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Tuesday Nov 09, 2021

Redefine Properties resumes dividends for 2021

Redeine Properties' share price surged after a robust balance sheet by the end of the year to August 31 gave it room to resume dividends as well as make an offer for the rest of shares it does not own in Poland's leading shopping centre group, EPP.

Undrawn facilities and cash amounted to R5.8 billion by year-end, while loan-to-value fell to 41.6 percent from 47.9 percent following significant debt reduction.

The Real Estate Investment Trust (Reit), one of the most heavily traded shares on the JSE in terms of volume, declared a 60.12 cents dividend, after not paying one for the 2020 year, and lifted net asset value 2.3 percent to 733.24c. "We have used the opportunity of the pandemic to reset every aspect of what we do," chief executive Andrew König said in an online presentation yesterday.

The group has proposed to buy out all the shares it does not own in Poland-based EPP, and keep it as an unlisted subsidiary.

Excluding properties held for sale, Redefine's portfolio comprises 85 percent South Africa properties and 15 percent in Poland, and this would change to 70 percent South Africa and 30 percent Poland, once the EPP de-listing took place.

König said the EPP de-listing from the JSE and Luxembourg exchanges would restore Redefine's investment in the Polish company to health - EPP had not paid a dividend in 24 months. It would also improve Redefine's credit matrix and allow the group to gain access to EPP's risk management and opportunities, going forward, he said.

Redefine, which has properties worth R81 billion, owns 45.4 percent of EPP. EPP's assets are valued at about €2bn (R34,7bn), including 29 shopping centres in Poland.

Redefine's share price gained as much as 10.23 percent to R5.28 on the JSE yesterday morning after the robust results were released, and closed 13.78 percent higher at R5.45.

Redefine said it would make an offer to EPP shareholders that would afford EPP shareholders an ability to swop their EPP shares for Redefine shares, at an independently verified fair swop ratio.

The proposed deal would, however, be conditional on EPP restructuring, including the sale of non-prime property portfolios to joint venture companies to be owned by EPP and third party investors, which would bolster EPP's balance sheet, generate liquidity and reduce EPP's loan-to-value.

Redefine's portfolio is mainly in local, directly held retail, office and industrial properties, which is complemented by its retail and logistics property assets in Poland.

Redefine's local property assets are valued at R60.3bn. The decrease in the property assets in the current year was due to disposals of R5bn, negative fair value adjustments and rand appreciation.

Milestones on a strategy in 2021 to reduce loan-to-value included disposal of local properties for R1.4bn; exiting local student accommodation to realise cash of R0.8bn; reduced speculative capital expenditure; halted local property acquisitions; and disposal of the Australian Journal Student Accommodation Fund (Journal) properties.

Initiatives were in progress to absorb the adverse impact of distributing 18 months of distributable income and bring the loan-to-value to below 40 percent by August 2022.

These included further disposal of non-core local property assets.

Given the recent reduction in the number of active cases and increase in the vaccine roll-out numbers, Redefine's local retail portfolio was experiencing a steady increase of foot count, but not yet to pre-Covid-19 levels. König said he believed the worst of the impact of the pandemic on the group's operations were over.

To support the sustainability of tenants, rental concessions of R125.7m (R355.3m) were provided, made up of discounts of R98.9m (R268.3m) and deferrals of R26.8m (R87m).

EPP's operational metrics had been encouraging for the first half of 2021, despite Covid-19-related retail limitations.
Ushukela Industrial Park and Chris Hani Crossing suffered combined damages of R148.7m in the looting in July, and insurance claims had been submitted.

Chief operating officer Leon Kok said the office sector remained under pressure due to the weak economy and rising unemployment, but "doomsday scenarios" had not played out. Office vacancies were at 12.9 percent from 13.8 percent a year ago. He said some areas and assets were performing better than others, and in an environment of oversupply and limited demand, there would be a flight to quality.


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