Expects 2024 to be the beginning of a turnaround for the sector.

Redefine Properties – the JSE-listed commercial landlord with a portfolio of assets in SA and Poland valued at almost R97 billion – believes the property cycle has bottomed out and expects some sort of upturn as interest rates ease in 2024.

Releasing its latest annual results of the year ended 31 August 2023 on Monday, the group declared in its Sens statement: “There is cause for optimism that the property cycle has bottomed out and that 2024 will be the turning point when interest rates begin to ease.”

Redefine, which owns landmark SA properties like Alice Lane in Sandton, Centurion Mall, The Towers in Cape Town’s CBD and Cato Ridge DC in KwaZulu-Natal, reported a 4.1% decrease in distributable income for its 2023 financial year to R3.5 billion (FY22: R3.6 billion).

It declared a final (second-half) dividend of 23.48 cents per share for the six months ended 31 August 2023. However, its total Dividend Per Share (DPS) for the year came to 43.8 cents (including its interim dividend), representing a 1.9% increase compared to FY2022.

Nevertheless, in its media statement, Redefine described the results as a “robust financial performance” considering the operating environment.

The real estate investment trust (Reit) pointed out that its distributable income of R3.5 billion (represented 51.53 cents per share for the year) surpassed the midpoint of its guidance range of 48 to 52 cents per share for FY2023.

Despite some optimism around the property cycle bottoming out and interest rates easing in the year ahead, Redefine said it “will not rely on external factors” to change its fortunes.

“We need to build on the positive momentum seen in the stabilised operating metrics and Opt for the upside while remaining laser-focused on the execution of our strategic priorities.”

“This requires that we cost-effectively source and allocate capital while operating efficiently in an environment with higher operating costs and a competitive rental market,” it added.

Shifting interest rate cycle

“Navigating the effectiveness of the structural energy transition and the expected shift of the interest rate cycle and responding to evolving stakeholder needs will be critical to positioning Redefine for its growth trajectory beyond FY24,” it said.

The group noted that the Polish economy (where it has a major presence through major-owned retail Reit EPP) has experienced challenges due to geopolitical tensions and resultant high inflation. However, it said inflation peaked in February and is now beginning to come down alongside interest rates. These factors have led to increased consumer spending.

Redefine CEO Andrew König said despite absorbing some hard knocks this year, the results demonstrate that the group’s business remains sound.

He added that the group’s “retail powerhouse” – EPP in Poland – has proved to be a strong contributor to the group’s earnings despite negative news coming out of Europe.

“Redefine’s local portfolio maintained a stable net profit margin of 78% despite the cocktail of challenges absorbed, while EPP’s net profit margin improved by a robust 9% to 74% in FY 2023,” said Redefine CEO Ntobeko Nyawo.

“EPP’s delivery in its first financial year of ownership in the Redefine stable shows that it has been restored into a yielding asset post the corporate restructure and now makes for a strong contributor to the group’s earnings,” added Nyawo.

In a brave tone, König concluded: “While some may ruminate on the persistent challenges around real estate and the tough macroeconomic factors, we are focused on variables under our control and spotting opportunities in every challenge.”

“That is what we call, opting for the upside.”

Redefine’s share price closed just under 1% lower (at R3.59 a share) on results day on Monday.

The stock is down over 15% year-to-date. However, it is up more than 63% over a three-year period, from the Covid fallout in 2020, but is over 65% down compared to five years ago.

Redefine’s share price

Source: moneyweb.co.za