Redefine International PLC Trading Update and Capital Markets Day (0458W)

TIDMRDI

RNS Number : 0458W

Redefine International PLC

06 February 2017

REDEFINE INTERNATIONAL P.L.C.

("Redefine International" or the "Company")

(Registered number 010534V)

LSE share code: RDI

JSE share code: RPL

ISIN: IM00B8BV8G91

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, GBP107.8 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 GBP13.3 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 GBP0.98 million.

VBG

As announced on 18 January 2017, the Company completed on the sale of four German office assets for a gross consideration of EUR106.0 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 EUR24.9 million, which includes a performance fee of EUR2.4 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 EUR8.1 million of which EUR4.0 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 GBP29.15 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 GBP1.1 million, with a WAULT of 4.1 years.

Other sales

A number of smaller sales totalling GBP21.2 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 GBP850.6 million at 31 August 2016 has been reduced by GBP55.4 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 GBP4.0 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,     Tel: +44 (0) 20 
  Janine Ackermann                     7811 0100 
 FTI Consulting 
  UK Public Relations Adviser 
  Dido Laurimore, Claire Turvey,       Tel: +44 (0) 20 
  Ellie Sweeney                        3727 1000 
 Instinctif Partners 
  SA Public Relations Adviser 
  Frederic Cornet, Lizelle du          Tel: +27 (0) 11 
  Toit                                 447 3030 
 Java Capital 
  JSE Sponsor                          Tel: +27 (0) 11 
                                       722 3050 
 
 

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 GBP1.5 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.

This information is provided by RNS

The company news service from the London Stock Exchange

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February 06, 2017 05:00 ET (10:00 GMT)