Interim Management Statement
REDEFINE INTERNATIONAL P.L.C.
(Incorporated in the Isle of Man)
(Registered number 010534V)
LSE share code: RDI
JSE share code: RPL
(“Redefine International” or “the Company” or “the Group”)
INTERIM MANAGEMENT STATEMENT
The Board of Redefine International, a UK Real Estate Investment Trust (“UK-REIT”), today issues the following Interim
Management Statement relating to the period from 1 September 2013 to 16 January 2014.
Greg Clarke, Chairman of Redefine International, commented:
“With its income focused and diversified portfolio, this is an exciting time for the Company. Sentiment continues to improve
significantly across the business reflecting a stronger investment market and competitive pricing. Furthermore, there are continued
signs of improved occupier demand, both in the retail and commercial sectors, although underlying rental growth may still take time
Having completed all the necessary steps to become a UK-REIT, strengthen the Board and improve liquidity, we believe Redefine
International and our shareholders are well positioned to benefit from the potential of its portfolio and the more positive market
conditions than have been seen for some time.”
Highlights for the period include:
- Improvements in portfolio occupancy to 97.6% (31 August 2013: 97.3%);
- Acquisition of Weston Favell Shopping Centre, Northampton completed for a purchase price of £84.0 million;
- Aviva debt restructuring successfully completed; and
- Sale of residential site in Harrow, recycling £13.77 million of capital.
- Conversion to a UK-REIT;
- Secondary listing on the JSE;
- Management internalisation completed;
- Board changes announced, bringing significant new financial and real estate experience;
- Inclusion in the FTSE AllShare, FTSE SmallCap and EPRA indices;
- Launch of American Depository Receipt programme;
The investment market, particularly in the UK, has seen a marked increase in activity. Strong investment demand for good quality
assets is being reflected in competitive bidding with pricing often exceeding asking prices. There is now strong evidence that
investment demand has extended to good quality secondary assets outside of London, most notably from UK institutions and foreign
capital, which is expected to benefit Redefine International’s diversified portfolio of assets.
Completion of corporate restructuring and UK-REIT conversion
The period since the end of the 2013 financial year has seen the finalisation of a number of milestones, resulting in the Company
having a simplified corporate, management and tax structure.
Following approval from the South African Reserve Bank in July 2013, the Company concluded its inward listing on the
Johannesburg Stock Exchange (the “JSE”) and unbundled Redefine Properties International Limited’s (“RIN”) majority shareholding
in the Company so that RIN unit holders became direct shareholders in Redefine International. The Company now holds a primary
listing on the Main Market of the London Stock Exchange (the “LSE”) and a secondary listing on the Main Board of the JSE.
On 4 December 2013 the Company converted to a UK Real Estate Investment Trust and moved its tax residence from the Isle of Man
to the UK.
Summary of internalisation and Board changes
The holding company of the investment manager, Redefine International Fund Managers Limited (“RIFM”), was acquired on 2
December 2013 thereby internalising the management function of the Company.
New Executive Director service contracts were implemented and the following Board changes have been announced:-
- Michael Watters appointed as CEO and status changed from Non-Executive Director to an Executive Director on 3 December
- Andrew Rowell appointed as CFO on 3 December 2013;
- Stewart Shaw-Taylor, a Non-executive Director, resigned on 3 December 2013;
- Stephen Oakenfull appointed as Deputy CEO on 17 December 2013;
- Sue Ford appointed as an Independent Non-executive Director on 17 December 2013;
- Ita McArdle, a Non-executive Director, to retire at the conclusion of the Company’s AGM on 30 January 2014; and
- Mark Taylor, a Non-executive Director, to retire at the conclusion of the Company’s AGM on 30 January 2014.
Michael Farrow will assume the role of senior independent Director following the retirement of Ita McArdle.
The above mentioned corporate changes have supported the Company’s inclusion in the FTSE AllShare, FTSE SmallCap and EPRA
indices, which has further enhanced liquidity and broadened the shareholder base.
American Depositary Receipt Programme
On 31 December 2013, the Company launched an American Depository Receipt ("ADR") programme. The ADR programme is on the
over-the-counter market in the United States ("US"), through a sponsored ADR programme with Bank of New York Mellon.
Each depository receipt in the ADR programme represents ten ordinary shares in Redefine International and trades under the symbol
The Company has a growing international shareholder base and, by establishing the ADR programme, it is hoped that investing in
Redefine International will be more readily accessible to an increasing number of international investors, particularly those located in
As announced on 12 December 2013, the Company completed on the acquisition of the Weston Favell Shopping Centre,
Northampton for a purchase price of £84 million, reflecting a net initial yield of 7.5%.
