RDI REIT agrees sale of UK retail park portfolio for GBP157mln

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RDI REIT PLC (LON:RDI) said it has exchanged contracts for the disposal of its UK retail parks portfolio comprising six sites for GBP156.9mln to M7 Real Estate.

The sale price reflects a 3% discount to the last reported value on February 29, 2020, and follows the sale of its Schloss Strassen Center in Berlin last week.

Discussions are underway over the disposal of a further EUR50.5mln worth of German shop assets, the trust added.

The UK retail parks to be sold generated gross annualised rental income of GBP12.5ln and include sites at Banbury, Bangor, Edinburgh, Kilmarnock, Merton and Watford.

Proceeds from the disposal will reduce a revolving credit facility by GBP100mln with the remaining GBP56.9mln to be held as cash within the group.

Cash and facility headroom will increase to around GBP240.mln following the sale with a pro-forma loan-to-value ratio of 30.2% compared to 41.8% in February.

In a statement, Mike Watters, RDI’s chief executive said: “Together with the disposal of Schloss Strassen Center in Berlin just last week, we have taken a substantial step forward in the implementation of our portfolio strategy in a very short space of time and against a challenging backdrop.

“In just 18 months since announcing our strategic review, we have undertaken around GBP330mln of disposals.”

Brokers hail ‘transformational’ deals

Berenberg notes that the UK portfolio’s annualised rental income of GBP12.5m, weighted average unexpired lease length of 7.3 years and occupancy of 98.4% stand out versus the sector, highlighting the strength of RDI’s asset management capability.

The sale should be taken positively versus the UK retail park capital value index, which has fallen by 11.1% in the five months to July 2020.

Peel Hunt described the UK retail parks sale as a gamechanger for the REIT.

“Although there will be an earnings impact from the disposal, we believe the de-risking this transaction brings to the business increases the probability of a resumption of dividend payments.

“We estimate that post disposal the current share price reflects a c.30% discount to the gross asset value of the remaining portfolio.”

The broker has a target price of 105p, compared to the market’s 90.9p, up 2.7% today.

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