PROPERTY: Prospects Redefined
Recent Western Cape Business News
For at least a year Redefine will have to cope with defaulting and struggling tenants, “like every other major property group in South Africa today”.
Outlining for new investors the implications of the now approved and completed merger between Redefine Properties, Apex-Hi and Madison Property Fund Managers, Mike Flax, formerly of Madison and now a Redefine director, was however bullish about the long term prospects for the group.
The reaction of the market to the merger, said Flax, had been complimentary: Redefine’s shares have risen 27% this year to date to stand at over R7.00. This, he said, reflects the company’s forecast that they will produce earnings between 70 cents and 74 cents per unit for the 2011 year, which will equate to a year-on-year growth in Redefine’s distributions of between 15 % and 20%.
The merged group, said Flax, will be larger than many property stock watchers realise: it will have a market capitalisation of close on R20 billion and should soon become an ALSI 40 company (i.e. among the 40 largest on the JSE Securities Exchange).
The 400 plus properties in the group have a combined floor area in excess of 3,5 million m², making it one of the largest property owning groups in Africa and in every way comparable to South Africa’s other major company in this field, Growthpoint.
Those listening to Flax learned that he and Brian Azizollahoff have been given responsibility for the growth of the company through acquisitions and disposals. Flax himself will also be playing a big role, along with Marc Wainer, in the international growth of Redefine through corporate acquisitions, which, he said, are expected to comprise over 20% of the company’s assets before the end of 2010.
Repeating what he has said for a year or more now, Flax said that the global recession has opened up a variety of property acquisition opportunities for any strong South African company in this field - and Redefine is determined to diversify geographically in and beyond South Africa and away from exposure to only a single currency, the rand.
“We will,” said Flax, “be forming a separate acquisitions and disposal unit to create a key contact point for South African and international property brokers. Our aim is ongoing accretive acquisitions.”
Another prime focus of the new company, said Flax, will be tenant retention.
“The company’s very large portfolio,” he said, “is typical of South Africa’s current property scenario and, like others, is now running with a 9% overall vacancy factor. Until the recovery period begins, we will initiate a number of measures to help ensure tenant survival and retention within our vast portfolio.”
Redefine’s board will continue to be headed up by Non-Executive Chairman, Dines Gihwala, with Marc Wainer and Wolf Cesman as Joint Chief Executives. The board, said Flax, has been reconstituted to reflect all unit holders’ interests, with a strong team of executive directors from all three of the merged companies. David Rice of Apex-Hi becomes the director responsible for operations and Janys Finn, formerly Chief Financial Officer of Madison, is Redefine’s new Financial Director.
Asked when he expects “normality” to return to the South African property scene, Flax said that the recession should be easing off by mid-2010, but property will take a further six to nine months to respond to any significant economic improvement.
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