UK portfolio helps Redefine bulk up

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Redefine International, the London and JSE-listed diversified property fund, acquires a R10bn property portfolio in the UK as it aggressively builds up its asset base.

This is the latest major deal in the sector this year.

The biggest deal involves Fortress Income Fund taking over Capital Property Fund to create a R50bn real estate investment trust to rival Growthpoint Properties, the largest diversified offering in SA. Investec Property Fund last month spent R7.1bn on a much-desired portfolio developed by Zenprop.

Listed property has been the most active sector on the JSE this year, with investors having spent R19bn during equity raises so far. Last year, R40bn was raised.

Head of listed property funds at Stanlib, Keillen Ndlovu yesterday said that interest was growing in the sector in SA and institutions that had not traditionally had exposure to it were paying more attention as it was outperforming traditional equities and bonds.

“Over the first eight months of the year, South African listed property achieved a 12.3% return while cash managed 4.2%, bonds 2.8% and equities, 2.4%.

“The sector has been vibrant and active for some time. Almost every week there is a transac-

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tion,” he said. Mr Ndlovu did not expect last year’s R40bn worth of equity raises to be reached this year but there was still scope for more deals, he said.

“There is still more equity to be raised, however, we expect the trend to slow down towards the end of the year,” he said.

The R10bn transaction would see Redefine International acquire a portfolio of mostly retail and office assets from Aegon UK for R9bn. Aegon is a large Scottish insurance group.

Redefine also did a separate deal to acquire Banbury Cross Retail Park for R1.09bn.

The deals would grow its portfolio 50% beyond R30bn and generate nearly R500m in additional rental income.

“This is a transformational deal for Redefine International, which rapidly enhances the quality and scale of our overall portfolio, supporting our growth plans and strategy to generate consistent and growing income returns,” CEO Mike Watters said.

“The 20 assets acquired present a number of attractive opportunities where we can enhance and capture value over time by applying disciplined asset management initiatives, while their geographic and sector spread will provide further income diversification,” Mr Watters said.

He wanted his fund to become larger and more liquid and to offer South Africans the chance to invest in a diversified fund abroad.

Analysts said the deal would increase Redefine International’s liquidity, which could attract new investors, but that this would take time even with this deal in place.

“For most institutional investors, investing in property securities will still come down to size and liquidity. Redefine International is tightly held and illiquid and therefore doesn’t appeal to many nonproperty specialist institutional investors,” Grindrod Asset Management’s chief investment officer Ian Anderson said.

“A big equity raise to fund this transaction might create additional liquidity and make Redefine International more attractive to larger investors. But I also think a lot of investors get their exposure to it indirectly through an investment in Redefine, which is a large and liquid stock,” he said.

Redefine Properties owns just more than 30% of Redefine International.


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