Strong market conditions help REI grow war chest to £50m
BIRMINGHAM-based property group, Real Estate Investors, the has boosted its 2017 war chest to more than £50m with the sale of two non-core retail properties in Crawley and Norwich for £2.725m.
The AIM-listed group said the deals underlined the current strength of the region’s commercial property sector.
Chief executive Paul Bassi said in a trading update markets had been especially strong since the start of the fourth quarter.
“We have received a number of unsolicited approaches for certain assets and we will look to recycle this capital into criteria-compliant acquisitions, where there is scope for further asset management, income and capital enhancement, in the first half of 2017,” he said.
This comes shortly after REI acquired 62/68 High Street, Bromsgrove, for £1.275m. The near-6.000 sq ft property produces a rental income of £114,220 per annum and tenants include Boots Opticians, Thorntons, Smart Ideas and Loritas Bakery.
The acquisition represents a net initial yield of 8.45% with a weighted average unexpired lease term of seven years to expiry and three years to breaks.
Mr Bassi said: “This has been an excellent addition to our portfolio as it gives scope to add further value from lease extensions and re-letting of the upper parts and unused ancillary space which will provide us with capital growth and a strong running yield.”
He added that occupier demand remained healthy, in particular within the retail sector, where there were a number of opportunities to secure residential planning approval to capture significant capital appreciation, most notably at the scheme in Walsall town centre where BHS was previously an occupier.
REI’s portfolio now comprises 1,410,881 sq ft, with an occupancy of 93% and 310 tenants.
During 2016 REI has spent approximately £40m on new acquisitions and has £50m in place to fund further acquisitions in 2017.
The year to date has seen major retailers like Holland & Barrett take two units in High Street, Birmingham and in Acocks Green, South East property consultancy Propitas establish a Midlands base on Colmore Row, homelessness charity Shelter take space in Gateway House, Birmingham, Poundworld move on to Southgate Retail Park, Derby, and the acquisition of the Market Shopping Centre in Crewe from Scottish Widows for £20m.
In the first half of the year REI paid £5.135m for developments in Telford and Nottingham.
The 33,166 sq ft Titan House, Euston Park, Telford, was acquired from the receivers. The building is on a modern business park next to Telford Central Station and Junction 5 of the M54.
The office development, which has 103 parking spaces, is let to Hewlett Packard Enterprise Service UK with four years remaining and a current rental income of £270,000 per annum.
The Nottingham development, Commodore Court on Nuttall Road, is a 15,000 sq ft mixed use development and incorporates three fully occupied retail units let to Sainsbury’s, Barnardos and Bathstore.
REI has also confirmed that it will pay its Q3 dividend of 0.625p per share for the period July 1, 2016 to September 30, 2016.
Mr Bassi said: “REI remains focused on its investment criteria, and with significant cash and bank facilities, remains well positioned to capitalise on any opportunities that may become available as Brexit discussions continue, while maintaining a £200m-plus portfolio.
“Our rental income has expanded progressively over the last few years and we anticipate further gains from asset management initiatives that will support the growth of dividend payments in line with our progressive dividend policy.
“We remain optimistic about the prospects for our business for the year ahead, and our regional economy, which has out-performed other UK regions in its economic performance during 2016.”
