Wrap Text
Condensed unaudited group results for the six months ended 28 February 2015
Redefine Properties Limited
(Incorporated in the Republic of South Africa)
Registration number: 1999/018591/06
JSE share code: RDF
ISIN: ZAE000190252
(“Redefine” or “the company” or “the group”)
(Approved as a REIT by the JSE)
Condensed unaudited group results for the six months ended 28 February 2015
Distribution of 39 cents, +7,1% in line with guidance
Property assets +R5 billion to R56 billion under management
Market cap +25,3% to R45,6 billion
Acquisitions of R10,7 billion
R5,3 billion in progress
Developments of R3,7 billion
R1,1 billion completed
First direct entry into Europe
R712 million German investment
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R’000 R’000 R’000
Revenue
Property portfolio 3 017 684 2 665 816 5 372 149
- Contractual rental income 2 937 252 2 605 315* 5 310 428
- Straight-line rental income accrual 80 432 60 501 61 721
Listed security income 137 334 99 938 185 742
Insurance proceeds received 119 420 - -
Fee income 12 374 7 838 35 204
Trading income 1 270 982 1 032
Total revenue 3 288 082 2 774 574 5 594 127
Operating costs (1 002 441) (952 921)* (1 907 524)
Administration costs (105 963) (93 976) (202 031)
Net operating profit 2 179 678 1 727 677 3 484 572
Change in fair value of properties,
listed securities and financial instruments 733 521 1 703 891 2 051 245
Amortisation of intangibles (31 428) (31 428) (62 856)
Equity accounted profit/(loss) 280 620 (63 623) 439 766
Profit from operations 3 162 391 3 336 517 5 912 727
Net interest (656 093) (706 811) (1 297 768)
- Interest paid (783 798) (793 883) (1 457 159)
- Interest received 127 705 87 072 159 391
Foreign exchange (loss)/gain (153 114) 43 645 (13 638)
Profit before debenture interest 2 353 184 2 673 351 4 601 321
Debenture interest - (1 115 697) (1 115 697)
Profit before taxation 2 353 184 1 557 654 3 485 624
Taxation (73 094) (1 565) 31 303
Profit for the period from continuing operations 2 280 090 1 556 089 3 516 927
Profit from discontinued operations - 369 459 369 458
Profit for the period 2 280 090 1 925 548 3 886 385
- Redefine shareholders 2 115 057 1 601 077 3 407 818
- Continuing operations 2 115 057 1 235 380 3 042 122
- Discontinued operations - 365 697 365 696
- Non-controlling interests 165 033 324 471 478 567
- Continuing operations 165 033 320 709 474 805
- Discontinued operations - 3 762 3 762
Other comprehensive loss (106 973) (58 550) (40 817)
Items that are or may be reclassified to profit or loss
Exchange differences on translation of foreign
continuing/discontinued operations - subsidiaries (1 409) 61 505 93 230
Exchange differences on translation of foreign
continuing operations - associates (33 570) (11 148) (25 140)
Recycling of exchange differences on translation of
disposal/deemed disposal of foreign subsidiary (71 994) (108 907) (108 907)
Total comprehensive income for the period 2 173 117 1 866 998 3 845 568
- Redefine shareholders 2 008 084 1 538 964 3 363 439
- Continuing operations 2 008 084 1 224 232 3 016 983
- Discontinued operations - 314 732 346 456
- Non-controlling interests 165 033 328 034 482 129
- Continuing operations 165 033 320 709 474 805
- Discontinued operations - 7 325 7 324
* Re-presented - refer to Basis of preparation.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R’000 R’000 R’000
ASSETS
Non-current assets 60 371 740 49 169 694 55 007 339
Investment properties 45 112 759 36 252 086 40 906 077
- Fair value of investment properties 42 172 722 33 635 897 37 710 045
- Straight-line rental income accrual 1 294 417 1 141 432 1 213 985
- Properties under development 1 645 620 1 474 757 1 982 047
Listed securities 3 933 827 2 047 805 2 750 900
Goodwill 3 769 570 3 647 251 3 769 570
Intangible assets 1 527 678 1 585 521 1 559 106
Interest in associates and joint ventures 4 751 352 3 993 422 4 173 173
Interest rate swaps - 194 807 -
Loans receivable 1 182 520 1 259 562 1 727 212
Other financial assets 2 462 88 198 23 510
Guarantee fees receivable 50 000 50 000 50 000
Property, plant and equipment 41 572 51 042 47 791
Current assets 1 862 822 1 188 745 992 697
Properties held-for-trading 18 677 21 192 21 349
Trade and other receivables 819 341 497 899 580 021
Loans receivable 504 926 113 060 2 050
