| Wed 18 Jan 2012, 9:00 | | RIN - Redefine Properties International Limited - Interim Management Statement |
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RIN
RIN
RIN - Redefine Properties International Limited - Interim Management Statement
Redefine Properties International Limited
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN Code: ZAE000149282
("RIN")
Set out below is an announcement which was released by Redefine International
P.L.C. (formerly Wichford P.L.C.) ("Redefine International"), the London Stock
Exchange-listed subsidiary of RIN, on the Regulatory News Service ("RNS") of the
London Stock Exchange today, 18 January 2012.
In terms of the Listing Rules of the UK Listing Authority, Redefine
International is required to publish a statement by its management, disclosing
all material events and transactions that have occurred since Redefine
International`s year end and their impact on the financial position of Redefine
International.
"REDEFINE INTERNATIONAL P.L.C.
("Redefine International" or the "Company")
INTERIM MANAGEMENT STATEMENT
The Board of Redefine International, the diversified income focused property
company, today issues the following Interim Management Statement relating to the
period from 1 September 2011 to 17 January 2012.
Greg Clarke, Chairman of Redefine International, commented:
"After assuming the role of Chairman in December 2011, the challenges facing the
world economies have grown and will, in all likelihood, prevail for a
significant portion of 2012. It is therefore pleasing to report that the
Company continues to meet its targets and expects to deliver on the earnings
forecast and strategic objectives set out in the prospectus at the time of the
reverse acquisition of Wichford P.L.C. in the summer of 2011".
Overview
The period since the Company`s year end, being 31 August 2011, has continued to
be dominated by the Eurozone sovereign debt and EU banking crises. The uncertain
and volatile economic environment that this has created continues to impact on
the performance of the commercial property market in the UK and Western Europe.
Consumer confidence in the UK and Western Europe has been negatively affected,
resulting in a significant reduction in consumer spending and a knock-on effect
on retailer profitability.
Notwithstanding these tough business conditions, the Company`s underlying
performance remains robust. The covenant strength of the UK Stable Income
portfolio, strong performance of the Hotel and European portfolios and a very
solid contribution from the Cromwell Property Group ("Cromwell"), the Australian
listed property trust in which the Company holds a 24.32% interest, have more
than offset the weaker performance of the UK Retail portfolio, illustrating the
benefit of Redefine International`s diversified portfolio to consistent income
generation.
Asset management activities continue to focus on protecting occupancy and income
to ensure that the Company`s historic cash distribution levels are sustained
going forward.
Business Segments
UK Stable Income
Lyon House, Harrow
The planning application for a residential-led mixed use scheme for the
adjoining Lyon House and Equitable House sites in Harrow was submitted in
November 2011. The application is for a new development comprising approximately
316,000 sq ft of residential and commercial space including 223 private
residential units and 85 affordable housing units. A conditional development
agreement has been concluded with Metropolitan Housing Trust for the affordable
element of the scheme.
The public consultation period ended in December 2011 and the post application
process is being progressed.
Occupancy and Rent Reviews
Occupancy in the portfolio has remained unchanged at 95.0%.
The proportion of the portfolio subject to CPI / RPI indexation or fixed
increases remained broadly unchanged at 54.8%. Inflation in the UK remains well
above the Bank of England`s 2.0% target, benefitting rent reviews which are
subject to CPI or RPI.
The following rent reviews were settled during the period or are in the process
of being agreed, providing an additional GPB289,336 of annualised income:
- Sheffield, Kings Court- CPI rent review agreed and completed with an
increase from GPB725,000 p.a. to GPB810,613 p.a. reflecting an 11.8%
uplift;
- Aberdeen, Atholl House- open market review agreed with an increase from
GPB715,000 p.a. to GPB765,000 p.a. reflecting a 7.0% uplift;
- Newcastle- fixed annual review effected with an increase from GPB113,140
p.a. to GPB115,969 p.a. representing a 2.5% uplift;
- Chester- RPI review agreed with an increase from GPB331,110 p.a. to
GPB390,679 p.a. reflecting an 18% uplift; and
- Plymouth, North Street- CPI rent review agreed with an increase from
GPB854,788 p.a. to GPB946,113 p.a. reflecting a 10.7% uplift.
UK Retail
UK retailers have generally reported poor to mixed trading conditions over the
Christmas period with a number going into administration in December 2011 and
January 2012. The Company has exposure to two La Senza stores in Wigan and
Harrow, both of which are earmarked for closure by the Administrator. Occupancy
in the UK Retail portfolio at 31 December 2011 was 97.7% (including La Senza) or
97.4% (with the La Senza stores included as void). Although the Company is
maintaining occupancy, the general trend with lease renewals is that rental
growth remains negative to flat.
