FTSE 250 UK Real Estate Investment Trust (REIT) Redefine International has reached a conditional agreement for the acquisition of the AUK Portfolio from the Aegon UK Property Fund in a deal worth £437.2 million.
Deansgate Manchester. Part of the AUK Portfolio
The “transformational” deal would see Redefine International acquire a total of 19 properties, altogether worth £439.9 million, of which six assets are single let and the remainder are multi-let. Assuming standard purchaser’s costs of 5.8 per cent are in place, the net initial yield on the portfolio would amount to 5.0 per cent, while the topped up net initial yield, post expiry of rent free periods, rises to 5.4 per cent.
At present, the portfolio generates an annual passing rent of £23.5 million, and when current rent free periods expire this will rise to £25.3 million. Yet this total has the potential to climb even further, as the portfolio’s estimated rental value (ERV) stands at £27.8 million upon last assessment – this could be achieved by utilising active asset management techniques to elevate the present occupancy rate of 96.7 per cent, for example.
Of course, the conditional nature of the agreement means that the deal cannot be completed on the AUK Portfolio until shareholders have granted their approval. In order to obtain this support and gain feedback from shareholders, an EGM has been called for the 25th of September.
Lakeview Warrington. Part of the AUK Portfolio
Chief executive officer at Redefine International, Mike Watters, believes that this opportunity could prove to be an immensely valuable acquisition for the firm.
He says; “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.
“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 portfolio, which includes two prime central London offices valued at £76.0 m, provides a number of attractive short and longer term opportunities where we can enhance and capture value by applying disciplined asset management initiatives, whilst the geographic and sector spread will provide yet further income diversification.”
Yet this is not the only deal secured between Redefine International and Aegon UK, as the former has also agreed to an unconditional acquisition of Banbury Cross Retail Park for a consideration of £52.5 million. Unlike the portfolio deal, this requires no shareholder input and so has already completed, with the price tag reflecting a topped up net initial yield of 6.4 per cent.
As with a number of properties in the AUK Portfolio, Banbury Cross Retail Park does currently have a number of existing tenants benefiting from rent free periods, meaning that the annual passing rent stands at £3.1 million. This is forecast to rise to £3.5 million once these periods expire, making the retail park a strong acquisition for a firm keen to expand its interests in key locations throughout the UK.
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