Improving European markets boost Redefine performance

Posted On Tuesday, 22 July 2014 16:51 Published by
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Improving markets in Europe buoy up Redefine International's recent performance‚ allowing it to make various acquisitions.

Mike Watters Redefine International

The group released an interim management statement for the period March 1 to July 17‚ in which it said property fundamentals had improved.

"The period since the interim results has seen a continued recovery in the real estate markets in which the company operates. With improving economic conditions‚ the company remains optimistic that rental growth is set to return in the sectors and types of assets that form our core portfolio‚" group chairman Greg Clarke said.

Redefine's investment portfolio is mainly in Europe and valued at more than £1bn. It is made up of assets in the retail‚ industrial‚ office and hotel sectors across the UK‚ Switzerland‚ Germany‚ the Netherlands‚ the Channel Islands and Australia.

The group was included in the FTSE 250 index on May 15. This was expected to improve trading liquidity of the company's shares and has broadened the company's shareholder base. The group highlighted that‚ in May‚ South African hotel group Tsogo Sun invested £8.1m to acquire a 25% interest in its subsidiary hotel management company‚ Redefine BDL Hotel Group Limited (RBDL).

The deal reduced Redefine International's interest in RBDL to 25.3%. RBDL has about 60 hotels under management. Redefine International also acquired Enfield Travelodge during the reporting period for £10.5m‚ at an effective 6.4% net initial yield. It conducted the asset swap of various petrol filling stations improving the overall asset mix and covenant quality‚ the group said. Portfolio occupancy was "steady at 97.2%".

Friday's interim management statement said rising confidence in the UK economy is supported by a revival in major office markets outside London. Occupier take-up is recovering to pre-recession levels in the UK's key office markets and the lack of speculative development since 2009 is expected to produce upward pressure on prime rents beyond the levels recorded in the previous property cycle.

The supply of vacant secondary properties is expected to fall in centres where values support conversion of obsolete office stock into residential or student accommodation. This is expected to have a positive effect on vacancy rates as second-hand stock is removed from the market.

Renewed confidence in the Thames Valley‚ the M4 corridor and certain other regional centres has also led to increased development activity and refurbishment of office buildings into "modern grade-A space."

The UK retail market is showing signs of stabilising with a drop in tenant failures and available space. Dominant retail centres are attracting occupiers and there are grounds for cautious optimism.

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