Andrew König
Redefine CEO
Redefine Properties (JSE: RDF) announced in its pre-close investor update for the half-year ending 28 February 2025 that its earnings outlook has stabilised despite a challenging operating context, driven by a focus on efficiency and strong demand for quality assets.
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%.
Redefine CEO Andrew König highlighted that the global path to economic normalisation has been disrupted by changes in US policy under President Donald Trump, which 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 geoeconomic tensions cloud the 2025 outlook. We cannot rely solely on interest rate movements to sustain growth in valuations. Our strategic focus remains on organic income growth, which will drive value creation in the current market.”
Looking ahead, Redefine’s strategy is focused on disciplined capital allocation, selling non-core assets to reduce its loan-to-value ratio, and restructuring joint ventures to enhance the visibility of income streams whilst delivering income growth. König noted that commercial real estate transactional activity is rising, supporting the company’s plans to offload non-core assets, with growing interest in the market.
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 greylist by October and restore the country’s investment-grade credit rating. “This is critical for our business, as Redefine’s Moody’s rating was downgraded alongside South Africa’s. Reversing this could improve access to international debt markets, and the delayed budget may even help with these efforts.”
Green shoots in the SA portfolio
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 growth indicator.
The industrial sector has proven exceptionally 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, except in select nodes, the office sector remains challenged by excess supply and limited demand. A significant lease renewal resulted in a -17% renewal reversion. However, Redefine mitigated this impact through vigorous 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 added.
Sustainability commitments
Redefine is making notable strides towards its sustainability goals, aiming to become the most sustainable property company by 2030. The company plans to expand its renewable energy capacity by 47%, with an anticipated 17% of energy consumption coming from renewable sources by year-end. Additionally, Redefine has achieved a 38% reduction in greenhouse gas emissions across its European portfolio, further solidifying its commitment to environmental sustainability.
The company also received recognition from Sustainalytics, earning three badges, including being ranked the 16th most sustainable global real estate company, the only South African REIT to place among the top 50 worldwide.
Growth in Poland
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 explained.
Strong cash generation
Redefine’s financial position remains strong, with a liquidity profile of R6.4 billion as of November 2024. The company has also proactively managed its debt profile, including the FY25 maturities, which are progressing well because of improved liquidity levels in the capital markets. As of February 2025, Redefine’s weighted average cost of debt decreased to 7.2%, providing some relief amid global inflationary pressures.
Ntobeko Nyawo, Redefine’s CFO, emphasised, “Our focus continues to be on generating organic growth from our existing portfolio, maintaining a strong balance sheet, and weathering the current economic cycle. We are positioning the company to capture opportunities in high-quality assets while ensuring strong cash generation to support our dividend payouts.”
Looking ahead: Living the upside
Redefine enters 2025 with a focus on “living the upside,” aiming for sustainable, long-term value creation. König concluded, “While some macroeconomic factors, including US policy shifts, remain unpredictable, we are confident in our ability to create our upside and deliver on our strategic goals.”
Despite macroeconomic challenges, the company is maintaining its earnings guidance for FY25, with distributable income per share expected to be between 50 and 53 cents., focusing