Real Estate Investors has announced its final results for the year ended 31 December 2016. Paul Bassi, the comopany’s CEO describes the year as one of excellent progress. He says that the company secured record property ownership, revenue and contracted rental income, with underlying profits rising 271% to £5.2 million (2015: £1.4 million). He says that profits are set to grow further as they start to see the full contribution from the acquisitions made in the prior year. During the period, the company’s gross property assets increased by 28.2% to £201.9 million (2015: £157.5 million), whilst the EPRA NAV per share increased by 2.7% to 66.2p (2015: 64.5p). EPRA Earning per share increased by 250% to 2.8p (2015: 0.8p), whilst revenue increased by 607% to £13.5 million (2015: £8.4 million). The total dividend per share increased by 31.3% to 2.625p with a final dividend 0.75p per share. Looking at the companies borrowings, the net loan to value increased to 37.2% (2015: 22.4%) but the average cost of debt was reduced to 4.1% (2015: 5.9%). The company says it has cash and available facilities of £17 million.
In terms of operational developments, the company made acquisitions of ‘criteria compliant properties’ totalling £38.6 million, at a net initial yield of 8.98% and reversionary yield of 9.97%. Non-core property disposal proceeds totalling £5.2 million, as the company recycles capital into criteria compliant assets. The company secured 25 new lettings and 5 lease renewals and overall occupancy increased to 93% (2015: 89%) – up 4.4%. The company says it has 232 tenants (2015: 211) up 9.9% with contracted rental income up 25.2% to £14.9 million (2015: £11.9 million). On a like for like basis, the portfolio value increased by 3.9% to £158.3 million (2015: £152.3 million). The company has also secured £45.2 million of new bank facilities, £41million secured at 1.75% above LIBOR and £4.2 million at 2.0% above base. The company’s WAULT is 4.71 years to break and 6.76 years to lease expiry (2015: 5.28 years to break and 6.67 years to lease expiry) whilst total ownership is 1.4 million square feet, an increase of 27.2% (2015: 1.1 million square feet). The company says that it has made £6.1 million of acquisitions since the year end. The company says that, with the benefit of our clear pathway to future growth in rental income, it also anticipates further growth in its dividend payments.
In terms of outlook, the company says that London and the South East have enjoyed over 50 years of exceptional economic prosperity, but, in their view, we are now seeing a political, social and economic re-balancing within the UK. They say that the regions, in particular Birmingham and the West Midlands, look set to enter a new golden era, propelled in part by the arrival of major projects such as HSBC’s HQ move and HS2, but also by the continued commercial growth in the area. The company says that the marketplace has been dominated by the European Referendum which resulted in uncertainty that provided a small window of opportunity shortly before and after the referendum result. Since then, they say that strong demand for investment property within our region has resulted in valuations holding firm or rising, due to the level of demand from a cross section of investors. These investors have been property companies, with access to debt, quoted REITs and high net worth individuals, of which foreign investment represented 21% of volume. Equally, there has been limited demand from institutional investors. The company says that it finds itself in a strong regional investment market, with demand outstripping supply against the backdrop of a resurgent regional economy which has been boosted by the fall in sterling and, also the availability of capital and investors who are increasingly recognising the attractiveness of the commercial property market in the Midlands.
The managers say that much of the capital chasing regional property assets is seeking “defensive-income” rather than the intensive asset management opportunities that it is seeking. The managers believe that other investors are proceeding mainly on a macro basis; that these markets offer good value and that yields will continue to run close to long-term averages and rental growth will further bolster performance. They say that all of this is likely, but their strategy is at a more micro level; they acquire property assets, from distressed vendors or less asset management intensive organisations, which require significant time and resources to manage, and produce a stable, growing income stream. They say that they have seen yields continue to fall for the ‘stabilised-income’ property assets, driven by the weight of money from investors now seeking opportunities in the UK’s regions.
Real Estate Investors sees its underlying profits rise by 271% to £5.2m : REI