JSE-listed REIT, Redefine Properties, says its balance sheet is in a stronger position than it was before the COVID-19 pandemic struck and that it should be well-positioned to take advantage of opportunities by the end of the financial year in August.
Speaking during a pre-close media briefing ahead of its February interim results, CEO Andrew Konig said 2021 is expected to be a key turning point. “The strategic initiatives put in place prior to the COVID-19 pandemic a year ago are well advanced and will position us for the eventual upward cycle”.
The major focus for Redefine in recent months has been on preserving liquidity and protecting its loan-to-value ratio (LTV) in the face of ongoing COVID-19 uncertainty, a new variant of the virus and a dreaded third wave of infections.
“We are confident we will be able to continue to improve our position by the end of the financial year and will be back to a situation where we can look at expanding and growing the business, with 2022 expected to look better.”
While 2020 was the worst year in history for listed property, a rebound will hinge on a successful rollout of the vaccine, and diminished chances of further upsurges of infections.
“COVID-19 taught us a lot of things – to reset our sights, not be overambitious and be realistic. Prior to the crisis, Eskom was our country’s chief economic risk, but COVID-19 quickly usurped that situation, although recent load shedding has not helped matters. Fortunately, the prospects of a successful vaccine rollout is now providing much needed confidence,” says Konig.
With all eyes on the Finance Minister ahead of Wednesday’s Budget, Konig says the market will welcome growth-orientated reforms to further improve confidence levels. However, the ongoing uncertainty and evolving unknowns, means Redefine cannot yet provide market guidance on distributable earnings for 2021.
But Konig says the strategy remains to continue to sell non-core assets to lower the LTV ratio rather than raising equity at highly dilutive pricing. In this regard, the sale of Australian student accommodation asset Leicester Street in December returned R2.5bn and R1.2bn of local disposals have been transferred during the last six months.
Reits are focusing on reducing their LTV ratios and Konig says “we are trending the right way, albeit slowly having chosen the tougher route” to getting back to the sub 40% level. A key risk is the impact of ongoing uncertainty on asset valuations.
The interim dividend decision for 2021 will be made at the time of approving the release of the half year results.
“We can’t pre-empt the outcome of deliberations on whether an interim dividend will be paid, but we will always act in the best interest of all stakeholders, while complying with all our regulatory obligations,” says Konig.
At the end of August 2020, the group’s local assets, which include Centurion Mall, premium office buildings Alice Lane and Rosebank Towers, were worth R65.4bn and its offshore assets R15.6bn.
“We are in the process of obtaining asset valuations for the half year, but it is evident that most of the pain was taken last year and the decline in value is expected to not be more than 3% – and could be even less,” says Konig.
“We are focusing on the variables we can control in this environment to position ourselves for the eventual upward cycle. By positioning our asset platform to be diversified in SA across the retail, office, and industrial sectors and geographically through Polish logistics – which is doing exceptionally well – and Polish retail, we have simplified our asset platform and eliminated a number of risk universes. As a consequence, we are well positioned to withstand prevailing market conditions,” says Konig.
Going forward, Redefine’s strategic priorities are centred on fulfilling its purpose to create and manage spaces in a way that changes lives. This is being done through collaboration, innovation, and differentiation.
“We need to be relevant to users’ evolving needs. We need to be agile and alert to the changing operating environment to ensure we are constantly refining our portfolio to remain relevant. We are fortunate to have repositioned Redefine with a capital structure that is well placed to thrive in the new normal,” concludes Konig.