RDI.L Regulatory News (RDI)

REDEFINE INTERNATIONAL P.L.C.

("Redefine International" or the "Company" or the "Group")

 (Incorporated in the Isle of Man)

(Registered number 010534V)

LSE share code: RDI

JSE share code: RPL

ISIN: IM00B8BV8G91

RESULTS FOR THE YEAR ENDED 31 AUGUST 2014

REDEFINE INTERNATIONAL REPORTS RECORD RESULTS FOR ITS FIRST YEAR AS A UK-REIT

Redefine International, a UK-REIT, which has a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange, today announces its results for the year ended 31 August 2014.

Financial Highlights

‒ Earnings available for distribution of £39.1m (31 August 2013: £30.1m), an increase of 29.9%

‒ Second interim dividend of 1.70p per share, resulting in a dividend of 3.20p per share for the full year (31 August 2013: 3.11p per share), an increase of 2.9%

‒ Weighted average earnings available for distribution of 3.28p per share (31 August 2013: 3.26p per share)

‒ Basic earnings per share of 7.98p (31 August 2013: 6.66p), an increase of 19.8%

‒ Adjusted NAV per share of 40.54p (31 August 2013: 38.66p), an increase of 4.9%

‒ Balance sheet strengthened with pro-forma Group LTV reduced to 48.1% (31 August 2013: 56.8%)

‒ £162.5m of banking facilities extended or refinanced, extending average debt maturity to 9.3 years (31 August 2013: 4.7 years)

‒ Unrestricted cash balances of £83.8m (31 August 2013: £29.6m)

Corporate Highlights

‒ Conversion to a UK-REIT, corporate structure simplified and management internalised

‒ Successful placing of 191.7m ordinary shares to raise £86.8m

‒ Board and management team strengthened

‒ Inclusion in the FTSE 250 and EPRA indices, providing increased liquidity

Operational Highlights

‒ Portfolio values (excluding non-core assets) up 4.7% for the year

o UK assets up 8.8%

o European assets up 2.4% on a constant currency basis

‒ Portfolio occupancy increased to 97.6% (31 August 2013: 97.3%)

‒ Successful capital recycling across business segments including:

o 62.7m Cromwell securities sold delivering net proceeds of £35.6m

o Sale of two residential development sites for £22.2m, an aggregate 24.9% premium to carrying value

o Acquisition of Weston Favell Shopping Centre for £84.0m (excluding acquisition costs)

o £28.2m of equity invested into new and existing hotels

o Edinburgh Doubletree by Hilton hotel acquired post year end for £25.3m

Mike Watters, Chief Executive, commented:

"The past year has again been a demanding and busy period for the Company. It is pleasing to report an increase in earnings to record levels, while also successfully delivering on the challenging objectives that we set ourselves at the start of the last financial year.

"We are now well underway with our wider ambition of becoming a leading income focused UK-REIT and our attention is firmly re-focused on ensuring our property portfolio is well positioned to produce consistent and growing income returns for our shareholders. We now have critical mass in the retail, commercial and hotel sectors in the UK and have taken a big step forward in building our German portfolio, supported by an overall business environment which is now positive across all our sectors.

"Against this backdrop, with our strengthened financial position and the flexibility to allocate capital to those areas of our portfolio which are expected to provide the best risk-adjusted returns, we look forward to the future with confidence."

Meeting, webcast and conference call

A meeting for analysts and investors will take place today at 09.00 (UK local time) at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. The meeting can also be accessed via a conference call dial in facility and webcast link, starting at 09.00am (UK time) 11.00am (SA time), using the details below. The presentation will be made available on the Company's website http://www.redefineinternational.com/investor-relations/financial-reports. 

Conference call

Dial in numbers: United Kingdom Local +44(0)20 3427 1909 and South Africa Local +2711 019 7015

Confirmation Code: 1752552

Webcast link: http://www.brrmedia.co.uk/event/127724

For further information, please contact:

Chairman's message

This time last year, we set ourselves a challenging list of objectives which the Company has worked hard on achieving over the past 12 months. These expansive targets included: improving the quality of the property portfolio; simplifying the corporate structure of the business; conversion to a UK-REIT; the internalisation of management; and securing the inclusion of the Company in the EPRA and FTSE 250 indices. Alongside all of this, we have added a number of highly qualified and well-respected individuals to the senior management team to ensure that we have the best team in place to support the growth of our business and to deliver our strategy.

I am pleased to report that all of these objectives have now been met and our strategic target of becoming a leading income focused UK-REIT is well underway.

Chief Executive's Statement

I am pleased to report that financial and operational results for the period were ahead of expectations. Distributable earnings increased 29.9% to £39.1m with distributable earnings per share increasing by 0.6% to 3.28p. Adjusted NAV per share rose 4.9% to 40.54p with the Group loan to value ratio reducing to 48.1%. Overall, the achievement of these key metrics represents a strong set of financial results, reflected in the total shareholder return for the period of 28.5%.

We remain committed to our business model of being a diversified income focused UK-REIT, with a high level of expertise in our chosen business segments. We now have critical mass in the retail, commercial and hotel sectors in the UK and have taken a significant step forward in building our German portfolio, both of which have been supported by a corresponding expansion of the associated management teams.

The overall business environment in which we operate has turned positive, notwithstanding ongoing concerns relating to weak economic fundamentals in the Eurozone, deflationary expectations and the interest rate cycle. Activity in the retail and commercial sectors in which we operate has improved on the back of these improving economic conditions.

The hotel properties and the Group's interest in the hotel management business have benefited from a stronger UK economy. Our strategy of investing into cash generative assets with strong property fundamentals and our market leading management platform has proved successful. We invested a further £28.2m of equity during the period, and acquired the Edinburgh Doubletree by Hilton hotel for £25.3m post year end.

Investment markets remain competitive and assets with sound fundamentals have typically transacted at prices well above asking levels. Despite a substantial cash holding at year end, we will continue to be disciplined in our investment approach. As an increased number of sellers enter the market to take advantage of recent yield compression, opportunities to acquire good quality assets may improve in 2015.

Capital recycling

The quality of the portfolio and its ability to generate sustainable income returns is being delivered through effective capital recycling and the sale of non-core assets.

Legacy non-core assets were reduced significantly post year end with the sale of the majority of the Delta portfolio. Non-core assets now represent just 3.3% of the Group's direct property portfolio. 

New investment in the second half of the year focused only on the hotel property portfolio, where we continued to find better risk-adjusted returns through new investments and investment into the existing portfolio.

A growing business

Our objective to become a significant mid-tier UK-REIT remains on track. Being promoted to the FTSE 250 index in May 2014 was pleasing given the effort that has been put into expanding the business.