Listed security income receivable 61 384 26 936 38 671
Cash and cash equivalents 458 494 529 658 350 606
Non-current assets held-for-sale 464 648 961 070 1 490 128
Total assets 62 699 210 51 319 509 57 490 164
EQUITY AND LIABILITIES
Shareholders’ interest 36 696 271 22 352 942 32 720 342
Stated capital 25 894 246 14 008 735 22 558 039
Reserves 10 802 025 8 344 207 10 162 303
Debenture capital - 5 320 447 -
Shareholders’ interest 36 696 271 27 673 389 32 720 342
Non-controlling interests (NCI) 3 059 279 2 966 483 3 015 595
Total shareholders’ interest 39 755 550 30 639 872 35 735 937
Non-current liabilities 18 760 397 15 479 608 14 997 245
Interest-bearing liabilities 18 032 530 14 853 459 14 355 324
Interest rate swaps 158 767 - 95 192
Other financial liabilities 22 507 44 848 36 731
Deferred taxation 546 593 581 301 509 998
Current liabilities 4 183 263 5 200 029 6 756 982
Trade and other payables 1 183 027 1 029 365 1 294 307
Interest-bearing liabilities 2 948 477 3 039 384 5 401 205
Interest rate swaps - 926 926
Other financial liabilities 19 832 6 332 12 872
Taxation payable 31 927 8 325 47 672
Linked unitholders for distribution - 1 115 697 -
Total equity and liabilities 62 699 210 51 319 509 57 490 164
Net asset value per share
(excluding deferred tax and NCI) (cents) 990,85 921,82 976,03
Net tangible asset value per share
(excluding deferred tax and NCI) (cents) 849,92 751,10 819,52
DISTRIBUTABLE INCOME ANALYSIS
Redefine Fountainhead International Total
R’000 R’000 R’000 R’000
Net property income (excluding straight-line rental accrual) 1 441 459 493 352 - 1 934 811
Listed security income 39 874 - 97 460 137 334
Fee income 12 374 - - 12 374
Trading income 1 270 - - 1 270
Administration costs (66 705) (33 971) (5 287) (105 963)
Distributable equity income from interest in associates - - 158 776 158 776
Realised foreign exchange losses - - (792) (792)
Net interest (571 649) (103 592) 19 148 (656 093)
Distributable income before taxation 856 623 355 789 269 305 1 481 717
Taxation (excluding CGT and deferred tax) (3 489) - (34 665) (38 154)
Distributable income after taxation 853 134 355 789 234 640 1 443 563
Non-controlling interests’ share of Fountainhead distribution - (121 349) - (121 349)
Distributable income before distributable income adjustments 853 134 234 440 234 640 1 322 214
Below the line-distributable income adjustments:
- Pre-acquisition income on listed securities (Cromwell) - - 6 565 6 565
- Antecedent interest 137 101 - - 137 101
Distributable income 990 235 234 440 241 205 1 465 880
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R’000 R’000 R’000
Opening balance 35 735 937 24 073 923 24 073 923
Issue of shares 3 336 287 1 029 689 3 663 579
Conversion of debentures to stated capital (91) - 5 915 414
Total comprehensive income for the period 2 173 117 1 866 998 3 845 568
Transactions with non-controlling interests (121 348) (125 520) (1 686 423)
Changes in ownership interests in subsidiaries - (1 527 582) (84 004)
Share-based payment reserve (240) 1 917 7 880
Dividends paid (1 368 112) - -
Total stated capital, reserves and non-controlling interests 39 755 550 25 319 425 35 735 937
HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS RECONCILIATION
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R’000 R’000 R’000
Profit for the period attributable
to Redefine shareholders 2 115 057 1 601 077 3 407 818
Changes in fair values of properties
(net of deferred taxation) (254 843) (802 735) (1 108 787)
Insurance proceeds received (119 420) - -
Profit on disposal/deemed disposal of subsidiaries - (332 713) (340 949)
Profit on deemed disposal of interest in an associate
(net of deferred tax) - (838 911) (726 919)
Headline profit attributable to Redefine shareholders 1 740 794 (373 282) 1 231 163
Debenture interest - 1 115 697 1 115 697
Headline earnings attributable to Redefine shareholders 1 740 794 742 415 2 346 860
Changes in fair values of listed securities and
financial instruments (net of deferred taxation) (478 118) (117 433) (238 302)
Amortisation of intangible assets (net of deferred taxation) 22 628 22 628 45 256
Straight-line rental income accrual (80 432) (60 501) (61 721)
Unrealised foreign exchange gain/(loss) 152 322 (38 720) 29 945
Fair value adjustments of associates and NCI
