JSE-listed property developer and manager Redefine Properties has concluded a deal with global private investment firm Starwood Capital Group to acquire Redefine’s 111.9-million shares in UK-based real estate investment trust RDI, for 95p apiece.
The deal forms part of Redefine’s strategy to advance its strategic priority of strengthening its balance sheet to offset the ongoing uncertainty and negative effects of the Covid-19 pandemic.
The disposal generates £106.3-million for Redefine, which translates, at the current exchange rate, to R2.3-billion. Following the disposal, which is denominated in pound sterling, and the redemption of bonds pursuant to the tender offer, which is denominated in euro, Redefine will restructure its pound sterling debt portfolio.
Given that a portion (49.8-million RDI shares) of Redefine’s investment in RDI is encumbered by an exchangeable bond it issued in September 2016, Redefine made a tender offer to the holders of the outstanding €150-million 1.50% secured exchangeable bonds due September 2021 exchangeable into the ordinary shares of RDI, of which €117.2-million are presently outstanding.
Redefine notes that undertakings from bondholders in support of the tender offer totalling 77.1% of the amount outstanding have been received.
Redefine FD Leon Kok says the disposal of the RDI shares and the settlement of the bonds (assuming all bonds are redeemed) will reduce Redefine’s loan-to-value ratio by about 1.1%.
Redefine CEO Andrew Konig says the exit out of RDI substantially advances Redefine’s stated intention of simplifying and solidifying its asset platform, as well as eliminating multiple entry points for South African equity investors into the same investment opportunities.
It also improves the company’s risk profile through eliminating a risk universe over which it has no direct management influence.
Konig says Redefine’s strategic intent to strengthen its balance sheet, recycle noncore assets and boost liquidity continues to place the company in a strong position to withstand the risks and challenges of the current uncertain operating environment.
The disposal will also allow Redefine to re-strategise and re-allocate its financial and capital resources to position the company for sustained value creation in a post Covid-19 environment.
“In the prevailing environment, the knowns are outweighed by evolving unknowns. Our intention is to ensure we can manage the variables under our control while being extremely well placed to benefit once conditions improve,” concludes Konig.