Real Estate Investors buoyant despite taking hit from Challinors collapse

BIRMINGHAM property company Real Estate Investors (REI) has reported a “real improvement in confidence and occupier activity”.

The firm, run by West Midlands entrepreneur Paul Bassi, saw its pre-tax profit for the half year to June 30 increase to £769,000 from £556,000 in 2012.

Rental income was down slightly at £2.60m (H1 2012: £2.67m) while investment property assets were also marginally off at £70m (Hi 2012: £70.4m).

Some 13,848 sq ft of new lettings and 6,577 sq ft of lease renewals were completed in the period.

Operational activity has seen a profit of £205,000 which is after providing for £345,000, as a result of its tenant Challinors Solicitors entering administration. 

Bassi, REI’s CEO, said: “Our valuations have been impacted by the downward valuation at Guardian House in West Bromwich as a result of the principal tenant, Challinors Solicitors, a long standing Midlands law firm, entering administration, and the likely vacating of the offices. 

“This is excellent office space, and we already have interest from potential new occupiers. We expect to re-let and recover the valuation loss.  We also have personal guarantees from some of the partners, whom we intend to pursue.”

More generally, Bassi said he anticipates improving values and occupier demand during 2013 and 2014, together with a series of sales and acquisitions.
“After five years of falling investment values, rents and market confidence, we have, during the first half of 2013, seen a real improvement in confidence and occupier activity,” he said. 

“Investor appetite from traditional funds, specialist funds, public and private property companies has seen a sharp rise in sentiment and demand for regional assets, with some transactions having taken place that will positively impact on our property values by the year end. 

“We have, in fact, seen some uplifts in some of our prime city centre assets, and other assets that have benefited from successful asset management activity.
“As investor demand improves, we will look to sell certain assets where we believe we have maximised value and have placed some properties for sale during the second quarter of 2013, including some of our historical non-core properties. 

“The renewed investor confidence appears to be driven by the search for higher yields achieved in the regions, together with the prospect of capital growth.
“Occupier demand, whilst erratic, has resulted in reducing incentives and the reduction in the available stock in our immediate market place. I anticipate a further reduction in incentives and some rental growth as demand exceeds supply, due to the lack of new developments and available stock.”