Redefine ready to embark on acquisitions

Posted On Monday, 26 April 2010 02:00 Published by eProp Commercial Property News
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The South African property sector presents companies such as Redefine Properties with a scenario that is “extremely” favourable for accretive deals capable of enhancing a property company’s bottom line.

Mike FlaxRedefine Properties executive director Mike Flax, who is responsible for acquisitions and mergers, said on Friday Redefine could spend up to R8bn on acquisitions in the next 12 months.

This figure could include the probable incorporation of Hyprop Investments, with its high-value portfolio containing such properties as Canal Walk, Hyde Park Shopping Centre, Mall of Rosebank and The Glen Shopping Centre.

Flax said Redefine’s planned acquisitions would be partially funded by “streamlining the current portfolio”.

Redefine plans to sell off about 40% of its total stock, getting rid of the smaller, less profitable properties and focusing on fewer, larger, quality A-grade complexes.

“It could be argued that, as we are still in a post-recession phase with little likelihood of an upturn in the immediate future, this is not a good time to be selling any property — but the truth is that we are getting above book value on our smaller assets.

“The reason for this is that these are often attractive to private investors and to owner-users,” Flax said.

The “cleaning out” of Redefine’s portfolio, he said, would work to the advantage of the company’s property management team who would take on full responsibility for the portfolio at the end of this year. Their lives, said Flax, would be simplified and they would be able to be more efficient by having fewer properties to manage.

Asked if the planned acquisitions would involve significant debt on Redefine’s part, Flax said that initially the company could increase its borrowings. But this, he said, would not raise its gearing percentage rate above the low 30s, where it now stands.

Flax said several factors had come together to create “good” buy opportunities for a group such as Redefine, which had both cash and credit resources on tap.

“Firstly, many of those landlords who built their portfolios on debt are now under pressure from the banks to de-leverage and have been forced to dispose of properties at below market value. This obviously works in favour of those companies able to buy right now,” Flax said.

Secondly, he said the listed property sector had performed far better than most anticipated and at Redefine this had resulted in the share price rising 8,5% in the first quarter of the year — against 5,5% for the overall listed property index.

“This, in turn, means that the capitalisation rate on our units is lower than the yield obtainable on quality, available properties, making it logical for us to place our stock and build the property portfolio. The net profit on these transactions ultimately, of course, goes to the shareholders.”

Last modified on Saturday, 26 April 2014 15:16

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