Trading Update

RNS Number : 8423V

Real Estate Investors PLC

08 November 2017

 

Real Estate Investors Plc

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

Trading Update

Acquisitions, Sales and Fixed Rate Debt Facility

Increase in Overall Occupancy and Contracted Rent

Real Estate Investors Plc (AIM: RLE) the Birmingham based property group and UK listed Real Estate Investment Trust, is pleased to announce a trading update and confirm the completion of a fixed rate debt facility.

Summary

·     Contracted rent has risen to a record £16.5 million per annum, up 10.6% since 31 December 2016.

·     Overall occupancy has increased to 95.1% (December 2016: 92.6%).

·     Successfully completed property acquisitions totalling £9.5 million, providing a combined initial yield of 9.86%.

·     Recent sales of £1.2 million bringing total sales to date in 2017 to £13.6 million.

·     £41 million RBS facility fixed at 2.75% until 20 January 2021. The Company is also in discussions to restructure its existing £20 million Lloyds facility.

Acquisitions

Through our long standing regional network and against a stock starved market place, we are pleased to have secured £9.5 million of property acquisitions providing a combined initial yield of 9.86%.  The investment properties acquired are as follows:

·     Market Place, Nuneaton was acquired for £2 million reflecting a net initial yield of 9.03% and comprises a 100% prime retail investment on the pedestrianised section of Market Place.  The property comprises 29,051 square feet of flexible retail accommodation and is let to Poundland until August 2022.

·     Venture Court, Wolverhampton was acquired for £2.5 million at a net initial yield of 8.37% producing £222,565 per annum. The property comprises a modern office on a busy business park and is let to Santander and Persimmon Homes with 1,952 square feet of vacant offices to let and a WAULT of 4.0 years.

·     1-11 Park Street & 82-87 Bradford Street, Walsall was acquired for £5.0 million at a net initial yield of 10.93%. The property comprises a prominent, unbroken retail parade on the prime pedestrianised retail pitch in Walsall town centre.  Approximately 85% of income is secured against multiple national tenants, with a WAULT of 6.1 years to expiry.  The investment is fully let with a current passing rent of £582,720 per annum.  New tenants include Thomas Cook, Smart Ideas, Game Retail, Luda Bingo (guaranteed by Mecca Bingo), Shoe Zone, Robsco Solutions (Cash Converters), Paddy Power and Toni & Guy.

The above are criteria compliant acquisitions that provide REI with the opportunity to add rental and capital value from rent reviews, lease renewals and letting opportunities.

Sales

The Company is also pleased to confirm the following sales:

·     1 Dutton Road, Coventry to Coventry City Council for a total consideration of £944,000 at a net initial yield of 8%.  We recently completed a five year lease extension with the occupational tenant (Personal Hygiene Services).  The property was held on a long leasehold basis to Coventry City Council with 69 years remaining.

·     46 High Street, Bromsgrove - sold for the sum of £300,000.

REI has additional properties under offer and anticipates completing further sales by the year end at book value or above.

After allowing for £13.6 million sales in 2017 and with the benefit of new acquisitions and lettings from within its existing portfolio, the Company's contracted rent has risen to a record £16.5 million per annum, up 10.6% since 31 December 2016.  Overall occupancy is up at 95.1%, which compares favourably with 92.6% as at December 2016.

Fixed Rate Debt Facility

REI has fixed its existing variable £41 million RBS facility at 2.75% until 20 January 2021, secured against a portfolio of property.  This provides REI with stability of cost, and 87% of its debt is now fixed.  The Company is also in discussions to restructure its existing £20 million Lloyds facility.

Commenting on trading and the vibrant Birmingham and Midlands economy, Paul Bassi, Chief Executive of REI, said:

"Overall the Company's portfolio is performing well and a significant part of our portfolio which was acquired during the downturn has excellent potential to add value from rental growth to current market levels.  Furthermore, the regional investment market remains strong and we anticipate further sales in Q4 of properties upon which we have completed our asset management initiatives.

We continue to benefit from our investment strategy of investing in Birmingham and the Midlands into asset management opportunities for income and capital growth against the backdrop of a vibrant Birmingham and Midlands regional economy that is in the process of rebirth following decades of stagnation.

Inward investment, the relocation of HSBC headquarters, HS2, HMRC, the Commonwealth Games nomination, significant transport and infrastructure improvement at Birmingham Airport and Birmingham's Grand Central Station, together with a growing economy, which is benefiting from the depreciation of Sterling, all provide a positive outlook for our strategy and our ability to deliver a progressive dividend, which has grown year-on-year over the last five years.

With the benefit of sales, existing cash and bank facilities, we remain well positioned to capitalise on any market unrest due to Brexit negotiations and continue to make criteria compliant property acquisitions in order to grow our portfolio further."

Enquiries:

Real Estate Investors Plc Paul Bassi	[phone]
Smith & Williamson Corporate Finance Limited Azhic Basirov/David Jones	[phone]
Liberum Jamie Richards/Ben Roberts	[phone]
Gable Communications Limited John Bick	[phone] [phone]

 

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