RDI Reit, of which SA’s second-largest listed property company, Redefine Properties, owns nearly 30%, has sold its German assets to free up cash and reduce its debt burden.
The company had net debt of £784.5m at end-February that placed its loan-to-value (LTV) at 48.5%. The management aims to reduce the LTV to 30%-40%.
Its latest asset sale is the Bahnhof Centre in Hamburg that has been sold for €91m.
RDI is trying to free up cash and lessen its debt burden so that it can rebound when the Brexit process is complete, CEO Mike Watters said.
The company and other JSE-listed property groups with exposure to the UK have suffered huge share price drops since the 2016 Brexit referendum in which the UK voted to leave the EU, as investors have pulled their money amid an uncertain environment.
RDI’s share price has dropped 56% since the referendum. Other companies with large exposure to UK property have suffered a similar fate. The share price of UK and Spanish mall owner Intu Properties, for instance, is down 90%.
The Hamburg asset sale, expected to be completed by end-2019, also comes as RDI shifts its focus to the UK. RDI is disposing of its German assets while it is able to earn premiums on each sale at a favourable time to sell in the market, Watters said.
“We believe we are selling out of Germany at a very good time. The market is very hot and countercyclical right now. This Hamburg asset, which is one of the largest assets in the group, is being sold at a relatively high price,” he said.
German assets
The sale price was at a 9.6% premium to the last reported value for the centre, he said.
Deputy CEO Stephen Oakenfull said once the deal is completed, RDI will be left with £180m in German assets.
The company will continue to sell its German assets during the rest of 2019, he said.
The net proceeds from the sale of assets would be used to reduce group debt and strengthen the company’s overall balance sheet, “at a favourable time in terms of the euro’s relative strength to sterling”.
RDI was expected to release its results for the year to end-August on October 24. As of the end of February, the company had a portfolio of £1.61bn, of which 83% is in the UK.
Watters said that once the German portfolio has been disposed of, RDI will be left with a portfolio consisting of hotels, logistics and offices, as well as shopping centres.
“We will be a very niche, well-managed property group with a diversified portfolio that can withstand economic risks. We will have sold out of high-street retail and our premium retail will continue to perform well, even while there is uncertainty around the Brexit process,” Watters said.
The share price of RDI, formerly known as Redefine International, was up 4.88% at R21.50 by early-afternoon on Wednesday and down 16.67% year-to-date.
Correction: September 19 2019
An earlier version of this article mistakenly referred to RDI’s full year as ending in July, when in fact it is August. Its UK property holding is also 83% of its portfolio.
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