Redefine International, the FTSE 250 income-focused UK-REIT, announces the successful exchange of contracts with Patrizia Immobilien AG for the sale of the Leopard (German supermarket) Portfolio with completion anticipated to take place in December 2017.
The consideration will reflect a purchase price of €205m, reflecting a 10.8% (€20m) premium to the 31 August 2017 book value. This opportunistic disposal capitalises on an exceptionally strong investment market and an approximate 11% increase in the value of the Euro relative to Sterling over the investment period.
The Leopard Portfolio comprises 66 German retail properties including a mixture of stand-alone supermarkets, food stores, anchored retail parks and cash & carry stores totalling over 138,000 m² of lettable area. Due to the granularity of the portfolio, its disposal will see the company’s average lot sizes increase significantly, whilst the portfolio will show an increased weighting to locations and sectors where the company expects to benefit from higher rates of growth to support the medium-term target of between 2% and 5% rental income growth.
The disposal will include the repayment of €86.1m of debt facilities, with a weighted average cost of debt of 1.4%. The portfolio’s annualised net rental income of €12.7m reflects a net initial yield of 5.8% on the sales price and an approximate 8.3% yield on equity. The consideration is payable in cash and the company intends to recycle the disposal proceeds into new investments which are in line with its stated strategy of enhancing the quality of the portfolio and its growth prospects. The company intends to reinvest at lower leverage than the company’s last reported LTV of 50%.
Mike Watters, CEO of Redefine International commented: “In line with our strategy, we are consistently looking to realise value by recycling capital at attractive prices. We are very pleased to announce this opportunistic disposal which capitalises on an exceptionally strong German investment market, resulting in a 10.8% premium achieved on book value and a 12.0% premium to the price paid for the acquisition of a controlling interest in April 2017. Following the deal, our overall exposure to Germany will decline from 27% to 18% and we anticipate reinvesting the proceeds into the UK, where we are witnessing some particularly attractive investment opportunities. However, we remain committed owners of and investors in properties that demonstrate strong fundamentals, which coupled with an experienced team of local asset managers, ensures Germany remains a strategic market for us.”
