Redefine Properties, the South African and Eastern European commercial property REIT listed on the JSE, said its earnings outlook has stabilised even though the cycle of global interest rate cuts may be shallower than it had previously expected.
This was according to Redefine CEO Andrew König, who said in a pre-close update for the six months to February 28 their South African portfolio had a net operating profit margin of 77.8%, while EPP, the Polish retail property platform, improved its margin to 71.7% from 66.4%. This group net operating profit margin was 75.9%.
“To sustain growth in valuations, we cannot rely solely on interest rate movements. Our strategic focus remains on organic income growth, as this will drive value creation in the current market,” König said.
He said the global path to economic normalisation has been disrupted by changes in US policy under President Donald Trump, which has introduced uncertainty regarding interest rates and inflation. While European interest rates are trending downward, escalating geo-economic tensions cloud the 2025 outlook.
Despite this, Redefine is maintaining its earnings guidance for the 2025 financial year, with distributable income per share expected to be between 50 and 53 cents (ZAR). This is barely changed from the 50.02 cents in 2024, which in turn was already a decrease from 51.53 cents the previous year.
Looking ahead, Redefine’s strategy is focused on disciplined capital allocation, the sale of non-core assets to reduce the loan-to-value ratio, and restructuring joint ventures to enhance visibility of income streams while delivering income growth.
He said commercial real estate transactional activity is on the rise, which will support the company’s plans to offload non-core assets, with growing interest in the market.
König said Redefine’s South African portfolio has demonstrated solid performance, particularly in the industrial and retail sectors, which drove a 1% increase in overall occupancy since August 2024. Additionally, 80% of renewals were completed at stable or increased rental terms, a positive indicator of growth.
The industrial sector was especially 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 Redefine COO Leon Kok.
The office sector remained challenged by excess supply and weak demand, except in select nodes. A significant lease renewal resulted in a -17% renewal reversion. However, Redefine mitigated this through strong leasing activity in other locations, such as the Western Cape and Sandton, which benefit from proximity to the Gautrain.
“Demand is focused on high-quality assets, and our active asset management ensures our portfolio remains well-positioned to attract this limited demand,” Kok said.
Redefine was making strides towards its sustainability goals. Renewable energy capacity was being expanded by 47%, with an anticipated 17% of energy consumption coming from renewable sources by year-end.
Additionally, Redefine achieved a 38% reduction in greenhouse gas emissions across its European portfolio. The company received recognition from Sustainalytics, being ranked the 16th most sustainable global real estate company, the only South African REIT to place among the top 50 worldwide.
Poland’s economic growth had benefited from European interest rate cuts and social grants that have boosted household spending and retail conditions. EPP’s core properties saw 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’s financial position remained strong with R6.4 billion in liquidity as at November 2024.
CFO Ntobeko Nyawo said: “We are positioning the company to capture opportunities in high- quality assets, while ensuring strong cash generation to support our dividend payouts.” Last year Redefine paid out 42.52 cents per share in dividends.
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