REI takes advantage of private investor demand to drive rapid return to profit
Real Estate Investors plc (REI plc) roared back into profit in its financial year to 31 December 2021, delivering a profit before tax of £13.9 million and fixing 90% of its debt ahead of rising interest rates supporting a fully covered dividend.
Chief executive Paul Bassi said: “Despite the restrictions imposed by the pandemic, REI has had a respectable year during which we have taken advantage of the private investor demand to sell some of our properties, using the disposal proceeds to repay £11.9 million of debt, retaining £9.8 million of cash.
“We believe we are set to see further valuation gains and occupancy improvement in the coming months and that this already active regional market is likely to be further boosted by the upcoming 2022 Commonwealth Games.”
The £13.9 million profit before tax includes a £4.9 million gain on property revaluations, a £1.2 million profit on sale of investment property and £1.4 million surplus on hedge valuations.
As a result, REI has declared a final dividend of 0.8125p per share, payable in April 2022 as a Property Income Distribution, representing a fully covered dividend of 3.0625p for the year. Since the commencement of the Company’s dividend policy in 2012, a total of £41.9 million has been declared/paid to shareholders.
During the year, REI completed 15 disposals totalling £17.55 million (an aggregate uplift of 7.3% before costs above December 2020 valuation) and the subsequent debt repayment reduced the Company’s loan to value (net of cash), to 42.2% from a 2020 figure of 49.2%.
REI finished the year with £9.8 million cash in the bank and an average cost of debt of 3.5%. A £51 million facility with NatWest was renewed for three years at 2.25% above LIBOR in March 2021. A £12 million facility with Barclays was extended by 12 months to 31 December 2024 in February 2022.
Already in 2022, REI has completed £1.115 in disposals at 12.6% above 2020 book value and has £7.5 million of sales in legals, driven by private investor demand.
Paul Bassi added: “We continued to maintain high rent collection levels throughout 2021, with an overall collection level of 97.81%, against a backdrop of the unfavourable government moratorium restrictions which are soon to expire. For Q1 2022, rent collection levels are currently at 99.42%.
“These collection levels are a testament to the diversity of our portfolio and the asset management team who worked collaboratively with our portfolio tenants to navigate a uniquely challenging period.”
He said the first few months of 2022 had seen market recovery continue to gather pace which has been improved further by the step-by-step ceasing of UK restrictions and the return to normality that has been so eagerly awaited, led by the UK regions who are now at near-normal activity and ahead of London and the South East.
“REI’s portfolio, valued at £190.8 million, with 256 occupiers across 47 assets, has weathered the COVID storm and we believe is well placed to benefit from the ongoing revaluation and occupancy recovery.
“Private investors with high levels of cash reserves continue to lead the interest in our assets. Many of our properties are acquired on the basis of their significant break-up potential to satisfy this demand, predominantly small retail units within local neighbourhood and convenience schemes.
“With a healthy exposure to the community retail market which is 39.07% of our portfolio, we successfully disposed of a number of these sought-after assets, along with the remaining legacy non-core stock and we continue to consider further sales of assets for a premium price,” he said.
He said the board of REI is optimistic that 2022 will see renewed interest in the company’s available spaces particularly the office portfolio.
“We are seeing the trend for non-City centre offices continue and, of our office stock, 81.03% is non-City centre.
“We will be focussed on unlocking the income sitting in our voids and the multiple existing embedded opportunities across the portfolio, including change of use, planning gains and lease re-gears, which would translate into enhanced occupancy levels, increased contracted rental income and improved WAULT.
“This activity, together with ongoing valuation recovery, should drive capital and income growth across the portfolio and a rise in our NAV, supporting our progressive dividend policy.
“As our region gears itself up for this year’s highly anticipated 2022 Commonwealth Games, we expect this ‘once in a lifetime’ event to further boost the recovery we have already witnessed and attract yet more investment to our thriving region.”
During 2022 and into 2023, Mr Bassi anticipates there will be further consolidation in the real estate sector and REI continues to seek corporate opportunities.
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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, 07990 978257
About Real Estate Investors Plc
Real Estate Investors Plc (REI Plc) is a publicly quoted, internally managed property investment company and REIT with a portfolio of 1.5 million sq ft of 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 of central Birmingham and 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.