Real Estate Investors puts its entire portfolio up for sale

REI chief executive Paul Bassi

Property group Real Estate Investors (REI) is to embark on a three-year programme to sell off its portfolio.

The Birmingham-based group, led by chief executive Paul Bassi, has struggled with a disconnect between the value of its portfolio and the company’s market value.

REI’s portfolio was valued at £170m in June, with net assets of £106m. At the time its share price was almost identical to Friday’s close price of 30.7p, which values the property group at just £50m.

In a statement, REI said: “Given the ongoing substantial discount between the share price and NAV [net asset value], combined with a lack of liquidity in its shares, the board has concluded that it will conduct an orderly strategic sale of the company’s portfolio over the next three years with the objective of maximising the return of capital to shareholders.”

REI will consider selling its assets individually, as smaller portfolios or as a whole portfolio sale.

The group sold £18m of assets in 2023, mostly to private investors, and said it has “a further healthy pipeline of sales in legals” which it expects to complete in the first half of this year.

However Bassi is not bullish about property valuations.

He said: “Despite a strong year of sales to private investors and special purchasers, market sentiment remains weak and we anticipate valuation decline across the industry.

“This is due to the lowest level of transactions since the financial crisis of 2008, high interest rates and the political uncertainty in an election year. However, we are confident that our diversification will outperform market benchmarks.”

The disposal strategy will be supported by a new incentive plan for Bassi and the company’s CFO Marcus Daly.

They will reduce their salaries by one-third, and their discretionary bonus by two-thirds, while unvested awards granted under their existing long-term incentive plan have been substantially reduced.

A new, shorter-term incentive plan has been put in place that encourages a fast sale of assets. It can pay out up to 10% of sales achieved over the market value of the company as at December 31, if the disposal strategy is completed in this calendar year. It reduces to 5% if it takes three years.

Click here to sign up to receive our new South West business news...