Redefine Properties, the second-largest local listed real estate group, has been forced to sell a chunk of assets to decrease its debt, which has created opportunities for smaller funds.
The company, which has a portfolio of investments worth more than R95bn, has put R8bn worth of properties, or 8.4% of its asset base, up for sale. It wants to bring its loan-to-value (LTV) from 43.9% to below 40% and to raise more cash so it can manoeuvre through a weak economy.
As much as half of the R8bn is in the form of local assets, while the other half is offshore assets. The local portfolio includes Redefine’s 51% interest in Respublica Student Living, one of the country’s largest student accommodation providers.
“I never expected them to sell Respublica, but it is a noncore holding for Redefine, so this is an opportunity for clever investors who may have plans to list a proper student player on the JSE,” said Evan Robins, portfolio manager at Old Mutual Investment Group.
David Rice, COO at Redefine, said the company had a number of candidate assets it would try to sell to make up the remaining R1.5bn. “We want to sell a couple of chunky assets worth about R1.5bn combined, instead of a whole bunch of small ones,” he said.
Robins said Redefine would not be the first property company to sell highly valued assets to lower its debt levels. “I see a trend developing here. Quite a few funds have high LTVs, so we are likely to see these funds put a chunk of assets on the market. We haven’t really seen consolidation among locally listed property companies this year but we could at least see a few significant properties change hands,” he said.
Redefine would also sell R4bn of its international assets, specifically the ones making up its Australian portfolio. The company would continue to be invested in the UK and Poland.
CEO Andrew Konig said on Monday that the group would not have wanted to exit Australia but its overall LTV needed attention. Redefine would sell its R3.3bn share of Aussie housing group Journal and its R700m holding in Cromwell.
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