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Real Estate InvestorsAnnouncement

23/05/2024 07:00

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RNS Number : 5281P  Real Estate Investors PLC  23 May 2024

23 May 2024

 

Real Estate Investors Plc

 

("REI", the "Company" or the "Group")

 

TRADING UPDATE

 

Further Sales Completed, Debt Repayment & Strong Lettings

 

Real Estate Investors Plc (AIM: RLE), the UK's only Midlands-focused Real
Estate Investment Trust (REIT) with a portfolio of commercial investment
property across all sectors, is pleased to announce the following update on
disposals, debt repayment and portfolio lettings in advance of its Annual
General Meeting ("AGM"), which will take place at 11 a.m. today at 2nd floor,
75-77 Colmore Row, Birmingham B3 2AP. The Company will announce the results of
its AGM following the conclusion of the meeting.

 

Further Disposals

 

Despite widespread market inertia and a lack of transactional activity, REI is
fortunate to have a diversified portfolio that has allowed us to complete
further sales since the year-end to private investors and owner occupiers at
prices at or better than our year-end book values, totalling  £5.442 million
(the loss of income associated with these sales equates to £360,000 p.a.).
We also have an additional number of properties that have exchanged and are
set to complete subject to deferred completions, vacant possession and change
of use/planning consents.

 

We have a further strong pipeline of sales in legals, which is pleasing,
though transactions are typically taking months from conception to
completion.

 

We are retaining our larger assets for income and will look to sell these once
we see a likely improvement in pricing and investor appetite for these assets,
which we anticipate will be triggered by a reduction in interest rates and a
clearer picture post the General Election.  Research from Avison Young
suggests that the UK office market is particularly subdued, with transactional
volumes of £324 million recorded in Q1 2024, nearly half the long-term
average.  In contrast, the retail and industrial sectors show more positive
activity.

 

Debt Repayment

 

The proceeds from recently completed disposals, combined with existing cash
has been used to reduce the Group's debt by a further £3 million, taking the
total debt repaid since the year end to £5.7 million.  This has resulted in
our total drawn debt reducing to £48.7 million at the time of writing (FY
2023: £54.4 million).  We remain focused on debt reduction as a priority,
using sales proceeds to accelerate our debt reduction objectives.

 

Strong Letting Activity

 

Against a sluggish property investment market, the occupier market is
relatively buoyant and our occupancy has improved to 86.84% (FY 2023: 83.03%)
and portfolio WAULT to 5.26 years to break and 6.24 years to expiry (FY
2023:  5.24 years to break and 6.01 years to expiry).  Contracted rental
income is now £10.9 million p.a. (FY 2023: £10.9 million p.a.) despite
selling £360,000 p.a. of income and a number of known lease events, recent
lettings (including Birch House) and other asset management initiatives have
ensured the rent remains at parity.

 

Birch House, Oldbury - Following the announcement in October 2023 that an
Agreement for Lease had been signed by DHU Health Care CIC to take the entire
35,749 sq ft space at the previously vacant Birch House, Practical Completion
and subsequent Lease completion has now taken place following the
refurbishment of the space by REI.  DHU have taken a 10-year lease at
£625,608 p.a., with a 5-year break and 6-months' rent free.  NHS England
have awarded the Midlands NHS111 contract to DHU Healthcare CIC, making DHU
the largest provider of NHS111 services in England, with responsibility for 11
million patients.

 

Signed Agreement for Leases Awaiting Completion

 

Jasper Park, Tunstall - McDonalds have signed an Agreement for Lease for
a 20-year lease at £55,000 p.a on a previously vacant unit, with breaks at
years 10 and 15.

 

Market Centre, Crewe - British Heart Foundation have signed an Agreement for
Lease to take the ground floor/part first floor of the former Argos unit, on
a 10-year lease at £57,500 p.a. with a 5-year break and a rent review in year
5.

 

Topaz Business Park, Bromsgrove - Following the signing of an Agreement for
Lease at £89,000 p.a. by Costa in 2023, the forward sale of the Lease has now
exchanged for £1.6 million.  The contract to build the Costa unit has been
secured with completion due in September 2024.  This sale is not included
in the property sales year to date.

 

Maypole - An Agreement for Lease has been signed with InHealth Limited, The
UK's largest specialist provider of diagnostic and healthcare solutions.
 They will be taking the old Halfords unit (4,500 sq ft) on a 15 year Lease
at a rent of £65,000 p.a.

 

Once these Agreement for Lease deals complete, the collective new contracted
rental income from these transactions will amount to £177,500
p.a. (excluding Costa at Topaz Business Park as unit is pre-sold as above).
Completion of these deals will boost our occupancy further to 88.42% and our
contracted rental income from £10.9 million p.a. to £11 million p.a.  With
further pipeline lettings due to complete, we anticipate further improvement
in these areas, subject to the pace of our disposal programme.

 

Paul Bassi, Chief Executive, commented:

 

"In a challenging market we are pleased to report the ongoing lettings
progress across our portfolio, which will maximise our rental income and
occupancy levels, supporting our ongoing dividend commitment.

 

The portfolio is continuously subject to active asset management which
provides quality assets for disposal as part of our strategic sales programme
and increases occupancy, revenue and capital values.

 

Although private investors and special purchasers continue to invest, we
anticipate that the market for larger property investment transactions will
pick up once interest rates decrease and this year's General Election
concludes.

 

We remain focused on sales and debt reduction and have a strong sales pipeline
in legals.  The key objective of the Board is to deliver on the stated
strategy of an orderly sales programme to maximise the return of capital to
shareholders."

 

Enquiries:

 

 Real Estate Investors Plc

 Paul Bassi/Marcus Daly                                  +44 (0)121 212 3446

 Cavendish Capital Markets Limited (Nominated Adviser)   +44 (0)20 7220 0500

 Katy Birkin/Ben Jeynes

 Liberum (Broker)                                        +44 (0)20 3100 2000

 Jamie Richards/William King

 

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
dividend policy. Further information on the Company can be found at
www.reiplc.com.

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