(other than investment property) (32 042) 439 015 63 965
Anticipated withholding taxes on RI PLC distributable profit (2 938) (7 802) (10 517)
Debt restructure costs and unrealised interest received - - 110 414
Pre-acquisition distribution received from Annuity - - 36 454
Transaction costs relating to Annuity and Fountainhead corporate action - - 14 423
Antecedent interest 137 101 136 095 77 446
Pre-acquisition income on listed securities (Cromwell) 6 565 - -
Distributable earnings 1 465 880 1 115 697 2 414 223
Six months ended 28 February 1 465 880 1 115 697 1 115 697
Six months ended 31 August - - 1 298 526
Total distributions 1 465 880 1 115 697 2 414 223
Actual number of shares in issue (000)* 3 758 667 3 065 102 3 404 630
Weighted number of shares in issue (000)* 3 656 134 2 995 531 3 090 599
Diluted number of shares in issue (000)* 3 795 745 2 995 531 3 654 675
Basic earnings per share (cents) 57,85 90,69 146,36
- continuing operations per share (cents) 57,85 78,49 134,53
- discontinued operations per share (cents) - 12,20 11,83
Diluted earnings per share (cents)^ 55,72 90,69 123,78
- continuing operations per share (cents) 55,72 78,49 113,77
- discontinued operations per share (cents) - 12,20 10,01
Headline earnings per share (cents) 47,61 24,78 75,94
- continuing operations per share (cents) 47,61 23,68 75,48
- discontinued operations per share (cents) - 1,10 0,46
Diluted headline earnings per share (cents)^ 45,86 24,78 64,22
- continuing operations per share (cents) 45,86 23,68 63,83
- discontinued operations per share (cents) - 1,10 0,39
Distribution per share (cents) 39,00 36,40 74,54
* Excludes 5 876 766 treasury shares.
^ In the comparative prior period there were no dilutionary shares in issue.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited Unaudited Audited
28 February 28 February 31 August
2015 2014 2014
R’000 R’000 R’000
Cash generated from continuing operations 1 639 360 1 643 842 3 612 333
Net interest paid (656 093) (732 900) (1 297 768)
Distributions paid (1 368 112) (1 025 396) (2 141 093)
Distributions to non-controlling interests (106 000) (55 673) (168 460)
Net cash (outflow)/inflow from operating activities - continuing operations (490 845) (170 127) 5 012
Net cash inflow from operating activities - discontinued operations - 180 979 180 979
Net cash (outflow)/inflow from operating activities (490 845) 10 852 185 991
Net cash outflow from investing activities (4 102 997) (2 265 683) (5 871 318)
Net cash outflow from investing activities - continuing operations (4 102 997) (2 814 235) (6 419 871)
Net cash inflow from investing activities - discontinued operations - 548 552 548 553
Net cash inflow from financing activities 4 961 690 2 447 297 5 558 778
Net cash inflow from financing activities - continuing operations 4 961 690 2 448 153 5 559 634
Net cash outflow from financing activities - discontinued operations - (856) (856)
Net movement in cash and cash equivalents 367 848 192 466 (126 549)
Cash and cash equivalents at beginning of period 350 606 358 908 358 908
Translation effects on cash and cash equivalents of foreign operations (259 960) (21 716) 118 247
Cash and cash equivalents at end of period 458 494 529 658 350 606
CONDENSED SEGMENTAL ANALYSIS
Office Retail Industrial Fountainhead Total
R’000 R’000 R’000 R’000 R’000
Six months ended 28 February 2015
Contractual rental income¥ 880 092 875 239 420 118 761 803 2 937 252
Operating costs (292 518) (348 976) (113 222) (247 725)** (1 002 441)
Net property income 587 574 526 263 306 896 514 078 1 934 811
Investment property portfolio# 11 829 222 12 048 698 8 132 372 11 921 495 43 931 787
Six months ended 28 February 2014
Contractual rental income¥* 791 441 723 547 309 065 781 262 2 605 315
Operating costs* (277 104) (295 444) (89 541) (290 832) (952 921)
Net property income 514 337 428 103 219 524 490 430 1 652 394
Investment property portfolio# 9 583 149 9 418 884 4 943 461 11 792 905 35 738 399
Year ended 31 August 2014
Contractual rental income¥ 1 597 514 1 520 780 633 521 1 558 613 5 310 428
Operating costs (551 164) (619 196) (183 896) (553 268) (1 907 524)
Net property income 1 046 350 901 584 449 625 1 005 345 3 402 904
Investment property portfolio# 11 781 330 11 302 104 5 162 643 12 168 081 40 414 158
¥ Excluding straight-line rental income accrual.
