Disposal strategy on track for property group with £13.4m of sales

Real Estate Investors (REI) is driving forward with its disposal strategy, with £13.4m of property sales completed this year.

The Birmingham-based group, led by chief executive Paul Bassi, announced in January that it was to embark on a three-year programme to sell off its portfolio.

Figures released for the half year to 30 June 2024 show that REI’s sales include completed disposals of £6.7m and contracted disposals of £1.6m, with a further £5.1m of sales since the half-year end.

Proceeds have been used to pay down £6.4m of debt alongside a further £3.6m since the end of June. It brings drawn down debt to £44.4m, compared to £67.9m in June 2023.

In 2025, REI plans to add larger assets to an “improving property market” with “potential interest rate reduction”.

It also intends to extend the reduced bank facilities for a further year in Q1 2025, which should be repaid in 2025 from property disposals.

Key lease deals this year so far include:

• Oldbury – DHU Healthcare CIC took out a new lease of Birch House, for 10 years at a rent of £625,608 p.a. occupying all 35,000 sq ft.
• Crewe – British Heart Foundation took 10,765 sq ft on a 10-year lease at £57,500 p.a., removing a large part of a void unit and associated costs.
• Tunstall – McDonalds Restaurants signed an agreement for 3,189 sq ft at £55,000 p.a. from July 2024, for 20 years with a break after year 10.
• Bromsgrove – United Recruitment Group took a unit at £31,787 p.a. In addition, Ladies Fighting Breast Cancer also took a unit – at a 50% rental discount as part of REI’s ESG policy.

Paul Bassi, chief executive of REI, said: “This has been a satisfactory period of activity, despite overall negative market sentiment with activity 40% below the five-year average.

“We are likely to now be at or near the bottom of this cyclical property decline and look forward to a period of positive activity.

“This will see the potential for capital and rental growth supported by lower interest rates and improving investor and occupier demand.

“A normalising market backdrop will contribute to more rapid sales and debt repayment, allowing us to execute our strategy and return capital to shareholders, while continuing to pay a covered dividend.

“Additionally, REI management remain open to evaluating any portfolio or corporate transaction that is in the best interests of shareholders, in order to maximise shareholder returns.”

The results for the half year show underlying profits before tax of £1.8m due to strategic disposals, with a loss before tax of £3.2m, which includes a non-cash item loss of £4.9m on property revaluations.

Bassi added: “REI announced in January 2024 that it would be undertaking an orderly strategic sale of its property portfolio over three years, disposing of assets individually or collectively, at or above book value, to optimise returns to shareholders.

“Looking forward, we will be bringing larger assets to the market in 2025 into an improving property market and potential interest rate reductions.”