Brisbane-based fund manager Cromwell Property Group is seeking to acquire London-listed RDI REIT, confirming that it has made an approach to the board of RDI regarding a potential transaction.
RDI is an established UK REIT invested in a diversified portfolio in the United Kingdom and Germany independently valued at £1.62bn. Their European portfolio consists of three shopping centres as well as a number of retail parks and DIY assets throughout Germany.
The RDI REIT breached a loan covenant in February 2019. Four of its UK shopping centres namely Grand Arcade, Wigan; Weston Favell, Northampton; Birchwood, Warrington and Byron Place, Seaham, are financed by a long-term fixed-rate debt facility with Aviva. The deterioration in values for UK shopping centres and the resultant increase in the lender’s loan to value ratio, has likely caused the breach of covenant requiring all net operating cashflows from this portfolio to be retained within the facility to reduce the outstanding balance.
Cromwell advised that any transaction would be consistent with Cromwell’s strategy to work with their capital partners to grow funds under management and continue to expand its investment footprint in the UK and Europe. Over half of Cromwell’s A$11.5bn of assets under management as at 31 December 2018 is concentrated in Europe.
Discussions are ongoing between the parties and a further announcement will be made in due course. Goldman Sachs has been named as Cromwell’s lead financial adviser, while Morgan Stanley has been named as its financial adviser.
The RDI REIT shares rose 15% on news of the speculation.