The growth of our business has been supported by the strengthening of our management team. Adrian Horsburgh joined as Property Director in April 2014 bringing over 30 years of investment and property experience as an international partner of King Sturge and more recently Jones Lang LaSalle.

Outlook

Occupational trends across all the sectors in which we operate are showing positive fundamentals, albeit to varying degrees. We will continue to allocate capital to those areas of our portfolio which are expected to provide the best risk-adjusted returns going forward.

Although investment activity and asset pricing appear to have run slightly ahead of fundamentals, expectations are that in the continued low interest rate environment, high quality income streams, backed by real assets, will remain attractive to investors.

Our Business

Business Strategy

The Group's strategy is focused on delivering sustainable and growing income to shareholders through investment in income yielding assets let to high quality occupiers on long leases. Capital values are enhanced and protected by asset management and the other development activities. As a UK-REIT, the Group targets distributing the majority of its earnings available for distribution on a semi-annual basis, providing investors with attractive income returns as well as exposure to capital growth opportunities.

Investment Markets

The Group is focused on real estate investment in large, well developed economies with established and transparent real estate markets. The investment portfolio is geographically diversified across the UK, Europe and Australia and provides exposure to the commercial, industrial, retail and hotel sectors.

Business Segments

Property portfolio by business segment at 31 August 2014

Notes:

1. Figures reflect the Group's share of joint ventures (share of market value: UK Commercial £15.8m; Europe £59.6m).

2. Property portfolio metrics exclude the Group's interest in Cromwell, which had a market value of £97.8m at 31 August 2014.

3. Non-core assets comprise the Delta portfolio (£35.06m of which was disposed of after year end), the Justice Centre in the Hague and the Ciref Berlin/German portfolio. They are operated within the UK Commercial and Europe business segments respectively.

Top 10 properties by value as at 31 August 2014

Notes: Figures reflect 100% of the asset values; ownership percentages are provided in the table above.

UK Commercial

Market

The investment market experienced a significant increase in investor demand for secondary assets in strong locations, largely led by UK institutions. This marked change in investor sentiment, combined with a lack of available Grade A stock, has resulted in a sharp recovery in values. More recently, the volume of available stock has increased with a number of parties seeking to take advantage of pricing levels, particularly on shorter leased and older properties. 

Rents have started to show growth in key cities, with clear signs of reduced incentives in the majority of regional centres. Overall supply of Grade A space is decreasing and headline rents of over £30 per sqft are reflecting a year-on-year increase of approximately 6.6%. This is however generally confined to established office markets.

The conversion of office space to residential has accelerated the reduction in the overall supply of secondary space, more so in areas that have witnessed a strong recovery in house prices.

Performance

Property values have benefited from a stronger regional investment market. The portfolio has been independently valued at £143.8m as at 31 August 2014, reflecting an increase of 8.1% for the year on a like-for-like basis.

Occupancy increased to 98.3% (31 August 2013: 97.8%) following lettings at The Observatory, Chatham and the Crescent Centre, Bristol.

Leasing activity for the period was limited, with 13 lease events completing. Seven rent reviews (including four fixed uplifts) were agreed providing a total rent of £2.8m, 7.2% above the previous passing rent. Six new lettings or renewals were completed totalling 25,800 sqft and providing a total rent of £0.34m, 9.0% above ERV. The portfolio has 45.8% of leases subject to fixed or inflation-linked leases.

The Observatory, Chatham reached full occupancy following two lettings totalling approximately 6,600 sqft. Both lettings were for 10 year terms at rents of £15.75 per sqft.

A new ten year lease has been agreed after the year end with the Highways Agency for their existing space of 76,000 sqft at Bedford. The rent of £0.6m was marginally ahead of ERV and removes a significant amount of re-letting risk from the portfolio.

The 2014 rent review for the Kwik-Fit portfolio is under review. The current passing rent of £1.03m is subject to the higher of a fixed 6.6% increase or open market rent.

Investment and asset management

Activity during the year focused on further rationalising the portfolio and capitalising on the strong investment market to sell non-core assets.

The sale of both the Harrow and Croydon residential schemes was completed in the first half of the year for an aggregate consideration of £22.2m, reflecting an average premium of 24.9% over book value. Further opportunities to convert existing secondary offices into residential, for either private sale or private rental, are under review.

The non-core assets were significantly reduced following the sale of the majority of the assets from the Delta portfolio. Four smaller assets totalling £6.3m were sold during the year with a further 10 assets totalling £35.06m being sold after year end. 

An asset swap within the petrol filling station portfolio was completed through which eight assets were sold and three were acquired. The transaction had a number of benefits including extending the average lease term across the portfolio, enhancing the tenant covenant, increasing the average lot size of the assets and reallocating capital to stronger South East locations.

The three new sites that were acquired are let on long term leases to BP Oil UK Limited with a weighted average lease term of 18.5 years and were acquired for £9.6m (excluding acquisition costs) reflecting a 5.2% net initial yield. Eight sites were sold for £8.6m reflecting a 6.5% net initial yield with a weighted average lease term of 11.0 years.

Looking forward, leasing activity will be focused on the 12,000 sqft of space available within The Crescent Centre, Bristol. Encouraging negotiations are progressing with a number of potential occupiers. Plans to enhance the appeal of the building by improving the reception, external facade and occupier amenities, including a café, external summer seating and bike storage are being progressed.

Strategy and outlook

We will continue to capitalise on the strength in the current investment market by selling smaller non-core assets at attractive prices and recycling capital into assets with long term sustainable income characteristics. Extracting value from the existing portfolio through planning gains and potential conversion to residential uses is ongoing.

Although competition for assets with sound fundamentals is high, increased stock availability and a potential tempering of risk appetite, may result in improved acquisition opportunities in main markets outside of Central London.

UK Retail

Market

While there are a number of retailers, including John Lewis, Next, Primark and many discounters experiencing success and there are noticeably fewer retailer administrations, overall trading conditions continue to be challenging outside of London.

Fit for purpose schemes in either discretionary or non-discretionary sectors are recovering. Within the Group's portfolio this is evidenced by the majority of the schemes at or close to full occupancy on conclusion of the deals under negotiation.

While it is too soon to anticipate meaningful rental appreciation, those landlords with schemes capable of achieving full occupancy have the opportunity to negotiate from a stronger position. Within our portfolio there is some evidence emerging on new deals which reflect net rental values ahead of previous expectations. 

