Redefine accquires ‘hotspot’ portfolio

The company stated that this move was part of a strategy to improve the overall quality of its property portfolio. It will be focusing on large, prime high-grade investment properties, these properties would likely only have one tenant.

Redefine said the framework agreement between itself and Zenprop Property Holdings for the acquisition of a number of investment properties had been amended, to exclude certain properties subject to pre-emptive rights.

In withdrawing its cautionary, it said the agreement now included additional properties, and was for the acquisition of 14 high-quality office and industrial properties for an aggregate price of R1,8bn.

Separate agreements governing the terms of each of the acquisitions had been concluded. The properties are mostly commercial, with no retail assets.

"We announced this before. It’s taken forever to get through legal hurdles," Redefine CEO Marc Wainer said yesterday.

"We are buying mostly A-grade buildings in ‘hotspots’ like Sandton in Gauteng, KwaZulu-Natal and the Western Cape," he said. "This is one more deal in that regard."

The group said no independent valuation of the properties had been made, with the value attributed by the purchaser being equivalent to the purchase consideration.

"While it’s a welcome strategy to improve the quality of the portfolio, it comes with a trade-off of earnings dilution," Keillen Ndlovu, head of property funds at Stanlib, said.

"The next stage for Redefine to achieve a rerating — an improved rating compared to the South African listed property sector — is to pay out distributions consisting entirely of annuity/rental income.

"At the moment, Redefine distributions also consist of non-annuity income (such as) fees from deals. The market penalises Redefine for this (because) such earnings/distributions are not sustainable and present a higher income forecast risk relative to the sector."

Mr Ndlovu also said the acquisitions were modern buildings, but average valuations and rent s seemed high relative to the market.

Mr Wainer said the group had identified secure properties within the amended agreement, which took into account various cost-of-living rises such as electricity and toll roads. "No one is going to shoot the lights out in this market," he said.

Redefine is one of the largest listed property loan stock companies in SA, with a market capitalisation of R21,3bn at yesterday’s closing price of R7,92. It has a domestic portfolio of about 400 properties valued at about R19bn, and a R5,2bn portfolio, including foreign properties, through Redefine International and its subsidiaries.

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