Buy­ing low

Finweek English Edition - - COMPANIES & MARKETS - LEANI WES­SELS

THEY SAY YOU shouldn’t waste a good re­ces­sion and Re­de­fine Prop­er­ties In­ter­na­tional is try­ing to take full ad­van­tage of the one tak­ing place in Bri­tain. The group’s merger with Wich­ford plc – a prop­erty com­pany fo­cus­ing largely on gov­ern­ment leases in Bri­tain, the Nether­lands, Ger­many and France – saw some de­tails ironed out re­cently. Cur­rently, most prop­erty firms won’t (be­cause they can’t) touch Bri­tish gov­ern­ment leased prop­erty with a barge­pole.

In crick­et­ing terms, Re­de­fine In­ter­na­tional (RI) is play­ing a test se­ries with this long-term in­vest­ment. As it stands, those prop­er­ties aren’t so hot due to Bri­tain’s aus­ter­ity mea­sures and gen­eral trim­ming of its gov­ern­ment’s work­force.

The deal will leave both sides happy, al­though Finweek be­lieves it will be a lit­tle longer un­til RI’s share­hold­ers share in the ben­e­fits. Wich­ford found it­self quite a good deal in this merger. RI’s low loan to value ra­tio will boost Wich­ford’s abil­ity to re­new its long-term debt (the ex­piry is com­ing up soon). Wich­ford also didn’t ex­actly break the bank to merge with RI. It made an of­fer to ac­quire all of the RI shares in re­turn for shares in Wich­ford, on the ba­sis of an ex­change ra­tio of 7,2 Wich­ford shares for ev­ery one RI plc share held. Even if that’s a long-term in­vest­ment, in­vestors should re­alise the rest of RI’s port­fo­lio isn’t pure gold: its shop­ping cen­tres aren’t bad, they’re just not the top prop­er­ties that, for ex­am­ple, Cap­i­tal & Coun­ties’ port­fo­lio boasts.

For the six months to end-Fe­bru­ary the group re­ported its net as­set value (Bri­tain’s prop­erty in­dus­try’s pri­mary in­di­ca­tor of growth) in­creased by just more than 8% to 47,03p/linked unit. The dis­tri­bu­tion trans­lated to 2,02p/linked unit. If you’re of an opin­ion the rand will be fall­ing again af­ter its two-year surge, then you’ll be in the money. Mean­while, RI will have to go through a cap­i­tal-rais­ing to re­fi­nance Wich­ford’s debt ma­tu­ri­ties next year. Un­til then, it’s a hold.

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