redefinitionThe second largest real estate investment trust in Japan by market capitalization, has announced its interim financial results until February 28, 2021. The results were overwhelming, with Redefine’s revenue cut by 30% and dividends postponed. Andrew Koenig, CEO of Redefine participated BizNews Power Hour Discuss these results and the future outlook for Redefine. König says he remains optimistic despite the hit real estate sector. “Loneliness and zoom fatigue will bring people back to the office.” – Nadia Swat
Andrew Koenig talks about the low occupancy of office space:
From a sectoral point of view, the office is arguably one of the weakest parts of our platform at the moment. There was an oversupply of offices before the pandemic, and we know that the pandemic caused a huge amount of pain around the occupation of space.
But I believe it is temporary and will bring me back to the office. I think that the loneliness of teleworkers will eventually bring them back together, along with burnout due to zoom fatigue and the like.
About his optimism that the facility will return to full occupancy:
I believe that the deployment of vaccination will give people the confidence to move again and allow them to return without fear of what the pandemic caused with respect to Covid’s contract. However, collaboration, connectivity, and cohesion are lacking when: Work at home.. And yes, in certain professions, it may work. Not all professions work.
And we believe you can’t underestimate fatigue, burnout, followed by emotional loneliness, and isolation. Everyone I interact with expresses the desire to return to the office, work in teams again, and collaborate around the table, rather than in teams or zoom meetings.
About the impact of the pandemic on Redefine’s assessment last year:
Most of Pandemic Brandt The value occurred in the previous accounting period until August. And that’s another reason we’re optimistic, last year with a drop in ratings of about 10% across the spectrum. This time, a 1% decrease was seen until the end of February, the first half.
As a result, the down cycle is beginning to bottom out, indicating that the worst of the pandemic has been priced at asset value. And from this reset base, we believe we will see growth in the future.
About the meaning of return:
Refund means that once the lease is renewed, renegotiations will take place to extend your stay with the tenant. If the expired rent is exceeded by the renewed rent (this is called a negative refund and vice versa), it is a positive refund. Currently, in a very difficult market with no new entrants to the market, we negotiate fiercely with our tenants to keep them. You can see that the tenant retention rate of executives is well over 95%. As a result, we needed to lower our rent to ensure that they were happy to be with us.
Now, putting this in context, about 20% of the entire lease is renewed each year, so it applies to that part of the portfolio. So, from a revenue perspective, the result was a reduction in total office revenue of about 8.6%, offset by a compulsory lease escalation to the remaining 7.1% of the portfolio. Therefore, on a net basis, it fell 1.5%.
Whether the real estate sector is still a yield plan:
I believe it and would like to make a suggestion. Last year was a unique situation brought about by a pandemic. As you know, the redefinition was based on the solvency and liquidity requirements set out in the Companies Act. We believe that at the end of this year, when things are more certain and the outlook is much clearer from a vaccination perspective, we can make a dividend decision. One payment.
It should be noted that it is subject to solvency and liquidity tests. But that doesn’t matter to us as we are sitting here now. Temporarily, it is important to increase financial liquidity and ensure flexibility in the coming months.
Whether it is realistic for Redefine’s share price to return to pre-provided levels:
We believe it will return to around the net asset value [NAV] The level is realistic. Our net asset value is slightly below R7,20. NAV premiums in this environment are not easy to see. But for us, a return close to NAV is where we believe the stock should go down in that NAV reflects value.
About Redefine’s goal of reducing loan-to-value to less than 40%:
We negotiated the sale of some non-core properties. The total amount is 2.7 billion rants locally. And I can give you a little breakdown of it over time. In addition, Australia has dormitory assets of R $ 2.1 billion. Therefore, a total of R $ 4.8 billion in sales is underway. By this time next year, we expect it to be less than 40% from an LTV perspective. This fiscal year at the end of August is scheduled to end at 41% (odd) LTV.
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Redefining CEO Andrew König: “Loneliness and zoom fatigue will bring people back to the office.”
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