The investment market was particularly strong over the summer, with secondary shopping centres outside of London witnessing yield compression of approximately 125 basis points without any discernible improvement in occupier fundamentals. The weight of money, combined with the relative scarcity of stock, pushed yields to levels that anticipate strong rental growth; in some cases on secondary assets in relatively weak retail locations. Since the summer the volume of available stock (principally in the secondary sector) has increased, with owners looking to capitalise on market strength. While there is good cause for optimism, we believe investment opportunities may be more favourable in 2015. 

Performance

The portfolio has been independently valued at £338.2m as at 31 August 2014. The like-for-like portfolio value (excluding the acquisition of Weston Favell) increased 7.4%. The valuation movement was driven by a 36 basis point reduction in net initial yields with like-for-like net rents marginally up by 0.2%. ERVs across the portfolio increased 1.8%, on a like-for-like basis.

Occupancy by lettable area increased to 95.4% (31 August 2013: 95.0%).

Leasing activity for the period covered 46 lease events (excluding temporary lettings). 15 rent reviews totalling 123,600 sqft were completed with the rent remaining unchanged at £2.3m. 31 new lettings or renewals were completed totalling 45,400 sqft and providing a total rent roll of £1.1m, 4.7% above ERV.

Individual leasing transactions and resulting rents relative to estimated market rents varied considerably, highlighting the ongoing change in the market and supply/demand dynamics for specific units. Retail rents have largely been rebased to levels which are economic to retailers and provides the opportunity of driving rental values in well let schemes.

Footfall declined 2.4% compared to the same period last year. While the Experian benchmark recorded a decline of 1.2%, the Group's portfolio is heavily weighted in the North West and Midlands where Experian recorded footfall declines of 3.6% and 3.7% respectively.

Investment and asset management

Weston Favell, Northampton

Following the acquisition in December 2013, a business plan including a £4.0m capital investment is progressing to significantly upgrade and rebrand the centre. A planning application has been submitted for the refurbishment and extension of units in the lower mall to harmonise it with the upper mall and improve the centre's customer appeal. Works are expected to commence in early 2015.

The reconfiguration works will create seven new unit shops and eight kiosks. Heads of terms are in circulation for two of the unit shops, with a further three in active negotiations, leaving two unit shops to let. Of the eight kiosks, heads of terms are in circulation on seven.

Grand Arcade, Wigan

At year end there was 5,600 sqft of space available to let. We are in advanced negotiations with a national shoe operator and a national multiple mobile phone shop on ten year leases, with a combined rental of £190,000 p.a. which compares favourably with an ERV of £156,000 p.a. The cost of leasing is improving gradually across the scheme with evidence of incentive packages reducing. It is therefore possible that the centre will be fully let before the end of 2014. A fully let scheme will provide the potential for asset management driven deals, a number of which have already been identified.

St George's, Harrow

Following a period of investment and successful lettings, there are a number of medium term opportunities to drive value, including downsizing certain retailers to accommodate new brands that will drive footfall, creating additional areas to accommodate further demand from restaurant operators as well as a leasing strategy to introduce valued brands that are currently trading from weak locations outside of our centre.

Key lettings during the period include:

‒ Frankie & Benny's entered into a new 25 year lease (15 years term certain) over 4,270 sqft at a rent of £102,480 p.a.

‒ Warren James entered into a new five year lease at a rent of £45,000 p.a. over a newly configured 575 sqft unit.

‒ Equivalenza agreed terms for a 10 year lease with a five year break option at a rent of £42,500 p.a.

All of the existing 2,700 sqft of vacant space is currently under offer at an estimated combined rent of £72,500 p.a. and a further £75,000 is under offer in relation to kiosks and commercialisation units. The final phase of refurbishment to the entrance of the centre is expected to start in January 2015.

Byron Place, Seaham

Planning approval has been received post year end for two new units totalling approximately 8,000 sqft as an extension to the scheme. Terms are at an advanced stage of negotiation on both units. The smaller unit of approximately 1,000 sqft is planned to be sold on a long leasehold basis to a branded coffee shop operator and a larger unit of approximately 7,000 sqft is to be developed and let to a discount food operator. The larger unit is expected to reflect a yield on cost of circa 9.0% against a current scheme valuation of 6.8%.

Birchwood, Warrington

The strength of successful discount operators is being reflected in the sales performance at convenience orientated centres such as Birchwood and Seaham. Discount retailers such as Home Bargains and Poundworld achieved double digit turnover increases for much of 2014. Although profit margins are lower in the discount sector, these levels of turnover translate to healthy profit margins and sustainable rents reflected in rent to sales ratios of 1.5% to 5.0%.

To capitalise on this segment of the market, plans are being progressed to develop a further 10,000 sqft for a food operator and a further 20,000 sqft for a discounter. As with Seaham, the yield on cost is expected to be well ahead of the scheme valuation and therefore accretive to NAV. The extension is subject to planning approval and terms being agreed with the tenants.

Digital marketing

Marketing efforts are currently focused on realigning online consumer engagement through both traditional and new digital channels. This includes trialling new technologies including mobile apps as well as improving functionality on existing platforms such as websites and social media.

A consumer-facing app focused on customer relationship management was launched at St George's shopping centre, following the introduction of the new website, and allows shoppers to select their interests and preferences in order to personalise their feeds and encourage further consumer engagement. This data will be used to personalise digital marketing via other channels. The St George's app features other functionality including a built-in QR code reader, which can be used to drive downloads and footfall.

As part of the refurbishment project at Weston Favell, a microsite will be launched that will act as an information hub for retailers, stakeholders and the local community to remain informed throughout the development period. The site will link to the centre's existing consumer website.

Strategy

The strength of the investment market has led to a rapid re-pricing of secondary shopping centres and retail parks driven, to a large extent, by the weight of money coming into the sector. A stronger UK economy, and the fact that many retail locations have now undergone a re-basing of rents to levels which are once again sustainable for retailers, is cause for optimism.

However, given the significant increase in values and the expected volume of retail investments to be brought to the market, we believe the return on investing into our own portfolio through the addition of retail space and lease driven asset management opportunities is, on average, likely to provide a better marginal return on capital. 

UK Retail at a glance

Note: Prior period figures have been re-stated to reflect 100% ownership of Grand Arcade, Wigan and West Orchards, Coventry.

UK Hotels and RedefineBDL

Ownership structure

The Group's hotel portfolio (except for the Enfield Travelodge) is held through its 71.0% shareholding in Redefine Hotel Holdings Limited ("RHH") which owns 100% of each hotel. The RHH portfolio is managed by RedefineBDL, in which the Company has a 25.3% shareholding. The Enfield Travelodge is leased to Travelodge directly.

