By Roy Cokayne for IOL
Redefine Properties is to reduce its exposure to Edcon as South Africa’s biggest clothing retailer seeks to cut its total retail space from about 1.5-million square metres to about 1-million through a rationalisation process.
Redefine chief operating officer David Rice yesterday said that the group would reduce its Edcon exposure by about 20 000m² this calendar year.
Rice said Redefine planned to fill the space vacated by Edcon. At Boulders Shopping Centre in Midrand, for instance, the retailer would reduce the number of outlets from three to one.
But Rice said one of these outlets had been re-let and it had interest from tenants for the third outlet.
Rice said retail vacancies in the market and Redefine’s portfolio had been increasing, particularly in the larger shopping centres, and lease negotiations were “tougher than they have ever been.”
He said there had been a significant push back from retailers on rental escalations, specifically from national retailers, and on parking fees.
“National retailers are far more clear about the space that they want in terms of their strategies and they are not scared to give up space whereas previously they may have kept more space,” he said.
However, Rice said international retailers were still coming into the South African market.
Rice said Redefine had secured two deals for 17 000m² stores with French-based Leroy Merlin, a DIY and homes company that would be competition to the likes of Builders Warehouse.
Rice added that Redefine had also done two deals with Decathlon, a sporting goods retailer that was a sister company to Leroy Merlin, that would also be big competition for local traders.
He said the office market was “very weak” and it was “musical chairs” with vacancy levels in many areas probably increasing beyond where they were.
Rice said Redefine’s focus in the industrial sector was on development, because its vacancy levels were low at 2.7%.
Redefine yesterday reported a 5.5% increase in distributions a share to 47.30 cents for the six months to February and expects to maintain this growth rate for its full financial year. It reported an operating margin of 82.7%, with the property cost ratio stable at 33.9%.
The overall occupancy rate improved to 95.8% and tenant retention to 94.7% from 86% in the prior period.
Leon Kok, the financial director at Redefine, said the company’s loan to value ratio declined to 40.1% and they would look to reduce it further to below 40% over time.
Redefine’s total assets were valued at R93.4-billion at end-February, an increase of R1.9bn since end-August, following the acquisition of a strategic 25% stake in Chariot Top Group in the reporting period for R907.9-million to give it direct access to a retail portfolio in Poland.
Redefine’s overall portfolio remains biased towards retail at 41% of its sectoral spread by value, with its offshore footprint contributing 25% of distributable income.
Redefine rose 0.89% on the JSE yesterday to close at R11.78.