Weston Favell is an enclosed shopping centre situated on the edge of Northampton which enjoys a wide catchment area. The property
comprises approximately 305,253 sqft of retail accommodation arranged over two floors with 1,150 free parking spaces. Anchored by
one of the largest Tesco Extra supermarkets in the UK (144,213 sqft, with a 14.1 years unexpired lease term), the centre has a total of
56 retail units and seven kiosks let to a variety of national and local retailers producing a net rental income of £6.67 million p.a.
The key investment attractions include the centre’s dominance in the wider catchment, the lack of supermarket competition in the
north east of Northampton and the strength of the Tesco covenant which accounts for 53% of the net passing rent. The current void
rate is 4.5% by ERV and 3.0% by area.
Lyon House and Equitable House, Harrow
As announced on 17 December 2013, the adjoining Lyon House and Equitable House sites in Harrow, North West London, were sold
to Redrow Homes Limited for a disposal price of £13.77 million, reflecting a 12.4% premium to the 31 August 2013 book value. In
addition, the Company has secured a share of sales revenues above agreed aggregate thresholds.
The disposal reflects a positive recycling of capital following a successful asset management strategy to convert the sites from
commercial to predominantly residential use. The profit share provisions secure an ongoing interest in the development against a
backdrop of an improving residential market.
Disposals of smaller and non-core assets
A number of smaller and non-core assets have been sold in line with the Group’s strategy of improving the overall quality of the
- A small industrial property in Aberdeen was sold for a disposal price of £2.2 million in December 2013, 4.8% above book value;
- Aschaffenburg, a retail outlet in Germany, was sold for a disposal price of €1.15 million; in line with book value;
- Finally, three assets from the Delta portfolio were sold for a total disposal price of £4.6 million to meet the agreed disposal targets
for the financing facility.
UK Stable Income
The investment market for regional assets is showing signs of a strong recovery over the period. Despite evidence of improving
occupational markets, the pricing of good quality assets or those with strong redevelopment potential is largely being driven by strong
investment demand, coupled with a limited supply of investment opportunities.
The recent planning changes enacted in the UK’s Permitted Development Rights 2013, addressing office to residential conversion,
have propelled the interest in Private Rented Schemes, which is a predicted growth area in the London market in 2014 given the high
demand for new homes in the capital. The Company is actively looking to exploit this trend and sell assets with residential conversion
potential where pricing significantly exceeds current book values.
Lettings and rental reviews
Further smaller lettings were completed at the Observatory, Chatham (The Insolvency Service, 4,475 sqft) and the Crescent Centre
(Arriva, 2,435 sqft). The occupancy rate for the UK Stable Income portfolio currently stands at 97.5% (31 August 2013: 97.8%). The
nominal increase in vacancy rate is attributed to the sale of West Tullos, Aberdeen, let in its entirety to Aberdeen City Council.
The Company has successfully agreed a rental review uplift at Newington House, Southwark taking advantage of rapidly improving
market evidence in the Southbank area of London. Current tenants, UK Power Networks, have agreed a rental uplift of circa 5% to
The past quarter saw a further strengthening of the retail market, albeit from a low base and retailer sentiment has improved to its
highest level for some considerable period of time. Retail sales for the same period were robust despite the trend of declining footfall
across the UK. Retailer insolvencies remained low during the period and retailer profitability appears to be on the increase.
Notwithstanding this, a full retail recovery is not yet underway and will probably not return until consumers experience real wage
A total of ten new leases were exchanged and/or completed during the quarter, equating to a total gross rent of £545,250 p.a.
Occupancy by ERV improved to 95.3% (15 January 2014). This compares favourably to the year-end position of 94.9% (31 August
St Georges, Harrow
The new Frankie and Benny’s restaurant opened in November 2013 and is now established as one of The Restaurant Group’s top
performing restaurants. The final major phase of the refurbishment is due to commence in February 2014 and is expected to be
complete by Easter 2014. Following the Company’s investment into St Georges, and the success achieved to date in new lettings, the
centre is expected to be the leisure and shopping destination of choice in the wider Harrow catchment area.
The 50,000 sqft extension and refurbishment has now been completed and the focus remains on leasing the remaining 8,588 sqft of
new retail space. The two new recent store openings, Home Bargains and 99p Stores, are both trading ahead of their expectations.
