Massive surge in profit for REI as property market resurgence continues
PROPERTY company Real Estate Investors has seen its pre-tax profit increase by a huge 238% in the six months to June 30.
It reported a profit of £2.6m compared to the £769,000 achieved in H1 2013.
The Birmingham firm, which raised £20m in an equity fundraising in March, also saw its rental income increase from £2.6m in H1 2013 to £2.7m.
Gross property assets were up by 15% to £86.2m (H1 2013: £75.2m) and investment property assets were up by 14% to £79.4m (H1 2013: £70m).
Acquisitions during the period amounted to £9.1m.
REI has total ownership of 695,713 sq ft (31 December 2013: 650,000 sq ft) with 160 tenants (31 December 2013: 150 tenants).
Prime Birmingham city centre ownership amounts to 157,980 sq ft (31 December 2013: 143,408 sq ft) across ten buildings.
Paul Bassi, CEO of Real Estate Investors, said: “An excellent first half of 2014. We are beginning to see the benefits of our strategy to focus on our region and asset management opportunities, which has resulted in improving valuations and allowed us to continue with our progressive dividend policy.
“We anticipate further profit enhancing sales and improving occupancy across our portfolio during 2014/2015.”
Bassi said that, in his opinion, property values, while improving, still did not truly reflect potential sales value, citing the sale of Cathedral Place in Birmingham city centre, which was sold for 19% above external valuers’ initial estimates.
“I believe that further planned sales will also provide an additional uplift to book valuations,” he said.
Bassi said that market conditions had dramatically improved over the last six months, and the market had in the first half of 2014 seen demand for investment property outstrip supply.
“There is now institutional, private equity, overseas and public company capital chasing regional assets with significantly more vigour than in the last five years and particularly evidenced in the last six months in our core market,” he said.
“We have experienced significant yield compression for prime Birmingham City centre business district assets, where REI has over 37% of its portfolio.
“Additionally, all the evidence reveals that secondary real estate in the town centres around the Midlands is well positioned to see an improvement in valuations.”
