Real Estate Investors defies market with portfolio performance

Midlands commercial real estate investment trust Real Estate Investors updated the market on its trading for the six months ended 30 June on Monday, reporting that its 1.53 million square foot portfolio was 96.2%, up from 92% year-on-year, with it currently generating an annualised contracted rental income of £17m, up 9%.

The AIM-traded firm said it completed eight lease renewals and 14 new lettings during the first half, covering 69,586 square feet, with new tenants including Colmore Bid, Nush Marlin Developments, Bargain Buys (Poundstretcher), One Below and Likewise.

Additionally, it said it agreed terms on two larger renewals at Westgate House in Warwick and Kingston House in West Bromwich, which were both let to the NHS on five-year lease extensions, for a combined rental income of £553,258 per annum.

Land at Coseley, upon which Real Estate Investors had secured planning permission for 100 units, reportedly received “strong” interest and was now in legals at above book value, the board said.

In June, the Government announced its plans to invest £778m in Birmingham and the West Midlands in advance of staging the 2022 Commonwealth Games.

The board said that, as “the UK's only Midlands-focused and Birmingham-based real estate investment trust”, the company was “well-positioned” to capitalise on any opportunities that major events, infrastructure and development projects would bring to the Midlands region.

It said it had monitored the availability of criteria-compliant assets to add to its portfolio, yet had seen limited opportunities in the last six months.

REI had £25m of cash and available bank facilities, and was this “well-positioned” to secure further assets during the second half, to add to the existing £225m as at 31 December 2018, the directors explained.

“With the benefit of our network, we are confident in our ability to add to our Midlands ownership,” the board said.

“The portfolio is diversified with no reliance on any single asset, occupier or sector.

“The office element of the portfolio, which represents 39% of the total value, is performing well and, coupled with management's strategy to invest in the thriving sector of neighbourhood and convenience retail, REI continues to mitigate against the issues faced by the traditional retail sector.”

Despite market sentiment, Real Estate Investors said it was experiencing “steady” demand from occupiers with its discount retailers continuing to trade well, with rents received promptly from its occupiers.

The company said it had experienced no material impact from the “highly publicised” UK company voluntary arrangements, noting that there were two Bathstore units in administration in Nottingham and Newcastle-under-Lyme, which represented 0.58% of its total contracted rental income.

It said it was confident that those two units would either be part of the administrator's sale or re-let at market rents.

The board also confirmed that it had no exposure to the recently-announced William Hill store closures.

“We are diversified, stable and opportunistic with strong occupancy across the portfolio. Significant permitted development opportunities for conversion to residential have been identified within the portfolio and we remain focused on extracting these embedded and undervalued opportunities, against a continuously strong regional housing market,” said chief executive officer Paul Bassi.

“Existing revenues, combined with income from opportunistic value-add acquisitions will further underpin dividend growth, which has now enjoyed 6 consecutive years of growth.”