Redefine sees upside potential as SA portfolio stabilises, Polish retail business grows

Real estate investment trust Redefine Properties (JSE:RDF), one of South Africa’s leading REITs, has posted robust financial results for the year ended 31 August 2023, driven largely by the local portfolio’s continued improvement in operational metrics and the growing contribution of EPP, the largest retail real estate asset manager in Poland by leasable area.

Distributable income of R3.5 billion, representing distributable income per share of 51.53 cents for the year ended 31 August 2023, comes in higher than the midpoint of the company’s guidance range of between 48 and 52 cents. The Group has a well-diversified asset portfolio that has grown by R7.9 billion during the year to a current value of R96.8 billion. A full-year dividend of 43.80 cents per share was declared, increasing from 42.97 cents per share in FY22, which signals a healthy liquidity position and a continued commitment to rewarding shareholders despite the constrained environment. Earnings guidance for the 2024 financial year remains flat between 48 and 52 cents per share.

Redefine CFO Ntobeko Nyawo says the sustained value creation is a result of “a stable and healthy balance sheet despite the volatile environment with a loan-to-value ratio of 41.1%, which is marginally outside our internally set medium-term optimal gearing range largely due to Rand depreciation during the financial year.”

He adds, however, that the Group’s balance sheet holds sufficient short-term liquidity headroom of R5.5 billion – consisting of cash on hand and access to committed undrawn facilities. This and a flat debt maturity profile place the business in a comfortable position to mitigate the anticipated volatility of the prevailing constrained capital environment.

While the cost of debt on a weighted average basis across the Group ticked up by 110 basis points, from 6.0% in FY 2022 to 7.1% as a function of higher interest rates, Nyawo says the company is protected against rising interest rates and is well-hedged at 77.1% of total Group debt.

Despite the headwinds and higher-for-longer interest rate environment, which impacts inter alia property valuations and fundamentals, operational performance and currency movements have offset this and resulted in a pleasing 6.4% increase in net asset value (NAV) to R7.66 per share.

Nyawo notes that another good outcome for the business, and an example of focusing on “variables within our control”, like operational efficiency, is healthy cash generation. The collection ratio sitting at 101% demonstrates that the business can fulfil its primary goal of generating cash flow.

“The FY23 outcome is a testament to positive operational performance and strong quality of earnings. It’s a solid set of results that were produced not by relying on any once-offs but recurring income. That underpins the quality of assets in SA and Poland,” he says.

He says Redefine will continue to rely on the positive operational strength of its overall portfolio, which will help the business to absorb some of the shocks of the interest rate environment.

“Redefine’s local portfolio maintained a stable net profit margin of 78% despite the cocktail of challenges absorbed, while EPP’s net profit margin improved by a robust 9% to 74% in FY 2023. EPP’s delivery in its first financial year of ownership in the Redefine stable shows that it has been restored into a yielding asset post the corporate restructure and now makes for a strong contributor to the Group’s earnings,” Nyawo says.

Poland poised for growth

CEO Andrew König says, that despite absorbing some hard knocks this year, the results demonstrate that Redefine’s business remains sound.

The Polish economy has experienced challenges due to geopolitical tensions and resultant high inflation, which peaked in February but is now beginning to come down alongside interest rates. These factors have led to increased consumer spending.

CEO Andrew König says this bodes well for retail powerhouse EPP, which has proved to be a strong contributor to the Group’s earnings despite negative news coming out of Europe.

The company’s Polish logistics platform has expanded by 275,014 sqm because of development activity completed during this period. The total gross lettable area is currently sitting at just under 1 million sqm, which König says puts Redefine in a commanding position in the logistics market in terms of size and scale.

He adds that Redefine’s foray into the self-storage market, which is still in its infancy compared to neighbouring countries, holds the potential to grow substantially. The company, through its acquisition of self-storage platform Stokado, has secured a development pipeline that will increase its net leasable area by about 26,000 sqm.

Local portfolio ‘largely stabilised’

COO Leon Kok says that Redefine’s local portfolio “has largely stabilised, showing signs of improvement across most operating metrics, and is, as a result, well-positioned for organic growth.”

The company completed 745,061 sqm of leases in the year, with new deals accounting for 40% and renewals making up the balance. Kok says this is indicative of underlying confidence and activity in the sector.

Another metric of importance is the tenant retention level, which has increased from 92.1% to 92.8% and speaks to “the quality of our assets and ability to retain existing tenants in a competitive environment, which is critical to unlocking cash flow.”

Although renewal reversion, in other words, the rate at which leases are renewed, is still in negative territory, this year’s result of -6.7% is a substantial improvement on last year’s (-12%). Again, this speaks to the ability to retain quality tenants in quality spaces.

