Redefine International Plc : Interim Management Statement

FOR IMMEDIATE RELEASE

18 January 2012

REDEFINE INTERNATIONAL P.L.C.

('Redefine International' or the 'Company')

Interim Management Statement

The Board of Redefine International, the diversified income focused property company, today issues the following Interim Management Statement relating to the period from 1 September 2011 to 17 January 2012.

Greg Clarke, Chairman of Redefine International, commented:

"After assuming the role of Chairman in December 2011, the challenges facing the world economies have grown and will, in all likelihood, prevail for a significant portion of 2012.  It is therefore pleasing to report that the Company continues to meet its targets and expects to deliver on the earnings forecast and strategic objectives set out in the prospectus at the time of the reverse acquisition of Wichford P.L.C. in the summer of 2011".

Overview

The period since the Company's year end, being 31 August 2011, has continued to be dominated by the Eurozone sovereign debt and EU banking crises. The uncertain and volatile economic environment that this has created continues to impact on the performance of the commercial property market in the UK and Western Europe. Consumer confidence in the UK and Western Europe has been negatively affected, resulting in a significant reduction in consumer spending and a knock-on effect on retailer profitability.

Notwithstanding these tough business conditions, the Company's underlying performance remains robust.  The covenant strength of the UK Stable Income portfolio, strong performance of the Hotel and European portfolios and a very solid contribution from the Cromwell Property Group ("Cromwell"), the Australian listed property trust in which the Company holds a 24.32% interest, have more than offset the weaker performance of the UK Retail portfolio, illustrating the benefit of Redefine International's diversified portfolio to consistent income generation.

Asset management activities continue to focus on protecting occupancy and income to ensure that the Company's historic cash distribution levels are sustained going forward.

Business Segments

UK Stable Income

Lyon House, Harrow

The planning application for a residential-led mixed use scheme for the adjoining Lyon House and Equitable House sites in Harrow was submitted in November 2011. The application is for a new development comprising approximately 316,000 sq ft of residential and commercial space including 223 private residential units and 85 affordable housing units. A conditional development agreement has been concluded with Metropolitan Housing Trust for the affordable element of the scheme.

The public consultation period ended in December 2011 and the post application process is being progressed.

Occupancy and Rent Reviews

Occupancy in the portfolio has remained unchanged at 95.0%.

The proportion of the portfolio subject to CPI / RPI indexation or fixed increases remained broadly unchanged at 54.8%. Inflation in the UK remains well above the Bank of England's 2.0% target, benefitting rent reviews which are subject to CPI or RPI.

The following rent reviews were settled during the period or are in the process of being agreed, providing an additional £289,336 of annualised income:

·     Sheffield, Kings Court - CPI rent review agreed and completed with an increase from £725,000 p.a. to £810,613 p.a. reflecting an 11.8% uplift;

·     Aberdeen, Atholl House - open market review agreed with an increase from £715,000 p.a. to £765,000 p.a. reflecting a 7.0% uplift;

·     Newcastle - fixed annual review effected with an increase from £113,140 p.a. to £115,969 p.a. representing a 2.5% uplift;

·     Chester - RPI review agreed with an increase from £331,110 p.a. to £390,679 p.a. reflecting an 18% uplift; and

·     Plymouth, North Street - CPI rent review agreed with an increase from £854,788 p.a. to £946,113 p.a. reflecting a 10.7% uplift. 

UK Retail

UK retailers have generally reported poor to mixed trading conditions over the Christmas period with a number going into administration in December 2011 and January 2012. The Company has exposure to two La Senza stores in Wigan and Harrow, both of which are earmarked for closure by the Administrator. Occupancy in the UK Retail portfolio at 31 December 2011 was 97.7% (including La Senza) or 97.4% (with the La Senza stores included as void).  Although the Company is maintaining occupancy, the general trend with lease renewals is that rental growth remains negative to flat.

Europe

Germany's unemployment rate continues to decline and is now at a 20 year low of 6.8%. However, the Bundesbank has revised its growth rate forecast for 2012 down from 1.5% to 1.0% as a result of the Eurozone debt crisis.  The European portfolio is stable and the majority of tenants are renewing on expiry of leases with limited rental growth being seen.

