learners

submit their own original written stories. Nearly 166 storybooks were submitted. The

winners are:

1st Place                     Tuscany Primary School, Olwam Sondlo

2nd Place                    Helderkruin Primary School, Sobo Ndongo

3rd Place                    Kenmere Primary School, Jordan Theart

Most Creative             Kenmere Primary School, Kylah Simons

The winning schools were awarded prizes to further support their educational efforts and enhance their students’ learning experiences.

Inspiring Future Leaders

Jewel Harris, Founder of Growsmart and General Manager of Growthpoint Properties Cape Town, applauded the dedication and talent of this year’s participants. “Congratulations to everyone who took part in this year’s interactive programme. It has been more focused, relevant, engaging, and innovative than ever before. Well done to the winning learners, mentors, and schools.”

Shawn Theunissen, Head of Corporate Social Responsibility at Growthpoint Properties, echoed these sentiments, adding, “The winning learners and mentors represent the leaders of tomorrow and today. We’re incredibly proud of them all. Investing in positive social impact across the entire education value chain not only transforms lives today but also shapes future generations.”

A Platform for Continued Success

Beyond the competition, Growsmart provides learners with additional opportunities through the Growsmart Bursary Programme, supporting their ongoing educational journey.

As Growsmart concludes its fifteenth year in the Western Cape, the programme continues to expand its reach and impact, celebrating growing successes in the Eastern Cape and Limpopo. Growsmart remains dedicated to creating educational opportunities that empower communities and foster future global citizens within a more inclusive society.

Guests were greeted with a complimentary coffee generously sponsored by Vida e Caffè and served with a smile by their friendly baristas.

Congratulations to all the Western Cape winners!

Growthpoint advances sustainability goals with automation and 1ai

Growthpoint Properties advances sustainability goals with automation and 1ai 

Growthpoint Properties (JSE: GRT) has developed a bespoke automation solution in partnership with 1ai, a leading provider of intelligent automation solutions, to streamline the processing of municipal invoices while unlocking valuable sustainability data. The initiative forms part of Growthpoint’s broader efforts in using pioneering technology to enhance operational efficiencies and reduce environmental impact to achieve its ambitious sustainability goals.

With its extensive South African portfolio spanning around 350 buildings, Growthpoint processes more than 1,100 municipal invoices each month, a task requiring around 160 hours of manual handling, and diverting resources from other vital activities. This makes it difficult to extract and apply critical data related to utility consumption, such as power and water use information.

Recognising the potential for automation to transform this process, Growthpoint collaborated with 1ai to develop a bespoke system that automates the invoice processing workflow while extracting and structuring the useful sustainability data embedded within the documents. The result is a process that combines advanced Robotic Process Automation (RPA) with powerful text extraction algorithms, designed to manage the varied formats and complexities of municipal invoices.

The project has already delivered substantial operational benefits. In addition to saving 475 hours per month across both invoice processing, as well as the extraction and analysis of sustainability data, Growthpoint can now redirect resources towards other efforts, such as enhancing sustainability reporting and supporting the company’s broader environmental, social, and governance (ESG) goals.

Engelbert Binedell, Chief Operating Officer at Growthpoint Properties, says, “Automation has significantly improved our invoice processing and data analysis capabilities. By accurately capturing detailed utility data, we are now better equipped to meet our sustainability targets and optimise resource management across our properties. This improves our efficiency and enhances our strategic decision-making process.”

Rudolph Janse van Rensburg, Founder and CEO of 1ai, adds, “Our partnership with Growthpoint demonstrates the practical value of intelligent automation in managing complex processes. By streamlining the processing of municipal invoices, and thereby unlocking critical sustainability data, we have helped Growthpoint enhance operational efficiency while gaining valuable insights that support their sustainability goals. Our collaboration reflects a shared commitment to leveraging technology to drive efficiency, sustainability, and innovation in the property sector.”

The success of the initiative is a key component of Growthpoint’s strategy of incorporating intelligent automation across various aspects of its operations, with plans to expand the application of RPA to other critical areas, including vendor onboarding and contract lifecycle management.

Binedell says the automation initiative aligns with Growthpoint’s vision of remaining at the forefront of sustainable property management and setting new standards for operational excellence and environmental stewardship within the industry.