Redefine currently leases 73 116 square metres to Pick n Pay. (Waldo Swiegers/Bloomberg via Getty Images)
Real estate company Redefine Properties, which leases space to Ster-Kinekor and Pick n Pay, among others, says it is reducing space in these two companies because it is not profitable.
The group is taking back 10 000 square metres from Pick n Pay during the 2024-25 financial year and will re-let it at better monthly rentals, said Nashil Chotoki, Redefine Properties’ national asset manager for retail.
He was speaking at a capital markets event on Tuesday to explain the company’s strategy, sustainability, operations and financials to investors and stakeholders.
Redefine currently leases 73 116 square metres to Pick n Pay.
“The driving factor in us taking back the space is the retail opportunity that lies within that space and we want to improve rental and trading densities on that space,” Chotoki said.
Trading density is turnover generated over space leased.
The 10 000 square metres Redefine is taking back from Pick n Pay is equivalent to one grocery store, leaving about six stores with the group.
“Part of the agreement with Pick n Pay is that in the remaining stores, they need to upgrade those stores so that the offering now becomes competitive,” Chotoki said.
Pick n Pay has faced difficulties recently. Its former chief executive, Pieter Boone, was asked to step down last year because the company was underperforming. And its founding Ackerman family earlier this year announced that it will forgo its majority shareholding in the grocery retailer.
“It’s no secret that Pick n Pay does underperform compared to the likes of Checkers,” Chotoki said.
On Tuesday, Pick n Pay warned shareholders to expect a loss of more than 20% in its half-year to 25 August results which are to be published on 21 October. The group said its sales lagged as a result of the closure of 16 supermarkets during the period.
“There is no purpose in living in the rear-view mirror. We must only look backwards to understand what went wrong and to make sure that we don’t repeat the mistakes of the past,” chairperson Gareth Ackerman said in a statement.
“We all take accountability for the position we find ourselves in — one which developed over many years — and we all take accountability for the action required to rebuild and restore Pick n Pay.”
Redefine said it will also take back space from Ster-Kinekor because the cinema operator has been struggling.
“In Ster-Kinekor we currently have six cinemas and those will be reduced to two. The space represents a specific opportunity for us to further increase our rent lending functions,” Chotoki said.
Redefine said by doing this, income risk would be mitigated through re-letting.
Ster-Kinekor announced in April the retrenchment of 236 workers.
This was just over a year after it exited its business rescue process and narrowly escaped liquidation, resulting in 800 jobs being saved.
“The repurposing of the cinema space will be done in phases and so there will be an impact on vacancy during that process. The important part for us is that given the low rental base that Ster-Kinekor was on, if we re-let the space we can properly utilise it, which is where the opportunity lies for us,” Chotoki said.
“We still want to incorporate the entertainment aspect to our shopping centres and I think there’s great opportunities to traditionally repurpose the space for that purpose.”