Redefine Properties, the JSE’s second-largest real estate counter, with a market cap of R21,5bn, is by no means shooting out the lights yet — growth of 3% in income payouts for the year to end-August is, after all, well below the sector’s average of 6%-7%.

But shareholders are no doubt pleased that the counter’s latest set of results is in line with forecasts. That’s unlike some prior reporting periods, when management didn’t deliver on its promises.

Redefine CEO Marc Wainer concedes that investor sentiment may well have been hurt because results in recent times have not always lived up to market expectations. But he’s confident that the company is on track to achieve sustainable growth in distributions over the next few years on the back of a restructuring strategy aimed at improving the quality of the group’s core portfolio.

Progress has already been made in getting rid of the rats and mice in the SA-based portfolio. The disposal strategy includes the recently approved unbundling of 98 smaller buildings to Arrowhead Properties for R1,72bn.

Wainer says the number of its SA properties will shrink to around 260, from more than 400 two years ago. At the same time, the average property value will increase from R50m to R80m.

There will also be a shift away from smaller provinces like the Eastern Cape, the Northern Cape and North West, where Wainer believes local authorities are becoming increasingly dysfunctional. “We are concerned about the provision of services in a number of local authorities and have accordingly chosen to vote with our cheque book,” Wainer says. Redefine will in future concentrate the bulk of its portfolio in the Western Cape, KwaZulu Natal and Gauteng, he says.

Meago director Jay Padayatchi says the jury is still out on how successful Redefine’s restructuring strategy will be. “Some investors actually liked having access to Redefine’s smaller, highyielding properties.”

He notes that management’s intention to include nonrecurring fee and trading income in distributions could create some volatility in earnings.

In the meantime the stock continues to trade at a discount, at a yield of 8,9% compared with the sector’s 8%.