Real Estate Investors Plc
(“REI”, the “Company” or the “Group”)
£20.1 MILLION SALES, DEBT REPAYMENT, SHARE BUYBACK AND COVERED DIVIDEND
Real Estate Investors Plc (AIM: RLE), the UK’s only Midlands-focused Real Estate Investment Trust (REIT) with a portfolio of commercial property across all sectors, is pleased to provide the following trading update:
· Disposals in 2022 to date of £20.1 million at an aggregate uplift of 11.4% to December 2021 book value
· Further disposals in legal pipeline significantly in excess of 2021 year end book values
· Disposal proceeds used to pay down £17 million of debt to date during FY2022
· Loan to Value (net of cash) now 38.3% (30 June 2022: 40.2%)
· £5.8 million cash at bank as at 30 November 2022
· Average cost of debt increased slightly to 3.7% (30 June 2022: 3.5%) as a result of paying down debt
· 100% of portfolio debt fixed and a weighted average debt maturity of 2 years
· As at 30 November 2022, hedge facility has improved by £2.2 million year to date
· Contracted rental income of £12.9 million p.a. with reduction due to disposals in line with strategy
· Normalised rent collection levels of 99.53% (for current quarter)
· Portfolio occupancy of 85.12% with potential to rise further as key pipeline lettings are completed (subject to ongoing sales and ongoing portfolio lease activity)
· WAULT of 4.88 years to break and 6.22 years to expiry
· Successful £2 million share buyback programme launched and completed in Q4 2022, in line with Company strategy announced on 6 July 2022
· Fully covered dividend for Q3 2022 of 0.4375p per share, with a final dividend to be announced in March 2023 – expected to represent a minimum annual dividend payment of 2.5p per share for FY2022, which would be the basis for the dividend for FY2023, subject to the pace of further disposals.
Despite widespread economic instability and negative market sentiment, private investor and overseas investors have remained active in the property market throughout H2 2022 to date. In line with our previously stated strategy, we have continued to dispose of assets and, since 30 June 2022, we have sold an additional £14.4 million of portfolio assets to satisfy investor demand, taking total sales year to date to £20.1 million, achieving an aggregate uplift of 11.4% to our December 2021 valuations. In addition to sales in our legal pipeline, we intend to make further sales to generate receipts to reduce portfolio debt and execute our strategy.
Our priority, in the absence of being able to reinvest funds from disposals into value-add assets (due to lack of suitably priced assets), has been to repay debt with a view to reducing portfolio gearing levels and debt costs, whilst completing a share buyback at value enhancing levels for shareholders. As a result of sales during 2022 to date we have reduced our debt to £72 million (31 December 2021: £89 million) and our LTV (net of cash) to 38.3% based on 30 June 2022 values (30 June 2022: 40.2%). Our average cost of debt has increased slightly to 3.7% and 100% of our debt is fixed, with a weighted average debt maturity of 2 years. The Company remains fully compliant with all banking covenants with headroom available.
COST SAVINGS AND REMUNERATION
As well as reducing debt, the Board has identified that certain services will no longer be needed or required in line with the reduction in portfolio size and the Company is looking to target up to £300,000 of savings in FY2023. Whilst mindful of overheads, the Board is aware of inflationary pressures and has agreed a 5% wage increase for all full-time staff. The Company’s CEO and FD have declined to receive any increase.
As previously announced, the Board remains committed to paying a covered dividend, throughout the period of the sales programme, subject to business performance. Due to the accelerated sales rate, the Board announces a fully covered dividend payment in respect of Q3 2022 of 0.4375p per share. The dividend will be paid on 20 January 2023 as a Property Income Distribution (PID), to all shareholders on the register as at 30 December 2022. The ex-dividend date is 29 December 2022. The Q4 2022 final dividend will be announced at the time of the final results for the year ended 31 December 2022 in March 2023, which is expected to represent a minimum annual dividend payment of 2.5p per share for FY2022, which would be the basis for the dividend for FY2023, subject to the pace of further disposals.
SHARE BUYBACK PROGRAMME & ONGOING STRATEGY
As part of our ongoing strategy and having assessed the options available to us, we launched and completed a Company share buyback programme, acquiring a total of 7,142,857 shares at an average cost of 28p per share during November and December 2022. All 7,142,857 Buyback Shares purchased under the Programme previously held in treasury have been cancelled. Therefore, the total number of Ordinary Shares in issue and carrying voting rights is 172,651,551 with no Ordinary Shares held in treasury.
The Company will maintain flexibility when considering all future options including a return of capital, special dividend to shareholders or further share buybacks, with the view to maximising shareholder returns.
The asset management team have completed 127 lease events during 2022 to date, with notable lettings at Birchfield House, Oldbury and Titan House, Telford totalling £384,000 rental income p.a.
The occupier market remains active and we have a significant pipeline of new lettings in our void space. The completion of key pipeline lettings would translate into improved contracted rental income of £13.7 million p.a and improved occupancy of 89.30% (subject to further sales and other additional leasing activity). We are confident that the combination of completed sales, intensive asset management and imminent pipeline lettings in our void space will support our year end portfolio valuations.
NOTICE OF FINAL RESULTS
The Company will release its final results for the year ended 31 December 2022 on 28 March 2023.
PAUL BASSI, CHIEF EXECUTIVE, COMMENTED:
“We have seen an accelerated sales rate from our planned disposals that has allowed us to reduce our debt by over £17 million and fund a share buyback of £2 million. Continued sales to capitalise on private and overseas investor demand will allow us to reduce our borrowings further and consider additional share buyback programmes (subject to market conditions). We anticipate improved occupancy which will reduce our void costs and improve our revenue, supporting our covered dividend payments whilst growing our NTA per share.”
Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.
Real Estate Investors Plc
Paul Bassi/Marcus Daly
+44 (0)121 212 3446
Cenkos Securities (Nominated Adviser)
Katy Birkin/Ben Jeynes
+44 (0)20 7397 8900
Jamie Richards/William King
+44 (0)20 3100 2000
Tim Robertson/Safia Colebrook
+44 (0)20 3151 7008
About Real Estate Investors Plc
Real Estate Investors Plc is a publicly quoted, internally managed property investment company and REIT with a portfolio of mixed-use commercial property, managed by a highly-experienced property team with over 100 years of combined experience of operating in the Midlands property market across all sectors. The Company’s strategy is to invest in well located, real estate assets in the established and proven markets across the Midlands, with income and capital growth potential, realisable through active portfolio management, refurbishment, change of use and lettings. The portfolio has no material reliance on a single asset or occupier. On 1st January 2015, the Company converted to a REIT. Real Estate Investment Trusts are listed property investment companies or groups not liable to corporation tax on their rental income or capital gains from their qualifying activities. The Company aims to deliver capital growth and income enhancement from its assets, supporting its covered dividend policy. Further information on the Company can be found at www.reiplc.com.