# Excluding properties under development and held-for-trading. Properties classified as held-for-sale are included.
* Re-presented - refer to Basis of preparation.
** Excludes property management fees reversed on consolidation of R20 726 000.
PROFILE
Redefine is a diversified Real Estate Investment Trust (REIT), internally managed and focused on delivering value to
stakeholders, by way of sustained long-term growth in both income and capital appreciation. Redefine controls a property
income-earning asset base of R55,6 billion and is capitalised on the Johannesburg Stock Exchange (JSE) at R45,6 billion.
Redefine’s shares are actively traded on the JSE, making it a highly liquid investment choice for gaining exposure to
the commercial real estate sector.
At 28 February 2015, Redefine’s diversified, directly held, local property portfolio was valued at R35,9 billion,
while Fountainhead Property Trust (Fountainhead), in which Redefine has a 65,9% equity interest, had a R11,9 billion
portfolio (predominantly retail properties).
Redefine’s international property investments totalling R8,2 billion and representing 14,7% of the group’s property
assets provide geographic diversification. Redefine has a 30,1% equity interest, equating to R3,6 billion, in Redefine
International PLC (RI PLC) which is listed on both the London Stock Exchange and the JSE. Redefine recently acquired a
German retail portfolio in a co-investment with RI PLC for R466 million. In addition, Redefine has a R4,1 billion presence
in the Australian property market through a direct 50% interest in North Sydney’s landmark tower, Northpoint, as well as
a holding of 15,9% in Cromwell Property Group (Cromwell), which is listed on the Australian Stock Exchange. Redefine has
an indirect equity interest of a further 10% in Cromwell through RI PLC.
FINANCIAL RESULTS
Redefine has declared a dividend of 39,00000 cents per share for the six months ended 28 February 2015, an increase of
7,1% on the comparable period and in line with market guidance. In Rand terms, distributable income for the year
increased by 31,4% (2014: 19,9%) benefiting from a number of substantial quality acquisitions made in recent years.
Property portfolio income for the review period was 95,2% (2014: 95,8%) of total revenue (excluding insurance proceeds
received), income from listed securities 4,3% (2014: 3,8%), and trading and fee income 0,5% (2014: 0,4%).
Operating costs were 34,1% (2014: 36,6%) of contractual rental income (excluding straight-line rental income
accruals), with the decrease arising mainly from reduced municipal charges resulting from successful valuation objections. Net of
electricity and utility recoveries, operating costs were 17,8% (2014: 19,6%) of contractual rental income. Redefine’s
international operations contributed 16,5% (2014: 19,8%) to distributable income.
CHANGES IN FAIR VALUES
The group’s property portfolio was internally valued by the directors as at 28 February 2015 resulting in a net
increase in value of R209 million. In terms of IAS 40 and IFRS 7, Redefine’s investment properties are measured at fair value
and are categorised as level 3 investments. There were no transfers between levels 1, 2 and 3 during the period. The
investment in listed securities increased in value by R608 million during the period. The balance relates to the
mark-to-market of the group’s interest rate swaps, which protect the group against adverse interest rate movements. In terms of
IAS 39 and IFRS 7, Redefine’s listed securities and interest rate swaps are measured at fair value through profit or loss
and are categorised as level 1 and level 2 investments respectively. There were no transfers between levels 1, 2 and 3
during the period.
REDEFINE’S property portfolio (EXCLUDING FOUNTAINHEAD)
MULTI AND SINGLE TENANTED PROPERTIES
GLA m² Portfolio split by tenant type
Multi 2 624 596 67.3%
Single 1 397 610 32.7%
4 022 206 100%
SECTORAL SPREAD BY GLA
GLA m² Sectoral spread by GLA
Office 1 171 802 29.1%
Retail 1 128 191 28.0%
Industrial 1 722 213 42.8%
4 022 206 100%
GEOGRAPHIC SPREAD BY GLA
GLA m² Geographic spread by GLA
Gauteng 2 609 237 64.9%
Cape 656 554 16.3%
KwaZulu-Natal 383 975 9.5%
Other 372 440 9.3%
4 022 206 100%
LEASE EXPIRY PROFILE (GLA)
Office Retail Industrial Total
Monthly 43 372 10 862 10 524 64 758
2015 228 221 94 008 140 815 463 044
2016 208 716 166 415 166 511 541 642
2017 232 507 153 553 100 012 486 072
2018 85 896 167 194 111 938 365 028
Beyond 2018 271 379 473 737 1 100 712 1 845 828
Vacancy 101 711 62 422 91 701 255 834
1 171 802 1 128 191 1 722 213 4 022 206
Letting activity: During the review period, the overall portfolio vacancy rate increased by 0,9% to 6,4% reflecting a
number of vacates in the office sector with retail impacted by the demise of Ellerines. Leases covering 291 369 m² were
renewed at an average rental increase of 1,9%, with the retention rate a pleasing 89%. A further 182 930 m² was let
across the portfolio. Vacancies are set out below as a percentage of gross lettable area (GLA):
Vacancy per sector 28 February 31 August 28 February
2015 2014 2014
Office 8,7% 7,2% 7,4%
Retail 5,5% 3,9% 4,5%
Industrial 5,3% 5,3% 2,9%
6,4% 5,5% 4,9%
Net arrears increased to R46 million (31 August 2014: R32 million), reflecting the growth in rental income
and also the effect of a number of tenants operating under business rescue proceedings.
