Roy Cokayne
REDEFINE International has completed the acquisition of a portfolio of 56 retail properties in Germany in an equal joint venture with Redefine Properties in a transaction valued at e157 million (R2.06 billion).
JSE-listed Redefine Properties is the largest shareholder in Redefine International with a 30.03 percent interest.
Redefine International has a primary listing on the London Stock Exchange and an inward listing on the JSE.
The acquisition represents the first direct investment by Redefine Properties in Europe. It also substantially expands Redefine International’s portfolio of assets in Germany to about £357.8m (R6.3bn), representing 35 percent of the company’s total core portfolio by value, from £258.4m or 28 percent in August.
Redefine International said the acquisition was in line with its stated strategy to focus on income yielding assets in the retail, commercial and hotel sectors in the UK and Germany to generate sustainable and growing income returns to shareholders.
The 56 properties have a total of more than 128 000m2 of lettable space and comprise a mix of stand-alone supermarkets, food stores, anchored retail parks, and cash and carry stores.
Of the portfolio’s total annual rental income, 85 percent is located in western Germany and Berlin and the remainder in eastern Germany.
Mike Watters, the Redefine International chief executive, said the acquisition of this portfolio in one of their core markets in conjunction with major shareholder Redefine Properties was a considerable achievement in a market that was highly competitive for quality income-producing assets.
“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,” he said.
Marc Wainer, the executive chairman of Redefine Properties, said the transaction was consistent with Redefine’s stated intention of acquiring offshore properties directly, and in partnership with, established players.
“It is our first direct investment in Europe, and by partnering with Redefine International, we also benefit from its experienced European asset management team.
“We sourced the portfolio and invited Redefine International to participate. All of the management and asset management will be undertaken by Redefine International for a fee of 0.375 percent of Redefine’s share of the portfolio’s gross asset value,” he said.
The conclusion of this acquisition follows Redefine Properties announcing on Wednesday the acquisition of the property portfolio of Leaf Capital, an unlisted company with nine substantial property assets in Gauteng and the Western Cape, for R4.1bn.
The German portfolio will initially be acquired with existing bank debt of e100m, which the joint venture intends to refinance immediately after the transaction closes.
After the financing, the portfolio will produce a yield on equity in excess of 11 percent.
The net equity consideration of about e58m will be funded equally by Redefine and Redefine International from existing cash resources.
In a trading update issued at Redefine International’s general meeting yesterday, chairman Greg Clarke said leasing activity in both the UK retail and commercial portfolios had increased since the financial year-end in August, with evidence of stronger occupational demand becoming clearer in many major regional cities.
Clarke said overall core portfolio occupancy on January 27 improved to 97.6 percent from 97.3 percent in the period, with 15 leases signed.