Archives for August 29, 2023

Real estate investment trust (REIT) Redefine Properties (JSE:RDF) said today in its pre-close update for the year ending 31 August 2023 that the business has been stabilised, with the company’s South African and Polish portfolios demonstrating “remarkable operational resilience” across all sectors in the face of the challenging operating environment.

While market-shifting dynamics such as the aftershocks of the pandemic, elevated inflation, an energy crisis and higher funding costs remain on the company’s radar, the update noted that there is cause for optimism that the property cycle has bottomed and that 2024 will mark a notable turning point for the sector.

Real estate fundamentals are building positive momentum

Notably, the upward trajectory of inflation is tapering, with early signs of cooling-off, which brings with it more predictable interest rate expectations. Meanwhile, the government and business’s plan to remove obstacles to inclusive economic growth and job creation through priority interventions is expected to restore much-needed confidence.

“We are encouraged by the fact that real estate fundamentals are beginning to build positive momentum that is expected to translate to future upside potential,” says Redefine CEO Andrew König.

“This has provided us with a renewed sense of optimism. However, we know that risks like geopolitical tensions, elevated inflation, high interest rates, rising energy prices and ongoing load shedding require an unwavering commitment to fostering strategic resilience as we look to pursue growth and deliver sustainable value.”

As such, Redefine is ensuring that it:

• Invests strategically in efficiency interventions to reduce reliance on municipal-supplied utilities
• Optimises capital by diversifying funding sources to spread concentration risk
• Improves operational efficiencies through disciplined cost management and by digitising processes to transform the tenant experience.

Signs of stability

Despite load shedding and related cost headwinds, Redefine reports that operating metrics across its South African portfolio are gradually improving and showing signs of stability. Demand for P- and A-grade office space in sought-after locations has strengthened, while the group’s industrial portfolio continues to be defensive and is performing well in a competitive landscape.

Considering the prevailing uncertainty around the energy outlook and associated risks to operational performance, Redefine remains focused on improving its energy efficiency and bolstering business resilience by investing in renewable energy in South Africa.

For instance, the group is participating in the City of Cape Town’s first electricity wheeling pilot project that is enabling commercial entities to sell electricity back to the City’s grid. Redefine is undertaking a 5.9MWp solar wheeling project on the roof of its Massmart Distribution Centre at its Brackengate 2 development.

Tapping growth opportunities

As an example of its efforts to realise growth and upside for shareholders despite market uncertainty, Redefine is unlocking opportunities in the retail, logistics and self-storage market segments in Poland.

“We remain confident about the potential in the Polish market,” explains König. “Our exposure to Polish retail and logistics provides stability; recovery of the shopping centre performance in that market is well on track, with positive retail sales forecast for the next two years.”

The update noted that rental rates continue to rise in the logistics market segment, particularly in sought-after locations and buildings with modern technologies and ESG solutions.

“The self-storage market in Poland represents an emerging asset class with untapped potential,” says König. “Poland has significantly fewer facilities than other European markets and demand is underpinned by robust micro business needs, representing 48% of overall users, which is above the EU average of 29%.”

The group reported strong working capital generation, with reason to expect improvements in the near term based on projected collections, which supports a healthy and stable liquidity profile.

The company’s SA REIT loan-to-value (LTV) at the end of May 2023 increased to 42.3% (HY2023: 40.9%) on the back of a weaker Rand. Redefine expects the LTV to moderate towards its internally set medium-term target of 38% to 41% during 2024. DIPS is expected to be in line with guidance of between 48 cents and 52 cents for the year ended 31 August 2023.

The company’s closed period commences on Friday, 1 September 2023 until its annual results are released on Monday, 6 November 2023.

 

Redefine Properties, one of South Africa’s leading real estate investment trusts (REITs), has issued another green bond as it leverages its sustainability journey.

Redefine will use the money raised to refinance eligible green assets across its property portfolio aligned to the group’s over-arching, long-term climate-resilient framework. The assets include highly rated green buildings that incorporate various initiatives to improve their energy and water efficiency.

Redefine’s third green bond was oversubscribed 1.9 times with R1.9 billion received in bids and resulted in an upsized allocation to ZAR1.0 billion across 3, 5 and 7 years at an auction on 21 August.

“Demand for the bond issuance was particularly high in the seven-year tenor, resulting in the allocation of ZAR425 million to that tranche, which bodes well for our long-term funding structure,” says Ntobeko Nyawo, Chief financial officer of Redefine. “South Africa’s debt capital market is experiencing a recovery in demand for high-quality commercial instruments with an ESG underpin.”

This green bond will further support the long-term decarbonisation of Redefine’s buildings, focusing primarily on reducing energy consumption through efficiency interventions, mutual collaboration with tenants and solar PV expansion.

“This latest green bond issue further improves our funding match between our assets and liabilities in our capital structure and reaffirms our commitment to placing ESG at the heart of what we do,” Nyawo says. “We believe this will continue to play a critical role in strengthening and solidifying our balance sheet.”

The capital raised will be deployed in refinancing qualifying buildings that have achieved a 4 Star or higher Green Building certification, a tool used to rate the environmental impact and sustainability-related performance of buildings, as defined by the Green Building Council South Africa.

The green bond aligns with Redefine’s sustainability goals to transform its properties into environmentally sustainable and resource-efficient assets.

The green bond also aligns with the International Capital Market Association’s green bond principles. It was listed on the JSE in the Sustainability Segment, a platform for companies to raise debt for green, social and sustainable initiatives.

Nyawo adds that Redefine will continue its strategic participation in SA’s deep and liquid debt capital market as it provides the opportunity to raise competitive funding to enable the group to achieve its mission as it aims to deliver the smartest and most sustainable spaces the world has ever known.

About Redefine Properties

Redefine is a Real Estate Investment Trust (REIT) with a sectoral and geographically diversified property asset platform. Redefine’s portfolio is predominately anchored in South Africa through directly held and managed retail, office and industrial properties, complemented by a strong presence in Poland’s retail and logistics property assets.

Redefine’s purpose is to create and manage spaces in a way that transforms lives, which requires more than a business-as-usual approach: it requires an integrated approach to making strategic choices that will sustain value creation for all stakeholders by putting people and purpose at the heart of what we do and focusing on what matters most by executing our strategic priorities.

Redefine is listed on the Johannesburg Stock Exchange (JSE). By volume, Redefine’s shares are among the most actively traded in the SA REIT sector. This makes it a highly liquid, single-entry point for investors to gain exposure to the South African and Polish real estate markets.