Redefine International CEO Mike Watters says the private placement was well received by South African investors hoping to benefit from this innovative rand-based opportunity to invest in an international portfolio of property investments.

 The capital raised in terms of the private placement will be used by Redefine International to subscribe for additional shares in Redefine International plc and to repay a loan from Redefine Properties Limited which was used to fund a further investment in Cromwell in Australia. 

Watters says Redefine International plc will use the balance of the capital raised to expand the group’s business of investing in commercial, retail and hotels primarily in the United Kingdom (UK) and Europe and to increase its holdings in selected property related listed securities in the UK and Australia. Redefine International plc will look to grow its portfolio through appropriate acquisitions and/or joint venture initiatives as and when opportunities arise. 

Redefine International will list a total of 336,7-million linked units at an issue price of R5,69 per linked unit, with an initial market capitalisation of R1,9-billion. The linked unit price has been established on the basis of an effective 50-pence issue price per private placement unit which was translated to South African Rand from pounds sterling at an exchange rate of £1/R11.3718, being a rate as published by the South African Reserve Bank on 30 August 2010. 

Post the private placement, Redefine Properties Limited will hold 57.9% of the Redefine International linked units in issue. As applications in excess of the minimum amount were received, Redefine Properties Limited will not be required to subscribe for any private placement units in terms of its underwrite commitments.

Successful applicants will be advised of their allocation of private placement units by Friday, 3 September 2010. It is a JSE requirement that there be a minimum of 300 public unitholders and following the private placement, Redefine International Limited will have over 1,000 public unitholders.

Watters says the level of interest has been exceptional in light of world markets not having fully recovered from the global financial crisis. “This is a vote of confidence in both Redefine International’s portfolio of investments as well as its highly professional management team,” he says.

Redefine recently acquired 19 686 558 units from Coronation Asset Management (Pty) Ltd which triggered an offer to the remaining Hyprop unitholders. As a result of the transactions, Redefine’s interest in Hyprop has increased from 55 323 970 Hyprop units (constituting 33.3% of Hyprop’s issued unit capital) to 75 937 121 Hyprop units (constituting 45.7% of Hyprop’s issued unit capital).

Redefine CEO Marc Wainer says the company is satisfied with its controlling interest of 45,7% and has undertaken to obtain Redefine unitholder approval before acquiring any further Hyprop units.

“The stake places a control premium to the value of Redefine’s holding in Hyprop, enhances our listed securities portfolio, and is sufficient to influence the strategy of Hyprop’s portfolio, and will enhance our distributions in the next financial year,” he says.

Download the prospectus

Redefine is on track to list its subsidiary, Redefine International, on the JSE on 7 September 2010, providing South African private and institutional investors with the opportunity to utilise Rands to invest in an international portfolio of properties.

Redefine International CEO Mike Watters says Redefine is the first listed property company to receive approval for foreign direct investment in offshore property. “Redefine International’s sole asset will be its shareholding in Redefine International plc – a company listed on the AIM market of the London Stock Exchange. Each linked unit in Redefine International will effectively equate to one share in the plc company,” he says.

The JSE has approved the listing of up to 348,505,303 Redefine International linked units in the Real Estate – Real Estate Holdings and Development sector of the JSE, which includes a capital raising by way of a private placement of up to 180-million additional linked units.

“The listing is being preceded by the private placement in order to afford potential investors with the opportunity to participate in the equity of Redefine International,” says Watters. Potential investors (including existing Redefine unitholders) may subscribe for up to 180-million Redefine International linked units at an issue price payable in Rand, which is equivalent to 50 pence per linked unit.

“The offer, which opens at 09h00 on Monday 23 August and closes at 12h00 on Monday 30 August, is expected to garner a positive response, based on the feedback we received at the presentations conducted earlier this month,” he says.

The listing and private placement is subject to, among other conditions, a minimum amount of the rand equivalent of £55-million being received.

The additional capital raised will fund the growth aspirations of the plc company, which invests in retail and commercial real estate primarily in the United Kingdom, Europe and Australia. The company currently owns a portfolio of 91 quality properties in the UK, Germany and Switzerland, valued at approximately £294-million with an effective GLA of 250 000m2. Post listing, the portfolio will include an additional six quality properties in the UK valued at approximately £194-million with an effective GLA of approximately 96,000m2.

It also has interests in two listed funds, namely Wichford in the United Kingdom and Cromwell in Australia.

Watters says the group’s strategy is to provide investors with strong investment returns and a balanced exposure to lower risk income-generating assets and opportunities that will provide a higher capital return. “The investment in Redefine International is expected to provide potential investors with a forward yield of over 7.5%,” he says.

Redefine International plc will pay out 100% of distributable core earnings in dividends in each financial period.

