Dundee International REIT Announces Update on Deutsche Post's 2014 Termination Rights

DUNDEE INTERNATIONAL REIT (DI.UN - TSX) is pleased to provide an update with respect to Deutsche Post's 2014 lease termination rights in respect of 59 properties.
 
Of the total 1.9 million square feet of gross leasable area (GLA) subject to Deutsche Post's 2014 termination rights, Dundee International REIT has leased or entered into negotiations to lease, sell or redevelop approximately 1.3 million square feet, or 67% of the total space subject to termination.
 
In June 2013, the REIT and Deutsche Post agreed to extend Deutsche Post's termination rights in respect of 54 buildings to August 31, 2013 in order to find a mutually beneficial way to address Deutsche Post's future space requirements. The REIT is pleased to announce that Deutsche Post has agreed to continue to lease approximately 764,000 square feet, or 74% of the space it occupies in the 54 buildings, beyond June 30, 2014. Of the 764,000 square feet, Deutsche Post has agreed to amend its leases for approximately 619,000 square feet by extending the term of such leases for 5 years commencing July 1, 2014 and to waive its 2014 termination rights with respect to the balance of such space.
 
As previously described in our press release dated June 24, 2013, the REIT had received notice of termination in respect of 5 properties representing 613,000 square feet of space effective July 1, 2014. Of the space terminated by Deutsche Post in these properties, approximately 261,000 square feet, or 43%, has already been leased, is in lease negotiations, or has been identified for redevelopment or sale.
 
The REIT is presently in discussions with Deutsche Post to lease back additional terminated space. As well, the REIT is in discussions with Postbank to remain as a direct tenant in a large number of the locations in which Postbank presently sublets space from Deutsche Post. If these discussions are successful, the REIT expects to lease an additional 258,000 square feet of the terminated space within 90 days.
 
After factoring in the Deutsche Post leases, asset planning activities including active lease discussions, planned sales and redevelopment, this leaves 641,000 square feet of space, or only 4% of the REIT's total GLA, to be addressed by the REIT.
 
CEO Jane Gavan commented: "We are pleased with the outcome of the negotiations with Deutsche Post and with the terms of the agreement reached between us, which we believe are beneficial to both parties. By working with Deutsche Post over the past few years we were able to generate better solutions to their needs that work for us as well. As a result of these efforts, we have retained them as a tenant in many of our properties for extended terms which will mean greater cash flow stability and value creation. We are pleased that by dealing with Deutsche Post pro-actively, we have retained them as a tenant in approximately three times more space than they retained in 2012."
 
As part of the overall deal, the REIT has also agreed to provide Deutsche Post with an annual rent reduction of €1.7 million per year, effective as of July 1, 2014. Based on recent inflation rates in Germany, we anticipate that prior to July 1, 2014 this reduction in annual rent will be substantially offset by CPI rent adjustments provided in the terms of the Deutsche Post leases. In addition, the REIT will make a one-time payment to Deutsche Post of €1.45 million to be used to improve the buildings and the tenant's space.
 
The following table is a summary of the foregoing:
 
 
 
"The REIT's team in Germany has developed a focused, asset-by-asset strategy which, together with today's agreement with Deutsche Post, and ten months in advance of the effective termination, already addresses over two-thirds of the GLA that was subject to the 2014 terminations. I have full confidence in our German team, who will continue to look for and execute on opportunities to maximize value within our Deutsche Post portfolio." said Jane Gavan, CEO.

 

on September 3, 2013