It appears that value chasers are being lured back to Redefine Properties because it is continuing to trade at a discount of more than 30%. This week the stock touched 570c, its highest level in more than five years, up 45% from early April lows.
That follows the release of better than expected results for the year to end-August, driven by lower debt funding costs and improved operating efficiencies, trading metrics and leasing activity. Redefine delivered a 4.7% increase in distributable income per share and lifted dividends by 7.8% after raising its payout ratio from 85% to 87.5%.
With a market cap of R40.4bn, Redefine is South Africa’s second-largest real estate investment trust (Reit) after Growthpoint Properties (R57.3bn). Vukile Property Fund (R31.6bn), Fortress Real Estate (R29bn) and Resilient Reit (R26.3bn) round out the top five.
Redefine expects another year of inflation-beating earnings growth — management has pencilled in 4%-6% distributable income per share for the 12 months to August 2026. This is welcome news for patient investors who have endured a decade of underperformance, during which Redefine lagged behind its peers on the earnings and share price growth front.
Analysts say above-market debt levels have long been a key concern. The company’s sprawling portfolio, historically a hodgepodge of assets across sectors and geographies, also weighed on sentiment. Now, after a multiyear restructuring, Redefine has emerged with a much leaner structure, with a marked shift in its geographical and asset composition.
Back in 2019, Redefine had exposure to South Africa and the rest of Africa, as well as the UK, Poland and Australia, spanning traditional subsectors (retail, office, industrial) and alternatives (student housing, hotels). Its R92bn asset base was 79% weighted to South Africa.
Today, its R103.2bn portfolio focuses only on South Africa and Poland, split 65/35, with a negligible 0.1% in the rest of Africa via a small stake in unlisted fund Lango (see graph).
The Polish portfolio leans towards retail, with logistics, offices and self-storage exposure, while Redefine’s South African interests remain diversified across retail, office and industrial. The company has eliminated holdings in other listed entities, a move analysts welcomed.
If we look at where we were prior to Covid and where we are now, our business has completely transformed. Today, we’re focused, disciplined, and in control of every asset we manage
— Andrew König
At last week’s results briefing in Sandton, CEO Andrew König said the company was in better shape now than it has been in many years.
“If we look at where we were prior to Covid and where we are now, our business has completely transformed. Today we’re focused, disciplined and in control of every asset we manage. That focus has changed not only how Redefine looks and feels, but is also starting to show in our results.”
König added: “Redefine has come through some treacherous shocks in the past five years, but we’ve shown resilience and absorbed the bumps. From here it’s upwards and onwards.”
He said that if sentiment improves and the share price continues to recover, Redefine would be able to access capital markets and pursue acquisitions again. But he cautioned: “It’s important to get the cost of capital right. We don’t want to be stupid and raise capital at ridiculous yields.”
Growth will focus on opportunities in the retail and logistics (warehouse and distribution centres) sectors in South Africa and Poland, both supported by what König refers to as consumption-driven economies, which ultimately underpin rental growth.
“We don’t want to be scattered again all over the place and invest in asset classes we don’t understand,” König told the FM. Debt reduction remains a priority, potentially through selling “one or two” Polish joint ventures in its EPP platform.
Despite a 24% year-to-date share price gain, Redefine still trades at a hefty 32% discount to NAV at this week’s level of about 570c. That’s in stark contrast to Growthpoint, which has already narrowed its discount to 16%. Fortress trades at a 6% discount while Vukile and Resilient are roughly in line with NAV.
Redefine has lagged its peers on the total return front in the short and longer term. In the 12 months to October, Redefine’s total return of 21.2% is well below Growthpoint’s 36.8%, Vukile’s 30.4%, Fortress’s 33.9% and Resilient’s 36.4%. According to the South African Reit Association, Redefine’s annualised total return over 10 years is 1.6%, against Growthpoint’s 4.9%, Vukile’s 11.3%, Fortress’s 10.5% and Resilient’s 3.2%.
Given its underperformance, the question is: does Redefine potentially offer more share price upside than many of its peers?
Independent property analyst Keillen Ndlovu says last week’s uptick suggests the market likes Redefine’s improved earnings guidance and higher payout ratio. “The latter signals more confidence in the performance of the business and its cash flows.”
Ndlovu says given how much work has been done to simplify the business, Redefine’s discount to NAV should start to narrow. “More so if there’s progress in reducing the complexity of the Polish joint ventures.”
These ventures, held through EPP, are characterised by layered ownership and high leverage, making them less transparent than analysts prefer.
Still, investors like the fact that Redefine’s only offshore exposure is to Poland. Ndlovu says the country is expected to outperform Europe, with GDP growth of 3.2% in 2025 and 3.1% in 2026, above the EU average. Its unemployment rate is below 3%.
Garreth Elston, MD of Golden Section Capital, agrees that disciplined balance sheet management and core asset quality are paying off. “The recent results confirm that the worst is probably behind it. But capital efficiency and offshore simplification remain key.”
Elston adds that if management improves earnings quality and maintains loan-to-value (LTV) discipline, the gap between the share price and intrinsic value could narrow “meaningfully” within 12 months.
Ian Anderson, head of listed property at Merchant West Investments, shares the sentiment. He says that because the rest of the South African listed property sector has run so hard in the past 18 to 24 months, “Redefine’s relative value proposition is becoming difficult to ignore”.
Still, he notes the large discount at which the stock continues to trade means the market remains concerned about the Polish joint venture structures and high leverage, which pose refinancing risk.
Though Redefine’s LTV fell from 42.3% to 40.6% in the year to August, Anderson notes that the European debt pushes the Reit’s see-through LTV to 46%. “That’s uncomfortably high in the South African listed context, and the reason the market is pricing in the risk.”
He adds: “The market will rerate Redefine’s shares once management reduces European debt and unwinds some of the complex joint venture structures.”
He also points to Redefine’s large office portfolio, weighted to Gauteng, where demand has lagged behind that of the Western Cape. Despite owning quality offices, vacancies and negative rent reversions persist.
Anderson adds that as long as Redefine trades at a sizeable discount, raising capital will be difficult, which will limit participation in acquisitions at a time when several other property stocks have become active in closing deals and bulking up portfolios.
The result, Anderson says, is that Redefine may struggle to match its peers’ earnings growth over the next two to three years. “So Redefine’s rerating will not be an earnings growth story but rather about an improvement in investor confidence.”
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