Market

Sentiment in the UK hotel sector remains buoyant, with expectations of growth continuing for the remainder of 2014 and into 2015. The market has been driven by better than expected UK GDP growth and a pick-up in both corporate travel and tourism. According to the latest PwC hotel industry report, these factors have pushed rates in favour of owners.

London is expected to see average RevPars reach an all-time high by the end of 2014, driven largely by growth of over 3.0% in average daily room rates. Regional hotels have also performed ahead of expectations, in strong locations including Aberdeen and Edinburgh.

Supply of new rooms in London is expected to have risen approximately 5% by the end of 2014 and a further 5% is anticipated in 2015. In strong locations, new supply is being taken up by additional demand as experienced in the Company's own portfolio.

Performance

Underlying operating performance at the property level reflected the strong London hotel market and, despite average occupancies dropping slightly compared to last year, average room rates and RevPars grew 9.1% and 8.5% respectively.

The rental level for the 2015 financial year has been set at £13.79m p.a. for the RedefineBDL managed portfolio which includes all of the Group's hotels except the Enfield Travelodge. On a like-for-like basis, rents have been increased by 4.8%.

The total hotel portfolio (including the Enfield Travelodge) was valued at £194.0m at 31 August 2014, an uplift in value of 12.7% on a like-for-like basis excluding acquisition costs.

RedefineBDL performed above expectations and delivered a profit after tax of £1.6m for the nine month period from the date of internalisation. During the year, Tsogo Sun, South Africa's largest hotel and casino operator acquired a 25% strategic shareholding in RedefineBDL for £8.1m, which conferred a valuation of £32.4m. We welcome Tsogo Sun as a shareholder who we expect to add significant value to RedefineBDL going forward.

Investment and asset management

There was significant investment activity during the year as set out below, including the acquisition of minority interests, the extension of the Southwark Holiday Inn Express and the acquisition of the Travelodge in Enfield. A stronger UK economy and improved access to opportunities through our strategic shareholding in RedefineBDL has supported a larger allocation of capital to the sector. The key developments include:

‒ RHH acquired the remaining 40% interest in the 150 bedroom Earls Court Holiday Inn Express. The consideration of £6.3m implied an asset value of £28.1m and a net initial yield of 7.0%. Earls Court was valued at £33.9m at year end.

‒ The extension to the Southwark Holiday Inn Express was acquired for £11.35m (excluding costs of £0.7m). The trading performance of the extension has remained steady since the opening of the additional rooms in June 2014, with overall occupancies and RevPars in line with figures for the existing 88 bedrooms.

‒ The Travelodge in Enfield was acquired in June 2014 for £10.5m (excluding costs of £0.5m), providing a net initial yield of 5.5%. The recently constructed 132 bedroom hotel is let on a 33 year lease with uncapped RPI indexation. The property includes a vacant unit of 6,300 sqft at ground level which is currently under negotiation. Once let, the yield is expected to rise to over 6.0%. 

In addition, the Edinburgh Doubletree by Hilton was acquired after year end for £25.3m on a net initial yield of approximately 6.9%. The hotel has 138 bedrooms which have recently been extensively refurbished to provide high quality flexible accommodation appealing to both business travellers and tourists. The five storey Hotel has extensive food and beverage offerings, meeting rooms and a small fitness centre. The hotel is managed by RedefineBDL.

Strategy and outlook

Our strategic shareholding in RedefineBDL, the largest independent hotel manager in the UK, has been instrumental in generating off-market investment opportunities and ensuring visibility on the management and performance of our hotels. Growth in the portfolio will be opportunistic and will remain focused on limited service, branded hotels located in Greater London and very selectively in other proven major cities, as evidenced by the acquisition of the Edinburgh Doubletree by Hilton.

We will continue to support RedefineBDL and encourage the expansion of hotel management contracts. To this end, RedefineBDL is in negotiations to increase its hotels under management with a significant new contract covering 22 hotels.

Europe

Market

Recent reports from German retail companies indicate year on year real sales growth of 1.2% and while unemployment remains low and stable at around 6.5%, consumer sentiment is expected to remain positive.

Prime rents increased on average 2.5% for the 12 months to June 2014, slightly ahead of the rate of growth seen on the same period last year. Rental growth in the 10 biggest retail locations increased 3.5% in the same period, with Berlin and Hamburg showing the biggest absolute rises to levels of €300 and €275 per sqm per month respectively.

Consumer spending will remain a key driver of Germany's economic and retail performance and a positive differentiator from the balance of the Eurozone.

Prime yields in the key German markets have compressed by 20bps to 30bps in the 12 months to June 2014 (Colliers) and are now back to historically low levels. The pricing of prime assets has resulted in a noticeable increase in risk appetite with institutional investors moving into secondary assets and a general increase in the number of transactions focused on more asset management intensive portfolios.

The availability of capital to invest in real estate from both German and international investors is expected to remain strong and currently outweighs existing available supply. Likewise, liquidity in the banking market remains robust and given the current interest rate environment, borrowing costs are likely to stay at exceptionally low levels. 

Performance

Values were increased in local currency terms by 2.4% on a like-for-like basis over the course of the year. On a Sterling basis, asset values declined 4.8% as a result of a 7.6% decline in the Euro against Sterling.

Occupancy improved to 99.4% (31 August 2013: 98.6%) following successful lettings at the Schloss Strassen Centre in Berlin.

Leasing events were relatively limited during the year, in part due to the high and stable occupancy across the portfolio. Leasing activity for the period covered 16 lease events. Three rent reviews totalling 13,000 sqm were completed providing a total rent of €2.2m, 8.7% above the previous passing rent. 13 new lettings or renewals were completed totalling 16,500 sqm and providing a total rent roll of €1.9m, 3.5% above ERV.

Investment and asset management

The extension of two supermarkets by approximately 660 sqm in total are under negotiation at Eilenberg and Bremen. The trend in the sector for convenience supermarkets to trade from larger format stores continues to create opportunities for extensions within the portfolio, often providing opportunities to extend leases.

Following new leases to Vitalia, Vodafone and Equivalenza totalling 173 sqm and providing an additional rent of €90,500, the Schloss Strassen Centre in Berlin reached full occupancy. This provides a strong position from which to drive asset management-led leasing deals.

Leasing activity at the Bahnhoff Altona Centre in Hamburg maintained the centre at full occupancy. Both Rossmann and Sportspa exercised their options to extend their leases for a further five years on existing terms.

The asset management opportunities identified as part of the acquisition of the CMC portfolio are making steady progress. The longer term prospects for the area surrounding the Bahnhoff Centre in Altona, Hamburg are particularly encouraging with large scale redevelopment anticipated as part of the relocation of the long distance high-speed rail network.