Distributions will be received by Redefine International in pounds and converted to rands at the ruling exchange rate on the date they are received. This rand denominated income will be distributed to Redefine International unitholders as interest. Interest distributions will be paid twice yearly by Redefine International for the six month periods ended August and February.

Watters says South African participants will own an investment in good quality offshore properties at an attractive yield and a growing income stream with an added benefit that investing offshore may provide an effective rand hedge.

“It is the view of many economists and market commentators that over time, the rand will weaken against the pound, euro and Australian dollar. Aside from the growth anticipated from the portfolio, distributions that are paid in pounds will be boosted by the weakening rand/pound exchange rate,” he says.

Watters adds that property values are expected to continue recovering in the UK, Germany and Switzerland. “Once a general economic recovery is underway, we also expect interest rates to rise until they normalise. The group will accordingly focus on interest rate hedging strategies.

“The company will continue to be managed conservatively, with a focus on protecting existing assets. The market is presenting a number of attractive investment opportunities and these will be assessed in accordance with the group’s strategy, subject to available financing and maintaining sound financial health,” he says.

The prospectus will be available on the following websites www.redefine.co.za/redefine-international or www.redefineinternational.je or can be collected from Redefine Properties’ offices at Redefine Place, 2 Arnold Road, Rosebank, Johannesburg or at The Spearhead, 42 Hans Strijdom Avenue Foreshore, Cape Town or from Computershare Investor Services at Ground Floor, 70 Marshall Street, Johannesburg.

Alternatively interested parties can contact Bianca Delport at Redefine Properties on +27 11 283 0150.

Editor’s notes
Redefine International will list as Redefine Properties International Limited, and will trade as Redefine International. The JSE share code will be RIN.

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This follows a series of presentations conducted last week by Redefine International CEO Mike Watters and other executives within the Redefine International group. 

Redefine Properties CEO, Marc Wainer says the South African attendees were most impressed with the competence and standing of the executives who will run Redefine International, and the company has been inundated with queries from interested potential investors. 

“We are eagerly awaiting the approval of the prospectus by the JSE and its registration by Cipro, which will provide full information on the company and action required by them to participate in the capital raising,” he says. 

Interested potential investors, who have notified the company, will be advised as soon as the prospectus is available. 

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Redefine now owns 45,2% of the retail focused fund, valued at R3,9-billion at current prices, and does not expect this stake to increase materially, despite the mandatory offer to Hyprop unitholders. 

Redefine CEO Marc Wainer says Hyprop unitholders have until 27 August to sell their Hyprop units to Redefine for R50 per unit, which is slightly below the current trading price of Hyprop’s units. 

Wainer says the Redefine board is grateful for the support from its unitholders and has undertaken to obtain Redefine unitholder approval before acquiring any further Hyprop units subsequent to this transaction and the mandatory offer. 

The acquisition is a coup for Redefine. The units, which were purchased from Coronation for R984-million, have increased in value by R30-million based on the closing price on 11 August. 

Redefine’s distributions for the 2011 financial year are expected to be enhanced by between 0.6 cents and 0.8 cents per unit, based on Redefine’s assessment and estimates of Hyprop’s distributions for the forecast period. 

A 45% holding in Hyprop represents effective control, and if Redefine should choose to sell its stake sometime in the future, it would attract a control premium. 

“We are delighted to have enhanced our listed securities portfolio with this stake, and are looking forward to working closely with the Hyprop team to protect and enhance our significant investment, which will benefit both Hyprop and Redefine unitholders,” says Wainer. 

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Redefine CEO Marc Wainer says this third quarter distribution, which is lower than the previous quarters, is due to a portion of Redefine’s forecast income being received in the final quarter.

“The fourth quarter distribution to end August 2010 is anticipated to be not less than 17,0 cents, which brings the expected total distribution for the year to at least 66,5 cents, which is in line with guidance,” he says.

Wainer says the property portfolio, which is overwhelmingly the largest contributor to net income, is performing to expectations. “The listed portfolio has delivered income in excess of expectations, however, this has been offset by increased interest payable on the additional borrowings utilised to fund the larger exposure to offshore interests.

“On the upside, as a result of restructuring a portion of debt, significant savings have been realised which will positively contribute to the annual distributions,” he says.

Wainer is excited about the prospects for the 2011 financial year, and says many of the initiatives that have been conceptualised in 2010 will bear fruit for the full period of the next financial year.

“Between Redefine International, the Hyprop transaction, in-sourcing the property management function, and the improvement in the Redefine property portfolio, we have all the ingredients for a positive year ahead,” he says.

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This paves the way for Redefine’s acquisition of an additional 19,7-million Hyprop units from Coronation Asset Management, which increases Redefine’s stake in the retail focused fund from 33,3% to 45,2%. 

The approval and implementation of the transaction triggers a mandatory offer by Redefine to all remaining Hyprop unitholders at a price of R50 per unit. 

