Birmingham-based Real Estate Investors plc (REI) is poised to pounce on any opportunities thrown up in 2020 by continuing consolidation within the real estate sector.
Chief executive Paul Bassi said that following the recent acquisitions of Mucklow and Hansteen, REI is maintaining a watching brief and remains alert to opportunities.
He said: “We have tended to trade well during periods of instability by having the flexibility to respond to opportunities.
In a trading update issued today (Wednesday 8 January), he added: “Despite high levels of economic and political uncertainty creating a relatively static market in 2019, we have increased our revenues and covered our dividend payments, with contracted rents rising to £17.66 million, up 3.85% over the year.
“With £15 million of cash and bank facilities to deploy, we are well placed to continue to do so and we also anticipate further growth in our portfolio and revenues to support our progressive dividend policy, while maintaining our diverse portfolio.”
“Looking ahead into 2020, we anticipate the pent-up requirement to trade that has been accumulating over the last 12 months being released which is likely to stimulate our markets and create further opportunities for REI.”
REI is the UK’s only Midlands-focused Real Estate Investment Trust and has a portfolio of 1.59 million sq ft of commercial property.
In his update, Mr Bassi commented that with 280 occupiers across 53 assets the portfolio remains well-balanced with additional value being created via asset management initiatives: in 2019, REI completed 53 lease events (44 new lettings and 9 lease renewals).
He said that in 2019 they maintained a diversified portfolio, with no material reliance on any single occupier, asset or sector and this has provided REI with excellent occupancy levels in excess of 96%.
“Strong occupier demand for offices in a vibrant regional economy with this sector representing the largest component within the REI portfolio (37%).
“Low levels of new build and existing stock being squeezed by conversion to residential under Permitted Development rights leading to strong rental increases, for example, Topaz Business Park, Bromsgrove, which achieved an 18.6% per annum rental increase.
He added they had a continued retail focus on convenience and neighbourhood shopping, a strong sub-sector, with no department stores/indoor shopping centres or out-of-town stand-alone retail and only two small retail units affected by insolvency in the year, representing 0.56% of income.
“We have excellent embedded value with 250,000 sq ft of space with the potential for conversion to residential within the portfolio under Permitted Development rights,” he said.
During 2019, REI aquired prime mixed-use investment properties for £9.25 million with a net initial yield of 8.13%, in Leamington Spa, Warwickshire, with established occupiers including O2, Toni & Guy, McDonald’s, Tiger UK, Moss Bros, Timpson and significant potential to improve rental income and capital valuations.
He reported that overall cost of debt has reduced to 3.4%, with 72% of the company’s debt now fixed. REI remains multi-banked across 6 funders, including a new Barclays Bank £8.5 million 4-year facility at 1.95% above LIBOR, secured against a portfolio of assets, drawn down on 30 December 2019.
Continued successful trading in 2019 had seen REI’s fully covered dividend, paid quarterly, now showing year-on-year growth for seven consecutive years, with total dividends paid to date of £27.3 million.
Paul Bassi said: “During 2019, we paid a pro-rata dividend of 3.75p per share and anticipate announcing an increase in our final dividend payment, thereby setting the level for our 2020 dividend.”