REDEFINE'S PROPERTY PORTFOLIO STRATEGY
Redefine continues to deliver on its strategy of diversifying, growing and improving the quality of the core property
portfolio. The emphasis in acquisitions, wherever possible, is to secure fully repairing leases with blue-chip tenants.
Acquisitions: 31 properties, with a GLA of 576 435 m², were acquired and transferred during the review period for an
aggregate consideration of R3 billion, at an initial yield of 8,6%. In addition, and subject to the usual conditions
precedent, agreements have been concluded for the acquisition of properties, including the Leaf Property Fund Proprietary
Limited (Leaf) property portfolio, for an aggregate consideration of R4,7 billion, at an initial yield of 7,8% and GLA of
274 587 m². Properties with an aggregate consideration of R4,6 billion transferred subsequent to the reporting period.
Developments: Matlosana Mall valued at R1 billion, a 65 180 m² super-regional mall, yielding 8,25%, successfully
opened its doors on 23 October 2014. New development projects covering 111 410 m² of GLA with an approved value of
R1,7 billion at an average yield of 8,3%, are presently in progress. Redevelopment projects in the existing portfolio with an
approved value of R841 million at an average yield of 6,5% are also in progress.
Disposals: During the period, 13 properties with a GLA of 70 920 m², which no longer meet Redefine’s investment
criteria, were sold to various buyers for an aggregate consideration of R593 million, at an average yield of 9,3%. In
addition, agreements, subject to conditions precedent, were concluded for the disposal of properties for an aggregate
consideration of R251 million, with a GLA of 66 352 m².
Leaf: On 28 January 2015, Redefine announced that it had concluded an agreement to acquire Leaf which owns a portfolio
of high-quality commercial property assets in prime locations across South Africa valued at R3,7 billion with an
effective date of 1 March 2015. This acquisition adds 192 052 m² to the portfolio and yield approximately 8%. The acquisition
is in line with Redefine’s strategy of improving the quality of its core property portfolio by acquiring high-quality
assets that offer cash flow comfort and low vacancy levels. Black River Park, one of the prime assets located in the
Western Cape, is the first office complex to be awarded a six-star Green Star SA rating in terms of the existing building
accreditation. This clearly supports and reaffirms Redefine’s commitment to sustainable business practices. Subsequent to
the reporting period, the transaction was completed.
Fountainhead: On 27 March 2015 Redefine announced that it had reached agreement with significant Fountainhead
unitholders representing 35,7% of the minority unitholders who have irrevocably undertaken to vote in favour of the acquisition
by Redefine of all of Fountainhead’s assets in exchange for 85 new Redefine shares for every 100 Fountainhead units in
issue and the assumption of all of Fountainhead’s liabilities. Redefine has also obtained non-binding indications of
support from a further 14,3% of minority unitholders. It is envisaged that Redefine and Fountainhead shareholder meetings
will be convened during July 2015 to approve the transaction, which if approved, will be implemented before the financial
year end.
Sustainability: Various energy-efficient and sustainable building technologies are being implemented on new
developments as well as existing buildings, which includes smart metering of electricity and water, as part of Redefine’s focus on
sustainability and cost efficiency. To retain and attract new tenants, Redefine is taking steps to ensure that there is
uninterrupted electricity supply at its key properties.
LISTED SECURITIES
Emira Property Fund (Emira): During the period under review Redefine acquired 13,7% of Emira’s participatory units and
subsequently realised a gain of R22 million by selling 11 million Emira units. Redefine currently holds 11,5% of
Emira’s participatory interests.
INTERESTS IN ASSOCIATES AND JOINT VENTURES
RI PLC: On 3 March 2015, shortly after the period end, RI PLC undertook a capital raise. Redefine participated in the
capital raise and purchased 39,5 million additional RI PLC units for a consideration of R384 million, consequently
maintaining its shareholding at 30,1%.