Europe
Germany`s unemployment rate continues to decline and is now at a 20 year low of
6.8%. However, the Bundesbank has revised its growth rate forecast for 2012 down
from 1.5% to 1.0% as a result of the Eurozone debt crisis. The European
portfolio is stable and the majority of tenants are renewing on expiry of leases
with limited rental growth being seen.
Occupancy across the portfolio remained close to 100% at 31 December 2011.
Hotels
The Company`s Hotel portfolio, which is fully let, is performing in line with
expectations. The refurbishment programme continues to be rolled out utilising
the fixture, fittings and equipment reserve.
Cromwell
On 16 December 2011 the Company announced that it had increased its strategic
stake in the ASX-listed Cromwell to 24.32% (22.66% at 31 August 2011) by
subscribing for 51,470,588 new Cromwell stapled securities for an amount of
AUD35 million (GPB22,646,392), in terms of an underwriting agreement. The
subscription formed part of an institutional placement and pro-rata non-
renounceable entitlement offer (the "entitlement offer") undertaken by Cromwell
to fund the acquisition of `HQ North` office tower in Fortitude Valley, Brisbane
for AUD186 million. AUD9,424,997 (GPB6,098,348) of the subscription was funded
through an existing facility with Investec Bank (Australia) Limited and the
balance was funded from available cash resources. The Company received a fee of
AUD875,000 (GPB566,160) from Cromwell in consideration for providing an AUD35
million underwriting commitment for the entitlement offer.
Following the appropriate resolutions being passed at the Annual General
Meetings of Redefine International and Redefine Properties International
Limited, the Company will exercise its call option to place new shares with
Redefine Properties International Limited at the sterling equivalent of up to
AUD7.5 million at current market prices to cover part of the cost of the
underwriting.
The new Cromwell stapled securities were admitted to trading on the ASX on 21
December 2011 and entitle holders to receive a pro-rata share of the
distributions from Cromwell for the quarter ending 31 December 2011.
The increase of Redefine International`s interest in Cromwell is in line with
one of the Company`s objectives of increasing its presence in the Australian
property market and is expected to be earnings enhancing for shareholders in the
medium to long term.
The Cromwell distribution, amounting to AUD3.7 million (GPB2.4 million) for the
quarter ended 30 September 2011, was received on 18 November 2011.
A distribution of 1.75 cents per Cromwell stapled security, for the quarter
ended 31 December 2011, was announced on 19 December 2011. The total
distribution due to be received by Redefine International on or about 15
February 2012 amounts to approximately AUD3.8 million (GPB2.5 million).
Debt Facilities
VBG
Following a market testing exercise for the Cologne and Stuttgart office assets
(the "VBG2 portfolio"), it has been agreed with the facility servicer that the
Dresden and Berlin office assets (the "VBG1 portfolio") will be incorporated in
a larger market testing exercise that may lead to a sale of all four assets. The
assets have a combined value of Euro94.7 million.
The loans in respect of the VBG1 and VBG2 portfolio have a principal value of
Euro117.9 million but are accounted for at a fair value equal to the value of
the assets. The loans are non-recourse to the Company. It is expected that any
potential sale would have a negligible impact on net asset value, but
importantly, would serve to reduce the Company`s overall gearing ratios.
Delta and Gamma
Preliminary discussions have taken place with the loan servicer to determine
possible options which are available on expiry of the facilities in October
2012. No meaningful outcome to these discussions is expected before the end of
the second financial quarter in 2012. A further announcement with regards to the
Company`s strategy in relation to the Delta and Gamma portfolios and proposed
capital raising will be announced in due course.
Dividend
The second interim dividend of 2.1 pence per share in respect of the six months
ended 31 August 2011 was paid on 24 November 2011.
Outlook
There have been no acquisitions or disposals in the period since 31 August 2011,
however a number of opportunistic acquisitions are being considered by the
Company in the European retail sector. Based on recent discussions with local
German banks, it appears that bank debt is still available for certain buyers
despite the debt crisis, albeit at lower LTV ratios.
The Company will continue to be managed on a conservative basis with consistent
income generation a priority. Despite the current economic challenges, the Board
is confident that the Company remains on track to deliver its earnings forecast
and strategic objectives set out in the reverse acquisition prospectus published
in July 2011.
Further enquiries:
Redefine International Property Management Ltd
Investment Adviser
Michael Watters, Stephen Oakenfull Tel: +44 (0) 20 7811 0100
FTI Consulting
Public Relations Adviser
Stephanie Highett, Dido Laurimore Tel: +44 (0) 20 7831 3113"
18 January 2012
Sponsor to Redefine Properties International Limited
Java Capital
Date: 18/01/2012 09:00:26 Produced by the JSE SENS Department.
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