Andrew Konig. Picture: RUSSELL ROBERTS
Andrew Konig. Picture: RUSSELL ROBERTS

SA's second-largest listed property company, Redefine Properties, has sold two warehouses in Poland to raise cash for the upgrade of existing assets and to have money available for rising administrative costs.

The group, which has a portfolio of investments worth more than R95bn, is making its balance sheet more defensive, which includes selling its noncore assets, its management said.

Redefine first invested in Poland through mall and office owner EPP in March 2016. It has since invested in distribution warehouses and logistics buildings in the country, which is Eastern Europe's largest economy. These investments are held by European Logistics Investment (ELI), of which Redefine owns 95%. 

ELI would sell two logistics warehouse buildings with 77,660m2 of gross lettable area and development land suitable for the construction of an additional warehouse of 22, 407m2 in Strykow, Poland to UK listed Investment Trust Tritax EuroBox for €51.8m (R844m). 

Redefine’s share of the proceeds will be €49.2m (R802m). 

“The sale further advances Redefine’s stated intention to strengthen its balance sheet through the recycling of ELI’s first development at a substantial premium to its development cost,” Redefine's CEO Andrew Konig said.

The sale bolstered Redefine's liquidity and represented the raising of funding at a cost of 6.1%, Konig said.

The company had said in November that it would sell a chunk of assets to decrease its debt.

As much as R8bn worth of properties, or 8.4% of its asset base, was up for sale. The sales would bring its loan-to-value (LTV) from 43.9% to below 40%, taking pressure off of its balance sheet.

The Strykow warehouses form part of the European Logistics Platform portfolio. They were the first development in the portfolio with construction having started in the second half of 2018 and having been completed in February 2019. The town of Strykow includes one of Poland’s largest logistics markets. It is situated close to Lodz in central Poland.

Redefine also said that Madison International Realty would become an equity investor in ELI.

“Prior to our discussions with Madison for an equity stake in ELI, we received an unsolicited approach from Tritax EuroBox whose interest was to own our assets in Strykow. We elected to move forward with the sale of the entire property, which is a win for everyone involved as the deal is value accretive,” Konig said.

He said the net proceeds, after settling debt of circa €22m (R359m), of the sale would flow back into the country.

The development was originally approved at a yield of 8%. The disposal of the property was at a net investment yield of 6.1%.

“This compares favourably to prevailing market yields and shows a strong appetite from investors for Polish logistics investments,” Konig said.

Stanlib senior fund analyst Ahmed Motara said Redefine had said numerous times that it would spend 2020 cleaning up its balance sheet.

“They said they would reduce their loan-to-value and introduce a new strategic partner in Poland,” he said.

“They are trying show evidence of what they said they would do. It makes sense for them to recycle certain assets abroad. It's really difficult to sell properties in our market at the moment,” Motara said.

andersona@businesslive.co.za