Strategy and outlook

Recent investment activity suggests increased risk appetite and demand for assets outside of Germany's top 10 cities or assets that are more management intensive. This is expected to have a positive impact on the value of good quality secondary assets. We continue to find value in the German investment market, which combined with the historically low interest rate environment and attractive borrowing costs, is providing an opportunity to generate attractive cash-on-cash returns.

European portfolio at a glance

Note: Figures reflect the Group's share of joint ventures

Cromwell

Our investment in Cromwell produced another consistent and high yielding income return. Although the market value of the investment fluctuated during the year, we capitalised on periods of strength and reduced our shareholding to 9.99% from 13.72% last year. Net proceeds of AUD62.6m (£35.6m) were raised through sales. 

Valuation

The Group reports its investment in Cromwell at market value which is subject to fluctuations in Cromwell's security price and any movements in the GBP:AUD exchange rate. Cromwell's share price at 31 August 2014 closed marginally down at AUD 100.5 cents per security (31 August 2013: AUD 102.5 cents per security) while the AUD:GBP exchange rate declined 2.2% during the financial year.

8.46m securities were sold in December 2013 for AUD 96.0 per security at an exchange rate of GBP1:00:AUD1.81. A further 54.24m securities were sold in August 2014 for AUD 101.75 cents per security at an exchange rate of GBP1:AUD1.78.

Shareholding

Following the disposal of 62.7m securities, the Company's shareholding in Cromwell reduced to 172.8m securities or 9.99% of Cromwell's issued share capital. Should a holding of below 10% be retained for a period of more than one year, potential capital gains tax may be avoided. Notwithstanding this, decisions on capital allocation within the Group's portfolio will be made taking into account overall anticipated returns to shareholders.

Distributions for periods related to the first two quarters of the 2015 financial year have been hedged at rates of GBP1:AUD1.81 and GBP1:AUD1.82 respectively. 

For further information please visit www.cromwell.com.au.

Portfolio Summary

Portfolio overview by business segment

Business segments - market values

Notes:

1. Figures reflect the Group's share of joint ventures.

2. Non-core assets includes the Delta portfolio (£35.06m of which was disposed after year end), the Justice Centre in the Hague and the Ciref German/Berlin portfolio.

Business segments - gross rental income

Business segments - valuation movement since 31 August 2013

Note: Includes the effect of foreign exchange movement during the period. The Euro declined 7.6% against Sterling.

Portfolio overview by sector

Property sectors at 31 August 2014

Notes: Figures reflect the Group's share of joint ventures.

Financial Review

Overview

The Group produced a profit attributable to equity holders for the year of £95.2m. Adjusted for the effects of the management internalisation and the extinguishment of the residual Gamma debt, this represents a £13.8m increase on the prior year. Basic and diluted EPS, excluding the effect of the management internalisation and Gamma debt write-off, were 6.30p compared to the 6.66p basic and 6.23p diluted EPS in the prior year. Earnings available for distribution were £39.1m, an increase of £9.0m from the comparable period.

Adjusted NAV per share increased to 40.54p compared to 38.66p at 31 August 2014, an increase of 4.9%. The costs of the management internalisation, which were written-off in the period, had an impact of 1.92p per share. Adjusted NAV per share, excluding the effect of the management internalisation, would therefore have been 42.46p.

The property valuation uplift of £49.8m was offset by a net fair value decline on Cromwell securities of £5.5m. £3.1m of gains on disposals of Cromwell securities were, however, achieved during the year. 

Earnings available for distribution and dividend

Earnings available for distribution increased 29.9% to £39.1m. Distributable rental income was up £19.1m largely due to the acquisition of the CMC portfolio, Weston Favell and the restructuring of the Aviva shopping centre portfolio, which resulted in Grand Arcade, Wigan and West Orchards, Coventry becoming 100% owned. The higher rental income was partly offset by the associated higher interest costs. 

The dividends declared for the year increased 2.9% to 3.20p (31 August 2013: 3.11p).

The Company's policy is to distribute the majority of its earnings available for distribution in the form of dividends to shareholders. Earnings available for distribution exclude capital items, earnings from the Gamma portfolio and only include the Group's share of the net income from the Delta portfolio.

The summarised statement of earnings available for distribution is as follows:

Reconciliation of EPRA Earnings and earnings available for distribution

Summary

Notes:

1. Comprises 35% of Delta income which is not received, split as follows:

2. Comprises Gamma accrued interest which is non-recourse and included within the loan release

The Board declared a second interim dividend of 1.70 pence per share on 28 October 2014, for the six month period ended 31 August 2014. The 3.20p per share distribution for the year reflects a yield of 7.9% on the Adjusted NAV per share at 31 August 2014. The Company proposes offering shareholders the option of receiving ordinary shares in lieu of the cash dividend under a Scrip Dividend Scheme. An announcement containing details of the tax components of the dividend, the timetable and the Scrip Dividend Scheme will be announced separately today. The record date for the dividend on the JSE and the LSE is 21 November 2014 and the dividend payment date is 5 December 2014.

Net assets

EPRA NAV per share has increased by 25.5% to 37.66p (31 August 2013: 30.00p) largely as a result of the Gamma residual debt extinguishment and a movement of the deferred tax on the Cromwell investment. EPRA NAV is used as a reporting measure to better reflect underlying net asset value attributable to shareholders by removing the cumulative fair value movements of interest rate derivatives and deferred tax.

The property valuation uplift of £49.8m (3.84p per share) was offset by a net Cromwell fair value decline of £5.5m (0.42p per share) as well as a £4.5m (0.35p per share) foreign exchange translation movement. Share placements during the period added 2.71p per share, owing to placements at a premium to net asset value.

The EPRA NAV as at 31 August 2014 includes items which, in the opinion of the Board, should be adjusted for in order to better reflect the underlying value of the Group. An Adjusted NAV per share has therefore been calculated as follows:

The £44.9m positive impact of the Gamma residual debt was achieved following the final determination notice being issued to the Gamma bondholders and the receipt of a legal extinguishment of the debt from the Security Trustee. The consideration of £22.8m related to the cancellation of the investment advisory agreement as well as the £2.1m of goodwill on the acquisition of RIMH, were written off in the period. This had the effect of reducing EPRA NAV per share and Adjusted NAV per share by 1.92p. There is no adjustment for this as it has a permanent impact despite the expectation that the management internalisation will have a long-term positive effect on earnings and the performance of the Group. Without the impact of the management internalisation, Adjusted NAV per share would have been 42.46p per share.

