RDI REIT acquires London office portfolio for €181.8m (GB)

RDI has acquired 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 €181.8m (£161.7m) reflects an anticipated net initial yield of over 6.0%. The acquisition includes existing debt facilities of €82.6m (£73.5 m) 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 €81.5m (£72.5m), 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 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.

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.

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.”