RIN - Redefine Properties International Limited - Preliminary Results Of
RIN - Redefine Properties International Limited - Preliminary Results Of
Redefine International Plc for the 11 month period ended 31 August 2010
Redefine Properties International Limited
(formerly Kalpafon Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2010/009284/06)
JSE share code: RIN ISIN Code: ZAE000149282
PRELIMINARY RESULTS OF REDEFINE INTERNATIONAL PLC FOR THE 11 MONTH PERIOD ENDED
31 AUGUST 2010
Set out below is an announcement which was released by Redefine International
plc, the AIM-listed subsidiary of RIN, on the Regulatory News Service ("RNS") of
the London Stock Exchange today.
"Redefine International plc
("Redefine International", "the Group" or "the Company")
PRELIMINARY RESULTS FOR THE 11 MONTH PERIOD ENDED 31 AUGUST 2010
- Profit from core operations of GBP7.49 million (2009: GBP6.67 million), an
annualised increase of 22%.
- Net loss per share of 2.46 pence (2009: 54.20 pence loss) after taking into
account unrealised losses on investments of GBP10.94 million and interest
rate swaps of GBP1.76 million.
- Final dividend of 2.07 pence per share (2009: 1.31 pence).
- NAV per share of 46.77 pence (2009: 58.43 pence). Pro forma 47.02 pence
after capital raising.
- Acquisition of 50% of Grand Arcade Shopping Centre, Wigan completed post
- Favourable restructuring of shopping centre senior debt completed post
- GBP33 million capital raising completed subsequent to the interim period.
- GBP53 million fully placed capital raising announced post period end.
- Shareholding in Cromwell Group, Australia increased to 19.9%.
- Exchange of contracts on GBP106 million hotel portfolio post period end.
Gavin Tipper, chairman, commented:
"Notwithstanding the continued volatility in international financial markets,
the Group performed well and achieved some major milestones. These included the
listing of its holding company on the JSE, a significant capital raising, the
conclusion of the Aviva restructuring and an acquisition of a portfolio of hotel
For further information please contact:
Redefine International plc + 27 (0)21 683 3829
Gavin Tipper - Chairman
Matthew Fletcher/Karen Le Cannu +44 (0)207 250 1446
SINGER CAPITAL MARKETS LIMITED
Jeff Keating +44 (0)203 205 7500
About Redefine International:
1. Redefine International is a property investment and development company
which invests in commercial real estate primarily in the UK, Germany,
Switzerland and Australia, with a focus on retail, commercial and hotel
assets. Redefine International`s current investments are in the UK, Europe,
the Channel Islands and Australia and it will continue to source value-
enhancing opportunities in these markets.
2. As at 31 August 2010 the Group had interests in 92 properties with a gross
rentable area of approximately 2.7million square feet and listed property
securities to the value of GBP93.7million, including:
- Four UK shopping centres;
- A large integrated UK town centre redevelopment project;
Well let, low risk, stable income office and commercial properties
spread across the UK and Jersey;
- Five German based portfolios which include, shopping centres,
supermarkets, petrol stations and a medical centre;
- A supermarket and home depot centre in Switzerland;
- A 19.9% stake in the Cromwell Group ("Cromwell"), Australia; and
- A 21.7% stake in Wichford P.L.C. ("Wichford"), a London Stock Exchange
("LSE") listed property investment company specialising in government
3. The strategy of the Group comprises four distinct yet complementary
elements: stable income investments; major development projects; value-
enhancing projects and investments in property securities. The resources of
the Group are allocated across the three major geographies and within the
four property investment criteria with the aim of providing shareholders
with a balanced exposure to lower risk, income-generating assets and assets
that have the potential to provide a higher capital return.
4. The Group has an experienced board of eight non-executive directors (the
"Board"). Three of the Directors are connected to the Investment Manager,
Redefine International Fund Managers Limited ("RIFM").
5. Further information on Redefine International can be found at
The period under review, and in particular the six months since the interim
results announcement, has been a very active time for the Group.
The highlight was the listing of, and simultaneous significant capital raising
by, Redefine Properties International Limited ("RIN") on the JSE Limited ("JSE")
on 7 September 2010.
RIN is the Company`s controlling shareholder and as at 31 August 2010 owned
76.9% of the Company. Redefine Properties Limited ("Redefine") in turn owned
100% of RIN at 31 August 2010, having swapped its shareholding in the Company
for linked units in RIN. Each linked unit comprises one share and one debenture
in RIN. Currently, (post the listing of RIN on 7 September 2010) RIN owns 81.9%
of the Company and Redefine in turn owns 57.2% of RIN.
