CAPE TOWN - Redefine Properties yesterday announced the details behind its plans to strengthen its balance sheet and enhance its logistics platform in Poland by bringing international real estate private equity firm, Madison International Realty on board as an equity investor.
Redefine said Madison would acquire a 46.5 percent equity stake in Redefine’s Polish logistics platform held through European Logistics Investment (ELI) as part of the deal that was expected to be finalised by the end of the month..
The group said Griffin Real Estate, which owns 5 percent in ELI, would acquire a further 2 percent on the same terms as Madison, leaving Redefine with a 46.5 percent equity interest.
It said the deal was in line with its plan to introduce an international equity partner to strengthen its balance sheet, and to expand its Polish logistics platform.
The platform comprises 19 assets of 560 000 square metres, with 80 000 square metres nearly completed, and an additional development pipeline of 270 000 square metres to be started once pre-leases are secured.
The completed properties are 95 percent occupied and spread across the distribution hubs of Poland in Warsaw, Lodz, Krakow, Silesia, Pomerania and Poznan regions.
Redefine said in a statement that they expected the Polish logistics market to continue to grow as a logistics hub, as well as an increasing number of manufacturing companies establishing operations in Poland.
It said Madison wou;d provide a €150 million (about R2.4 billion) commitment to ELI, of which €83.7m (R1.3bn) will be used to acquire their share of the existing assets and developments in progress, while leaving €66.3m (R1.1bn) to expand the portfolio over three years.
Redefine will match Madison’s equity commitment of €66.3m. Panattoni Europe, a market leading European logistic developer, is a co-manager of the platform.
“The focus for 2020 remains on asset quality, offshore expansion through development activity, notably through ELI and leveraging opportunities to participate in a broader, more diversified portfolio of logistics assets.” Redefine chief executive Andrew Koning said .
Redefine will realise €87.2m (R1.4bn) from this transaction, of which €14.7m (R235m) will be surplus cash after reinvestment in ELI of €72.6m (R1.2bn) – comprising the equity commitment of €66.3m and completing existing developments totaling €6.3m (R101m).
“By co-investing with Madison, over two to three years, ELI will have access to sufficient capital (€148.7m) for its logistic platform portfolio to grow to a sizable scale (to circa 910 000 square metres in leasable area), and benefit from attractive development yields and low cost of European debt funding,” said Konig.
He said the transaction demonstrated the Redefine was on course to reduce balance sheet risk while continuing to deliver sustainable quality earnings, as well as alleviating investors’ apprehension around liquidity.
Redefine is comprised of R92bn internally managed property assets including a diversified local property portfolio valued at R72.9bn and international real estate investments valued at about R19.1bn.