Notes:

1. The EPRA publishes best practice recommendations for Europe's Stock Exchange listed real estate sector. In order to enhance comparability and transparency the Company has adopted the EPRA net asset value measure within its reporting. The EPRA net asset value ("NAV") presented removes the cumulative fair value movements of interest rate derivatives and deferred tax.

2. Following the successful completion of the Delta restructuring announced on 15 October 2012, the negative net asset value position of 1.64p per share is expected to reverse at the end of the loan term.

3. A liability of £5.6m (0.43p per share) is currently held relating to the facility provided to the Grand Arcade, Wigan. As part of the Aviva restructure completed in December 2013, Aviva retained the right to participate in 50% of the income and capital growth generated by Grand Arcade. This right was recognised at fair value, although is not deemed to have an immediate impact on NAV and has therefore been adjusted for. In addition, as a result of the non-recourse nature of the debt relating to the Justice Centre in the Hague, Netherlands and the Ciref Berlin/German portfolio, the negative net asset value positions of 0.69p per share and 0.12p share respectively have been written back.

Net debt and capital management

The Company has delivered on its plans of improving its capital structure and extending its debt maturity. The Group's pro-forma LTV ratio reduced to 48.1% (31 August 2013: 56.8%) as a result of actively managing the balance sheet through the successful issuance of new equity, the refinancing of existing facilities at lower LTVs and selective sales of, and repayment of debt associated with, non-core assets. 

The Company refinanced the majority of its facilities with maturity dates in 2015 and 2016. This included the extension of the Zeta facility with Lloyds Bank by two years (expiring May 2018) as well as the refinancing of the hotel portfolio, which now has a revised maturity date of 30 November 2021. Historically low interest rates combined with a competitive lending market provided an opportunity to extend the Group's debt maturity profile at attractive rates. The Group's weighted average cost of debt (excluding the delta facility) was 4.30% at the year end (31 August 2013: 4.67 years).

The Group's pro-forma weighted average debt maturity stands at 9.34 years. The Group disposed of 10 Delta assets on 6 October 2014, which resulted in a reduction in the Delta debt from £73.1m to £38.7m. The "pro-forma" ratios shown below exclude the debt against the Delta portfolio, other legacy non-recourse loans and the Group's share of debt in joint ventures.

The Group's economic share of debt at 31 August 2014 (including its share of debt in subsidiaries and joint ventures), was £704.5m (31 August 2013: £635.1m). 

£101.4m of Mezzanine Capital loans were repaid with effect from 1 December 2013 preceding the Group entering the UK-REIT regime. This had a nil impact on the net asset value of the balance sheet as both the receivables and payables in relation to this debt were settled.

Equity

The Group's total equity attributable to equity holders increased by £181.2m during the year. The substantial increase in equity was due to the issue of 79.0m shares to fund the acquisition of the investment advisor and settle the incentive fee, the placement of 155.1m new ordinary shares and the 36.6m shares issued to fund the repayment of the Aviva convertible loan instrument, and the 31.7m shares issued to the vendors of the Schloss Strassen and Bahnhoff Altona Centres in Germany.

Cashflow

The 54.2m increase in unrestricted cash balances from the prior year includes the £31.1m realised from the disposal of the 54.5m Cromwell securities on 29 August 2014.

Proceeds from the loans and borrowings include the £50.0m financing received on the acquisition of Weston Favell, £18.25m with respect to West Orchards and £11.1m with respect to additional debt in the hotel portfolio following the acquisition of the Southwark Holiday Inn Express extension and the 40% of the Earls Court Holiday Inn Express.

The repayment of loans and borrowings include the £101.4m Mezzanine Capital loan repayments, £6.1m with respect to the Delta facility following Delta asset disposals, £3.0m with respect to the Zeta refinancing and £5.5m on the facility secured against the Cromwell investment following the disposal of shares during the year.

Dividends paid during the period, being the final 31 August 2013 dividend of £17.3m and the February 2014 interim cash dividend of £5.3m, amounted to £22.6m. A cash saving of £13.8m was achieved following a 72.3% take up of scrip relating to the interim dividend.

Hedging

The Group utilises derivative instruments, including interest rate swaps and interest rate caps to manage its interest-rate exposure. At 31 August 2014, the net fair value liability of the Group's derivative financial instruments was £2.9m (31 August 2013: £4.7m).

The Group has a hedging policy which requires at least 75% of all interest rate exposures exceeding one year to be on a fixed or capped rate basis. At 31 August 2014, Group debt (including its economic interest of subsidiaries and joint ventures) was 97.5% fixed. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the duration of the facility. The Group has not applied hedge accounting during the current period and changes in the fair value of the Group's hedging instruments have been recognised in profit or loss.

Taxation

The Company converted to a UK-REIT on 4 December 2013. The Group continues to pay tax on non-UK property earnings as well as overseas investment earnings under the UK-REIT rules.

Income Statement

For the year ending 31 August 2014

Consolidated Statement of Comprehensive Income

For the year ended 31 August 2014

The accompanying notes form an integral part of these financial statements.

Consolidated Balance Sheet

As at 31 August 2014

Consolidated Statement of Changes In Equity

For the year ended 31 August 2014

Consolidated Cash Flow Statement

For the year ended 31 August 2014

1. general information

Redefine International P.L.C was incorporated on 28 June 2004 under the laws of the Isle of Man.

Following approval from the South African Reserve Bank in July 2013, the Company concluded an inward listing on the JSE. The Company now holds a primary listing on the Main Market of the LSE and a secondary listing on the Main Board of the JSE. 

On 4 December 2013 the Company converted to a UK Real Estate Investment Trust and moved its tax residence from the Isle of Man to the UK.

New articles of association were adopted by the Company in the period and it converted to an Isle of Man Companies Act 2006 company with effect from 3 December 2013.

The financial information presented herein does not amount to statutory financial statements. The annual financial report for the year ended 31 August 2014 will be available on the Redefine International website at the beginning of December 2014. The Auditors KPMG have reported on the audited financial statements and their report was unqualified. A copy of their unqualified audit opinion is available at Top Floor, 14 Athol Street, Douglas, Isle of Man, IM1 1JA. 

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the IASB.

The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its audited financial statements as at and for the year ended 31 August 2013, except for the new standards adopted during the year and the additional policies adopted due to the changes in the business during the year. 

New standards adopted during the period

The following new standards, amendments and interpretations became effective and have been adopted during the year:

· IAS 1 (amended) - Presentation of Items of Other Comprehensive Income;

· IFRS 10 Consolidated Financial Statements;

· IFRS 11 Joint Arrangements;

· IFRS 13 Fair Value Measurement.

