Wrap Text
Acquisition of four flexible London offices valued at £161.7 million
RDI REIT P.L.C.
(formerly Redefine International P.L.C.)
(Incorporated in the Isle of Man)
(Registered number 010534V)
LSE share code: RDI
JSE share code: RPL
LEI: 2138006NHZUMMRYQ1745
ISIN: IM00B8BV8G91
(“RDI” or the “Company” the “Group”)
ACQUISITION OF FOUR FLEXIBLE LONDON OFFICES VALUED AT £161.7 MILLION
Live webcast today at 9:30am (UK time) -
RDI, the FTSE 250 income focused UK-REIT, announces the acquisition of an 80% interest in a portfolio of
four established, strategically located and high quality flexible offices in Central London from Forum Partners,
Kailong Group and Office Space in Town (“OSIT”).
The portfolio value of £161.7 million reflects an anticipated net initial yield of over 6.0%. The acquisition
includes existing debt facilities of £73.5 million reflecting a loan to value (“LTV”) of 45%, in line with the
strategic priority of reducing Group leverage. The equity consideration for RDI’s 80% interest in the portfolio
of £72.5 million, including transaction costs of less than 1.0%, is a timely and efficient reinvestment of the
majority of the proceeds from the recent disposal of the German supermarket portfolio. The net cash yield on
equity is anticipated to be in excess of 9.0%. The acquisition supports the Company’s strategy of recycling
capital into assets and locations benefiting from sustainable long-term growth opportunities, structural change
in occupational demand and strategic infrastructure investment.
OSIT, the Company's new strategic partner, will continue as the operator and retain a 20% interest in the
portfolio. OSIT is one of the sector’s most experienced managers with a track record of over 25 years
developing and managing serviced offices in the UK. OSIT is led by founders Giles Fuchs and Niki Fuchs,
who have extensive industry experience and will have a strong alignment of interests through OSIT’s 20%
co-investment and an EBITDA based management fee.
London is the global leader in the serviced office market, where structural and behavioural changes are driving
strong demand for quality, flexible, cost efficient space. In a global workplace with technology supporting
employee mobility and flexibility, businesses are demanding the ability to adapt and save costs. This trend is
not only seen in small and start-up companies, but also large corporates which are increasingly embracing
flexible space.
Within the flexible office sector there are operators that own the assets outright and others operating a property
leased model, essentially sub-letting the space. As owners of the assets, the Company has direct control over
the building management, design (including density and service provision), desk rates, cost base and use of
the properties. In addition, RDI has the freedom to leverage asset management opportunities and synergies
with its existing London portfolio.
OSIT provides a premium flexible office service at mid-market rates which has consistently delivered high
levels of occupancy and client satisfaction. The newly acquired assets offer a high ratio of quality shared and
amenity space, while design and services are focused on key client requirements including sound attenuation
and market leading IT services. All four properties have been extensively refurbished and redeveloped by
OSIT in the last four years and each presents a unique identity with flexibility in design to accommodate
customers’ bespoke requirements.
Portfolio details:
Portfolio statistics St Dunstan’s, Boundary Little Britain, New Broad
(as at 31 December 2017) EC3R Row, SE1 EC1A Street, EC2M Total
Market value (£m) 63.7 36.3 32.3 29.4 161.7
Capital value per sqft 1,090 902 984 830 971
Nearest Underground station Monument Southwark St Paul’s Liverpool Street
Lettable area (sqft) 58,432 35,796 36,908 35,419 166,555
Implied rent per sqft 78 66 50 63 65
Number of desks 694 453 328 352 1,827
Number of clients 58 29 27 35 149
Average monthly desk rate
(£, licence fees only) 814 635 663 644 705
Occupancy (%) 86 99 92 96 92
Average stay (months) n/a(1) 30 23 30 26
Note: 1) Average stay for St. Dunstan’s not yet applicable given it has only traded since 2015
The four assets are all individually established with proven trading records, while three of the four were
recently rated in the top ten serviced offices in London. All are strategically positioned within short walking
distances of London Underground stations. New Broad Street and Little Britain are near the new Elizabeth
Line Crossrail stations. St Dunstan’s is set between Monument, Tower Hill and London Fenchurch Street
stations and Boundary Row, near London Waterloo, provides the Company with further exposure to London’s
Southbank market which is benefitting from large scale investment and redevelopment.