A commendable achievement on the office front is the reduction in vacancies from 14.4% to just below 12%. “In an environment where office prospects have been largely negative, we think this is a phenomenal achievement. It speaks to the quality of our office portfolio, which is 95% invested in A- and Premium-grade office buildings. We will continue to invest in those well-located properties to ensure we attract demand within the office sector,” Kok says.

Transforming challenges into opportunity

Says König: “While some may ruminate on the persistent challenges around real estate and the tough macro-economic factors, we are focused on variables under our control and spotting opportunities in every challenge. That is what we call opting for the upside.”

He said Redefine faced down several market dynamics that have evolved and dissipated, not because they’ve disappeared but because “we have adapted and responded to them and strengthened our business as a result”.

For instance, Redefine addressed liquidity risk arising from the global liquidity crunch by broadening its funding sources through the issuance of green bonds worth R4.2 billion, which has enabled the company to extend a new source of debt funding into its funding book.

The global energy crisis has resulted in cost challenges in Poland, and the business has responded by significantly reducing energy consumption by 20% over two years, while the energy crisis in SA has created an investment opportunity in renewable energy.

Kok explains that the investments made into solar PV capacity (36MW) in SA “will stand the business in good stead going forward”. “This makes Redefine the REIT landlord with the largest fleet of rooftop solar panels in the country, which is highly relevant in an environment where we are not only battling an energy crisis but severe cost pressures. Solar PV makes for a stable investment that can provide an attractive financial return.”

Looking ahead, König says Redefine will continue to shift its emphasis to evolving market dynamics. “Navigating the effectiveness of the structural energy transition and spotting the opportunities as the interest rate cycle starts shifting will be key,” he says. “When interest rates start to come down, it will mark a turning point for the investment real estate cycle.”

He says Redefine will continue to build and manage a simplified property platform that offers enhanced transparency with an extreme focus on holding onto each tenant. “We continue to drive strategies that assist us in understanding and responding to stakeholder needs, leading the charge in ESG and maintaining our high staff engagement rate. We aim to achieve this by staying grounded by our purpose; we’re not landlords; we’re people.”

Redefine redevelops Black River Office Park amid demand for quality office space in the Western Cape

JSE-listed diversified real estate investment trust Redefine Properties (JSE: RDF) will continue to invest in the redevelopment of Black River Office Park, one of the greenest office precincts in South Africa, as it looks to satisfy demand for quality office space in the Western Cape.

Located in Fir Street, Observatory, a vibrant Cape Town suburb, the ultra-modern Black River Office Park boasts a diversity of office space, with a growing retail offering that will be boosted by the retail offerings being built next to the Amazon River Club development.

The office park is comprised of two units, namely South Park and North Park (also known as Observatory Business Park). It’s ideally located just off the N2 freeway, with easy and convenient access to Cape Town International Airport as well as the CBD. The roads within the precinct are being upgraded to ensure ease of access to the Amazon development and Black River Office Park. Berkley Road will be extended to feed into the M5, a major metropolitan route that links to the N1 and N2, as well as Maitland and the northern suburbs.

The gradual upgrade of the various properties began with the refurbishment of the courtyard in North Park. The courtyard was extensively upgraded in 2022. This expansive space within the business park was transformed while retaining its Varschedrift homestead historic heritage elements.

Scott Thorburn, National Office Asset Manager at Redefine, explains that the redevelopment of the internal heritage courtyard includes the introduction of information display boards that accentuate the historic nature of the site. The design and positioning of the courtyard seating areas highlight the foundation of the historic homestead. This, he says, has created a relaxing and serene environment that existing and future tenants can use to break away from the business of the day. The next phase of the courtyard improvements include impactful aesthetic improvements to the four perimeter common area entrance lift lobbies.

The office park’s Central Building renamed Central Park after the upgrade, is being refurbished to provide about 12 245 sqm of P-Grade office space over five floors. Upon completion in April 2024, the building will be an iconic landmark within the node, thanks to its modern design and breathtaking views. Given the shortage of quality office space in Cape Town and the excellent location of the property within a rejuvenated node, there is keen interest from prospective tenants to take up the space. Following a successful upgrade of Central Park, Redefine is refurbishing other buildings and the common area of the park to further enhance the Black River Office Park offering.

Black River Office Park seamlessly blends office and retail space. Outstanding on-site facilities deliver the latest in urban living, with work and leisure elements skillfully integrated. Restaurants, coffee shops, a hair and beauty salon, yoga studio, car wash facilities as well as a Total Ninja inflatable obstacle course, are all available onsite and provide much-needed convenience for tenants.

