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Trading update and capital markets day
REDEFINE INTERNATIONAL P.L.C.
(Incorporated in the Isle of Man)
(Registered number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00B8BV8G91
(“Redefine International” or “the Company”)
TRADING UPDATE AND CAPITAL MARKETS DAY
Redefine International, the FTSE 250 income-focused UK-REIT, is pleased to provide a trading update ahead of its
Capital Markets Day presentation to be held today at 10:30am (UK time), 12:30pm (SA time).
The Company will be setting out its strategy to become the UK’s leading income focused REIT, and will provide
detail on its outlook for the portfolio, operations and capital structure.
Leasing activity
We continue to see robust occupational demand across our portfolio and active discussions are ongoing across all
sectors in respect of vacant space, renewals and asset management activity. Occupancy by ERV increased to 98.4%
(31 August 2016: 97.7%), largely driven by the letting of an additional 10,900 sq ft at City Point, Leeds and the
disposal of 201 Deansgate, Manchester.
The underlying trading performance across our UK hotel portfolio has improved markedly, following a period of
weaker trading towards the middle of 2016 around the June referendum, with revenue performance now marginally
ahead of budget.
City Point, Leeds
In January 2017, all the remaining vacant space at City Point, Leeds, comprising 10,900 sq ft (1,013 sqm) on the
second floor, was filled following the signing of a 10 year lease to Blacks Solicitors, which was completed in line with
ERV. The 61,500 sq ft (5,713 sqm) office building is now fully occupied and has a strong tenant line up including
Ashcourt Rowan plc, GVA, Savills, JLL, Starbucks and HSBC.
Disposals
Since the Company’s previous financial year ended 31 August 2016, £107.8 million of disposals have been completed
or are in solicitors’ hands. The aggregate sales price reflects an average premium of 9.0% to the last reported book
values.
Exchange House, Watford
As announced with our year end results, the sale of Exchange House was completed in October 2016 for
£13.3 million, a 12.3% premium to book value. The sale price reflects a net initial yield of 6.9% and a reversionary
yield of 5.8%. The 63,000 sq ft (5,853 sqm) office building is occupied by the Department of Work and Pensions until
March 2023 with a break option in March 2018. The annual passing rent was £0.98 million.
VBG
As announced on 18 January 2017, the Company completed on the sale of four German office assets for a gross
consideration of €106.0 million. The assets, which were disposed of via a share sale, were held in a joint venture with
the Menora Mivtachim Group. The Company’s 49% share reflects an 8.6% premium to the book value. The
Company’s net proceeds of €24.9 million, which includes a performance fee of €2.4 million, delivered an IRR of 27%
over the investment period.
The properties, situated in Berlin, Dresden, Cologne and Stuttgart, total 485,937 sq ft (45,145 sqm), and are let to a
German government-backed social insurance body, VBG, on a combined WAULT of just under seven years. The
portfolio generated a total annual gross rental income of €8.1 million of which €4.0 million was attributable to
Redefine International.
Deansgate, Manchester
As announced on 31 January 2017, the Company completed on the disposal of 201 Deansgate in Manchester for
£29.15 million. The office block was originally acquired as part of the AUK Portfolio in March 2016 and the sale
price represents a net initial yield of 3.6% and a 14.3% premium to the last reported book value. The geared IRR over
the investment period was 22%.
The property provides 83,688 sq ft (7,776 sqm) of office space and delivered an annual net rental income of
£1.1 million, with a WAULT of 4.1 years.
Other sales
A number of smaller sales totalling £21.2 million have either been completed or are under offer. The aggregate sales
price is in line with book value and reflects a combined net initial yield of 9.0%.
Refinancing and leverage
The Company’s proportionate share of debt of £850.6 million at 31 August 2016 has been reduced by £55.4 million
with an average cost of debt of 4.2% which is materially ahead of the Company’s average cost of debt of 3.4%. This,
together with a reduction in the Group’s average cost of debt to c3.2%, is anticipated to deliver an interest saving of
approximately £4.0 million per annum.
The pro-forma leverage, prior to any reinvestment assumptions, currently stands at 49.6% (31 August 2016: 53.4%).
