In a recent update, real estate investment trust Redefine Properties said that despite tough challenges such as the pandemic, elevated inflation, an energy crisis and higher funding costs, their properties in South Africa and Poland have done well.
They are optimistic that the property cycle has bottomed and that 2024 will mark a notable turning point for the sector. It also seems inflation is tapering, which could mean more predictable interest rates. Moreover, the government and businesses are working on various plans to boost the economy and create jobs, which should increase confidence all round.
“We are encouraged that real estate fundamentals are beginning to build positive momentum, which is expected to translate to future upside potential,” says Redefine CEO Andrew König. “This has provided us with a renewed sense of optimism. However, we know that risks like geopolitical tensions, elevated inflation, high interest rates, rising energy prices and ongoing load-shedding require an unwavering commitment to fostering strategic resilience as we look to pursue growth and deliver sustainable value.”
Therefore Redefine is ensuring that it invests strategically in efficiency interventions to reduce reliance on municipal-supplied utilities; optimises capital by diversifying funding sources to spread concentration risk; improves operational efficiencies through disciplined cost management and by digitising processes to transform the tenant experience.
Despite load-shedding and related costs, Redefine’s operating metrics in South Africa are gradually improving and showing signs of stability. Demand for P- and A-grade office space in sought-after locations has strengthened, while the group’s industrial portfolio is performing well.
Due to uncertainty around the energy issues, Redefine are investing in renewable energy in SA. For instance, the group is participating in the City of Cape Town’s first electricity wheeling pilot project where commercial entities can sell electricity back to the City’s grid. Redefine is undertaking a 5.9MWp solar wheeling project on the roof of its Massmart distribution centre at its Brackengate 2 development.
In Poland, the group is finding new opportunities in retail, logistics, and self-storage. “We remain confident about the potential in the Polish market,” says König. “Our exposure to Polish retail and logistics provides stability; recovery of the shopping centre performance in that market is well on track, with positive retail sales forecast for the next two years.”
The group reported strong working capital generation, with reason to expect improvements in the near term based on projected collections, which supports a healthy and stable liquidity profile.
