TIDMRLE
RNS Number : 6555U
Real Estate Investors PLC
16 July 2018
16 July 2018
Real Estate Investors Plc
("REI" or the "Company" or the "Group")
Trading Update
Acquisitions, Sales, Debt Facility and Untapped Residential
Value
Real Estate Investors Plc (AIM: RLE), the London Stock Exchange
listed Real Estate Investment Trust (REIT) with a portfolio of 1.5
million sq ft of investment property in the Midlands property
market across all sectors, is pleased to announce a trading update
and the completion of a new debt facility.
Summary
-- Property acquisitions totalling GBP7.58 million, with a
combined net initial yield of 7.66% and a potential reversion of
8.31%.
-- Property sales totalling GBP5.04 million.
-- A new GBP10 million facility with RBS at 1.95% above LIBOR,
for a term of 5 years. The Company is also in discussion to
restructure its GBP20 million Lloyds Bank facility.
Portfolio Update
The portfolio remains robust and diverse, with no material
reliance on any asset or occupier. REI remains focused on
neighbourhood and convenience retail, plus city centre and town
centre offices, coupled with change of use opportunities from
within the existing portfolio. With the benefit of existing cash
and banking facilities of GBP30 million, the Company anticipates
achieving record contracted income by the year end and making
opportunistic acquisitions in the event of any 'Brexit' unrest in
the market.
Acquisitions
In Q2 2018, REI completed acquisitions totalling GBP7.58
million, with an average net initial yield of 7.66% and
reversionary potential to 8.31%. The assets provide excellent
initial returns and significant capital growth potential. These
opportunities have been secured favourably due to the Company's
local knowledge, established market reputation and track record as
a cash buyer.
Topaz Business Park, Topaz Way, Bromsgrove, Worcestershire - A
prominent high-quality office business park incorporating 10
self-contained office buildings, located close to Junction 1 of the
M42 and comprising a total of 45,071 square feet of high
specification office accommodation, with a low-density site
offering prospects for further development. Acquired for GBP4.00
million with a rental income of GBP293,994 per annum and a net
initial yield of 6.90%. It is multi-let with tenants including QS
Finance, MV Kelly, Handelsbanken, Fuelsoft, Toshiba and Instinctive
Technologies. The Company believes that office rents in the asset
are below local market levels and therefore anticipate positive
rental and capital growth.
Molineux, Wolverhampton - A city centre office which is let to
the Secretary of State, Department for Communities and Local
Government on a recently re-geared 10-year full repairing and
insuring lease with a tenant break at the fifth year. The building
is well located and comprises 31,935 square feet of office
accommodation, arranged over four floors, together with 44 on site
car parking spaces. The investment was acquired for GBP3.58 million
with a current rental of GBP324,370 per annum and a net initial
yield of 8.50%. The property provides an excellent yield together
with a Government-backed covenant and has strong potential for
residential conversion should the asset ever become vacant.
Sales
Capitalising on strong investor appetite for regional real
estate, REI has completed the sale of 24 Bennett's Hill in
Birmingham City Centre and a parade of shops on High Street, West
Bromwich for a total of GBP5.04 million. Additionally, contracts
have been exchanged at GBP2.81 million on the sale of retail and
offices at 158 Marlowes, Hemel Hempstead, and vacant offices at
Metro Court, High Street, West Bromwich. Proceeds from these sales,
at around book value, will be recycled to secure further criteria
compliant assets.
New GBP10 million facility with RBS
The Company has secured a new GBP10 million loan facility with
RBS at 1.95% above LIBOR. This capital, combined with existing cash
and bank facilities provides up to GBP30 million to acquire
additional assets in order to further enhance rental income, whilst
retaining existing gearing levels.
Additionally, discussions with Lloyds Bank to restructure the
Company's GBP20 million facility are in advanced stages and should
be completed over the summer period. The details will be confirmed
in the Interim results and are likely to result in reducing the
cost of the Company's existing debt with Lloyds Bank.
Untapped Residential Value
REI's acquisition criteria remain strict and non-negotiable and
part of which is the 'change of use' potential. Based on the
Company's analysis to date, it is believed that approximately
250,000 sq ft of the portfolio has potential for 'permitted
development' conversion to residential.
Management believe the implementation of this element of the
Company's strategy will provide significant capital uplift that is
not presently recognised in the existing use of certain assets as
office buildings.
REI has monitored for some time the rising value of Midlands
residential property, which has outperformed most other UK regions
on a number of key measures, with further growth expected:
-- The latest Halifax house price index has confirmed that the
West Midlands recorded the fastest annual growth in the UK, with
prices in Q2 2018 increasing by 7% year on year.
-- According to Knight Frank's 2018-2022 UK Residential Market
Forecast the West Midlands looks set to enjoy 14.8% overall house
price growth over the period.
REI is well positioned to gradually target vacant possession of
certain assets, with a view to converting them for residential use,
for resale or retention for rental income.
Paul Bassi, CEO of Real Estate Investors Plc, commented:
"We continue to manage and grow a Midlands property portfolio
which is focused on maximising value through rental increases and
through capital appreciation, with no material reliance on any
particular occupier or sector. We continue to see excellent demand
for our neighbourhood and convenience retail and we are also
beginning to see rental growth within our office portfolio. Our
strategy of seeking residential conversions in a very strong
residential market place, will positively enhance capital values
and further diversify our portfolio on a low risk basis.
Our region continues to enjoy strong economic activity across
all sectors, with the West Midlands in particular set to prosper
further from the major relocations of HSBC, HMRC, PwC to name a
few, with preparations already underway for Birmingham to host the
Commonwealth Games in 2022, whilst Coventry looks forward to being
the City of Culture in 2021.
We anticipate further acquisition opportunities being made
available to us and have GBP30 million in cash and bank facilities
to capture criteria compliant assets, particularly in the event of
any 'Brexit' unrest in the market.
We are positive about our continued performance and remain
committed and well positioned to continue growing the Company's
dividend payments which have now grown consecutively for the past
five years."
Enquiries:
Real Estate Investors Plc
Paul Bassi +44 (0)121 212 3446
Smith & Williamson Corporate Finance
Limited
Azhic Basirov/David Jones +44 (0)20 7131 4000
Liberum
Jamie Richards/William Hall +44 (0)20 3100 2000
Gable Communications Limited +44 (0)20 7193 7463
John Bick +44 (0)7872 061 007
About Real Estate Investors Plc
Real Estate Investors 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.
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 a progressive dividend
policy. Further information on the Company can be found at
www.reiplc.com.
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END
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