German portfolio: On 29 January 2015 Redefine entered into a joint venture arrangement with RI PLC to acquire a 50% interest
in a portfolio of 56 retail properties in Germany. Redefine’s aggregate consideration for the first phase of the acquisition
was R418 million at an initial yield of 7,5%. The second phase of the co-investment (acquisition of a complimentary portfolio
from RI PLC and refinancing of the existing debt) was concluded on 5 May 2015.
Distribution adjustment: It is Redefine’s policy to distribute its share of income from international investments to
the extent of dividends received. Accordingly, an adjustment has been made to the company’s distributable earnings for
the year to adjust the equity-accounted results from its international investments to reflect the anticipated dividends.
FUNDING
Redefine’s group borrowings of R21 billion (2014: 17,9 billion) comprised borrowings of R18,2 billion (2014: R14,8 billion)
by Redefine and R2,8 billion (2014: R3,1 billion) by Fountainhead. Redefine’s debt represented 35,1% (2014: 37,6%)
of the value of its property assets. Redefine’s average cost of funding is 8,4% (2014: 8,2%) - interest rates are fixed
on 86,2% (2014: 78,3%) of borrowings for an average period of 3,3 years.
During the period Redefine raised R1,4 billion (143,1 million shares) through an accelerated bookbuild, issued 107 million
shares for the acquisition of Redefine’s stake in Emira and retained R988 million (103,9 million shares) through the
distribution reinvestment alternative.
Subsequent to the reporting period a further 139,6 million shares in respect of the Leaf acquisition were issued
taking the total number of shares in issue to 3 904 153 777.
Moody’s credit rating: The rating was refreshed during August 2014 and remains unchanged as follows:
Global long-term Baa3 Global short-term P-3
National long-term A3.za National short-term P-2.za
CONTINGENCIES AND COMMITMENTS
At 28 February 2015, Redefine had guarantees and suretyships in respect of its BEE initiatives amounting to R220
million (2014: R280 million). Redefine has capital commitments outstanding of R2,6 billion (2014: R3,5 billion) and committed
property acquisitions of R4,7 billion (2014: R2,0 billion). The commitments are funded by the issue of Redefine shares
and undrawn banking facilities.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT INITIATIVES
Redefine Empowerment Trust
As part of Redefine’s commitment to sustainable, long-term economic and social development it has established the
Redefine Empowerment Trust. Redefine will issue up to 300 million shares to the Trust, which will be funded by a loan
advanced by Redefine. The Trust will focus on activities to improve education and training; through the provision of
scholarships and bursaries and community development programmes. The Trust is constituted as a capital preserving trust and as
such will not be entitled to dispose of the shares not used to redeem the loan from Redefine. The Trust will therefore continue in
perpetuity. A SENS announcement has been released in this regard and a circular will be distributed in order to obtain shareholder
approval.
Fountainhead Empowerment Transaction
Fountainhead, which is a property unit trust, is not permitted to provide financial assistance for BEE initiatives. As part of
Redefine’s BEE strategy for the group, Redefine agreed in principle in late 2014 to enable a wholly owned subsidiary of
Bakgatla-Ba-Kgafela Investment Holdings Proprietary Limited (BBK), the investment company for the broad-based Sedibelo Community
Development Trust (Sedibelo Trust) serving the 350 000 strong platinum-rich Bakgatla-Ba-Kgafela tribe of the North West to acquire
a stake in Fountainhead. The transaction, which was formalised earlier this year remains conditional on the conclusion of debt
funding agreements, involves the sale of 75 million Fountainhead units to a special purpose wholly owned subsidiary of BBK (BBK SPV)
at a price of R9,19 per unit. The Fountainhead units will be sold ex the entitlement to the Fountainhead distribution for the
six months ended 28 February 2015. The transaction will be partly equity funded by BBK (in an amount of R150 million equating to
R2 per Fountainhead unit) with the balance being funded by debt which will be credit enhanced by Redefine. The sold Fountainhead
units will be subject to a five-year lock-in period and contractual commitments on the part of BBK SPV, BBK and the Sedibelo Trust
to retain their empowerment credentials. These restrictions will remain in place in respect of any Redefine shares received by
BBK SPV should Redefine’s offer for Fountainhead’s assets be successful. A SENS announcement setting out further details of the
transaction has been released.
PROSPECTS
Property fundamentals remain challenging and the operating environment across all sectors continues to be subject to
uncertainty around electricity supply and local service delivery. In addition upward interest rate pressure will pose a
challenge going forward, but will no doubt also create opportunities during the remainder of the year. The diversified
asset base, combined with Redefine’s dedicated commitment to the execution of its stated strategies will enable it to
deliver on its long-term goals. We are therefore confident of achieving distribution growth of between 7% and 7,5% for the
full 2015 year compared with the distribution of 74,54 cents to 31 August 2014.
