UK REIT Redefine boost German retail holdings in €157m deal
Redefine International, the London Stock Exchange-listed REIT, completed an €57.4 million acquisition in mid-January of a portfolio of 56 German retail properties in a 50/50 joint venture with Johannesburg-listed Redefine Properties, its biggest (30%) shareholder.
The portfolio is valued at €156.8m and will be acquired together with existing bank debt of €100m, which the joint venture intends to refinance immediately after the deal is closed. The deal reflects a net initial yield of 7.5%, although Redefine says that, subject to refinancing, it is expected to produce an initial yield on equity of more than 11.0%. The deal will boost Redefine International’s portfolio of assets in Germany to about €478m.
The acquisition is in keeping with Redefine International’s stated strategy of focusing more on income yielding assets in the retail, commercial and hotel sectors in the UK and Germany to grow income returns to shareholders. Germany now represents 35% of Redefine International’s total core portfolio by value, while the company recently exited the Swiss market by selling its retail portfolio there, let out to COOP, Switzerland’s second-largest retailer.
The portfolio’s 56 properties total over 128.000 sqm of lettable area, made up of stand-alone supermarkets, grocer-anchored retail parks and cash-and-carry stores. The properties are well-located within their respective micro markets, with 85% of the total annual rental income located in western Germany and Berlin and the remainder in eastern Germany.
The net price paid includes the acquisition costs and net working capital and will be funded equally by Redefine International and Redefine Properties from existing cash resources. As part of the deal, the joint venture will assume the existing bank debt facilities totalling €100 million.
Mike Watters, CEO of Redefine International, said the deal in one of the company’s core markets in conjunction with its major shareholder is a considerable achievement in a highly competitive market. “The portfolio is well let, has been well managed, and offers considerable scope for asset management activity. The transaction is expected to be earnings accretive in this financial year,” Watters said.
Redefine’s other assets in Germany include: four office buildings let out to VBG, a workmen’s compensation insurance system; three major shopping centres in Berlin, Hamburg and Ingoldstadt; and a range of strip malls, supermarkets and DIY stores, numbering Edeka, Aldi, Lidl, OBI and others among their key tenants.