20% increase in Redefine distributions

Posted On Tuesday, 30 October 2007 02:00 Published by eProp Commercial Property News
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Redefine Income Fund’s interest distributions to linked unitholders have grown by a noteworthy 20% from last year, substantially outperforming the sector

Brian AzizollahoffThe fourth largest JSE Limited listed property company today announced a distribution of 14.65 cents per linked unit for its final quarter, ended 31 August 2007. This, together with distributions of 36.6 cents per linked unit for the nine months ended 31 May 2007, gives a total distribution for the year of 51.25 cents per linked unit, which substantially increased from the 42.7 cents per linked unit for the previous year.

Redefine Income Fund CEO Brian Azizollahoff attributes this growth to various factors including the company’s acquisition of Spearhead Property Holdings Limited. “Sustainable income from property trading, contractual rental escalations and continued control of expenses all contributed to the increased distribution,” explains Azizollahoff.

In addition to the 20% growth in distributions for this year, Redefine further anticipates distributions to grow by at least 14% higher to 31 August 2008.

“Growth in distributions will benefit from demand for space at higher rentals, favourable yields on new developments, sustainable trading revenue, strong growth from the listed securities portfolio and debt management,” says Azizollahoff.

During the year Redefine’s net asset value increased by 24% to R7.83 per linked unit excluding deferred taxation, its total assets grew by 61% to R9.9 billion and, likewise, it’s market capitalization also increased by 60% to R6 billion. Gearing decreased by 17% to a conservative 34%, with a current average all-in interest rate of 9.99% on borrowings and the interest rate on 67.8% of borrowings fixed for an average of five years. 36.9% of the weighted average number of Redefine linked units in issue traded during the year.

Redefine Income Fund is a relatively low-risk investment company by virtue of its diversification through the spread of premium fixed property ownership in prime locations, with quality tenants on long leases as well as its investment in select listed property securities. The innovative structure provides flexibility for this unique high yielding property loan stock.

During the year Redefine’s directly held the property portfolio which now comprises 53% of Redefine’s total assets, as compared to 47% at the close of the previous year grew by 101%. The independently valued portfolio is made up of 95 investment properties, land under development and properties held for development and trading with a carrying value of R5.22 billion.

Redefine purchased the Makhado Shopping Centre in the Northern Province, Newcastle Pick ‘n Pay in KwaZulu-Natal and vacant land in Isando, Gauteng for a total of  R128.2 million.  The land in Isando has been developed as a 40,000m2 warehouse let to Pepkor Limited on a 12 year lease at a cost of approximately R100 million. Redefine sold 15 properties for a total of R277.4 million, 13 of which comprise the portfolio for the Dipula Property Fund enterprise development initiative.

At 31 August 2007, the property portfolio had a gross lettable area of 777,334m2 and 44.3% of leases, by gross lettable area, expire in 2011 and beyond. The properties in the portfolio are located in the major metropolitan areas and certain select growth nodes in South Africa and are made up of 41% industrial properties, 34,7% offices and 24,3% retail. During the year 61,300m2 of vacant space was leased and leases in respect of 71,244m2 were renewed, resulting in an occupancy level of 97.8%.

“In a market where new investment properties are not readily available for purchase, Redefine is creating its own opportunities to grow its property portfolio with suitable assets. Redefine now undertakes the development of commercial, retail and industrial properties,” Azizollahoff points out.

In a short space of time, it has become one of the largest development companies in South Africa. Redefine has 10 projects under development at an estimated cost of R773 million with an average initial forward yield of 9.7%. Two trading developments at an estimated cost of R186.5 million for Redefine are currently underway with an average return on investment of 14.5%. A further eight developments at an estimated cost of R1.7 billion for Redefine are planned. These are funded from Redefine’s cash resources and by way of development finance.

During the year under review, Redefine’s listed securities portfolio increased by R627.5 million after acquisitions of R587.7 million and disposals of R572.6 million. Redefine disposed of its entire holding in CBS Property Portfolio Limited to the Public Investment Corporation for R198.2 million in cash.

Diversifying its investments, Redefine is the first South Africa listed property company to invest offshore. “We chose a solid fund with proven managers, Coronation International Real Estate Fund (CIREF) which is listed on the London Stock Exchanges Alternative Investment Market (AIM). The results of this strategy are already bearing fruit,” says Azizollahoff. During the year Redefine exercised its rights in terms of a rights issue undertaken by CIREF and received 3,182,500 CIREF shares at a cost of £1.45 per share for a total consideration of R68,77 million.

Redefine’s commitment to the Department of Trade and Industry’s B-BBEE Codes of Good Practice and the Property Sector Transformation Charter resulted in the facilitation of two new successful  enterprise development initiatives, Dipula Property Fund (Pty) Ltd and Mergence Africa Property Investment Fund (Pty) Ltd, each in which Redefine a 49% stake.

Furthermore, after the close of its financial year, Redefine reached agreement to effect a BEE transaction in terms of which 80 million Redefine linked units, constituting approximately 10% of the current issued linked units in Redefine, are to be issued to a selection of strategic and broad-based BEE parties who will acquire 48 million and 32 million linked units respectively for an aggregate cash amount of R548 million. Following its implementation approximately 15.5% of the Redefine linked units will be held by BEE parties.

The linked units are to be issued at a price of R6,85 per linked unit, a discount of approximately 15% to Redefine’s linked unit market price of R8.08 at close of trade on 10 October 2007, an economic cost of 1.5% of Redefine’s market capitalisation.  “This cost will be outweighed by the commercial and strategic benefits to be derived by Redefine from the BEE transaction as well as its related strategies and transformation objectives in the medium to long term,” says Azizollahoff. The transaction is subject to Redefine linked unitholder approval.

Subsequent to the year end, Redefine has sold, but not yet transferred, Old Oak Shopping Centre in Belville, for R17,5 million at a yield of 8,7%.

Last modified on Tuesday, 22 April 2014 19:12

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