Redefine Properties’ share price has rebounded by more than 60% in the past 18 months, after almost a decade of underperformance.
The JSE’s second-largest South Africa-based real estate investment trust (Reit), with a market cap approaching R44bn, disappeared from stock pick lists after the pandemic as investor concerns mounted over its complex offshore structures and high debt levels.
That was evident in the disproportionately large discount to NAV of more than 50% it was still trading at two to three years ago.
But it is no accident that Redefine has recently emerged as one of the listed property sector’s top performers. The recovery in investor sentiment comes on the back of a multiyear restructuring, during which management made progress in paying down debt, simplifying offshore joint venture structures and selling underperforming properties. As a result, Redefine is back in inflation-beating earnings growth territory.
Speaking at Redefine’s recent capital markets day in Sandton, CEO Andrew König said the Reit is on track to achieve the upper end of its 6.5%–7% growth guidance for the year to August. That’s comfortably ahead of the 4%–6% growth management had pencilled in late last year.
Redefine’s improved fortunes have been driven by a stronger balance sheet and improved operational performance across its portfolio, which recently surpassed R100bn.
According to König, simplifying Redefine’s international interests and joint ventures has been central to the company’s restructuring. Back in 2019, the portfolio spanned a mixed bag of assets across the UK (hotels), Australia (student housing) and Poland (offices and retail). Management has since trimmed offshore exposure to a single country, Poland, which represents 33% of Redefine’s R101.2bn portfolio by value. The portfolio is now about 75% retail-linked.
König said the company may have “run off course” in terms of capital allocation in the past but added: “We are back on track. The portfolio is now much simpler and easier to understand.”
The latest trading metrics point to a continued improvement across the Reit’s local shopping centre, office and industrial portfolios. The vacancy rate in its mall portfolio, which includes Centurion Mall, Maponya Mall in Soweto, Blue Route Mall in Cape Town and Matlosana Mall in Klerksdorp, dropped from 5.9% in the year to August 2025 to 4.8% in July. Rentals on retail lease renewals accelerated from 1% to 3.2% over the same period.
The long-suffering office sector has also posted a welcome uptick in rentals in the 11 months to July, from an average of R186/m² to R193/m². Still, Redefine’s average office reversion remains in negative territory at -12.7%, skewed by two particularly large corporate lease renewals.
Encouragingly, office vacancies have fallen from 13% to 10.7%, the lowest level in more than six years.
Referring to the balance sheet, König said the loan-to-value ratio is starting to look “much healthier”, recently dipping below 40% for the first time since the pandemic.
Given the strong rally already seen in Redefine’s share price, the question is whether the stock is starting to look expensive.
Ridwaan Loonat, senior property analyst at Nedbank CIB, doesn’t think so. He says the investment case for Redefine has evolved materially. “Two years ago, the story was largely about balance sheet repair. Today it is increasingly about earnings growth.”
How much upside remains will depend on the extent to which management can translate improving occupancy levels, lower funding costs and better capital allocation into sustainable earnings growth. Loonat says it is encouraging that growth is now being driven by several factors rather than a single catalyst.
“Retail continues to benefit from improving occupancy and positive rental reversions, industrial is enjoying structural demand and near-full occupancy, office vacancies are steadily declining and funding costs are falling as debt is refinanced at lower margins.”
He adds: “These are all tangible and measurable drivers of earnings growth rather than relying on a strong property cycle or aggressive acquisitions.”
Naeem Tilly, portfolio manager and head of research at Sesfikile Capital, echoes the sentiment, saying Redefine’s investment case has improved meaningfully over the past 12 to 18 months, supported by a stronger balance sheet, an improved debt profile and better operating momentum across the portfolio.
He agrees that the recent rally has not fully eroded the valuation case. “The shares are still offering a distributable earnings and dividend yield of about 9.9% and 8.4% respectively, which remain attractive relative to the broader listed property sector.”
Tilly adds that Redefine appears “relatively cheap” and still trades at a sizeable discount to NAV of about 25%.
“Provided management delivers on its upgraded growth expectations and continues to strengthen the balance sheet, there remains scope for further upside.”
