Property group Real Estate Investors, headed by Midlands financier Paul Bassi, said it was set fair to take advantage of the current property market turmoil.

Mr Bassi revealed REI was in negotiation to pick up on some “distressed sales” now beginning to come through.
His comments came as the company unveiled interim results for the six months to the end of June.

The AIM listed firm reported pre-tax profits of £663,000 against £2.88 million in the same period a year ago. However, the 2007 figure included a significant revaluation surplus and leaving it aside the profit before tax figure was £530,000.
Revenue was up to £1.066 million against £833,000.

REI held cash of £22 million, and controlled net assets of £ 35.8 million.

Since then, recent deals have taken in the £ 2.4 million acquisition of Bridge Street, Walsall, and the £ 4 million purchase of York House in Birmingham city centre. New lettings have been obtained from Adroit Construction, United Business Centres, Vantis and Caffè Nero, plus additional upward rent reviews and lease renewals of approximately £200,000 a year.

Mr Bassi, the largest shareholder in REI, co-founder and chairman of auctioneers Bond Wolfe and deputy chairman of chartered surveyors Bigwood, said: “We continue to have a robust business model that is able to capitalise on the property and financial market turmoil.

“We are beginning to see the worth of our strategy of acquiring property to which we can add value through asset management, thus benefiting from increased rental income and enhanced capital values, and this should be reflected in our results over the next 12 months.

“We anticipate the next 12-18 month period as an ideal environment in which to significantly grow the group.
“Our cash deposits continue to attract premium interest rates and these will only be employed where we see real value, and quality investment opportunities. We still have significant funding in place with our financial backers, with the ability to establish a £150 million portfolio over the next few years.

“Our strategy is to capitalise on market opportunities within our specific geographic focus, where we can secure attractive yields and capital growth via constructive asset management. We do not rely upon yield compression or inflation, and this strategy continues to serve us well.”

Saying REI would stay concentrated on the West Midlands, and was boosted by the association with Bond Wolfe and Bigwood, he added: “These relationships provide first hand insight into the property climate and market conditions.”
REI had been choosing to concentrate on speeding up its refurbishment programme and on achieving new lettings rather than significant new acquisitions.

Refurbishments at Colmore Row and Bennetts Hill were now complete with Waterloo Street set to be finished before the year end.
The resulting increase in rental income would help mitigate any further falls in property values.

Mr Bassi went on: “Occupier demand within our markets remains strong and additionally, as a result of the slowing down in property development due, principally, to lack of funding, occupiers are turning to existing property and we anticipate being beneficiaries of this demand.

“I remain positive about our prospects. We are in legals on a number of further lettings and I anticipate increased acquisition activity over the next 12 months. We have a number of acquisitions currently under consideration from distressed sellers, corporate/institutional vendors, as well as the principal banks who are restructuring their loan books, and I believe we are in a strong negotiating position. We will only be making such acquisitions on our terms.”
Mr Bassi said the overall portfolio was “prudently valued”.

Some small retail investments, inherited from a previous management team, continued to perform well but nevertheless valuations on these had been cut by £900,000 to reflect the current market conditions.

However, Mr Bassi asserted: “I continue to believe that we could readily find purchasers for these properties at or above our book valuations. However, it is not necessary or prudent to sell these until further asset management and market recovery takes place, allowing us to fully benefit from their values.”

The majority were let on long leases, to strong tenants on attractive debt terms.

Mr Bassi now holds 22.13 per cent of REI, acquired at a significant premium to the current market value.
“I look forward to increasing my shareholding when the opportunity arises,” he pledged.