Redefine restructures VBG portfolio

Johannesburg - Redefine International (RIN)‚ the diversified income focused property company‚ has agreed terms to restructure all four VBG assets and the associated financing facilities.

This will result in the company owning a 50% interest in the VBG assets together with a major pension fund as its joint venture partner‚ it said on Friday.

As part of the restructuring‚ Redefine has agreed to sell‚ for a nominal amount‚ 50% of its interest in the VBG holding company to a major pension fund.

The VBG assets comprise four individual office properties situated in Berlin‚ Dresden‚ Cologne and Stuttgart in Germany‚ all of which are currently let to a German government-backed social insurance body.

This newly established joint venture company‚ together with certain of its subsidiaries‚ has reached agreement with the servicer of the VBG facilities to dispose of the VBG assets to new subsidiary companies within the joint venture vehicle. The proceeds from the disposal of approximately €80.0m will be used to settle the original VBG facilities in full. The facilities have a current outstanding balance of €117.3m.

The gross acquisition cost of approximately €84.9m will be partly funded by the joint venture company with a new five year €57m debt facility secured from a German bank‚ with both joint venture partners injecting €14m for their 50% interests.

The new debt facility has been secured at a margin of 1.72% p.a. which‚ together with current five year swap rates‚ provides an indicative all in rate of 2.8% p.a. This will result in an initial yield on equity in excess of 19% on the group´s investment.

The restructuring process is expected to complete shortly after the company´s financial year end on 31 August 2012.

The leases have unexpired terms of between 7.8 years and 12.6 years and are indexed to 100% of German CPI. The VBG portfolio has a current rent roll of €7.6m p.a.

Redefine has now restructured or repaid €139.9m of legacy financing facilities since its interim results‚ significantly reducing both leverage and near term refinancing requirements.

"The restructuring of the VBG portfolio is another significant milestone in successfully implementing the company's strategy of reducing the Group's leverage and exposure to short term debt maturities. The establishment of a joint venture with a major pension fund also secures an alternative source of funding and the ability to capitalise on market opportunities‚" said Greg Clarke‚ Chairman of Redefine International.