Other highlights for the period included the finalisation of the Aviva
restructuring for the shopping centre senior debt, the acquisition of a 50%
interest in the Grand Arcade Shopping Centre, Wigan in September 2010, an
increase in the investment in Cromwell in Australia (to 19.9%) and the exchange
of contracts on the portfolio of hotels known as the "Splendid Hotel Portfolio".
Redefine International performed solidly at an operational level and exceeded
the forecasts set out in the RIN fund raising prospectus dated 23 August 2010.
The Group continues to be managed conservatively in light of the volatile on-
going economic conditions.
The Group produced a profit from core operations for 11 months of GBP7.49
million (2009: GBP6.67 million for 12 months).
The Group`s stable income portfolios in both the UK and Europe performed solidly
in a challenging environment. Cash flows were strong and tenant delinquencies
and voids low. The vacancy rates are currently 2.84% and 2.06% by rentable area
The UK shopping centre portfolio (including Grand Arcade Shopping Centre, Wigan,
which was acquired post period end) performed well. The vacancy rate for the
portfolio is currently 1.36% by rentable area.
Wichford`s operational performance was above expectations during the period but
its share price performance has been weak due to the concerns over the impact of
the UK`s new coalition governments` austerity plans.
Net earnings were affected by an aggregate deficit on investment property
valuations, losses on interest rate swap valuations and the write-down of the
investment in Wichford to its share price at 31 August 2010.
The deficit on the investment property valuations related primarily to Delamere
Place Crewe, a property held for redevelopment. The balance of the property
portfolio showed a net increase in value.
The losses on the interest rate swap valuations arose largely on two long term
swaps. While the losses have been accounted for, it is unlikely that similar
term money of the same fixed rates would be available in the current market.
Cromwell performed to expectations and the high dividend yield made a
significant contribution to earnings.
Wichford is exposed to a significant number of government leases and the
company`s share price has been affected by the market`s concern over the
possible impact of the government`s planned austerity measures. The Investment
Manager is confident that the parties to the Wichford leases and the tenure of
these leases are such that the financial risk to the company of the austerity
measures is low. Despite the weakness in its share price, Wichford`s
operational performance was above expectations during the period.
The Board has declared a final dividend for the period of 2.07 pence per share
which is subject to approval at an Extraordinary General Meeting ("EGM")
scheduled to take place on 24 November 2010. This will result in a total
dividend per share for the period of 3.21 pence, an annualised yield of 6.5%
based on the closing share price of 53.75 pence.
The dividend is offered to shareholders as a scrip dividend, with the ability to
elect a cash dividend alternative. Further details on the terms of the scrip
dividend are set out in a separate circular and form of election which were sent
to all shareholders on 21 October 2010.
The world`s advanced economies look likely to keep interest rates low for an
extended period. The UK is poised to experience an extended period of austerity
due to government cut backs in spending. Inflation remains a risk in most
advanced economies which should be positive for property in the medium term.
The Group is well positioned due to the nature and geographical diversity of its
investment base. Australia`s economy is growing strongly and should support
Cromwell`s earnings growth going forward. Our European portfolio has been
resilient and has benefitted from consumers trading down in the German economy.
The UK shopping centre portfolio financing has been restructured and is set for
solid medium term growth as these assets become increasingly difficult to
The Company will continue to pursue a broad investment strategy that focuses on
assets that provide a strong yield, at low risk and with the likelihood of
capital enhancement. The listing of RIN is expected to provide major benefits
to the Group`s growth objectives.
INVESTMENT MANAGER`S REVIEW
The Group owns investments in commercial and retail properties in the UK,
Switzerland, Germany and the Channel Islands, which provide sustainable
occupancy rates and income flows, together with opportunities for development
and value enhancement. The Group also owns investments in two listed companies
being Wichford in the UK and Cromwell in Australia. It recently extended its
investment mandate to include limited service hotels.
Redefine International has an investment management agreement with RIFM, a
British Virgin Islands registered and regulated Fund Manager. In terms of the
agreement with the Group, RIFM is responsible for the investment and management
of the Group`s assets.
The Group is a hybrid property fund with exposure to a broad range of
properties, listed property securities and geographical areas.
The Group`s strategy is to provide investors with strong investment returns and
a balanced exposure to lower risk income generating-assets and opportunities
that will provide a higher capital return.
In implementing its strategy, the Group contemplates available opportunities and
future undertakings that will yield satisfactory returns at acceptable risk
levels. In making investments the Group seeks to achieve a reasonable level of
diversification across types of assets and geographies.