The forecast is predicated on the assumption that current trading conditions will prevail. Forecast rental income is
based on contractual terms and anticipated market-related renewals. This forecast has not been reviewed or reported on by
the group’s independent external auditors.
DECLARATION OF A CASH DIVIDEND WITH THE ELECTION TO REINVEST THE CASH DIVIDEND IN RETURN FOR REDEFINE SHARES
The board of directors of Redefine have declared an interim cash dividend of 39,00000 cents per share, for the six months
ended 28 February 2015, out of the company’s distributable income (the cash dividend).
Shareholders will be entitled, in respect of all or part of their shareholding, to elect to reinvest the cash dividend
in return for Redefine shares (the share alternative), failing which they will receive the cash dividend of 39,00000
cents per share that will be paid to those shareholders not electing to participate in the share alternative.
A circular providing further information in respect of the cash dividend and share alternative will be posted to
Redefine shareholders on 7 May 2015.
Shareholders who have dematerialised their shares through a Central Securities Depository Participant (CSDP) or broker
should instruct their CSDP or broker with regard to their election in terms of the custody agreement entered into
between them and their CSDP or broker.
SALIENT DATES AND TIMES
The salient dates and times for the cash dividend and share alternative are as set out below.
2015
Circular and form of election posted to shareholders Thursday, 7 May
Finalisation information including the share ratio and price per share published on SENS Friday, 15 May
Last day to trade in order to participate in the election to receive the share alternative
or to receive a cash dividend (LDT) Friday, 22 May
Shares to trade ex-dividend Monday, 25 May
Listing of maximum possible number of shares under the share alternative Wednesday, 27 May
Last day to elect to receive the share alternative or to receive a cash dividend (no late
forms of election will be accepted) at 12:00 (SA time) Friday, 29 May
Record date for the election to receive the share alternative or to receive a cash dividend (record date) Friday, 29 May
Announcement of results of cash dividend and share alternative released on SENS Monday, 1 June
Cash dividend cheques posted to certificated shareholders on or about Monday, 1 June
Accounts credited by CSDP or broker to dematerialised shareholders with the cash dividend payment Monday, 1 June
Share certificates posted to certificated shareholders on or about Wednesday, 3 June
Accounts updated with the new shares (if applicable) by CSDP or broker to dematerialised shareholders Wednesday, 3 June
Adjustment to shares listed on or about Friday, 5 June
Notes
1. Shareholders electing the share alternative are alerted to the fact that the new shares will be listed on LDT + 3 and that
these new shares can only be traded on LDT + 3, due to the fact that settlement of the shares will be three days after the
record date, which differs from the conventional one day after record date settlement process.
2. Shares may not be dematerialised or rematerialised between Monday, 25 May 2015 and Friday, 29 May 2015, both days inclusive.
3. The above dates and times are subject to change. Any changes will be released on SENS.
TAX IMPLICATIONS
Redefine was granted REIT status by the JSE with effect from 1 September 2013 in line with the REIT structure as
provided for in the Income Tax Act, 58 of 1962, as amended (the Income Tax Act) and section 13 of the JSE Listings
Requirements.
The REIT structure is a tax regime that allows a REIT to deduct qualifying distributions paid to investors, in
determining its taxable income.
The cash dividend of 39,00000 cents per share meets the requirements of a qualifying distribution for the purposes of
section 25BB of the Income Tax Act (a qualifying distribution) with the result that:
- qualifying distributions received by resident Redefine shareholders must be included in the gross income of such
shareholders (as a non-exempt dividend in terms of section 10(1)(k)(aa) of the Income Tax Act), with the effect that the
qualifying distribution is taxable as income in the hands of the Redefine shareholder. These qualifying distributions are
however exempt from dividends withholding tax, provided that the South African resident shareholders provided the
following forms to their CSDP or broker, as the case may be, in respect of uncertificated shares, or the company, in respect
of certificated shares:
- a declaration that the dividends are exempt from dividends tax; and
- a written undertaking to inform the CSDP, broker or the company, as the case may be, should the circumstances
affecting the exemption change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Shareholders are advised to
contact their CSDP, broker or the company, as the case may be, to arrange for the above mentioned documents to be
submitted prior to payment of the distribution, if such documents have not already been submitted.
