Redefine International is proposing a placing of up to 86,643,642 new ordinary shares in the capital of the company representing 7.5 per cent of the company’s issued share capital.
Following the group’s corporate restructuring to become a UK-REIT, which completed in December 2013, the board of Redefine International believes the company is now strongly placed to create and enhance shareholder value.
The company sees good opportunities in its preferred geographies of the UK and Germany through a combination of new acquisitions, efficient portfolio recycling and asset management. An appropriate balance sheet structure, as facilitated by the placing, would provide a strong platform for this.
The proceeds of the previous placing of GBP16.8m in August 2013 were used to support the acquisitions of the Weston Favell shopping centre for GBP84m and CMC portfolio for EUR189m at yields of 7.2 per cent and 5.5 per cent respectively. The company has since disposed of GBP28.4m of non-core assets.
The proceeds of the proposed listing would be used for:
• A proposed acquisition of minority interests within the existing portfolio (equating to c.GBP6m).
• Redevelopment and asset management opportunities associated with the group’s retail portfolio in Germany (equating to c. GBP10m).
• Support the early extension of 2016 debt maturities at lower LTVs and lock-in current interest rates.
• Repaying a GBP20m working capital debt facility in the short term, saving the company an interest charge of approximately six per cent per annum.
• Fund potential acquisition opportunities in the UK and Germany.
The company continues to see opportunities to enhance the quality of its portfolio by delivering a number of accretive asset management opportunities, selling non-core assets into a strong investment market and recycling capital into assets with long term growth potential.
Specific near term opportunities include:
• An opportunity to acquire the minority interest in an existing asset with strong rental growth prospects and located in an improving area of London. This transaction is consistent with the company’s strategy of simplifying its structure and improving the overall quality of the portfolio.
• Good progress has been made on a number of asset management opportunities in Germany, including the identification of potentially profitable redevelopment opportunities from within the existing retail portfolio.
• Indications of a strengthening economic recovery in the UK have also enhanced the prospects for asset management driven capital expenditure.
The company also believes the current interest rate environment, together with an active and competitive bank lending market, is conducive to extending existing debt facilities at attractive interest rates.
The extension of banking facilities maturing in 2016 provides an opportunity to pro-actively lock-in interest rates over the next five to seven year interest rate cycle providing greater certainty on interest costs. The proposed placing and extension of debt facilities provides an opportunity to incrementally reduce the company’s loan to value ratio towards 50 per cent (August 2013 pro-forma: 56.8 per cent).
Under the terms of the placing, Redefine International intends to place up to 86,643,642 placing shares, representing approximately 7.5 per cent of the current issued ordinary share capital of the company as at 19 February 2014.
Mike Watters, chief executive of the Company, says: “Having completed our restructuring programme and become a tax transparent REIT, we are fully committed to creating and enhancing shareholder value through the selective recycling of capital and executing on accretive asset management opportunities. We are particularly positive about the opportunities for growth in our chosen sectors of secondary offices, shopping centres and hotels across the UK and Germany and also see a clear case for the early refinancing of our facilities in this current benign interest rate environment.
“The proceeds from the placing will provide a strong platform to allow us to continue to deliver our sustainable income growth strategy, whilst pursuing our drive to achieve FTSE 250 index inclusion.”