The Group has historically selected property investments on the basis of four
- stable income investments that produce a stable, predictable and low risk
income stream but where there are opportunities to enhance the value of the
- major development projects which provide opportunities for considerable
redevelopment and where major parts of the developments can be pre-let to
businesses with strong rental covenants. These are multi-year projects
which generally require high levels of funding and which may be delayed in
difficult markets to reduce risk;
- value enhancing projects which are smaller properties that can be converted
on a relatively low risk basis to provide premium commercial space;
- investments in property securities which are acquired when their value is
considered superior to physical property. These investments are often of a
strategic nature where the shareholding can be used to unlock value in
underlying property assets or significant influence can be exerted through
Board representation or through management.
These criteria continue to be applied, however the Group will increasingly look
at other property investments as markets recover. Investments outside the above
criteria will only be made where risk adjusted returns are satisfactory and the
Group has the resources necessary to extract an above-market return from the
The Group`s investments currently fall into three major geographies (UK, Western
Europe and Australia). The Group`s investments are managed and resources
allocated according to five reportable segments, being UK Portfolio, Shopping
Centres, European Portfolio, Wichford and Cromwell. Cognisance is taken of the
levels of investment in each category, by geography, and concentration risk is
avoided or managed, where necessary.
The Group`s investment portfolio consisted of a portfolio of properties and a
portfolio of listed securities. At 31 August 2010, the Group held an interest in
twenty-six investments in fixed and listed property assets located within the
UK, Switzerland, Germany, the Channel Islands and Australia.
Details of the investments are set out below;
NAME/(LOCATION) CATEGO USE/TYPE VALUE %
RY (GBP OWNED
Delamere Place, Crewe SII/MD Retail Centre 22.70** 90.78
Streatham Retail Parade MDP Office, Retail 6.55** 100.0
& Wentworth House (UK) & Residential 0
Birchwood Shopping SII Retail Centre 30.00 100.0
Centre, Warrington (UK) 0
West Orchards Shopping SII Retail Centre 45.00 81.07
Centre, Coventry (UK)
Byron Place Shopping SII Retail Centre 16.7 100.0
Centre, Seaham (UK) 0
Kwik-Fit Portfolio (UK) SII Motor & 13.65 84.23
Newington House Ltd, SII Office 10.15 76.73
Malthurst Portfolio SII Motor & 23.93 84.00
98-100 Main Street, SII Retail 1.13 71.43
26 The Esplanade, St SII Offices 23.70 50.00
Co-Op Store SII Supermarket & 17.471 80.46
(Switzerland) Home Depot
Drinkgern, Lidl & SII Retail Centres 18.302 92.71
Inkstone Portfolio SII Retail Centres 8.972 55.17
Bremenvorde Portfolio SII Retail Centres 3.842 92.71
Premium Portfolio SII Retail Centres 27.752 92.71
Lindenhof Portfolio SII Retail Centre 6.002 75.08
Churchill Court, SII/VE Offices 16.60 50.00
Crawley (UK) P *
15-17 The Square, VEP Residential 0.61 60.42
Pearl House, Swansea VEP Retail & 1.97 50.00
7-11 High Street, VEP Retail & 2.90 61.36
Reigate (UK) Offices,
Regal Walk, Margate VEP Retail Centre 4.00 25.00
Stafford Redevelopment VEP Development 1.43 84.23
(UK) Property *
Stockport Redevelopment VEP Development 0.93 84.23
(UK) Property *
Alpha Property Fund PS Unlisted 0.22 1.04
Wichford P.L.C. (UK) PS Listed Property 18.923 21.73
Cromwell Group PS Listed Property 74.784 19.85
* % ownership of the Group which owns 50% of the property
** Properties held for redevelopment included at Directors` valuation,
1 Functional currency is Swiss Franc (CHF), converted at a period-end closing
rate of 1.56 CHF:1 GBP
2 Functional currency is EURO, converted at a period-end closing rate of 1.20
3 Market value as at 31 August 2010
4 Market value as at 31 August 2010, functional currency is Australian Dollar
("AUD"), converted at a year-end closing rate of 1.72 AUD:1 GBP
MDP - Major Development Project SII - Stable Income Investment
VEP - Value Enhancing Project PS - Property Security
In the UK, commercial property valuations have stabilised and expectations are
that 2011 will show positive returns from both an income and capital point of
view. There are however downside risks, the most important being credit
availability from banks. The latest data available from the Bank of England
showed that in August 2010 the net lending flow to the property sector was
negative GBP1.1 billion (taking the cumulative outflow for 12 months to negative
Interest rates are expected to remain low for an extended period, and should UK
banks fulfil their commitment to provide commercial property funding (albeit at
broadly flat rates), this should limit any major downside risk in the UK.
In Europe, the Company only has investments in the stronger geographical
locations (Switzerland and Germany) which are proving to be very resilient.
Economic growth forecasts are also encouraging.
In Australia, the Central Bank has begun a tightening of monetary policy in the
face of strong growth in the economy. With demand for mineral products strong
around the world, Australia is expected to continue to perform well.
