26 January 2022
Real Estate Investors Plc
(“REI” or the “Company” or the “Group”)
TRADING UPDATE AND NOTICE OF RESULTS
£17.55M OF ASSETS SOLD INTO STRONG PRIVATE INVESTOR MARKET
Real Estate Investors Plc (AIM:RLE), the UK’s only Midlands-focused Real Estate Investment Trust (REIT), with a portfolio of 1.5 million sq ft of commercial property, is pleased to provide the following update for the year ended 31 December 2021:
· Completed 15 disposals totalling £17.55 million (an aggregate uplift of 7.3% before costs above December 2020 value)
· Further £2.33 million of assets in pipeline legals to take advantage of strong investor demand
· Near normal rent collection levels for 2021of 97.81% (adjusted for monthly/deferred agreements)
· Occupancy levels at 85.75% with near-term potential to rise to 86.73% (based on pipeline lettings and pipeline disposals)
· Improved WAULT to 5.03 years to break and 6.76 years to expiry (FY 2020: 4.84 years / 6.54 years)
· Disposal proceeds used to pay down £11.9 million of debt
· Average cost of debt of 3.5% with 90% of debt fixed as at 1 January 2022
· As at the year-end, hedge facility has improved by £1.4 million for the year to 31 December 2021
· Dividends paid of 2.25p per share in respect of 2021, with a final dividend to be announced in March, making a minimum annual payment of at least 3p
· Cash at bank of £9.8 million as at 31 December 2021
Paul Bassi, Chief Executive, commented:
“Despite trading in an environment dominated by COVID, our diversified portfolio, which has a healthy exposure to growing market subsectors, has proved to be resilient and portfolio rents are sustainable. The period saw the business take advantage of private investor demand, particularly in the neighbourhood and convenience sector, disposing of 15 assets for a total of £17.55 million.
Following a hiatus in office occupier decisions due to government ‘work from home’ advice and the uncertainty around the Omicron variant, there is now a revival of interest in office space, particularly our out-of-town stock and we have a healthy pipeline of new lettings in our void space. We expect this activity, combined with portfolio lease renewals, to translate into enhanced occupancy levels in 2022.
We expect a sharp increase in market activity over the next few months as our region is showcased on the global stage in 2022 during the hosting of the highly anticipated Commonwealth Games. The business is well positioned to benefit from the increased activity and opportunities that this event will generate.”
Strong Disposal Activity
We identified a number of portfolio assets with enhanced break-up value to satisfy strong levels of private investor demand. We completed 15 disposals totalling £17.55 million during the period, an aggregate uplift of 7.3% (before costs) on December 2020 book value, freeing up capital for debt repayment and future acquisitions. As this appetite shows no signs of slowing down, we have a further £2.33 million of pipeline disposals which we expect to complete in Q1 2022. We anticipate valuation gains within 2022 as the enhanced income and capital value from asset management initiatives is realised and our opportunistic disposals provide the comparable data needed for valuers to recognise the unlocked potential and future value of our assets.
High Rent Collection
Robust rent collection levels reported in H1 2021 continued throughout H2 2021 and led to an overall collection for 2021 of 97.81%. This demonstrates the cushioning that the portfolio diversification provides from sector over-exposure which has crippled many businesses. Our strong rent collection levels over the last 12 months, coupled with the fact that we anticipate the end of the government moratorium on unpaid commercial rents in March 2022 (extended in June 2021 for 9 months) makes us confident regarding ongoing rental collection levels.
WAULT and Occupancy
With 256 occupiers across 47 assets, the portfolio has proven itself to be robust with ongoing opportunities being realised via asset management initiatives. Against a challenging backdrop, in 2021, REI completed 54 lease events resulting in an improvement in our WAULT to 5.03 years to break and 6.76 years to expiry (FY 2020: 4.84 years to break/6.54 years to expiry), as at 31 December 2021.
Occupancy at the year end sits at 85.75% (FY 2020: 91.60% / H1 2021: 83.73%) with a potential to rise to 86.73% due to pipeline lettings and pipeline disposals. The occupancy reduction since December 2020 is largely due to disposals and known lease events predominantly across our office sector, however our retail portfolio occupancy is strong at 95.68%. We are in advanced discussions with potential occupiers and remain very optimistic with current market interest that we will recover occupancy in 2022.
Following competitive bidding at West Plaza, the former Premier Inn, Vine Hotels signed up to a 15-year lease over six floors, at a rental level above valuer ERV. This represents almost two thirds of the building and the remainder is fully occupied. Following a refurbishment, the hotel has been opened as a Best Western. New tenants to the portfolio in 2021 also include The Trustees of Association of School and College Leaders; Merkur Slots UK Limited; JD Sports Gyms Limited; Comex 2000; Bennetts Motorcycling Services Limited; Community Health and Eyecare Limited; YMCA; Secretary of State for Housing, Communities and Local Government.
Demand for our neighbourhood and convenience assets remains very strong. We are also experiencing high demand for roadside/fast food and drive thru locations and, in response, we have identified suitable unoccupied sites/redundant land and are negotiating competitive terms to strong covenants in this space.
Banking & Capital
Following our announcement in March 2021 regarding a new £51 million NatWest facility, the business took the opportunity to take advantage of the low interest rate environment and fixed £35 million of this facility. With effect from 1 January 2022 our fixed debt ratio is now 90%, with our average cost of debt increasing slightly to 3.5%. During 2021, using disposal proceeds, we repaid £11.9 million of debt. Cash at bank at the year end was £9.8 million. All banking covenants continue to be met with headroom available and various cure facilities, and as at the year-end, our hedge facility has improved by £1.4 million for the year to 31 December 2021.
We continue to engage with our stakeholders, recognising our duty to them to operate a sustainable business. We are working with market experts and consultants to accurately capture, measure and report ESG data and intend to expand on our ESG reporting in our year-end results.
Notice of Results
The Company announces that it will release its final results for the year ended 31 December 2021 on 22 March 2022.
The information communicated in this announcement contains inside information for the purposes of Article 7 of 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/Fergus Young
+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 1.5 million sq ft 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 progressive dividend policy. Further information on the Company can be found at www.reiplc.com.