In an exciting and growing market, this acquisition presents a scalable platform which could be easily
integrated with potential future acquisitions and which complements RDI’s existing portfolio, through
strategic optionality and synergies.
Trading update
The Company has had an active period since the end of the 2017 financial year. At a corporate level, our
change of name and rebranding exercise has been well received by the market and we look forward to
establishing the Company and our brand as the UK’s leading income focused REIT.
We have seen continued strong tenant performance and a positive letting market. Over 50 lease events have
been completed since 31 August 2017 and occupancy levels remain high across the portfolio. Our retail tenants
have had varied but generally satisfactory trading over the Christmas period and our hotels continue to trade
ahead of budgeted expectations.
Our stake in the IHL hotel portfolio was successfully increased from 17% to 74% and disposal of the Leopard
portfolio of German supermarkets was confirmed at €205 million, a 10.8% premium to the 31 August 2017
valuation. Three further disposals totalling £28.8 million were completed in the period and included the
Crescent Centre, Bristol and the House of Fraser store in Hull.
An office and light industrial park was acquired opportunistically for £18.8 million reflecting a net initial yield
of 5.8%. The park is extremely well located in Kingston-upon-Thames and is in close proximity to the
mainline railway station and town centre. The acquisition, while fully let, is expected to be part of a larger
mixed-use redevelopment in the medium term.
Mike Watters, CEO of RDI commented:
“We are very pleased to have secured this opportunity to efficiently recycle the majority of the proceeds from
the recent disposal of German retail assets into four high quality flexible London offices whilst maintaining
our high-quality income profile. The long-term market outlook for the flexible office sector remains extremely
positive, with structural and behavioural change driving the momentum behind strong occupier demand. Our
detailed analysis of the market suggests that this sector is resilient and well positioned to withstand any market
uncertainty.
“One of the many benefits of our diversified portfolio strategy is that it provides us with the ability and agility
to invest across sectors where we see the best growth prospects. Given our experience with our hotel portfolio,
we are confident in investing in operational real estate, as well as collaborating and aligning interests with
high quality operational partners.
“This earnings accretive acquisition enhances our exposure to areas of long-term economic growth and
supports our strategic priority of buying and owning assets with strong property fundamentals in order to
continue delivering superior, sustainable and growing income returns. Furthermore, and in line with our
strategy to reduce leverage, this portfolio is currently financed at 45% LTV, which is at the lower end of our
medium-term target of between 45.0% and 50.0%. Our medium-term target of delivering between 3.0% and
5.0% growth in underlying earnings per share remains unchanged.”
Presentation and webcast
There will be a presentation and a live audio webcast today at 9.30am (UK time), 11.30am (SA time), which
can be accessed via the homepage of the Company's website: www.rdireit.com. The webcast will give a
business update, elaborate on the deal and sector, comment on the outlook for the year ahead and allow for
live questions.
Participant dial in numbers and access code
United Kingdom Local: 020 3936 2999
South Africa Local: 087 550 8441
All other locations: +44 20 3936 2999
Participation Access Code: 10 87 62
For further information:
RDI REIT 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
15 January 2018
Note to editors:
About RDI
RDI is a FTSE 250 UK Real Estate Investment Trust (UK-REIT) committed to becoming the UK’s leading
income focused REIT. The Company's income-led business model and strategic priorities are designed to offer
shareholders superior, sustainable and growing income returns, with a target growth in underlying earnings
per share of 3%-5% across the medium term.
Income sustainability is underpinned by a diversified portfolio and tenant base, with no overreliance on any
one sector or tenant, together with an efficient capital structure. The secure and growing income stream is
39% indexed and has a WAULT of 7.4 years to first break (8.5 years to expiry). This is complemented by an
average debt maturity of 7.3 years of which over 90% of interest costs are either fixed or capped. The Company
is focused on all aspects impacting shareholder distributions and reports one of the lowest cost ratios in the
industry whilst maintaining a low cost of debt. All figures as at 31 August 2017.
