Redefine International (RDI) made solid progress towards strengthening its balance sheet and scaling up its business during the 12 months to August 2017. On the first count, it reduced its weighted average cost of debt to 3.1 per cent from 3.4 per cent in 2016, putting it below its medium-term target range. Disposals worth £148m in aggregate were made at a 12.2 per cent premium to book value, as part of management’s strategy to recycle mature assets and reinvest funds into growth opportunities.
Around €49m (£40m) of the proceeds were used to acquire a controlling stake in a portfolio of 66 German retail properties. At the time of the acquisition in April the portfolio was valued at €175.5m, reflecting a net initial yield of 7.4 per cent. Management is seeking assets that are likely to deliver stable, but increasing, returns. Almost 39 per cent of its gross rental income was linked to inflation or fixed increases, up from 35 per cent. It agreed 235 leases during the period, providing a 3.9 per cent increase in passing rent of £17.3m.
Post period-end, management agreed to purchase a further 33 per cent stake in International Hotel Properties, taking its total interest to 59 per cent. The portfolio – last valued at £104m – consists of assets including Hampton by Hilton at Gatwick Airport and four Travelodge hotels, providing long-dated consumer prices inflation-linked income.
Analysts at Peel Hunt expect adjusted net assets of 41p a share at 31 August 2018, in line with this year.
