South African Real Estate Investment Trust (REIT) Redefine Properties is significantly broadening its offshore footprint via an initial 75% investment into Echo Investment’s 1.2 billion euro commercial platform comprising 18 properties in Poland.
South African Real Estate Investment Trust (REIT) Redefine Properties is significantly broadening its offshore footprint via an initial 75% investment into Echo Investment’s 1.2 billion euro commercial platform comprising 18 properties in Poland.
Redefine will pay 362 million euros for the majority stake once Echo’s debt is taken into account. The deal will be funded by offshore bridge financing to be settled by the sale of convertible bonds in Europe.
Echo Investment is a recognised player of the Polish commercial and residential property development and investment market with a strong regional footprint. It has completed over 115 real estate projects in 37 cities and 4 countries, with a total area of more than 1 million square metres. Currently its portfolio includes 138,000 sqm of real estate projects under construction and 136,000 sqm in preparation with additional land bank of over 200,000 sqm for retail and office space in Poland. It has presence in four real estate sectors including housing, shopping, outlets and entertainment centres, office buildings and hotels.
According to Redefine, a significant benefit of the agreement is further complemented by a right of first offer on over €500m worth of newly developed properties from the large retail and office development pipeline of Echo, with more than 80% of the projects expected to be delivered within the next 2 years. Furthermore, Redefine’s 25% participation right in these developments gives it access to the exciting growth potential of a pipeline of properties via profit share if these properties are sold to third parties.
The deal was made possible after Echo made a strategic decision to split its high yielding platform from its development and residential business and to find a buyer for the commercial real estate platform in which it will retain a 25% stake.
With rand weakness persisting and inflation on the rise in South Africa, Redefine believes offshore driven tail winds are anticipated to offset the domestic head winds. The low interest rate environment in certain overseas markets will be exploited by taking advantage of the positive yield spreads that are currently available. Apart from the Polish deal, the company is also in the process of establishing an investment presence in Spain and diversification into student accommodation in Australia.
The Johannesburg-based buyer’s offshore assets will increase to 25 percent of the total property portfolio following the deal, which is still subject to the approval of the European Commission.
