“Offices are in a difficult cycle at the moment. There’s far more new stock coming on stream than there is new demand and it’s all a function of the economy. In Sandton, there’s lots happening and with that there are areas elsewhere that will be vacated, and that will put pressure on other renewals coming up in the office space,” [DATA RDF:Redefine Properties] financial director, Andrew Konig, told CNBC Africa.
(READ MORE: Company changes reflected in Redefine’s results)
“Retail has shown the most resilience over the last while and even though there is pressure on the consumer in-pocket, there are those who are still doing very well. We believe our retail offering will be able to retain the tenants, the shoppers and will stand us in good stead from an earnings point of view.”
Redefine Properties recently stated that property unit trust, Fountainhead Property had agreed to sell all of its assets to Redefine.
Konig explained that as a result of this transaction, Redefine would acquire well-located retail spaces and stated that this is the most offensive place to be in property.
“About two and a half years ago, Redefine embarked on a process of transforming its property portfolio. We initially started by unbundling all our secondary grade office and industrial properties but where Redefine had a gap was that it had a very low exposure to the retail property sector,” he said.
“Fountainhead offered us a solution to complete that aspect of our property restructure and, going back to about March 2012, we began the process of acquiring Fountainhead Property Trust. We’ve come back to the market with a transaction that is done and dusted, [aside from] the regulatory approvals as well as shareholder approvals from both Fountainhead and Redefine.”
(READ MORE: Redefine refines property portfolio)
He also emphasised that the Fountainhead transaction not only completes Redefine’s portfolio restructure, it substantially transforms the company’s property portfolio as well.
“What this means for Redefine is that our exposure to offices gets diluted from about 45 per cent to approximately 35 per cent post the transaction, and our exposure to the retail sector grows from approximately 40 per cent to about 50 per cent,” Konig said.
“These are very good quality, retail assets that you can’t develop from a greenfield point of view – they’re well located, they’re established, they need some tweaking [but] that’s underway.”