JSE Listing of RIN
The Company`s controlling shareholder Redefine transferred its shareholding in
Redefine International to a South African subsidiary RIN with effect from 1
August 2010 in exchange for linked units in RIN. The linked units comprise one
share and one debenture in RIN. RIN was successfully listed on the JSE on 7
September 2010. The investment opportunity was well received by the South
African investment community and justified the decision to pursue a listing
which was preceded by a capital raising of some GBP84 million being raised in
the listing process. RIN is a property loan stock company which has shares
linked to debentures to create linked units. RIN`s sole asset comprises its
shareholding in Redefine International with each RIN linked unit effectively
equating to one share in Redefine International.
Issue of Equity
As at the date of this announcement, the Company has issued a total of
168,069,337 new shares to RIN subsequent to the interim period, as set out
13 July 2010 : 60,000,000 at 50 pence per share
17 August 2010 : 6,000,000 at 50 pence per share
7 September 2010 : 102,069,337 at 50 pence per share
These shares do not rank for the dividend declared for the period to 31 August
On 7 September 2010 the Company placed a further 4 million shares to investors
at an issue price of 52 pence per share. These shares rank for the dividend
declared for the period to 31 August 2010.
As at the date of this announcement, Redefine International had 410,775,743
shares in issue of which RIN holds 81.9%. As at 31 August 2010 Redefine held
57.2% of RIN giving it an effective holding in Redefine International of
Acquisitions and Disposals
The following acquisitions and disposals were made subsequent to the interim
period and prior to 31 August 2010:
On 25 March 2010 the Company paid GBP1.1million to acquire the remaining 50%
beneficial interest in the Byron Place Shopping Centre.
On 15 July 2010 the Company increased its stake in the Birchwood Shopping Centre
from 33.33% to 100%. The acquisition was secured by way of a capitalisation in
Birchwood Warrington Limited of a GBP531,850 debt due to the Company.
On 13 July 2010, the Company acquired 69,333,333 new Cromwell stapled securities
at a price of AUD 0.75 per security for a total cost of approximately GBP30
million. The securities were acquired "cum div" with a AUD 0.02 per stapled
security dividend for the period ended 30 September 2010.
Redefine International subsequently followed its rights in the Cromwell rights
issue and acquired a further 4,750,000 stapled securities at AUD 0.72 per
stapled security ("ex div"). The Company currently owns 178,833,333 stapled
securities valued at approximately GBP74.8 million at 31 August 2010. This
equates to a holding of 19.9% in Cromwell.
The historic dividend yield on this investment has been in excess of 10% .
The investment in TYS, British Virgin Islands was disposed of during the period
at book value.
The following transactions occurred post 31 August 2010:
Acquisition of a 50% share in the Grand Arcade Shopping Centre, Wigan ("Grand
Arcade") a 425,000 square feet shopping centre. It is the dominant centre in
Wigan, and houses retailers such as Debenhams, BHS, Marks & Spencer, HMV, Top
shop and 46 other tenants. Grand Arcade is one of the first carbon neutral
shopping centres with natural ventilation and a strong commitment to recycling.
A total investment of GBP7 million was made by the Group into Grand Arcade as
part of the overall Aviva debt restructuring (see below).
Contracts have been exchanged to acquire an effective 50% interest in two
properties located in Herzogenrath and Schwandorf in Germany, which are leased
to OBI. OBI is Germany`s largest DIY chain. The Group will acquire a 50% equity
interest in 2 companies whose sole assets comprise each of the OBI properties.
The properties are leased to OBI on 15 year leases (commencing 2009) and have an
aggregate lease area of 20,000 square meters with 640 parking bays. The gross
purchase price of the properties held within the acquired companies is Euro23
million. Bank debt of Euro16.7 million, has been secured, which will be used to
partly fund the purchase price.
This is expected to be an earnings enhancing long term secure investment with a
historic yield of close to 8%.
Agreements between Aviva Commercial Finance Limited ("Aviva") and subsidiaries
of Redefine International in relation to the restructuring of the senior debt
facilities on the Birchwood Shopping Centre Warrington; Delamere Place Shopping
Centre, Crewe; West Orchards Shopping Centre Coventry; Byron Place Shopping
Centre Seaham; and the Grand Arcade Shopping Centre Wigan ("the Shopping Centre
Portfolio"), was completed on 13 September 2010.
As part of the restructuring, Company Voluntary Arrangements were successfully
implemented on the two companies that own the Grand Arcade, prior to Redefine
International acquiring a 50% shareholding.
The amended and restated loan terms
As the restructuring of the debt was only completed after the period end, a
substantial portion of the debt is reflected as current in the financial
statements. This will be reclassified in the next financial report to reflect
the long term nature of the Group`s obligations.
Details of the current and r