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AUK acquisition is a-okay for landlord Redefine

Redefine International's acquisition of the AUK portfolio has boosted assets by a half
April 26, 2016

Headline numbers don't tell the full story for property landlord Redefine International (RDI) because these were distorted by costs associated with the acquisition of the Aegon UK property portfolio (AUK). This transformational deal boosted the real estate investment trust's assets by around a half to £1.5bn, and will add £28.6m in annualised gross rental income.

IC TIP: Hold at 46.9p

Redefine's diverse property portfolio delivered strong returns, notably on the UK commercial side, where the AUK acquisition added exposure to the distribution warehouse market for the first time. Business here was brisk, with strong competition for the one unit vacant on acquisition. Demand for office space was also strong, with two rent reviews in Charing Cross Road in London resulting in renewals at 29 per cent above passing rents.

The group also achieved virtually full occupancy on its retail portfolio, while its hotel portfolio also performed strongly. Redefine continues to recycle capital by making selected disposals, and a portfolio of 10 petrol filling stations were sold in the first half for £12m, a 6 per cent premium to year-end book value. And within the AUK portfolio, 16 Grosvenor Street was sold for £35.6m for a 23 per cent gain on the purchase price.

Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) at the August 2016 year-end of 43p a share, from 42p a year earlier.

REDEFINE (RDI)
ORD PRICE:46.9pMARKET VALUE:£828m
TOUCH:46.9-46.95p12-MONTH HIGH:59.9pLOW: 41.9p
DIVIDEND YIELD:7%DEVELOPMENT PROP:nil
PREMIUM TO NAV:18%NET DEBT:81%
INVESTMENT PROP:£1.42bn*

Half-year to 29 FebNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201537.938.52.71.6
201639.98.40.51.625
% change+5-78-81+2

Ex-div: 19 May

Payment: 6 Jun

*Includes joint ventures