The 14 buildings within Black River Office Park offer a combined +/- 75 000sqm of office space. Eleven of these buildings have Green Building credentials awarded by the Green Building Council of South Africa. Additionally, the park’s 1 561kWp roof-mounted solar panel installation is one of the 30 largest installations in the world and one of the largest in Southern Africa.

  • Three buildings have 4-star ratings
  • Six buildings have 4-star ratings
  • Two buildings have 3-star ratings
  • Ten buildings feature solar panel installations of 962kWp
  • Four buildings feature solar panel installations of 599kWp

The park’s tenant mix is equally impressive, with blue-chip companies and multinationals finding a business home in the heart of a prosperous node. Some of the tenant mix include Regus, Genesis Medical, Smollan, Flash Mobile, SKAO, SITA, AON, Beck Family Estate, Cavi Brands, Adidas, Sunglass Hut, Asics, Performance Brands, Vida e caffè, The Mill and Press Café, Yo Yoga, Total Ninja, At Stylar, and Black River Office Park Car Wash.

Thorburn says: “All tenants within this development find peace of mind in knowing that the park is equipped with a state-of-the-art security system with on-site connectivity through various fibre providers. Thanks to standby generators that are equipped at each of the buildings, business can flow freely and without disruption when load shedding kicks in.”

Demand for A-grade office space has recently spiked in the Western Cape. “The area that Black River Office Park is in is seeing heightened development activity with, for instance, the new Amazon Web Services building, situated opposite our development, currently in construction. This is set to bring upgrades to the node, including cycling and running trails, and unlock access from the North, South and CBD areas, which will of course benefit our tenants.”

He adds: “Businesses are seeking quality spaces in excellent locations that support business continuity and offer easy and convenient access to amenities and services to complement the fast-paced lifestyles of the modern world”. This is exactly what tenants and prospective tenants can find in Black River Office Park.

“With the upgrades we are currently undertaking, the space will certainly encourage further social interactions, connections, and breakaways from the tenants’ working day. This, in turn, helps promote and enhance wellbeing in the workplace, which has become fundamental in the post-COVID world,” Thorburn concludes.

Spear REIT swims upstream in Western Cape for first part of 2023

SPEAR REIT LIMITED (JSE: SEA) the Cape-based regional Real Estate Investment Trust listed on the JSE, has released its unaudited consolidated interim results for the first half of 2023.

Spear REIT has declared an interim Distribution per Share (DPS) of 38.33 cents for the six months ending August 31, 2023 on a 94% pay-out ratio, demonstrating the company’s dedication to delivering consistent income and value to its shareholders. “I am enormously proud of the interim results generated during this reporting period. The entire company has worked collaboratively to achieve these results,” stated Quintin Rossi, CEO of Spear.


  • HY24 DIPS growth compared to the prior corresponding period: -1.19%
  • HY24 DPS growth compared to the prior corresponding period: +3.21% (based on an increased payout ratio of 94% versus the 90% payout ratio in HY23)
  • Interim distribution per share: 38.33 cents per share based on a 94% pay-out ratio
  • LFL Net Property Operating Profit Growth: +10.14%
  • LFL income growth: +9.80%
  • Portfolio value: R 4.46 billion
  • Portfolio GLA: 426,588m²
  • Asset value growth: 85% from FY23
  • YTD Collection: 98.36%
  • Occupancy: 94.19%
  • LTV: 39.58%
  • TNAV: R 11.62 per share

During the results presentation, Rossi highlighted the company’s exclusive focus on the Western Cape as a key factor in outperforming a somewhat challenged REIT sector. He noted, “The first half of the year tested our resilience, cost controls, and asset management skills. We consider ourselves fortunate to have 100% of our real estate assets located in the Western Cape, where cautious optimism prevails due to the positive effects of semigration, localisation, and international investment boosting real estate markets but not making it immune to trading headwinds.”

Strategic focus and unique advantage:

Confirming the semigration trend, Census 2022 results revealed a substantial surge in population growth in the Western Cape over the past decade, with a remarkable 27% increase, translating to a population of 7.4 million. Premier Alan Winde predicts that this figure is set to rise to approximately 8 million by 2030. The Western Cape remains a shining example of effective governance and administration. The latest findings from the Auditor General, presented for the 2022/2023 financial year, showcased the Western Cape Government’s performance, with all 14 provincial departments and 11 entities receiving a 100% unqualified audit outcome.

