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.