UK REIT Redefine International has completed the acquisition of a portfolio of 56 German retail properties in a 50-50 joint venture with its largest shareholder, Redefine Properties, at a net initial yield of 7.5%.
UK REIT Redefine International has completed the acquisition of a portfolio of 56 German retail properties in a 50-50 joint venture with its largest shareholder, Redefine Properties, at a net initial yield of 7.5%.
The deal was closed at a price of €157 mln including the assumption of €100 mln of bank debt with a weighted average maturity of 5.7 years and a cost of 4.44% per annum.
The joint venture intends to refinance the debt immediately after the transaction closes and is targeting a 50% loan to value, and an all-in cost of debt of 1.80%. Subject to refinancing, the package is expected to produce an initial yield on equity in excess of 11%.
The portfolio comprises over 128,000 m2 of lettable area including a mix of stand-alone supermarkets, foodstore-anchored retail parks and cash-and-carry stores under the Edeka, Netto, Rossmann and Real brands. Around 85% of the total annual rental income of €12.6 mln is generated by assets in western Germany and Berlin. The assets have an occupancy rate of 99.2% and a weighted average unexpired lease term of 10.3 years.
Redefine International will manage the portfolio in return for a management fee of 0.375% of Redefine Properties’ share of the portfolio’s gross asset value.
The transaction doubles Redefine International’s portfolio of assets in Germany to £358 mln, representing 35% of the company’s total core portfolio by value, the company said in a statement.
Mike Watters, CEO of Redefine International, commented: 'The acquisition of this portfolio in one of our core markets in conjunction with our major shareholder is a considerable achievement, in a market which is highly competitive for quality income-producing assets such as these.' The transaction is expected to be earnings accretive in this financial year, he added.
The acquisition is in line with the UK REIT's strategy of focusing on income-yielding assets in the retail, commercial and hotel sectors in the UK and Germany.
With a market cap of around £650 mln and a £1 bn portfolio, Redefine International is listed in London and Johannesburg, and counts institutional investors such as AXA, M&G, and Henderson Global Investors among its shareholders.
More recently, Redefine has scaled back its investment in Cromwell, an Australian A-REIT, with a view to placing a greater emphasis on investment in the UK and German markets.
