Property investor maintains diverse portfolio in ‘static’ market
Birmingham property group Real Estate Investors (REI) has increased revenues despite a background of political and economic uncertainty leading to what it called a “static” market in 2019.
The stock market listed business, which owns a commercial property portfolio of 1.59 million sq. ft, issued a trading update this morning on its performance for 2019 and the outlook for the year ahead.
Chief executive Paul Bassi said: “Despite high levels of economic and political uncertainty creating a relatively static market in 2019, we have increased our revenues and covered our dividend payments, with contracted rents rising to £17.66m, up 3.85% over the year.
“Looking ahead into 2020, we anticipate the pent-up requirement to trade that has been accumulating over the last 12 months being released which is likely to stimulate our markets and create further opportunities for REI.”
REI said that with 280 occupiers across 53 assets the portfolio remains well-balanced with additional value being created via asset management initiatives, In 2019, REI completed 53 lease events (44 new lettings and 9 lease renewals).
It said it maintained a diversified portfolio, with no material reliance on any single occupier, asset or sector , providing it with occupancy levels in excess of 96%.
There was strong occupier demand for offices in a vibrant regional economy with this sector representing the largest component within the REI portfolio (37%).
REI said low levels of new build and existing stock being squeezed by the conversion to residential under Permitted Development rights led to strong rental increases e.g. Topaz Business Park, Bromsgrove which achieved an 18.6% per annum rental increase.
The group said it continued its retail focus on convenience and neighbourhood shopping while it said it has 250,000 sq. ft. of space with the potential for conversion to residential within the portfolio under Permitted Development rights.
REI acquired prime mixed-use investment properties for £9.25m with a net initial yield of 8.13%, in Leamington Spa, Warwickshire, with established occupiers (including O2, Toni & Guy, McDonald’s, Tiger UK, Moss Bros, Timpson) and significant potential to improve rental income and capital valuations.
The company’s fully covered dividend, paid quarterly, has now seen year-on-year growth for seven consecutive years, with total dividends paid to date of £27.3m. During 2019, REI paid a pro-rata dividend of 3.75p per share and anticipate announcing an increase in its final dividend payment, thereby setting the level for its 2020 dividend.
Bassi added: “We have tended to trade well during periods of instability by having the flexibility to respond to opportunities. With £15m of cash and bank facilities to deploy, we are well placed to continue to do so and we also anticipate further growth in our portfolio and revenues to support our progressive dividend policy, whilst maintaining our diverse portfolio.
“Consolidation within the real estate sector is likely to create corporate activity during 2020, to follow the recent acquisitions of Mucklow and Hansteen and we remain alert to opportunities that are in the best interests of our shareholders.”
