By Suren Naidoo
Redefine Properties – the Rosebank headquartered diversified SA Real Estate Investment Trust (REIT) – yesterday announced it was selling a major 19.5% stake of its shares in Australia-listed Cromwell to Singapore-based ARA Asset Management Limited.
It said in a statement that the R3.7bn deal bolsters its liquidity, and marked the start of a process to refine its international holdings. Redefine added that “operating in a constrained and costly capital environment”, recycling of capital had become a prominent feature of its funding strategy, to efficiently source capital and improve credit metrics.
The deal is still subject to approval from Australia’s Foreign Investment Review Board. Following the sale, Redefine said it would retain 60 million shares, or 3.09% of Cromwell securities in issue, offering it an opportunity to benefit from future pipeline deals in Australia.
Commenting on the sale, Andrew Konig, Redefine’s CEO, said: “This deal ticks a number of boxes for Redefine, which supports our mission to create sustained value for stakeholders. We create capital efficiency, refine our international holdings, reduce debt and have a lot of funding capacity should another investment opportunity arise.”
He added: “To sustain value creation for all stakeholders, Redefine seeks to optimise its allocation of capital through active asset management. The sale of the majority holding in Cromwell significantly advances these strategic objectives.”
Brisbane headquartered Cromwell is a real estate fund manager listed on the Australian Securities Exchange. Konig said he only has the highest regard for the management of Cromwell in what he says “has been a fantastic partnership over the past ten years”.
Cromwell CEO, Paul Weightman, said in a statement: “Redefine have been a longstanding investor and partner…They have been with us every step of the way since late 2009, and I would like to put on the record our appreciation of their input, expertise and insight. Cromwell would not be what it is today without their valued contribution.
Redefine has grown its offshore footprint significantly over the last six years, with one of those investments being a 23% stake in Australia’s Cromwell Property Group. A R5 billion investment into Poland-based Echo Polska Properties in 2016, and more recently a strategic 25% stake in a €692 million retail portfolio of 28 quality, established and well located assets across Poland further diversified rand hedge earnings.
As at 31 August 2017, the net asset value of Redefine’s total investment in Cromwell was AUD475 668 093 or R4 889 868 000. The proceeds on disposal of the sold Cromwell securities is AUD405 865 792 (AUD1.05 per share) or R3 725 847 971 and Redefine will retain 60 million Cromwell securities, which has a current market value of AUD60 600 000 or R556 308 000. For the financial year ended 31 August 2017, Redefine received dividends of R380 069 000 in respect of its investment in Cromwell.
Said Konig: “All our offshore assets are actively managed to create sustained value for stakeholders and are therefore under constant review. When offers come through, we critically evaluate the long-term value creation and in this case we saw an opportunity to optimise capital sourcing and the allocation of capital, while lowering debt.”
He added: “The Cromwell sale is investor positive from a number of respects, most notably from a liquidity point of view, and, is balance sheet positive on the loan to value front… We are selling most of the holding and for us, it is about optimising capital efficiency, while still benefiting from future distributions and the redevelopment of certain quality assets in Australia.”
Konig said Redefine’s broader strategy remained growing its local portfolio, while targeting a diversified stream of revenue in offshore jurisdictions with growth potential.