One of SA's leading real estate investment trusts, Redefine Properties, says its normal domestic trading has not been "materially impacted" by disaster management regulations following the coronavirus outbreak, and that it remains well within its debt covenants.
Redefine Properties owns more than 300 large properties in South Africa, including offices and large malls. It owns Maponya Mall, East Rand Mall, and Blue Route Mall, as well as office buildings on 90 Rivonia Road, Alice Lane, Rosebank Link and 90 Graystone Drive.
Redefine Properties on Friday issued an update on its balance sheet management during the outbreak. This follows President Cyril Ramaphosa's declaration on Sunday of a state of national disaster due to the Covid-19 outbreak.
Government also introduced strict measures to contain the spread domestically – among these new closing times for liquor stores, bars, clubs, shebeens and restaurants that sell liquor, Fin24 previously reported. Emergency price controls have also been put in place for products like toilet paper and masks.
Global markets have been reeling for weeks, as coronavirus fears triggered a sell-off. Redefine Properties acknowledged these "unprecedented financial market conditions" in its statement to shareholders. Redefine Properties said that these conditions call for prudent balance sheet management and "careful" liquidity planning.
"At the time of release of this communication, normal domestic trading has not yet been materially impacted by disaster management regulations and business continuity plans have been implemented to minimise disruption by initiatives implemented to curb the spread of Covid-19," the REIT said.
Redefine has established a dedicated Covid-19 response team for its business. "Management takes the threat seriously and is implementing practical measures to curb the spread of the virus for as long as the circumstances demand. A curtailment on discretionary costs has been implemented to make allowance for the anticipated costs associated with the various initiatives to combat the spread of Covid-19," the REIT said.
According to the balance sheet update, Redefine said its loan-to-value ratio (the loan in relation to the value of the asset that was purchased) for 29 February 2020 is not to be materially different from the ratio of 43.9% recorded at year-end 31 August, 2019.
Redefine said the value of its 34% of unencumbered assets amounts to R32.6 billion, which is available to support unsecured debt of R14.5 billion. Local property assets are used to secure 78% of its secured debt – the loan-to-value ratio for this is 40.3%. Its offshore debt of R3.3 billion is secured against its offshore property assets, "which has no recourse to the South African balance sheet," the group said.
Within debt covenants
Redefine said it had R6.3 billion worth of debt maturing by 31 August 2020, of which R1.6 billion was to fall due on 29 February 2020.
"Substantially all of this debt has been successfully refinanced and management is comfortable the balance will be addressed. We also have taken advantage of the lower interest rate curve to increase and extend our hedging maturity profile," Redefine Properties said.
"Although we are operating in a fluid environment, Redefine remains well within all its debt covenants," the update read.
The REIT is working to reduce its balance sheet risk and prioritise working capital management.
"Redefine has a strong liquidity position with access to R2.8 billion in committed undrawn credit facilities," it said.
The REIT also commented on its logistics operations in Poland. Trade in Poland's shopping centres has been limited.
"Despite the limitation of trade in Poland’s shopping centres the movement of freight around, in and out of Poland continues as usual and the manufacturing sector is not shut down.
"In fact, there is additional demand for logistics space to support the current contingency measures," Redefine Properties said.
Poland's government has also announced a $51.5 billion rescue package for the Polish economy to mitigate the impact of the Covid-19 outbreak. A portion of the package will be used to help businesses affected by trade restrictions to pay salaries. Redefine earlier this month also managed to secure an equity partner for its logistics operations in Poland.