29th Jan 2015 08:17
LONDON (Alliance News) - Redefine International PLC Thursday said it has acquired a portfolio of 56 German retail properties valued at EUR156.8 million in a 50/50 joint venture with its biggest shareholder, Redefine Properties Ltd.
The FTSE 250-listed income focused UK real estate investment trust said the portfolio has been acquired together with existing debt of EUR100 million, which the joint venture intends to refinance immediately.
The portfolio is currently valued at EUR156.8 million, reflecting a net initial yield of 7.5%, although Redefine said that subject to re-financing, it is expected to produce an initial yield on equity in excess of 11.0%.
Redefine said the net consideration of approximately EUR57.4 million, including the acquisition costs and net working capital, will be funded equally by Redefine International and Redefine Properties from existing cash resources.
"The acquisition of this portfolio in one of our core markets in conjunction with our major shareholder is a considerable achievement, in a market which is highly competitive for quality income producing assets such as these. The portfolio is well let, has been well managed, and offers considerable scope for asset management activity. The transaction is expected to be earnings accretive in this financial year," said Chief Executive Mike Watters in a statement.
In a separate statement, which will be addressed to shareholders at the company's annual general meeting later, Chairman Greg Clarke said that since the start of its new financial year in September, leasing activity in both the UK retail and commercial portfolios has increased, citing evidence of stronger occupational demand in many major regional cities.
"It has been an active period since the August 2014 financial year end and good progress is being made on letting and asset management opportunities within the portfolio. In particular, letting progress across our UK shopping centres supports the view of gradually improving occupier demand outside of London," said Clarke.
Clarke said the company's UK hotel portfolio has had a strong start to the year and expectations are for continued underlying like-for-like revenue growth.
"Investment market activity remains strong and the occupational market is providing encouraging signs. Against this backdrop, we continue to review opportunities to recycle capital. The sale of our Swiss portfolio has proved timely and the sale means that our core European portfolio is now wholly focused on Germany," Clarke added.
On the company's outlook, Clarke said that the expectation of an extended low interest rate environment in its key markets is likely to be supportive of property values.
"In a low interest rate environment we expect high quality income returns to remain attractive and, given the company's income focused strategy, we believe the company is well positioned to benefit from this," he said.
Redefine shares were up 1.8% at 56.00 pence Thursday morning, one of the best-performing stocks on the FTSE 250.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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