Property group boasts £25m war chest for Birmingham 2022 and HS2-driven opportunities
Property group Real Estate Investors (REI) is poised to take advantage of property opportunities created by Brexit uncertainty and says it remains confident about the region’s ongoing prospects and benefits from the forthcoming Commonwealth Games, Coventry City of Culture and HS2.
The Birmingham-based, AIM-listed company has issued a trading update as the region gears up for these projects.
REI, which has a portfolio of 1.53 million square feet of commercial property in the Midlands across all sectors, is now operating at 96.2% (92% H1 2018) occupancy and is generating annualised contracted rental income of £17m, up 9% on the first half of 2018 (£15.6m).
REI has completed eight lease renewals and 14 new lettings covering 69,586 sq ft during the period, with new tenants including Colmore BID, Nush Marlin Developments, Bargain Buys (Poundstretcher), One Below and Likewise.
Terms have been agreed on two larger renewals at Westgate House, Warwick, and Kingston House, West Bromwich, both let to the NHS on five-year lease extensions for a combined rental income of £553,258 a year.
A piece of land at Coseley, for which the company secured planning permission for 100 units has received strong interest, REI said.
Chief executive Paul Bassi said: “In June 2019, the Government announced its plans to invest £778m in Birmingham and the West Midlands in advance of staging the 2022 Commonwealth Games.
“As the UK’s only Midlands-focused and Birmingham-based Real Estate Investment Trust, REI is well positioned to capitalise on any opportunities that major events, infrastructure and development projects will bring to the already vibrant Midlands region.
“We have monitored the availability of criteria compliant assets to add to our portfolio, yet have seen limited opportunities over the last six months. REI has £25m of cash and available bank facilities and is therefore well positioned to secure assets during H2, to add to the existing £225m portfolio (as at 31 December 2018).
“With the benefit of our network we remain confident in our ability to add to our Midlands ownership.”
The portfolio is diversified with no reliance on any single asset, occupier or sector. The office element of the portfolio, which represents 39% of the total value is performing well and, coupled with management’s strategy to invest in the thriving sector of neighbourhood and convenience retail, continues to protect REI from the wider issues faced by the traditional retail sector.
Despite the national market sentiment, REI said it is experiencing continuous demand in the Midlands from occupiers with discount retailer tenants continuing to trade well and rents received promptly, with the company suffering no material impact from highly publicised UK CVAs.
Bassi highlighted the continuing opportunities for conversion of commercial space to residential within the portfolio: “We are diversified, stable and opportunistic with strong occupancy across the portfolio.
“Significant permitted development opportunities for conversion to residential have been identified within the portfolio and we remain focused on extracting these embedded and undervalued opportunities, against a continuously strong regional housing market.
“Existing revenues, combined with income from opportunistic value-add acquisitions will further underpin dividend growth, which has now enjoyed six consecutive years of growth.”