The acquisition and mandatory offer collectively require Redefine unitholder approval, and a circular has been dispatched to unitholders, convening a general meeting on 12 August 2010. 

Redefine CEO Marc Wainer says Redefine has played an integral role in Hyprop’s growth, acquisition strategy and strategic management. “Our investment in Hyprop is significant, and we can protect this investment by increasing our influence on the management of the company. The acquisition will significantly increase Redefine’s holding, and therefore its influence,” he says. 

The recent increase in Hyprop’s unit price is beneficial to Redefine since Redefine purchased the units from Coronation at R50 per unit, and the unit price movement has already increased the value of the investment significantly. 

“The increase in unit price also makes the mandatory offer to Hyprop unitholders less attractive, and we are not expecting a significant take up of the mandatory offer, which means the transaction will be less dilutionary than we originally anticipated,” he says. 

A further announcement detailing the terms of the mandatory offer will be published in due course. 

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Redefine Properties Limited CEO Marc Wainer says SARB has granted approval for Redefine Properties to hold its interest in Ciref Plc directly through a wholly owned South African subsidiary, Redefine International Limited, which will be listed on the JSE.

“Redefine International will be a property loan stock company with its shares linked to debentures to create linked units. Redefine International’s sole asset will be a controlling shareholding in Ciref,” he says.

Wainer says the company will be structured in such a way that a single linked unit in Redefine International will be equivalent to a single share in Ciref.

Simultaneous with the listing of Redefine International on the JSE, Ciref intends to undertake a capital raising to allow it to further develop its business.

As a result of the listing of Redefine International on the JSE, Ciref’s Board has taken a decision to implement a change of name for Ciref to Redefine International Plc with effect from 1 July 2010 (approved by shareholders on 18 December 2009).

“It is currently anticipated that the listing of Redefine International on the JSE and the associated capital raising will be completed by the end of August 2010,” says Wainer.

Further details of the listing and the proposed capital raisings will be announced in due course.

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The original agreement, based on a fixed consultancy fee of R1,5-million per month, was entered into on the premise that both Wolf Cesman and Marc Wainer would provide a continued combined contribution.

“With Cesman’s departure, we’ve agreed to renegotiate the role that Redefine plays and the fees that would be earned from Hyprop. We are excited about the prospects of the new agreement, because it could provide the opportunity to earn more than the fixed consultancy fee in the 2011 financial year,” says Wainer.

The current agreement will terminate on 31 August 2010, with no impact on projected fees earned in the 2010 financial year.

In 2011, Redefine would have earned R15-million from the remainder of the contract. Wainer says that subject to Competition Authorities approval, Redefine could own over 50% of Hyprop by the start of the 2011 financial year. “Any savings by Hyprop as a result of the termination of this contract will translate into increased distributions for all Hyprop unitholders, and therefore Redefine, as a majority shareholder, will benefit. In light of this, the net impact to Redefine should be only approximately R7,5-million. However, subject to the successful conclusion of our current negotiations, Redefine would most likely still be earning fees from Hyprop, but on a different basis.

“We are very proud of our contribution to Hyprop to date, and look forward to negotiating a continued role in the future,” says Wainer.

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Redefine executive director responsible for operations, David Rice says 84% of the leases that expired in the first six months of the financial year were renewed, and he expects a similar retention rate for the next six months.

“To fill the space that tenants may vacate during this period, and to make a dent in the space that is already vacant, we have placed a huge emphasis on new letting deals,” says Rice.

Quintin Rossi, the national leasing manager responsible for new lettings, says the team is definitely experiencing an increase in demand for space, especially in the industrial sector. In the first six months of the financial year, new lettings were done over 75,400m2. Since then, in less than three months, leases over 65,800m² have been concluded for previously vacant space, which should bring the vacancy down by the financial year end.

Rossi says Redefine fields new leasing enquiries of over 161,000m² nationally, per month. “Our conversion rate from enquiry to signed deal has averaged between 8%-10%, but the activity of the last few months has increased this rate to over 10% on average for the year,” he says.

Significant new leases for industrial space, concluded since end February 2010, include a 20,000m2 deal with Duro Processing in the Alrode facility previously occupied by African Glass; a 9,000m2 deal with Precision Molding and Engineering Works for an industrial property in Port Elizabeth; and a 10,400m2 deal in 5 Laub Street in New Centre, which was let to Fair Price. In addition, the Taxi Finance Co took 5,000m2 at Rand Stadium Toyota in La Rochelle. 

Major renewals include the SANDF offices in Pretoria for 22,700m2 for two years and Price Forbes renewed 14,270m2 in 90 Rivonia Road, Sandton. Glenrand MIB renewed its 12,600m2 Randburg head office lease to 2015 and Absa renewed its lease for 10,500m2 in Parktown for a further seven years along with the flagship Pro Shop for 5,045m² for three years. 

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