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Redefine’s diversified portfolio weathers effects of Brexit


Britain’s vote to leave the European Union (EU) has thrown most UK-focused property funds into disarray but this immediate impact on Redefine International is not a “major concern”.

Although the stocks of property companies with UK investments have been aggressively sold down since the Brexit vote, South African property companies hitching their wagons to offshore markets have also not been spared.

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The market rating of rand hedges Capital & Counties (Capco) and Capital & Regional (Capreg), have cemented both companies as casualties from the UK’s imminent exit from the 28-member bloc.

Local property counters with investments in the UK and greater parts of Europe such as Texton Property Fund, Vukile Property Fund, Accelerate Property Fund, Tower Property Fund and Attacq Limited were among the many casualties.

Redefine International says its diversified portfolio has been less affected by the Brexit vote than other UK-focused property funds. The has also managed to retain those investors who seek income payouts.

CEO Mike Watters said recently this month that the company had weathered the effects of the Brexit referendum better than a number of other UK-focused property groups.

“We firmly believe the diversified nature of the Redefine International portfolio, with 21% of market values located in Germany, together with our income focus and long average lease length, will prove to be defensive in light of the uncertainty following the UK’s vote to exit from the EU.

“We remain comfortable with our debt profile, with an average debt maturity of 7.4 years, and no significant debt maturing until 2020,” said Watters.

Redefine said it had made progress in generating returns from its recently acquired Aegon UK (AUK) portfolio that it bought for £490m.

After the EU referendum result, Redefine International completed two leases in the AUK portfolio totalling £600,000, which represented a 10% rise in estimated rental value.

Since exchanging contracts on the AUK portfolio in September 2015, the company has increased the portfolio’s weighted average unexpired lease term from seven-and-a-half years to eight years, saved £300,000 in vacancy costs, and achieved an additional uplift of £600,000 to annualised rental income, representing a 5% increase on estimated rental value.

Watters said completed refinancing activities since its halfyear results had reduced the cost of debt to 3.4%, from 3.6%.

“We are pleased with the level of income-enhancing activity achieved on the AUK portfolio to date. Investors are attracted to the fact that we distribute strong regular income payouts. I believe this is why post the Brexit vote, we have seen our shares sold down but, not as much as some other counters have,” said Watters.