Occupancy across the portfolio remained close to 100% at 31 December 2011.

Hotels

The Company's Hotel portfolio, which is fully let, is performing in line with expectations. The refurbishment programme continues to be rolled out utilising the fixture, fittings and equipment reserve.

Cromwell

On 16 December 2011 the Company announced that it had increased its strategic stake in the ASX-listed Cromwell to 24.32% (22.66% at 31 August 2011) by subscribing for 51,470,588 new Cromwell stapled securities for an amount of AUD35 million (£22,646,392), in terms of an underwriting agreement. The subscription formed part of an institutional placement and pro-rata non-renounceable entitlement offer (the "entitlement offer") undertaken by Cromwell to fund the acquisition of 'HQ North' office tower in Fortitude Valley, Brisbane for AUD186 million. AUD9,424,997 (£6,098,348) of the subscription was funded through an existing facility with Investec Bank (Australia) Limited and the balance was funded from available cash resources. The Company received a fee of AUD875,000 (£566,160) from Cromwell in consideration for providing an AUD35 million underwriting commitment for the entitlement offer.

Following the appropriate resolutions being passed at the Annual General Meeting of Redefine International and Redefine Properties International Limited, the Company will exercise its call option to place new shares with Redefine Properties International Limited at the sterling equivalent of up to AUD7.5 million at current market prices to cover part of the cost of the underwriting. 

The new Cromwell stapled securities were admitted to trading on the ASX on 21 December 2011 and entitle holders to receive a pro-rata share of the distributions from Cromwell for the quarter ending 31 December 2011.

The increase of Redefine International's interest in Cromwell is in line with one of the Company's objectives of increasing its presence in the Australian property market and is expected to be earnings enhancing for shareholders in the medium to long term.

The Cromwell distribution, amounting to AUD3.7 million (£2.4 million) for the quarter ended 30 September 2011, was received on 18 November 2011.

A distribution of 1.75 cents per Cromwell stapled security, for the quarter ended 31 December 2011, was announced on 19 December 2011. The total distribution due to be received by Redefine International on or about 15 February 2012 amounts to approximately AUD3.8 million (£2.5 million).

Debt Facilities

VBG

Following a market testing exercise for the Cologne and Stuttgart office assets  (the "VBG2 portfolio"), it has been agreed with the facility servicer that the Dresden and Berlin office assets (the "VBG1 portfolio") will be incorporated in a larger market testing exercise that may lead to a sale of all four assets. The assets have a combined value of €94.7 million.

The loans in respect of the VBG1 and VBG2 portfolio have a principal value of €117.9 million but are accounted for at a fair value equal to the value of the assets. The loans are non-recourse to the Company. It is expected that any potential sale would have a negligible impact on net asset value, but importantly, would serve to reduce the Company's overall gearing ratios.

Delta & Gamma

Preliminary discussions have taken place with the loan servicer to determine possible options which are available on expiry of the facilities in October 2012. No meaningful outcome to these discussions is expected before the end of the second financial quarter in 2012. A further announcement with regards to the Company's strategy in relation to the Delta and Gamma portfolios and proposed capital raising will be announced in due course.

Dividend

The second interim dividend of 2.1 pence per share in respect of the six months ended 31 August 2011 was paid on 24 November 2011.

Outlook

There have been no acquisitions or disposals in the period since 31 August 2011, however anumber of opportunistic acquisitions are being considered by the Company in the European retail sector. Based on recent discussions with local German banks, it appears that bank debt is still available for certain buyers despite the debt crisis, albeit at lower LTV ratios.

The Company will continue to be managed on a conservative basis with consistent income generation a priority. Despite the current economic challenges, the Board is confident that the Company remains on track to deliver its earnings forecast and strategic objectives set out in the reverse acquisition prospectus published in July 2011.

Further enquiries:

Redefine International Property Management Limited Investment Adviser
Michael Watters, Stephen Oakenfull	Tel: [phone]
FTI Consulting Public Relations Adviser
Stephanie Highett/Dido Laurimore/Olivia Goodall	Tel: [phone]