REI reporting strong assets sales, reduced debt and improving occupancy in first half of 2022
Real Estate Investors (REI) plc has maintained its portfolio value of £190 million, even after sales of £10.2 million in the year to date, the results for the six month period ended 30 June 2022 reveal.
REI, the UK’s only Midlands-focused Real Estate Investment Trust, also has significant pipeline sales in legals which will be reflected in the second half results.
Chief executive Paul Bassi said REI had focused on building up cash and will consider capital return options to shareholders, and opportunistic acquisitions.
The company has reported pre-tax profits of £8.3 million, including a £3.1 million gain on property revaluations.
Revenue was down slightly from £7.8 million in the first half of 2021 to £7.2 million, predominantly due to disposals. The business has 95% fixed debt with an average cost of debt of 3.5%.
REI continues to pay a covered dividend and will make a fully covered quarterly dividend payment of 0.8125p per share for the second quarter of 2022.
Mr Bassi said: “The first half of 2022 was a stable period after the challenging years of Brexit and Covid.
“Improving occupier demand and sales to a strong private investor market and overseas buyers will provide the foundation for rising valuations and improved rental income and allow us to execute our strategy, while remaining open to any sector consolidation opportunities.
“We are mindful of current recessionary concerns, inflation and rising interest rates. While we are not immune to the effects of economic downturns, we are well insulated with fixed and reduced debt, lower loan-to-value, a diverse occupier base plus a healthy WAULT with growing levels of cash to capitalise on any market opportunities.
“Post period lettings will also add to our revenues going forward, plus the potential for further capital value appreciation.”
He added: “We remain focused on delivering maximum value to our shareholders and subject to the ongoing success of the disposals programme and market conditions, in particular the impact of economic headwinds on the real estate sector and with due consideration being given to any downturn, the Board will consider how best to allocate surplus capital including a capital return to our shareholders.
“Alternatively, if the environment for acquisitions changes markedly by the year end and opportunities offering significant value start to arise, then we may look to make opportunistic acquisitions where there is scope to capture material upside through asset management.”
During the first half of 2022, REI used disposal proceeds to pay down £5.7 million of debt, with total net debt now down to £75.5 million from the full year 2021 figure of £79.6 million.
Already, since 30 June 2022, REI reports further sales of £4.5 million with additional significant sales pending. Contracted rental income is now £13.7 million, allowing for sales.
The company has completed a further 28 lease events including 4 lease renewals, 6 break removals and 11 lettings in legals, which have the potential to improve occupancy to 89.7%, up from the 2021 full year figure of 85.75%.
In addition, a further £2.5 million of debt has been repaid so far in the second half of 2022.
Mr Bassi said: “The portfolio continues to deliver strong rent collection levels with overall collection for the period standing at 99.36%, adjusted for monthly and deferred agreements. In the current quarter, June–September, rent collection so far is 99.86%.”
He added: “The region enjoyed a very successful 2022 Commonwealth Games, which launched Birmingham on to the global stage and has positively driven investor and economic activity.
“The region has been further boosted by the Chancellor’s Growth Plan announcement detailing the inclusion of the West Midlands in the 38 local combined authorities that will benefit from ‘investment zones’.
“These zones promise to offer generous, targeted and time-limited tax cuts for businesses, backing them to increase productivity and create new jobs, liberalised planning rules and reforms to increase the speed of delivering development. This is expected to further encourage and improve demand from investors and occupiers.
“REI continues to benefit from its locality and expects both investor and occupier demand to remain positive into the foreseeable future.”
Ends (680 words)
For further information, please contact:
Paul Bassi, Chief Executive, Real Estate Investors plc, 2nd Floor, 75/77 Colmore Row, Birmingham B3 2AP
0121 265 6406 or 0121 212 3446
Prepared and issued by Andy Skinner at ASAP, 01608 651203, mobile, 07990 978257
About Real Estate Investors plc
Real Estate Investors plc is a publicly quoted, internally managed property investment company and REIT with a portfolio of mixed-use commercial property, managed by a highly-experienced property team with over 100 years of combined experience of operating in the Midlands property market across all sectors.
The company’s strategy is to invest in well located, real estate assets in the established and proven markets across the Midlands, with income and capital growth potential, realisable through active portfolio management, refurbishment, change of use and lettings. The portfolio has no material reliance on a single asset or occupier.
On 1st January 2015, the company converted to a REIT. Real Estate Investment Trusts are listed property investment companies or groups not liable to corporation tax on their rental income or capital gains from their qualifying activities. The Company aims to deliver capital growth and income enhancement from its assets, supporting its covered dividend policy. Further information on the Company can be found at www.reiplc.com.