Leeds property sale reduces RDI risk

JSE-listed RDI has sold City Point, an office in Leeds, for £26.05m as part of its strategy of selling mature assets and investing the proceeds in new growth opportunities.

CE Mike Watters said the office was sold at a premium to the acquisition price of 20.6%, showing that RDI had delivered significant value for investors.

RDI said in 2017 it was in a position where it could sell a number of assets at attractive prices in Germany and especially in the UK.

RDI, which is an FTSE 250 income-focused UK real estate investment trust, originally bought the office as part of a portfolio that it acquired from Aegon UK Property Fund in March 2016.

City Point was bought for £21.6m, with a vacancy of more than 17%.

RDI let 1,022m² to Blacks Solicitors in January 2017, bringing the asset to full occupancy.

The sale price represents a net initial yield of 5.8% and a 15.3% premium to the last reported market value.

The geared internal rate of return over the investment period was more than 20%.

The property, which is being sold to West Midlands Pension Fund, delivers total gross annualised rental income of £1.6m with an average lease length of 3.7 years.

“The disposal of City Point, Leeds, represents yet another example of delivering value from the UK acquisition. After two years of owning this asset, we have delivered an excellent 20.6% premium to the acquisition price, while also derisking the portfolio by reducing our exposure to a maturing regional office investment market and an asset with a number of upcoming lease breaks and expiries,” said Watters.

Investec Asset Management portfolio manager Peter Clark said the deal was positive.

“Overall it was a good sell and the right deal for the company, although it will have to work hard near term to minimise dilution,” he said.

London stockbroker Peel Hunt earlier in April reaffirmed its buy rating on shares of RDI in a research report.