· IFRS 12 Disclosure of Interests in Other Entities;

· IAS 28 Investments in Associates

· IAS 19 (revised) Employee Benefits; and

· IFRS 7 (amended) - Offsetting Financial Assets and Financial Liabilities.

2.2 basis of preparation

The consolidated financial statements are presented in Great British Pounds, which is the functional currency of the Company and the presentational currency of the Group, rounded to the nearest thousand pounds. They are prepared using the historical cost basis except for investment property, derivative financial instruments and financial instruments designated at fair value through profit or loss.

2.3 Key judgements and estimates

The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the period reported. Although these estimates are based on the Directors' best knowledge of the amount, event or actions, actual results may differ from those estimates.

The principal areas where such judgements and estimates have been made are:

2.3.1 Investment Property Valuation

The Group uses the valuations prepared by its independent valuers in accordance with IFRS 13 as the fair value of its investment properties. The valuations are based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties. Further details are provided in Note 6.

2.3.2 Fair value of restructured or acquired liabilities

New borrowings or borrowings which have been substantially modified are recognised at fair value. The determination of fair value involves the application of judgement.

The Group determines fair value by discounting cashflows associated with the liability at a market discount rate. The key judgement surrounds the determination of an appropriate market discount rate. Management determine the discount rate on a loan by loan basis having regard to the term, duration and security arrangements of the new liability and an estimation of the current rates charged in the market for similar instruments issued to companies of similar sizes.

This judgment is made more difficult given the bespoke nature of certain loans obtained by the Group. Any difference between the nominal value of the loan and the deemed fair value will be accreted through profit or loss over the term of the loan through the effective interest rate.

2.3.3 Classification of Investment Property for hotels

The hotel properties are held for capital appreciation and to earn rental income. The hotel properties included within the Redefine Hotel Holdings portfolio have been let to Redefine Hotel Management Limited ("RHML") and Redefine Earls Court Management Limited ("RECML") for a fixed rent which is subject to annual review. The annual review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. RHML and RECML operate the hotel business and are exposed to the fluctuations in the underlying trading performance of the hotels. They are responsible for the day to day upkeep of the properties and retain the key decision making responsibility for the business.

As part of the acquisition of RIMH in December 2013, Redefine International acquired a 33.0% shareholding in RedefineBDL which in turn owns RHML and RECML. The shareholding was subsequently diluted to 25.3% with effect from 1 May 2014 following the issue of additional shares by RedefineBDL to Tsogo Sun Holdings Limited. Having considered the guidance in IFRS 10, the respective rights of each of the shareholders in RedefineBDL and the size of the Company's shareholding compared with other shareholders, management have determined that Redefine International does not control RedefineBDL and hence does not control RHML or RECML.

Aside from the payment of rental income to Redefine International which resets annually and the Group's shareholding in RedefineBDL, Redefine International is not involved with the hotel business and there are limited transactions between the two entities. As a result, Redefine International classifies the hotel properties as investment properties in line with IAS 40.

2.3.4 Classification of the Group's Investment in Cromwell at Fair Value through profit or loss

The Group ceased to account for Cromwell as an associate in April 2013 from the date its shareholding fell below 20%. While the Company does not have a right to appoint a director it does currently have board representation. Having considered all the facts and circumstances the Directors believe that significant influence over Cromwell does not exist and that the designation of the Company's residual investment at Fair Value through Profit or Loss is appropriate.

2.3.5 property acquisitions

Where properties are acquired through the acquisition of corporate interests, the Directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.

Where such acquisitions are not judged to be an acquisition of a business, the transactions are accounted for as if the Group had acquired the underlying property directly. Accordingly, no goodwill arises, rather the cost of the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.

Otherwise corporate acquisitions are accounted for as business combinations.

3. segmentAL reporting

The Group's identified reportable segments are set out below. These segments are generally managed by separate management teams. As required by IFRS 8, Operating Segments, the information provided to the Board, which is the Chief Operating Decision Maker, can be classified into the following segments:

Relevant revenue, asset and capital expenditure information is set out below:

i) Information about reportable segments

ii) Reconciliation of reportable segment profit or loss

4. Net gains from financial assets and liabilities

The following table details the net losses and gains (incurred)/earned by the Group during the year:

In the prior year the Group recognised a gain on loss of significant influence in Cromwell of £46.69m comprising a £9.97m net gain on sale of securities, a £26.09m gain calculated as the difference between the carrying value and fair value of the remaining Cromwell securities held on the date significant influence was lost and £10.63m related to the recycle to the income statement of the foreign currency translation reserve.

5. gain on legal extinguishment of debt

A Fixed Charge Receiver (the "Receiver") was appointed to the property subsidiaries which secured the Gamma facility, in January 2013. At that point the Board had considered the impact of the appointment in light of the fact that Wichford Gamma Limited, which the Group continued to control, was the primary obligor for the debt. The Directors determined that the Receiver had been acting on behalf of the lender and that the appointment of the Receiver was in substance the transfer of those assets to the lender and a part settlement of the debt.

As a result the Gamma loan facility recorded in the books of Wichford Gamma Limited and consolidated by the Group of £199.68m was reduced by the fair value of the net assets of £157.82m of the relevant property subsidiaries at the date the Receiver was appointed. Interest continued to accrue on the residual loan balance.

On 28 August 2014, following the sale by the Receiver of all of the properties securing the Gamma facility and the Final Determination Notice being issued to the Gamma bondholders, the Group received legal extinguishment of the residual Gamma debt from the Security Trustee. All residual outstanding amounts under the facility were written off by the lender.

This legal write off resulted in a credit of £44.9 million to the income statement being the write off of the residual Gamma debt of £41.86 million and the associated accrued interest on the residual debt.

6. investment property

The cost of the consolidated investment properties at 31 August 2014 was £1.3 billion (31 August 2013: £1.02 billion). The carrying amount of investment property is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued (together referred to as "valuers").

The fair value of each of the properties for the year ended 31 August 2014 was assessed by the valuers in accordance with the RICS standards and IFRS 13.

The valuations performed by the independent valuers are reviewed internally by senior management. This includes discussions of the assumptions used by the external valuers, as well as a review of the resulting valuations.

Discussions of the valuation process and results are held between senior management and the external valuers on a half-yearly basis. The audit and risk committee reviews the valuation results.

Technique

The valuation techniques described below are consistent with IFRS 13 and use significant "unobservable" inputs. There have been no changes in valuation techniques since the prior year.

Yield capitalisation - for commercial investment properties, market rental values are capitalised at a market capitalisation rate. The resulting valuations are cross-checked against the net initial yields and the fair market values per square foot derived from recent market transactions.