The extension and refurbishment, together with a rebranding exercise, is seeing positive consumer and retailer feedback.
Following the acquisition of RIFM, the hotel portfolio now consists of six hotel properties located in Greater London and one hotel in
Reading together with a 33% shareholding in Redefine BDL Hotel Group Limited (“RBDL”) which manages the Company’s hotel
portfolio. The Company’s shareholding in RBDL is a strategic investment in a high growth company.
RBDL is the UK’s largest independent hotel management and development company with 60 hotels under management representing
6,700 rooms. RBDL has developed 3,850 hotel rooms since 2000.
The underlying operating performance of the Company’s seven hotels has remained strong during the period. Key operating metrics,
including RevPar and occupancy, are in line or above operating budgets with expectations that this trend should continue through
The extension of the Holiday Inn Express in Southwark is on track for completion by the middle of 2014.
Asset management initiatives identified as part of the recent acquisition of three German shopping centres from CMC Capital Limited
are progressing in line with expectations.
Schloss Centre, Berlin
A number of new leases were signed during the period including a new five year lease with Vitalia health and food products for 174
m2 (1872.9 sqft) at an annual rent of €46,980, the space had previously been vacant. An existing food operator has also been replaced
increasing rent on the 60 m2 (645.8 sqft) unit from €36,000 to €43,200 p.a. Occupancy at the centre is now over 98%.
Bahnhoff Altona, Hamburg
Good progress is being made with lease negotiations and renewing a number of leases expiring in 2015.
Overall occupancy by area remains unchanged at 98.6%.
Redefine International disposed of a further 8,460,067 securities in the Cromwell Property Group (“Cromwell”) on the ASX on 3
December 2013 at a price of AUD0.96 for a total consideration of AUD8.1 million (£4.5 million). The Company’s current
shareholding in Cromwell is 13.19%.
Cromwell’s underlying operating performance during the period has been solid and in line with expectations. Cromwell declared a
distribution of 1.875c (AUD) for the quarter ending 31 December 2013 payable on 12 February 2014.
The Directors remain vigilant to the exchange rate risk of the Australian Dollar against the Pound Sterling. The exchange rate has
declined by 5.7% since 31 August 2013 and the Company’s exposure to the currency translation of the Cromwell security price
The four quarterly distributions for FY2014 expected from Cromwell have, however, been hedged at exchange rates of between
AUD1.71:£1 to AUD1.74:£1.
Aviva debt restructuring
In December 2013, the Company completed a significant restructuring of the Aviva debt secured against Grand Arcade Shopping
Centre in Wigan (“Grand Arcade”) and West Orchards Shopping Centre in Coventry (“West Orchards”).
The debt against the West Orchards property was repaid in cash at the market value of the property (£37 million). The property was
subsequently refinanced through a new £18.25 million Santander Bank facility at an all-in rate of 4.78%.
The debt against the Grand Arcade property was reduced by approximately 50% to £73 million in consideration for a cash payment of
£7 million. The Company has assumed 100% ownership, however, Aviva will retain the right to participate in 50% of the income and
capital growth generated by Grand Arcade (after all costs, expenses and interest) going forward. The Company will have the right to
“buy-back” the profit share for a maximum cash payment of £18.5 million in five instalments upon the valuation of Grand Arcade
increasing by certain agreed benchmarks.
On 29 November 2013, the second interim dividend of 1.635 pence per share was paid to all shareholders recorded on the register on
22 November 2013.
Market sentiment has improved significantly across all the sectors in which the Company operates, and this is being reflected in a
strong investment market and competitive pricing.
The Company remains opportunistic to new investment projects but is mindful of the competitive investment environment and recent
sharp increase in values. The market is, however, presenting opportunities to dispose of assets where asset management plans have
been completed and capital can be recycled on an earnings accretive basis.
There are continued signs of improved occupier demand, both in the retail and commercial sectors, although underlying rental growth
may still take time to be clearly demonstrated.
The Company expects earnings for the current financial year to be in line with management expectations.
For further information:
Redefine International P.L.C.
Michael Watters, Stephen Oakenfull Tel: +44 (0) 20 7811 0100
UK Public Relations Adviser
Stephanie Highett, Dido Laurimore Tel: +44 (0) 20 7831 3113
SA Public Relations Adviser
Jaclyn Lovell Tel: + 27 (0) 11 783 0700
Java Capital Tel: + 27 (0) 11 283 0042
Redefine International is a UK REIT with a primary listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange.
17 January 2014
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