Real Estate Investors has announced the acquisition of two properties, one of these deals needs to be approved by shareholders.
Real Estate Investors has exchanged contracts to acquire the freehold of West Plaza, 144 High Street, West Bromwich B70 6JJ from Bond Wolfe Estates Limited (“BWE”) for a consideration of £8m, to be paid in cash from the Company’s existing resources and facilities (no debt is being assumed by the Company under the Acquisition). The Property has been valued by an independent professional valuer, GBR Phoenix Beard Limited, at £8.1m as at 5 February 2016.
West Plaza is an eleven storey, 87,929 sq ft building close to Junction 1 of the M5 motorway. It adjoins Metro Court, a 26,000 sq ft office building which is already owned by the Company (acquired in December 2008). West Plaza’s current contracted annual rent is £656,050 and the ERV (estimated rental value) is estimated at £712,918, although the Company’s internal ERV estimate is higher based on its assessment of the Property and the market.
The largest single tenant is Premier Inn (part of Whitbread PLC) with an 85 bedroom hotel occupying 6 floors (comprising 48,551 sq ft) at a current annual rent of £310,000 (rent review due in April 2016; expiry date April 2031 with break in April 2021). The 8th floor is let to Bond Wolfe (a partnership in which Paul Bassi (Real Estate Investors’ Chief Executive) is the principal equity holder); this lease covers 8,555 sq ft, is at an annual rent of £112,500 and expires in September 2020.
The WAULT (weighted average unexpired lease term) of the Property is 10.6 years (4.7 years to break options) and occupancy is currently 91.6% (the vacant space is currently under offer). The Acquisition is expected to enhance RLE’s net income and the Company believes that there is potential, in the longer term, for residential development of the Property. The Company also believes there may be additional marriage value from combining the Property with Metro Court, the adjoining property it owns.
Mr Bassi, who has a 65 per cent. equity interest in BWE, was informed by the other shareholders in BWE that they wished to realise their investment in West Plaza (which was acquired by BWE in October 2003). Mr Bassi intends to re-invest part of his share of the estimated net proceeds from the sale of the Property in buying shares in the Company in the market (subject to the normal AIM close period rules), in addition to the 375,000 shares he purchased in December 2015. The Company’s directors (with the exception of Paul Bassi who is involved in the transaction) consider, having consulted with its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
Due to Mr Bassi’s shareholding in BWE, the Acquisition is required to be approved by REI shareholders at a General Meeting of the Company pursuant to s190 of the Companies Act 2006. The Company is convening a General Meeting to be held at the Company’s offices at 2nd Floor, 75/77 Colmore Row, Birmingham B3 2AP at 10:00am on 6 April 2016 to seek approval for the Acquisition. A circular containing notice of the General Meeting will be posted to shareholders and a copy will shortly be made available on the Company’s website www.reiplc.com.
The second deal is an investment property in Wythall, Birmingham for a consideration of £2.45m in cash, producing total rental income of £243,547 p.a. at a net initial yield of 9.39%.
The modern two storey office building comprises 21,294 square feet with 117 car parking spaces. The property is well located in a strategic position on the southern side of Birmingham, close to junction 3 of the M42, with access via the A435. The building comprises a high specification office building. The property is fully let to Grafton Group (UK) PLC on three leases with WAULT at purchase of 6 years and 5 months – since taking the first lease in 2013, the company has expanded to occupy the whole building.
RLE : Real Estate Investors adds two properties