Profits up 271% at property company

Paul Bassi, chief executive officer, Real Estate Investors

A West Midlands property company has announced a 271% increase in pre-tax profits as its chief executive says the region is about to enter a golden era.

Real Estate Investors saw full year underlying pre-tax profit increase to £5.2m (2015: £1.4m), with revenues up 60% at £13.5m (2015: £8.4m).

Paul Bassi, CEO of REI, said: “We firmly believe that London and the South East have enjoyed over 50 years of exceptional economic prosperity, but we are now seeing a political, social and economic re-balancing within the UK.

“The regions, in particular Birmingham and the West Midlands, look set to enter a new golden era, propelled in part by the arrival of major projects such as HSBC’s HQ move and HS2, but also by the continued commercial growth in the area.”

With REI now sitting on gross property assets of £201.9m – a 28.2% increase on 2015’s £155.5m, Mr Bassi announced a total dividend per share of 2.625p, up 31.%, with a final quarterly dividend of 0.75p.

“This has been another excellent year of progress, despite an uncertain economic and political backdrop, during which we secured record property ownership, record revenue and contracted rental income,” said Mr Bassi.

“These figures, and our 271% surge in underlying profits, are set to grow further as we start to see the full contribution from the acquisitions made in the prior year.

“Our like-for-like portfolio valuation was up 3.9%, reflecting the active asset management that we have undertaken.”

Other highlights of a record year include contracted rental income of £14.9m (2015: £11.9m), an increase of 25.2%, plus an increase in overall occupany rates to 93% (2015: 89%).

At year-end (December 31, 2016) REI had cash and available facilities of £17m.

Mr Bassi added: “With the benefit of our clear pathway for future income in rental growth, we also anticipate further growth in our dividend payments.”

He said that since the EU referendum strong demand for investment property across the region had resulted in valuations holding firm or rising, due to the level of demand from a cross section of investors.

“These investors have been property companies with access to debt, quoted REITs and high net worth individuals. Foreign investment represented 21% of volume, but equally there has been limited demand from institutional investors,” he said.

Major factors driving this regional resurgence include the availability of capital and investors who are increasingly recognising the attractiveness of the commercial property market in the Midlands, he said.

During 2016, REI paid £38.6m for criteria compliant properties, during the period of uncertainty, and as demand returned, sold £5.2m of assets into a strong investment market – sales that were exchanged in 2016 but completed in 2017.

REI also acquired Market Square Shopping Centre, Crewe for £20m and West Plaza, West Bromwich for £8 m.

Other notable acquisitions included Titan House, Telford (£2.75m), Boundary House, Birmingham (£2.45m), Commodore Court, Nottingham, (£2.38m), and 62/68 High Street, Bromsgrove (£1.275m).

In addition, REI paid £1.1 million for land at Bourne Street, Coseley, which has been acquired with a view to securing planning approval for approximately 100 residential units for subsequent sale.