Redefine considers retail acquisitions

Andrew Konig, Financial Director at Redefine Properties.

Redefine International Limited released its interim management statement on Wednesday, in which it announced considerations for a number of opportunistic acquisitions in the European retail sector.

The company said that it would continue to be managed on a conservative basis with consistent income generation a priority. Despite the current economic challenges, the board was confident that the company remained on track to deliver its earnings forecast and strategic objectives set out in the reverse acquisition prospectus published in July 2011.

Occupancy in the portfolio 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 remained well above the Bank of England's 2.0% target, benefitting rent reviews, which were subject to CPI or RPI.

Redefine said that the period since the company's year-end (August 31, 2011) had continued to be dominated by the eurozone sovereign debt and EU banking crises. The uncertain and volatile economic environment that this had created continued to impact on the performance of the commercial property market in the UK and Western Europe.

Consumer confidence in the UK and Western Europe had been negatively affected, resulting in a significant reduction in consumer spending and a knock-on effect on retailer profitability.

UK retailers had 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 had 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 December 31, 2011 was 97.7% (including La Senza) or 97.4% (with the La Senza stores included as void). Although the company was maintaining occupancy, the general trend with lease renewals was that rental growth remains negative to flat.

Notwithstanding these tough business conditions, the company's underlying performance remained 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.

Greg Clarke, Chairman of Redefine International said: "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 PLC in the summer of 2011".