JSE-listed real estate investment trust (Reit) Redefine Properties has posted distributable income per share (DIPS) of 50.02c and a dividend of 42.52c apiece for the financial year ended August 31.

This compares with DIPS of 51.53c and a dividend of 43.80c in the prior financial year.

Having achieved a payout ratio of 85% for the reporting year, the group comfortably maintains its dividend payout range of between 80% to 90%.

CEO Andrew König says the financial year marked a crucial turning point for the property sector as easing interest rates and increasing confidence on the back of less political risk and stable electricity supply led to better property fundamentals and a more favourable operating environment.

The Reit’s net asset value per share increased from 765.96c apiece in the prior year to 788.28c in the reporting year, while Redefine’s total assets increased from R99.4-billion to R101.9-billion.

Redefine reported a higher loan-to-value ratio of 42.3% in the year under review, from 41.1% in the prior year, with the acquisition of the Mall of the South property having contributed to this figure.

The Reit plans to reduce this ratio within the targeted 38% to 41% range over the medium term.

The group’s South African occupancy level is currently at 93.2%, while its occupancy level in Poland is at 99.1%.

About R64.7-billion, or 65%, of Redefine’s assets are located in South Africa, comprising 28% retail, 22% office, 13% industrial and about 1% other properties, while the balance of its portfolio is located in Poland, totalling R34.7-billion worth of assets across mostly retail properties and some logistics, office and self-storage properties.

Redefine has focused on preparing for a potential recovery in the property cycle, including through strategic initiatives such as simplifying its asset base, restructuring R27.7-billion in South African debt, developing talent and expanding its solar PV network.

During the year, Redefine added 8 MW of solar capacity to its portfolio, with an additional 18 MW currently in development. Once completed, Redefine will have a total solar installed capacity of more than 60 MW.

The company currently generates 18% of its South African retail portfolio requirements from solar PV, while its Polish retail, logistics and office assets use 25%, 86% and 100% green energy, respectively.

COO Leon Kok says tenant retention has become challenging owing to heightened competition from excess supply in the property sector; however, Redefine’s tenant retention rate of 90% reflects the quality of the Reit’s portfolio and the strength of its relationships with tenants.

Redefine reported an overall improvement in renewal reversions from -6.7% in the prior year to -5.9% in the reporting year, which was primarily driven by the retail and industrial sectors.

The Reit’s office portfolio recorded negative reversions of -13.9% in the year, which Kok attributes to market rentals not keeping pace with underlying rental escalations.

Redefine nonetheless benefits from its offices being P- and A-grade assets, since the limited demand in the office market is increasingly focused on higher-quality properties.

The Reit’s industrial portfolio remains resilient, benefitting from long leases and quality tenants. Renewal reversions in the year increased by 5.5%, which reflects underlying activity that supports market rental growth.

Kok says Redefine’s strategy in the industrial sector is bullish regarding capital allocation as the group has access to developable land in prime locations near key transport hubs, which creates a strong pipeline of leasing opportunities.

Commenting on the Polish trading environment, König says the economy is stabilising, with Redefine observing a rebound in retail spending growth on the back of moderating inflation and electricity costs returning to pre-energy-crisis levels.

Redefine is focused on growing its self-storage operations in Poland following the acquisition of TopBox, with seven new developments being considered to potentially increase the group’s net leasable area by 33 277 m².

Meanwhile, Redefine CFO Ntobeko Nyawo says the Reit’s balance sheet remains strong, with the group having reported net operating income growth of 5.2% year-on-year in the South African portfolio to just under R5-billion.

The Polish portfolio delivered net property income of R1.3-billion.

Redefine’s cash distributions from its joint ventures (JVs) also increased to R612-million in the year under review, compared with R334-million in the prior year.

Nyawo says the group has noted concerns about the complexity and high leverage of its JVs and, to address these issues, the Reit has developed a comprehensive plan to undertake necessary corporate actions.

Nyawo adds that the Reit’s solid operational results were offset by net finance charges increasing by 15.1% year-on-year to R2.1-billion.

“However, if we look at the quality of our earnings, it is pleasing that 95.8% of the reporting year’s distributable income is recurring in nature, which demonstrates the business’s ability to generate sustainable earnings in a tough operating environment.”

Looking ahead, König is optimistic that Redefine will deliver DIPS of between 50c and 53c in the 2025 financial year on the back of enhanced operational efficiency, restructured debt and a simplified asset base. 

“Our strategy emphasises organic growth and, as our share price approaches a level where the forward yield aligns with our debt pricing, we can reassess the overall debt-equity balance.

“Additionally, we will offer a dividend reinvestment plan, which seeks to conserve cash for the company and give investors the opportunity to cost effectively reinvest in Redefine’s compelling investment proposition,” König concludes.