Redefine inks €600m Aegon UK fund buy in 'transformational deal'

UK REIT Redefine International has reached a conditional agreement with Dutch insurer Aegon's UK Property Fund to acquire the vehicle's entire portfolio for £437 mln (€600 mln) excluding costs.

The acquisition was carried out through Redefine's wholly owned subsidiary, Redefine AUK, and is conditional upon shareholder approval, for which an extraordinary general meeting will be convened on 25 September.

The AUK Portfolio comprises 19 single and multi-let properties with an occupancy rate of 97% and a value of £439.9 mln. A majority of the assets (45.2%) is for retail use, while offices represent 26.7% of the total and industrial the remaining 28.1%.

The portfolio generates an annual passing rent of £23.5 mln, increasing to £25.3 mln after the expiry of rent-free periods and with an estimated rental value of £27.8 mln. The weighted average unexpired lease term is 7.6 years to the first break option and 9.7 years to expiry.

The net initial yield is 5.0%, assuming standard purchaser’s costs of 5.8%.

In addition, Redefine is acquiring the Banbury Cross retail park for £52 mln. Banbury Cross generates an annual passing rent of £3.1 mln, rising to £3.5 mln once existing rent-free periods expire.

'This is a transformational deal for Redefine International, which rapidly improves the quality and scale of our overall portfolio, supporting our growth plans and strategy to generate consistent and growing income returns,' commented CEO Mike Watters. 'This also represents an efficient recycling of our cash balances following sales of Cromwell and other non-core assets and investment of March’s placing into this high quality portfolio.'

The deal lifts the value of the company’s portfolio to £1.5 bn.

The acquisition of the AUK Portfolio will be split into two tranches, with Phase I comprising nine properties expected to complete on or around 2 October 2015 at a purchase price of £203.5 mln. Tranche 2, comprising 10 properties, is expected to complete on or around 1 March 2016 at a purchase price of £233.7 mln.

The company has secured a new £303 mln bank facility from a syndicate comprising HSBC Bank, Barclays Bank, Abbey National Treasury Services and the Royal Bank of Scotland, consisting of a £155 mln term loan and £148 mln revolving credit facility, to assist in funding the acquisition. The margin will be 1.90% per annum.

Redefine said it also intends to raise additional funds from asset sales, new equity and/or debt capital, subject to market conditions, to part fund Tranche 2.