90 Rivionia Road
February 25 2025 23:40
Redefine Properties (JSE: RDF) said in its pre-close investor update for the half-year ending February 28 2025 that its earnings outlook has stabilised.
The company reported that its South African portfolio achieved a net operating profit margin of
77.8%, while EPP, its directly owned Polish retail property platform, improved its margin from
66.4% to 71.7%. This led to a consolidated group net operating profit margin of 75.9%. This was pleasing as the group’s tenants were mostly managing their way through a sluggish economy in SA.
Redefine CEO Andrew König said changes in US policy under President Donald Trump introduced
uncertainty around interest rates and inflation.
“The stage is now set for a shallow easing cycle, and rates may not reach the levels we previously expected. While European interest rates continue to trend downward, escalating geo-economic tensions cloud the 2025 outlook. To sustain growth in valuations, we cannot rely solely on interest rate movements,” he said.
Redefine’s strategy is focused on disciplined capital allocation, the sale of non-core assets to reduce its loan-to-value ratio, restructuring joint ventures to enhance visibility of income streams, while delivering income growth.
Despite the disruption caused by the delayed national budget speech, König pointed to two
promising initiatives from the National Treasury: efforts to remove South Africa from the trade and investment grey list by October and the restoration of the country’s investment-grade credit rating.
Redefine’s South African portfolio was flat with a 1% increase in overall occupancy since August 2024.
But, 80% of renewals were completed at stable or increased rental terms.
The industrial sector has proved resilient, with occupancy rising to 97.6%, alongside
positive rental reversions in a competitive market.
“The industrial sector continues to be one of our strongest performers, and we see potential for further growth if capital availability allows us to expand,” said Leon Kok, Redefine’s COO.
Conversely, the office sector was challenged by excess supply and limited demand, except
in select nodes. A significant lease renewal resulted in a -17% renewal reversion during the
period. However, Redefine mitigated this impact through strong leasing activity in other
locations, such as the Western Cape and Sandton, which benefit from proximity to the Gautrain.
While South Africa faces ongoing challenges, Poland’s economic growth has benefited from
European interest rate cuts and social grants that have boosted household spending and retail
conditions. EPP’s core properties have seen impressive occupancy levels of 99.3%, with rental
reversions rising from 0.2% to 1.5%. The rent-to-sales ratio remains well below 9%, indicating
healthy tenant affordability.
Redefine is pursuing a strategy of selling non-core assets and restructuring joint ventures in
Poland to reduce complexity and lower the see-through LTV. “We are exploring options to
simplify our joint ventures to either exit or fully own them,” König said.
Redefine enters 2025 with a focus on “living the upside,” aiming for sustainable, long-term value
creation. König said. Despite macroeconomic challenges, the company is maintaining its earnings guidance for financial year 2025 to show some growth with distributable income per share expected to be between 50c and 53c.
247@propertyflash.co.za
