REDEFINE Properties is set to reach its 25% offshore target with the biggest single offshore investment by a South African property fund in a €1.2bn deal for a portfolio in Poland.
The group will expand its offshore footprint through an initial 75% investment in 18 properties in the country.
Redefine will gain exposure to highly desired retail and office assets in Poland, the biggest market in eastern Europe, with a population of 38-million, and gross domestic product growth that has been averaging 3.5% a year for about five years.
Redefine announced on Tuesday a share purchase and subscription agreement with Echo Investment and Echo Prime Properties (EPP). Redefine would acquire 75%, plus one share of the issued share capital of EPP, which indirectly owns a portfolio of prime real estate assets throughout Poland.
The total consideration payable by Redefine for the EPP shares will be an amount equivalent to 75% of €1.19bn, plus the amount of working capital held by the EPP group, plus the cash held by the group immediately before the effective date, minus the amount of debt held by the group immediately prior to the effective date.
This is estimated to result in a total consideration price for the 75% share in EPP of about €362m. The return profile was attractive, with a net operating income yield of 6%, and leased net operating income in the region of €77m, CEO Andrew Konig said. "These are all high-quality properties, with average portfolio occupancy rate of 95% and a large share of modern and sizeable properties," he said.
The deal would be financed by debt and equity at a proposed 60% gearing at the property level. "A significant benefit of the agreement, which is still subject to the approval of the European Commission, is further complemented by a right of first offer on over €500m worth of newly developed properties from the large retail and office development pipeline of Echo, with more than 80% of the projects expected to be delivered within the next two years," he said.
Redefine defeated 10 bidders to the deal, including other South African companies.
South African funds are investing abroad as they look for better priced growth opportunities than at home. Eastern Europe is one of the more attractive markets.
Redefine follows Rockcastle Global Real Estate, the first South African property company to venture into Poland. Rockcastle has been trying to buy quality shopping malls and is understood to have been one of the bidders for EPP.
Redefine’s goal is to have about 75% of its assets based in SA and 25% offshore. The Polish deal will realise that split.
Maurice Shapiro, portfolio manager at Ma’alot Investments, said the deal was "highly impressive" and Redefine was showing it could develop into a "truly global property fund".
Andrew Konig, CEO Redefine Properties. Picture: TREVOR SAMSON
REDEFINE Properties is set to reach its 25% offshore target with the biggest single offshore investment by a South African property fund in a €1.2bn deal for a portfolio in Poland.
The group will expand its offshore footprint through an initial 75% investment in 18 properties in the country.
Redefine will gain exposure to highly desired retail and office assets in Poland, the biggest market in eastern Europe, with a population of 38-million, and gross domestic product growth that has been averaging 3.5% a year for about five years.
Redefine announced on Tuesday a share purchase and subscription agreement with Echo Investment and Echo Prime Properties (EPP). Redefine would acquire 75%, plus one share of the issued share capital of EPP, which indirectly owns a portfolio of prime real estate assets throughout Poland.
The total consideration payable by Redefine for the EPP shares will be an amount equivalent to 75% of €1.19bn, plus the amount of working capital held by the EPP group, plus the cash held by the group immediately before the effective date, minus the amount of debt held by the group immediately prior to the effective date.
This is estimated to result in a total consideration price for the 75% share in EPP of about €362m. The return profile was attractive, with a net operating income yield of 6%, and leased net operating income in the region of €77m, CEO Andrew Konig said. "These are all high-quality properties, with average portfolio occupancy rate of 95% and a large share of modern and sizeable properties," he said.
The deal would be financed by debt and equity at a proposed 60% gearing at the property level. "A significant benefit of the agreement, which is still subject to the approval of the European Commission, is further complemented by a right of first offer on over €500m worth of newly developed properties from the large retail and office development pipeline of Echo, with more than 80% of the projects expected to be delivered within the next two years," he said.
Redefine defeated 10 bidders to the deal, including other South African companies.
South African funds are investing abroad as they look for better priced growth opportunities than at home. Eastern Europe is one of the more attractive markets.
Redefine follows Rockcastle Global Real Estate, the first South African property company to venture into Poland. Rockcastle has been trying to buy quality shopping malls and is understood to have been one of the bidders for EPP.
Redefine’s goal is to have about 75% of its assets based in SA and 25% offshore. The Polish deal will realise that split.
Maurice Shapiro, portfolio manager at Ma’alot Investments, said the deal was "highly impressive" and Redefine was showing it could develop into a "truly global property fund".
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