- qualifying distributions received by non-resident Redefine shareholders will not be taxable as income and instead
will be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions per section 10(1)(k)
of the Income Tax Act. It should be noted that until 31 December 2013 qualifying distributions received by non-residents
were not subject to dividends withholding tax. From 1 January 2014, any qualifying distribution will be subject to
dividends withholding tax at 15%, unless the rate is reduced in terms of any applicable agreement for the avoidance of
double taxation (DTA) between South Africa and the country of residence of the shareholder. Assuming dividends withholding
tax will be withheld at a rate of 15%, the net dividend amount due to non-resident shareholders is 33,15000 cents per
share. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied upon if the non-resident
shareholder has provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated
shares, or the company, in respect of certificated shares:
- a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
- a written undertaking to inform their CSDP, broker or the company, as the case may be, should the circumstances
affecting the reduced rate change or the beneficial owner cease to be the beneficial owner, both in the form prescribed by
the Commissioner for the South African Revenue Service. Non-resident shareholders are advised to contact their CSDP,
broker or the company, as the case may be, to arrange for the above mentioned documents to be submitted prior to payment of
the dividend if such documents have not already been submitted, if applicable.
Shareholders are advised that in electing to participate in the share alternative, pre-taxation funds are utilised for
the reinvestment purposes and that taxation will be due on the total cash dividend amount of 39,00000 cents per share.
OTHER INFORMATION
- The ordinary issued share capital of Redefine is 3 904 153 777 ordinary shares of no par value before any election
to reinvest the cash dividend.
- Income tax reference number of Redefine: 917/852/484/0.
The cash dividend or share alternative may have tax implications for resident as well as non-resident shareholders.
Shareholders are therefore encouraged to consult their professional advisers should they be in any doubt as to the
appropriate action to take.
DIVIDEND DECLARATION AFTER REPORTING DATE
In line with IAS 10 Events after the Reporting Period, the declaration of the dividend occurred after the end of the
reporting period, resulting in a non-adjusting event which is not recognised in the financial statements. In prior
periods, the distribution consisted of debenture interest which accrued on a daily basis.
CHANGES TO THE BOARD
Phumzile Langeni has been appointed to the Board as an independent non-executive director, with effect from 6 May 2015.
BASIS OF PREPARATION
The condensed unaudited interim financial statements for the six months ended 28 February 2015 are prepared in
accordance with International Financial Reporting Standard, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council, the JSE Listings Requirements and the requirements of the South African Companies Act, 2008 (as
amended).
Except for the amendments to the standards adopted as set out below, the accounting policies applied in the
preparation of these interim financial statements are in terms of International Financial Reporting Standards and are consistent
with those applied in the previous annual financial statements. Redefine adopted the following amendments to existing
standards:
- Amendments to IAS 32: Financial Instruments Presentation.
- Amendments to IAS 36: Impairment of Assets.
There was no material impact to the group’s interim financial statements.
The prior period comparatives have been represented to reflect the change in accounting policy for property portfolio
revenue as set out below.
In terms of IAS 18 Revenue, Redefine acts as a principal for the collection of operating cost recoveries and as such
these recoveries should be accounted for as revenue and included in contractual rental income. In light thereof the
directors of Redefine decided during the previous financial year to revise the accounting policy relating to the recognition
of the operating costs recoveries received from tenants. In the prior comparative period these recoveries were offset
against the relevant operating costs. The revised policy adopted is as follows: Recoveries of costs from lessees are
included in contractual rental income; however, where Redefine merely acts as an agent and makes payment of these costs on
behalf of lessees, the recoveries are offset against the relevant costs. In our view this policy better reflects the
economic substance of the transaction and is seen as best practice in the REIT industry. This change provides more relevant
information to the users of the financial statements. This change has not resulted in any impact on the profit of the
group. This change has been applied retrospectively and as a result the prior comparative period’s statements of
comprehensive income and the segmental analysis have been represented to reflect this change.
The results were prepared under the supervision of Leon Kok CA(SA), Redefine’s Financial Director.
These condensed interim financial statements have not been reviewed or audited by Redefine’s independent auditor,
Grant Thornton.
By order of the board
Redefine Properties Limited
6 May 2015
Directors: M Wainer* (Chairman), A J Konig* (CEO), L C Kok* (FD), D H Rice*† (COO), H K Mehta, B Nackan+, D A Nathan,
M J Ruttell*@, G Z Steffens#, M J Watters
*Executive †British @Irish #German +Lead independent
Registered office: 3rd Floor, Redefine Place, 2 Arnold Road, Rosebank, 2196.
(PO Box 1731, Parklands, 2121)
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Java Capital
Company secretary: CIS Company Secretaries Proprietary Limited
www.redefine.co.za
7 May 2015
Date: 07/05/2015 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