We have set a medium-term target of 45%, which we aim to achieve through a combination of capital recycling,
refinancing or reinvesting at lower leverage and a dividend pay-out ratio of 90 – 95%, assuming the market backdrop
remains largely unchanged. Together, these measures provide the ability to deliver incremental but material
improvements to leverage and liquidity without materially impacting earnings.
Distribution policy and outlook
As announced in October 2016, the Company will be moving to an industry standard EPRA-based earnings metric.
Adopting this earnings measure, adjusted only for necessary Company specific adjustments, allows for a closer
alignment between earnings and operating cashflow.
To facilitate our leverage objectives and to provide greater financial flexibility, a medium-term dividend pay-out ratio
within the range of 90% - 95% of our rebased earnings measure will be targeted. In the short-term, some degree of
flexibility in the pay-out ratio may be required to smooth distributions to shareholders following the transition to the
EPRA-based earnings metric.
A full presentation will be delivered to investors and analysts today and will be made available on the Company’s
website. Shareholders should note the earnings per share guidance of 2.70 to 2.80 pence per share for the financial
year ended 31 August 2017 is subject to suitable re-investment opportunities being secured. Growth in earnings per
share is targeted to be 3.0% - 5.0% per annum over the medium-term, subject to ongoing favourable market
conditions.
Capital Markets Day
We look forward to welcoming investors to our Capital Markets Day today, Monday 6 February 2017. A live webcast
will be available on the Company's website, starting at 10:30am (UK time), 12:30pm (SA time),
(www.redefineinternational.com) and the full presentation will be available on the Company’s website subsequently.
Mike Watters, CEO of Redefine International commented:
"I am pleased to report that, since the publication of our full year results, the Company has continued to trade well,
demonstrating excellent resilience in an unsettled environment whilst continuing the delivery of our stated strategy.
The disposals achieved since the start of our new financial year illustrate our commitment to improving the overall
quality of the portfolio and simultaneously strengthening our capital structure. Furthermore, new opportunities to
create value from the portfolio continue to be identified, and our first class asset management team has ensured robust
occupancy levels, all of which enable us to deliver superior income-led total returns.
We look forward to welcoming investors to our Capital Markets Day and reiterating our ambition to become the UK’s
leading income-focused diversified REIT.”
For further information:
Redefine International P.L.C.
Mike Watters, Stephen Oakenfull, Janine Ackermann Tel: +44 (0) 20 7811 0100
FTI Consulting
UK Public Relations Adviser
Dido Laurimore, Claire Turvey, Ellie Sweeney Tel: +44 (0) 20 3727 1000
Instinctif Partners
SA Public Relations Adviser
Frederic Cornet, Lizelle du Toit Tel: +27 (0) 11 447 3030
Java Capital
JSE Sponsor Tel: +27 (0) 11 722 3050
6 February 2017
Note to editors:
About Redefine International
Redefine International is an income focused FTSE 250 UK Real Estate Investment Trust (UK-REIT) committed to
delivering superior distributions to its shareholders throughout the property cycle.
The Company’s income driven total returns are underpinned by a diversified portfolio, together with an efficient
capital structure. The continued transformation of both the corporate structure and asset base offer a solid foundation
to drive further value. At 31 August 2016, the diversified portfolio, independently valued at £1.5 billion, is focused in
Europe's two strongest economies, being the United Kingdom and Germany. The portfolio is weighted towards well
located properties across a range of sectors, including retail, offices, distribution and hotels, which benefit from strong
demand and from which they can capture income and value growth by attracting high calibre occupiers on long leases.
The Company’s investment philosophy is to effectively allocate recycled capital from mature assets into sectors and
locations with strong occupier fundamentals and individual assets with realisable upside.
The secure income stream is supported by a diversified portfolio and tenant base, with a WAULT of 7.8 years
complemented by an average debt maturity of 6.9 years of which over 95% of interest costs are either fixed or capped.
The Company is focused on all aspects impacting shareholder distributions and boasts one of the lowest cost ratios in
the industry whilst continuously driving lower cost of debt.
Redefine International holds a primary listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange and is included within the FTSE 250, EPRA and GPR indices.
For more information on Redefine International, please refer to the Company’s website
www.redefineinternational.com.
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