The Company owns properties independently valued at £1.5bn in the United Kingdom and Germany, Europe’s
two largest and most transparent property markets. RDI invests in assets with strong property fundamentals
spread across UK shopping centres, UK retail parks, UK offices, UK logistics, UK hotels and German retail.
RDI 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 RDI, please refer to the Company’s website www.rdireit.com
About Office Space in Town
Office Space in Town (“OSIT”) was established in 2009 by a brother and sister team, Giles and Niki Fuchs,
who have both been involved in the Serviced Office Industry for over 25 years.
It is a service company that offers businesses and individuals workspace solutions through providing serviced
offices, managed offices, co-working space, meeting rooms and virtual offices in London, Cardiff,
Northampton, and Edinburgh.
The company currently manages six London and five regional flexible offices, including the four offices
acquired by RDI.
For more information on OSIT, please refer to the company’s website www.officespaceintown.com
Proforma portfolio
Annual-
ised
% of gross EPRA Weighted EPRA
portfolio Market rental topp- average voids
Proforma by market value income ERV EPRA ed up Reversion lease (by %
Portfolio value (£m) (£m) (£m) NIY yield -ary yield length ERV) Indexed
UK
Shopping
Centres 19% 316.5 26.2 27.1 6.4% 6.8% 8.0% 8.0 3.3% 27.5%
UK Retail
Parks 10% 169.9 11.4 10.8 5.8% 6.2% 6.0% 7.7 3.8% 4.7%
UK Other
Retail 2% 28.3 2.3 2.3 7.5% 7.5% 7.8% 16.6 - -
UK Retail 31% 514.7 39.9 40.2 6.3% 6.6% 7.3% 8.4 3.2% 19.4%
UK Offices -
Greater
London 6% 90.2 3.4 4.4 2.8% 3.3% 4.6% 5.1 4.1% 23.7%
UK Offices -
Flexible
London 10% 161.7 10.3 10.3 6.0% 6.0% 6.0% 2.2 5.6% -
UK Offices -
Regions 7% 113.6 9.6 9.2 6.9% 7.7% 7.6% 3.3 4.2% 23.0%
UK
Distribution
& Industrial 7% 117.6 6.3 7.5 4.8% 5.0% 6.0% 5.0 3.7% -
UK
Automotive 3% 42.8 2.9 2.3 6.3% 6.3% 5.0% 12.3 - 100.0%
UK
Commercial 33% 525.9 32.5 33.7 5.4% 5.7% 6.0% 4.3 4.2% 18.2%
Greater
London
RBL
portfolio 11% 184.4 11.9 12.5 6.0% 6.0% 6.4% 8.3 - -
Edinburgh –
RBL
portfolio 2% 39.1 2.6 3.0 6.1% 6.1% 7.1% 8.5 - 3.4%
IHL Hotels -
RBL
Portfolio 5% 75.4 6.0 6.0 7.5% 7.5% 7.5% 10.0 - -
IHL Hotels -
Travelodge
Portfolio 2% 29.0 1.6 1.6 5.3% 5.3% 5.3% 21.1 - 100.0%
Enfield
Travelodge 1% 16.1 0.7 0.7 4.2% 4.2% 4.2% 29.9 - 100.0%
UK Hotels 21% 344.0 22.8 23.8 6.2% 6.2% 6.5% 10.3 - 10.5%
Total UK 85% 1,384.6 95.2 97.7 5.9% 6.2% 6.6% 7.5 2.8% 16.9%
German
Shopping
Centres 11% 181.3 9.4 10.6 4.2% 4.3% 5.5% 4.8 0.6% 94.5%
German
Supermarket
s and Retail
Parks 4% 68.7 4.8 4.9 5.9% 5.9% 6.6% 5.2 3.2% 94.4%
Total
Europe 15% 250.0 14.2 15.5 4.7% 4.7% 5.8% 4.9 1.4% 94.5%
Total 100% 1,634.6 109.4 113.2 5.7% 6.0% 6.5% 7.1 2.6% 27.0%
Note: Portfolio data as at 31 August 2017 adjusted for three major transactions since year end, the IHL and OSIT acquisitions and
the disposal of the German supermarket portfolio
Date: 15/01/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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