Redefine Properties, the JSE-listed real estate investment trust (Reit) will invest in South Africa and Poland only for the next few years, as it looks to benefit from the recoveries of both economies.
The Reit has just completed the takeover of EPP, the largest retail landlord in Poland. Redefine initially invested in EPP upon its formation back in 2016 and subsequent listing. Redefine’s founder and former CEO, the late Marc Wainer, had come across the opportunity to invest in eastern Europe’s largest and most developed economy, following a chance meeting with a Polish businessman in pub during the 2015 Rugby World Cup. Since then, Redefine has invested more and more into Poland, buying logistics assets for example.
Redefine’s Polish property platform is now worth R11.5bn. This includes EPP which is valued at R6.bn, European logistics assets worth R2.6bn and retail assets referred to as the M1 Marki assets, worth R2.2bn.
M1 Marki includes two main retail buildings, the M1 shopping mall and a stand-alone Obi DIY store, as well as three smaller buildings; Norauto, Burger King and a Shell petrol station. The centre along with the neighbouring properties: IKEA, Decathlon, Agata Meble and Homepark Targowek retail park, forms one of the biggest retail clusters in Warsaw, Poland’s capital.
Redefine’s diversified property portfolio in SA accounts for 59% of its assets while the Polish properties account for 41%. Its total assets are worth R91bn, making it second to only Growthpoint Properties in terms of the size of SA-based Reits’ assets.
CEO Andrew Konig said on Tuesday that in five years’ time, around 45% of Redefine’s assets would be in Poland with the remainder in SA.
“We are optimising our capital allocation to sectors that have scale and we are significant in the respective category,” he said.
He said EPP’s management team had been retained following the takeover.
“Properties do not create value, people do. The entire Polish management team remains on board and is fully aligned to Redefine’s strategic objectives,” said Konig.
He said Redefine had been working on improving its balance sheet for a few years which had included selling its UK and Australian assets. The company wants to decrease its loan-to-value (LTV) to below 40%.
LTV is used to indicate the strength and health of a Reit’s balance sheet. It measures the company’s debt relative to the value of its assets. Fund managers argue that LTVs should not exceed 40% or a company risks suffering some level of financial distress.
Redefine’s LTV now sits at 41.9%. The company will complete its balance sheet fixing plan with some R3.7bn, Konig said.
Alistair Anderson