Spear is a specialist value investor in this market, with a hands-on asset management approach that has been pivotal in navigating the real estate environment of the Western Cape. A significant competitive advantage for Spear is its reliance on the City of Cape Town for electrical supply. With 93% of its assets powered by the city’s grid, the company successfully shields its tenants from the deeper challenges of load-shedding, making it an attractive proposition for businesses operating within its properties.

Leasing momentum and property value growth:

Despite a persistently challenging economic climate, Spear has achieved success in improving its leasing metrics. Notably, No.1 Waterhouse and the Bloemhof Building reached full occupancy in the first half of the year, with the Liberty Life Building securing fully let status post the half year.  Once again, the focus on the Western Cape has proven to be a strategic advantage, with a total portfolio year-to-date increase of 5.85%.

Spear Bloemhof Tygervalley Copy
Spear Bloemhof Tygervalley

Spear’s current portfolio consists of 28 high-quality assets, averaging R157.5 million per property. In total, the portfolio comprises a Gross Lettable Area (GLA) of 426,588 m2, valued at R4.46 billion. Key elements supporting the income stream include contractual escalations of 7.41%, a Weighted Average Lease Expiry (WALE) of 27 months and a heavily industrial sector exposure of 60% of total portfolio GLA. Spear maintains a consistently high occupancy rate, with vacancies well below national averages, resulting in an overall vacancy rate of 5.81% at the half year.  Spear’s proactive asset management approach and strong lease covenants have led to 3.57% positive rental reversions and 98.36% rental collection rate.

With a Loan-to-Value (LTV) ratio of 39.58%, Spear maintains a strong and well-managed balance sheet. The company’s prudent approach to debt management positions it for sustainable growth and financial stability.

Abp Gtx Park, George Copy
Abp Gtx Park, George

Following the successful rezoning of agricultural land for industrial use, Spear is leading the development of GTX Industrial Park in George. Phase 1 of the Airport Business Park/GTX Park, commenced on October 2, 2023. This project focuses on key infrastructure, providing a strong foundation for future expansion. GTX Park will offer modern industrial solutions, catering to logistics, warehousing, agri-logistics, last-mile delivery, and airport-related services, with unit sizes ranging from 350m² to 10,000m². The total capital investment for Phases 1 and 2 is estimated at R400 million, with an anticipated yield of 9.25% to 9.50%.

Rossi concluded, “The SA REIT sector continues to trade at deep discounts to NAV, which may persist as attractive Government bond yields, attract investor preference. The road ahead for REITs will be challenging as the sector recovers from the impact of COVID-19, load-shedding, reduced payout ratios, and challenging economic conditions. Both businesses and consumers are feeling the pinch of rising costs, with trading pressures remaining prevalent across the real estate sector. Amidst these challenges, the Western Cape undoubtedly remains the single best location to own real estate assets in South Africa.”

Redefine forges ahead with its journey to net zero

Redefine Properties, one of South Africa’s leading real estate investment trusts (REITs), has reached yet another significant milestone in its sustainably efforts.

The REIT has achieved Net Zero Carbon: Level 2 (measured) certifications from the Green Building Council South Africa (GBCSA) for three of its Gauteng-based properties: 90 Rivonia, 2 Pybus and Rosebank Link.

These three Redefine buildings are the first in South Africa to achieve a Net Zero Carbon: Level 2 certification, which is based on actual measured energy consumption data.

A ‘net zero carbon’ building is one that operates with zero net carbon emissions over the span of a year. Such a building is highly energy-efficient and uses renewable energy for its remaining energy requirements, where feasible. It only relies on carbon offsets to balance its remaining energy use as a last resort.

“Green building practices are a key milestone in the journey to net zero,” says Anelisa Keke, Chief sustainability officer at Redefine. “A sound climate change resilience strategy ensures that our capital investments are safeguarded against manageable climate risk exposure and creates long-term value for our stakeholders.”

Redefine achieved its Net Zero Carbon: Level 2 (measured) ratings through a combination of energy efficiency-enhancing projects, on-site renewable energy installations (where possible), and as a last resort, carbon offsets traded through a well-established voluntary carbon offsetting programme. It’s a significant achievement that signals Redefine’s commitment to performance-based sustainability and underscores the company’s leadership in the journey towards net zero carbon.

GBCSA offers two Net Zero Carbon ratings: modelled and measured. ‘Modelled’ ratings refer to predicted energy consumption over a 12-month period for buildings as per their design. On the other hand, ‘measured’ ratings are operational ratings for existing buildings based on actual performance data over a predetermined period.

This is a real milestone,” explains GBCSA Head of Technical, Georgina Smit. “For a landlord to move from focusing on base build energy, which is within their control, to including tenant behaviour is significant. This is a major consideration for the Level 2 rating that has been achieved.”

