Redefine primed after strategic reset 

The past few months have been tumultuous and volatile for the local and global economies, but Redefine Properties (JSE: RDF) is well-positioned for sustained value creation and growth. 

Speaking during the pre-close for the half-year ending 28 February 2022, CEO Andrew König says the company is firmly focused on executing its strategic priorities further in 2022. These include embedding a revised executive committee structure that drives more inclusion and diversity, on-boarding the R26.2 billion EPP portfolio, introducing a climate resilience framework and continuing to de-risk and refine the asset platform.  

“Redefine is now primed for growth after we used the crisis to reset and refine every aspect of what we do. We have exited multiple geographies, optimised what we have and positioned every asset for the best possible sustainable capital and income growth prospects while entrenching ESG into everything we do,” says König. 

At a time when growth is constrained for many peers, Redefine is set to expand its asset base and footprint with the takeover of EPP. The transaction received the thumbs up from shareholders in January and the business will be fully integrated into Redefine during the second half of 2022.  With all conditions fulfilled, the delisting of EPP is set to take place on 8 March. 

“This deal is transformative as it is Poland’s largest retail landlord and amounts to an estimated R7.2 billion in additional equity for Redefine and adds around R19.7 billion of total assets onto our balance sheet. This equates to about an additional 19.8% of shares in issue for Redefine. In the next six months we will be focusing on integrating EPP into our business in a sustainable way that maximises long-term value creation,” says König. 

The strategic reset for Redefine has entailed a recent reconstitution of its executive committee.  

“We are bringing more depth and balance to our executive committee (ExCo), incorporating a broader range of strategic skills to take us forward sustainably and effectively,” says König. New additions include the Company Secretary, Chief Sustainability Officer, Chief People and Chief Legal and Regulatory Officers. 

“All the good work, restructuring and refining what we have is now bearing fruit and ensuring we are well-positioned to benefit from the eventual upward cycle,” says König. 

For the future, the focus turns to refining the asset platform further by recycling any remaining unproductive domestic assets. Internationally, numerous logistics developments will be pursued in Poland.  

“I don’t think there will be fireworks from the SA economy for some time. We are more focused on the variables under our control,” adds König. 

Redefine CFO, Ntobeko Nyawo says the integration of EPP will support Redefine’s medium-term growth outlook, while the company’s credit metrics remain “very stable”. 

“We have maintained good liquidity thanks to disposals and strong cash generation. We are actually getting to a point where our recoveries are at 103% as we recover Covid-19 deferrals,” he says.  

“The quality of earnings is therefore getting more sustainable, enhancing our ability to build and grow,” says Nyawo. 

Nyawo says a loan to a value close to 40% should be achieved in FY2022 based on disposals and earnings generated. 

COO Leon Kok says while conditions locally remain challenging, there are some signs of recovery, especially in the retail space. He says turnover from retail tenants is now at around 105% of their pre-Covid-19 levels. “The recovery is largely being driven by homeware and essential services, which are now at about 110% of their 2019 levels.” 

Online shopping has seen significant growth in reported sales, driven by the grocery and pharmacy sectors. However, Kok says all indications point to online and physical retail co-existing. “As a landlord, we are looking at ways to embrace that and make sure offerings are more seamless, for instance by accommodating the growing demand for click and collect and to also drive loyalty,” he says. 

The office sector is under the most pressure, with vacancy rates increasing to 16% from 14% before – the highest it has ever been. 

“I don’t see much in terms of improvement given that a lot of space is available and demand is low thanks to unemployment. However, the key is to make sure we retain the tenants we do have by making sure assets are relevant to their needs. For instance, we are focusing on improved health and safety and sustainability initiatives,” he says.  

Kok says the office space is beginning to show some signs of life as workers gradually begin to return to physical offices, though in many cases still for only a few days a week. 

“I think we might see that trend continue as many employers embrace flexible working arrangements.”  

Kok says the industrial portfolio has remained defensive, with demand for logistics solutions driven principally by the retail growth. “Logistics remains very competitive, but participants are becoming more cost-conscious, making cost management critically important,” he says. 

Kok says Redefine’s diversity across the sectors remains a key benefit. “Over the years we have been actively recycling assets to improve the overall quality of our portfolio. In these uncertain times, I believe the old adage of a ‘flight to quality’ will hold true.” 

Internationally, Redefine’s logistics pipeline in Poland continues to grow. This includes two projects of 96,917 square metres to the gross leasable area (GLA) and further projects of 207,420 square metres under construction to be completed in the next six months  

Another highlight over the past six months on the international front was the receipt of the proceeds from the sale of the remaining student accommodation property in Australia, during the first week of February.  

As part of its Moonshot strategy, Redefine is driving ESG as a key strategic thrust. Redefine is SA’s first REIT to become a signatory to the UN Global Compact. 

“Redefine’s purpose is to create and manage spaces in a way that changes lives, which requires more than a business as usual approach: it requires an integrated approach to making strategic choices that will sustain value creation for all stakeholders through focussing on what matters most. We are firmly on track to doing just that,” concludes König. 

Redefine’s half-year results to 28 February 2022 will be announced on 16 May.