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NEWS RELEASE
REDEFINE INCOME Fund
Share code: RDF
ISIN CODE: ZAE000023503
Thursday, October 04, 2001
Headline earnings of R35,03 cents in line with expectations.
THE R1,6-billion listed property loan stock (PLS) company Redefine Income
Fund met the goals it set itself in the first full financial year of
operation since listing on February 23, 2000.
It increased revenue for the year ended August 31, 2001, to R214,2- million,
derived evenly from its hybrid asset base of directly owned properties
(R107,2-million) and its investments in other property companies listed on
the JSE Securities Exchange (R106,9-million).
This translated into headline earnings of 35,03 cents per linked unit, which
is in line with expectations.
Redefine, the only hybrid PLS, and one of the first to make quarterly
payments to linked unit holders, declared a fourth quarterly distribution of
9 cents per linked unit for the financial year, bringing total payout to 35
cents.
Chief Executive Officer Peter Penhall said this represented an income yield
of 13 percent and capital growth of 34 percent on the review period closing
price of R2,70 per linked unit.
"It has been a year of solid progress with steady achievement of the goals
set by Redefine. As a result, there has been a marked shift in perceptions
from an initial cautiousness about the pioneering hybrid nature of Redefine
to one of ready acceptance by the market.
"Redefine has become one of the most highly traded property loan stock
counters, with yields that are attracting increasing demand from individual
investors and the smaller institutional investment institutions. In
addition, the major funds have remained active investors.
"This is reflected in liquidity of 33 percent of total linked units in
issue, with 78,9 million linked units being traded at a value of R180-
million during the financial year." Redefine sold 18 non-core properties for
a total consideration of R177-million. The majority of these were acquired
as a portfolio by ApexHi Properties Limited in exchange for ApexHi A and B
class linked units at a combined price of R10 per unit.
There were two immediate benefits: Redefine's exposure to convenience retail
property was reduced from 38,1 percent to 23 percent in favour of the office
sector; while the subsequent re-rating of the ApexHi units increased
Redefine's net asset value at year end by R50-million.
A further outcome was to move Redefine's weighting of its hybrid asset base
from the more favoured equal split between properties and listed securities
to 67 percent in favour of listed counters.
"Restoring the preferred 50:50 investment relationship provides a solid
opportunity to re-structure and increase the property portfolio at yields
more in keeping with Redefine's forward planning."
Penhall said strong management of the balance sheet had sharply reduced the
company's exposure to property portfolio debtors during the financial year.
"Moreover, the property portfolio lease profile is extremely sound, with 30
percent of current leases expiring after financial year 2006. The net
present value of contractual rental income from this long-term lease profile
equates to R1,05 per linked unit - strongly underpinning the current NAV of
R2.72 per linked unit," he said.
On the listed securities side, market value of investments in 12 listed PLS
and Property Unit Trusts (PUTs) rose to R902-million, an increase of R160-
million over the cost of R742-million.
Ninety percent of Redefine's listed securities portfolio is held in six
prominent counters: ApexHi, Capital, GrayProp, HyProp, Marriott and Sycom.
"There was some re-alignment of our listed security portfolio during the
year, with the proceeds being applied to the reduction of interest-bearing
debt, and to further acquisitions in the hybrid asset base.
"We have entered into a programme of interest rate swaps with staggered
maturity dates which covers a minimum of 70 percent of our long-term debt.
Furthermore, settlement during the year of the majority of deferred vendor
payments obligations, incurred when the property portfolio was initially
assembled, was funded from internal resources and will be repaid completely
by March 2002," Penhall said.
Post year-end acquisitions in listed property investments totalling R118-
million, which included investments in ApexHi, Growthpoint, Rand Leases
Properties and Sycom, were funded through proceeds from disposal of listed
securities, ApexHi linked unit asset swaps, and new debt. As a result, this
increased Redefine's investments in listed property companies to 14
counters. In addition to the listed securities acquisitions, Redefine
increased its property portfolio by five properties ( two offices, two
industrial and one retail property) at a total cost of R100-million. All
five properties conform with the objective of having single to few tenants
with long-term lease profiles. "These acquisitions strongly increase
exposure to A-grade properties (from 59 percent to 64 percent) and extend
the property portfolio's lease expiry profile to 40 percent (from 30
percent) of leases expiring after financial year 2006."
Penhall said this post balance sheet activity increased investment
in total non-current assets by 14 percent to R1,6-billion, and
placed Redefine another step closer to building the asset base to
R2-billion.
Overall, the company's performance had underscored Redefine's A+
Fitch investment rating, Penhall said, and the foundation had been
laid for Redefine to deliver inflation beating growth in distribution levels
in the financial year ended August 31, 2002.
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