Sensitivity

An increase or decrease in ERV will increase or decrease the fair value of the Group's investment properties.

An increase or decrease to the net initial yields and reversionary yields will decrease or increase the fair value of the Group's investment properties.

An increase or decrease in the estimated costs of the development will decrease or increase the fair value of the Group's investment properties under development.

There are interrelationships between the unobservable inputs as they are determined by market conditions; an increase in more than one input could magnify or mitigate the impact on the valuation.

The Group considers that all of its investment properties and assets held for sale fall within 'Level 3', as defined by IFRS 13. Accordingly, there has been no transfer of properties within the fair value hierarchy in the financial year.

The table below summarises the key unobservable inputs used in the valuation of the Group's wholly owned investment properties and assets held for sale (excluding finance leases) at 31 August 2014:

In accordance with IAS 40 Investment property: Paragraph 14, judgement is needed to determine whether a property qualifies as an investment property. The Group has developed criteria so that it can exercise its judgement consistently in recognising investment properties. These include inter alia; property held for long-term capital appreciation, property owned (or under finance leases) and leased out under one or more operating leases; and property that is being constructed or developed for future use as an investment property. The recognition and classification of property as investment property principally assures that the Group does not retain significant exposure to the variation in cash flows arising from the underlying operations of properties. Investment property comprises a number of commercial and retail properties that are leased to third parties. The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to RHML and RECML for a fixed rent which is subject to annual review. The annual rent review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level.

As detailed in the key judgements and estimates in Note 2.3.3, aside from the payment of rental income to Redefine International which resets annually and the Group's shareholding in RedefineBDL, Redefine International is not involved in the hotel management business and there are limited transactions between it and RHML and RECML. As a result, Redefine International classifies the hotel properties as investment properties in line with IAS 40.

Property operating expenses in the consolidated income statement relate solely to income generating properties.

*During the year, an asset swap was executed within the Malthurst portfolio. 8 petrol stations were provided as consideration for 3 petrol stations. The above acquisition figure represents the difference in valuation between the two portfolios plus acquisition costs and is the net cash paid by the Group as part of the transaction.

*£6.7m of the proceeds from this disposal were deferred and are payable within one year under the terms of the transaction.

A reconciliation of investment property valuations to the consolidated statement of financial position is shown below:

7. investments at fair value

The following table details Investments at fair value.

The movement in investments designated at fair value may be reconciled as follows:

The Group ceased to account for Cromwell as an associate from April 2013 as it was deemed to have lost significant influence over that entity following a disposal of shares.

The Group disposed of 8,460,067 securities in Cromwell on 3 December 2013 at a price of AUD 0.96 for a total consideration of AUD 8.1m (£4.5m) and a further 54,242,549 securities on 29 August 2014 at a price of AUD 1.0175 for a total consideration of AUD 55.19m (£31.1m).

The Group's shareholding in Cromwell at 31 August 2014 was 9.99% (31 August 2013: 13.70%). The closing price of Cromwell on 31 August 2014 was 100.0 Australian cents per security (31 August 2013: 102.5 cents).

8. investment in joint ventures

The Group's investments in joint ventures currently consist of the following:

(i) 50% in Pearl House Swansea Limited, a joint venture with Sandgate Properties Limited, which owns a long leasehold retail interest in Swansea, Wales.

(ii) 50% in Swansea Estates Limited, a joint venture with Sandgate Properties Limited, which owns a long leasehold retail interest in Swansea, Wales.

(iii) 50% in Ciref NEPI Holdings Limited, a joint venture with New Europe Property Investments, which ultimately owns property in Germany, Western Europe.

(iv) 50% in 26 The Esplanade No 1 Limited, a joint venture with Rimstone Limited, which ultimately owns an office building in St. Helier, Jersey.

(v) 50% in Ciref Crawley Limited, a joint venture with Graymont Limited, which owns 3 blocks of offices in Crawley, Surrey.

(vi) 50.5% interest in RI Menora German Holdings S.a.r.l, a joint venture with Menora Mivtachim, which ultimately owns properties in Waldkraiburg, Hucklehoven and Kaiserslautern in Germany. Notwithstanding the economic shareholding the contractual terms provide for joint control.

(vii) 49% interest in VBG Holdings S.a.r.l., a joint venture with Menora Mivtachim, which ultimately owns government let properties in Dresden, Berlin, Stuttgart and Cologne, Germany.

The investment in joint ventures includes investments held at nil value in the balance carried forward on 1 September 2013.

Ciref Coventry Limited and Redefine Wigan Limited became subsidiaries with effect from December 2013, following the purchase of 50% of the shares in the entities for £1. These joint ventures had been held at nil value prior to this acquisition.

9. investment in associates

As detailed in Note 17, the acquisition of the investment in associate for the period year ended 31 August 2014 reflects the 33% shareholding acquired in RedefineBDL, acquired as part of the management internalisation on 2 December 2013. The shareholding was subsequently diluted to 25.3% with effect from 1 May 2014 following the issue of additional shares by RedefineBDL.

Significant influence over the operations of Cromwell was deemed to have ceased in April 2013 following the sale of 86 million Cromwell securities and from that date the Group ceased to equity account for its investment. The investment was designated at fair value through profit or loss from that date and the group recognised a gain on loss of significant influence of £46.69m.

10. intangible assets

As detailed in Note 17, intangible assets were recognised on the acquisition of RIMH and represented the fair value of the advisory agreements acquired by the Group. The value attributed to the Group's agreement with RIPML of £22.79m has been treated as a payment to avoid making future payments under the contract and has been fully written down in the year. The value attributed to the contracts between RIMH and third parties including joint ventures of the Group and the non-controlling element of properties held by the Group of £1.85m is being amortised on a straight line basis over the remaining terms of the contracts, which have an average life of eight years.

11. cash at bank

As at 31 August 2014, there was £6.6m (31 August 2013: £4.1m) of cash at bank to which the Group did not have instant access. The principal reason for this is that rents received are primarily held in locked bank accounts as interest and other related expenses are paid from these monies. At 31 August 2014 trade and other payables include accrued interest on bank debt facilities of £1.1m against which these cash balances will be applied.

Also included in the restricted cash balance at 31 August 2014 is £5.5m held with Aviva with regards to the development in Birchwood Warrington Limited, and the proposed developments in Grand Arcade Wigan Limited and Weston Favell Limited (31 August 2013: £0.7m).

Cash also includes £31m due from brokers in respect of the sale of Cromwell securities on 29 August 2014.

12. capital and reserves