Adds Keke: “Being certified as net zero provides objective confirmation to Redefine’s key stakeholders that the performance of these buildings has been benchmarked against global best practice efficiency standards. We will apply the learnings achieved during our net zero journey to enhance energy efficiencies broadly across our portfolio, which benefit Redefine and its tenants, in line with our purpose to create and manage spaces in a way that transforms lives.”

With this ground-breaking achievement and commitment to continuously pursue and maintain its net zero carbon status, Redefine is setting a clear example for the rest of the property sector to follow.

Keke says that international tenants and brokers prioritise Green Star-rated offices, which makes Redefine’s buildings more competitive in a tough environment.

Over the last decade, Redefine has played a fundamental role in leading the green building movement in South Africa. With 186 active certifications across the South African property portfolio, Redefine boasts an impressive portfolio of active Green Star-rated buildings in the country.

Commenting on the importance of ESG, Keke explains, “At Redefine, we are on a drive to increase the scale and effectiveness of our ESG initiatives through discussions with tenants. This includes negotiating the inclusion of green provisions in leases, as well as sharing Redefine’s ESG strategies with tenants and their teams and identifying areas of collaboration over ESG initiatives.”

Emira concludes disposal of Enyuka

Emira Property Fund (JSE: EMI) has finalised the sale of its entire 49.9% stake in Enyuka Property Holdings, the rural and lower-income retail property fund. The stake was purchased by their partner, One Property Holdings, which offered to buy Emira out for a total of R641.5 million.

Exiting Enyuka was always one of the potential options for Emira. In 2016, Emira contributed 15 rural retail properties from its direct portfolio for its shareholding in the Enyuka portfolio, partnering with lower-income retail property specialists, One, with the aim of deriving scale with more value and greater growth from the portfolio.

Enyuka has been a good investment for both Emira and One. Enyuka launched with an R575m portfolio in 2016 and has earned an average 13.5% cash yield over the period. Emira exited its investment at R641m, realising net cash proceeds of R511.5m after the vendor loan of R130m provided by Emira to One.

16645 Geoff Jennett Ceo Of Emira Property Fund Copy 1
Geoff Jennett,  CEO, Emira Property Fund 

Geoff Jennett, CEO of Emira Property Fund, comments, “Emira has successfully exited an indirect investment at a favourable price in a single deal aligned with our objectives. The proceeds will be reinvested into core strategies for Emira. Meanwhile, the cash has been used to reduce debt, lowering LTV to around the 42% level.”

Jennett adds, “The transaction timing was ideal for Emira as we intend to use the funds elsewhere. It also suits One as they intend to take Enyuka to their next stage. We are grateful for our successful partnership with One and know that Enyuka will be well looked after.”

Chris van Reenen, CEO of One that acquired the Emira stake, said: “This transaction was the ultimate conclusion of a longer-term joint strategy with Emira in this sector of retail in South Africa and, as much as we are sad to end our close association with Emira, we are delighted to take Enyuka further by improving and growing the asset base”.

Jennett remains convinced that Enyuka’s assets require a different, specialised approach and confirms that Emira isn’t likely to invest directly in this kind of asset again. As part of its diversified portfolio, Emira retains direct investment in 17 larger, urban retail assets with an overall value of some R5bn, with Wonderpark Shopping Centre in Karenpark, Pretoria, being the biggest.

The Enyuka sale is one of several transactions that Emira is progressing, including its sectionalisation and sale of apartments at The Bolton in Rosebank, Johannesburg, which was a joint venture with the residential specialist the Feenstra Group, and has fulfilled its expectations. Emira has also secured control of Transcend Residential Property Fund and is in the process of finalising a scheme of arrangement, which will see Transcend become wholly owned by Emira and delist from the JSE.

“As Emira becomes more mature in each of the diverse sectors in which we invest, it is a natural progression for us to move up the curve towards having greater control of our partnerships. Nevertheless, we remain fully supportive of co-investing when embarking in a new area of real estate that requires specialist skills,” notes Jennett.

The Enyuka disposal confirms Emira’s skill in recycling assets well and recognises the advantages of trading assets in certain instances. “This transaction follows through on our ultimate intention to recycle out of assets in Enyuka’s specialist sub-sector with a good realisation of cash, after creating value through a mutually rewarding partnership with One.”

Emira Property Fund is a diversified, balanced REIT with a track record of delivering stability and sustainability through different cycles. It is invested in a mix of directly-held retail, office, industrial and residential assets, indirectly-held investments with specialist co-investors and has equity investments in grocery-anchored open-air convenience shopping centres in the USA.