Listed funds deliver solid income

09 May 2012

Johannesburg Stock Exchange (JSE) listed property loan stock company, Redefine Properties declared a distribution of 31.50 cents per linked unit for the half year.

90 Grayston in Johannesburg is one of the properties owned by Redefine Properties.

Redefine Properties is the second largest listed South African property loan stock company by market capitalisation (R22.1 billion) with a diverse range of property assets under management exceeding R37 billion.

Its property portfolio consists of 243 properties located in South Africa valued at R20 billion and a R5 billion portfolio of strategic listed securities.

The Redefine portfolio is further geographically diversified by 206 offshore properties and listed securities valued at R12 billion held through Redefine Properties International Limited and its 70 percent owned subsidiary Redefine International PLC listed on the JSE and London Stock Exchange respectively.

Marc Wainer, chief executive officer of Redefine says on a geographic basis, South Africa generated 91 percent of distributable income.

Contractual rental income comprised 81 percent of total revenue, income from listed securities 10 percent, hotel income 7 percent and trading and fee income 2 percent.

Operating costs represent 25.6 percent (31 August 2011:26.5 percent) of contractual rental income, mainly reflecting the full period efficiencies arising from the internalisation of property management, he says.   

Wainer explains that the Group has made significant progress in implementing its strategy of restructuring and improving the quality of its core property portfolio. 

The value of the Group’s properties declined by 1.7 percent in the review period, the South African portfolio valuation increased by R260 million, while the offshore portfolio valuation declined by R719 million, arising mainly from the Wichford legacy assets.

The Discovery building in Sandton is owned by Redefine Properties.

During the review period, leases covering 384 436 square metres were renewed at an average rental increase of 4.2 percent.

A further 123 609 square metres was let across the portfolio and  together with vacancies from properties disposed of, the total vacancy level after adjusting for unlettable space, reduced marginally by 0.3 percent to 6.6 percent (31 August 2011: 6.9 percent).  

Five properties were acquired and transferred during the review period for an aggregate purchase price of R1.3 billion with a GLA of 110 147 square metres at an initial yield of 9.1 percent.

Wainer says Redefine continues to improve the quality of its properties such as the Pepkor Distribution Warehouse Phase 2, Scania Aeroton, 90 Grayston and 90 Rivonia in Gauteng.

In KwaZulu-Natal, the Essex Park Office Park and in the Western Cape, Maynard Mall, Shoprite Parow and Park Meadows – The Food Lover’s Market.

Andrew Konig, Redefine financial director notes that Redefine has over the six months scored 21 percent and was named as one of the actively traded funds by trade volumes on the JSE listed property sector.

The company’s top properties by value include Golden Walk in Germiston, 155 West Street in Sandton, Standard Bank Centre in the Cape Town CBD, Sammy Marks Shopping Centre in the Pretoria CBD, Thibault Square Cape Town CBD, Convention Tower, Cape Town Foreshore, Cleary Park Shopping Centre in the Eastern Cape, Commerce Square in Sandton, Park Meadows in Kensington and Poyntons in the Pretoria CBD.

Meanwhile, Rebosis Property Fund, the first black-managed and substantially black-held property fund reports interim distribution of 43.0 cents per linked unit (up 12.7 percent on the previous three month reporting period).

Rebosis listed on the JSE Limited on 17 May 2011.

The fund has R3.78 billion of investment property, 16 percent of retail turnover growth in this period and has secured property acquisitions to the market value of R543.

Rebosis’ portfolio consists of 60 percent shopping centres and 40 percent office buildings (by value), located in Gauteng and the Eastern Cape.

The Liberty Building in Pretoria is owned by Rebosis Property Fund.

The retail portfolio comprises three quality shopping malls delivering secure, escalating income growth underpinned by strong anchor and national tenants.

The office portfolio consists of five buildings which are well located in nodes attractive to government tenants – four in Pretoria and one in Braamfontein, Johannesburg.

These are mainly let to the National Department of Public Works under long leases.

The office portfolio provides a sovereign underpin to a substantial portion of the earnings and shields it from private sector risks such as tenant insolvency and default.

Rebosis chief executive officer, Sisa Ngebulana says they are very pleased with these solid results.

He explains that the inclusion of Bloed Street Mall in the reporting period and encouraging retail turnover growth of 16 percent created positive momentum.

“The acquisition of four commercial properties currently underway is the first step forward in the company’s objective to scale up its asset base to the benefit of its investors.”

Occupancy across the portfolio reached 4.1 percent as at 29 February, well above the sector average.

New and renewed leases comprise 7 652 square metres of space, made up of 3 757 square metres of new leases and 3 805 square metres of renewed leases respectively.

Ngebulana points out that Hemingways Mall in East London attracted new brands with Busby’s, Guess, Guess Kids, Forever New, Frasers and Aldo among the fashion brands that recently signed lease contracts.

“Our active management initiatives at the centres have resulted in enhanced catering and leisure options with the family entertainment centre Electric Avenue opening in April and Spur expected to open mid-year.”

Rebosis expects Beares to open soon to further complement the offering at the mall.

Mdantsane City, another property owned by Rebosis, introduced a new gym and refurbished the Fruit & Veg City with a new Checkers Liquor store replacing the previous liquor outlet.

Mdantsane City introduced a new gym and refurbished the Fruit & Veg City with a new Checkers Liquor store replacing the previous liquor outlet, he says.

Rebosis’s net borrowings of R1.433 billion equated to a gearing ratio of 37.9 percent, allowing head room within the company’s target range of 40 to 45 percent.

The average interest rate for the period was 8.9 percent and interest rates are fixed in respect of 80 percent of the borrowings for an average 3.5 years.

Rebosis has also grown its portfolio with the acquisition of four properties being 28 Harrison Street, SASSA Campus, The Revenue Building and 270 Jabu Ndlovu Street with a combined valuation of R543 million.

The purchase consideration was R519 million, excluding costs and will be funded through debt facilities.

These acquisitions with a combined gross lettable area of 50 698 square metres are expected to be yield enhancing from the date of transfer on 1 July 2012.

"With less than a year since listing, we have entrenched ourselves solidly in our chosen areas of operation and remain well positioned for future growth,” says Ngebulana.

He adds that Rebosis’ target distribution range for the year ending 31 August 2012 remains unchanged at between 85.0 cents and 88.3 cents per linked unit. – Denise Mhlanga

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