TIDMRLE
RNS Number : 0787E
Real Estate Investors PLC
05 July 2021
5 July 2021
Real Estate Investors Plc
("REI" or the "Company" or the "Group")
H1 Trading Update
Real Estate Investors Plc (AIM:RLE), the UK's only
Midlands-focused Real Estate Investment Trust (REIT), with a
portfolio of 1.6 million sq ft of commercial property across all
sectors, is pleased to provide the following update:
H1 2021 Highlights
-- Strong Rent Collection for H1 2021 of 97.22% (adjusted for monthly and deferred agreements)
-- Completed 8 asset disposals totalling GBP10.7 million (an
aggregate uplift of 10.3% above book value)
-- Pipeline disposals of GBP5.53 million (GBP5.35 million
unconditionally exchanged and GBP0.18 million conditionally
exchanged)
-- Occupancy levels at 83.43% with near-term potential to rise
to 88.15% (based on 4.72% in pipeline lettings) with the reduction
in occupancy dominated by the loss of Npower in Oldbury and Premier
Inn in West Bromwich
-- Improved WAULT to 5.01 years to break and 6.70 years to
expiry (FY 2020: 4.84 years / 6.54 years)
-- March 2021 renewal of GBP51 million facility with National
Westminster Bank plc for 3 years at 2.25% above LIBOR with GBP4.1
million repaid since March 2021
-- Fixing of GBP35 million of GBP51 million NatWest facility at competitive rates
-- As at 1 July 2021, hedge facility has improved by GBP716,000 for half year to 30 June 2021
-- All banking covenants continue to be met with headroom available
-- Non-Executive directorate changes in line with succession planning
-- Dividend payment of 0.75p per share for Q1 2021
Paul Bassi, Chief Executive, commented:
"Following a very uncertain 2020, we are beginning to see some
early signs of market normalisation coupled with a strong investor
market place. Whilst we are not immune to the ongoing impact of
COVID-19 on the wider UK property market, we are very well
positioned in an active regional Midlands market, with a healthy
exposure to resilient and sought-after community assets.
As we apply our extensive local market knowledge and utilise our
unrivalled property network, we continue to achieve strong pricing
on our disposals. We intend to use the cash generated from these
disposals to continue our focus on resilient and emerging
sub-sectors and will look to secure opportunistic acquisitions
which offer the real prospect of capital growth and rental income,
with a view to improving our NAV and further support our
progressive dividend policy.
Occupier demand is beginning to strengthen across the market
place, with decision makers less cautious and naturally eager to
move forward after a uniquely challenging 18 months. We have a
healthy pipeline of new lettings on our void space, which is
expected to improve our occupancy levels and support our valuation
recovery.
The diversity of our portfolio continues to underpin our strong
rental collection in an unstable environment and it is this
resilience, combined with numerous initiatives rolled out by our
specialist in-house asset management team on specific assets, that
we expect to lead to some recovery in our property valuations over
2021/2022 as transactional evidence becomes apparent, which will
contribute to a rise in our NAV and a reduction in our
gearing."
Strong Midlands Investor Market - Disposals
The investment market remains free of distress with strong
demand, in particular, from private investors. We are currently
evaluating the potential enhanced break-up value of some assets to
satisfy this particular investor appetite.
Since the year end, we have completed 8 asset disposals
totalling GBP10.7 million, an aggregate uplift of 10.3% on December
2020 book value. The capital from these sales will, in due course,
be recycled into new assets with higher total return potential. The
income associated with these disposed assets is GBP392,652 per
annum.
There are a further GBP5.53 million of assets for disposal
(GBP5.35 million unconditionally exchanged and GBP0.18 million
conditionally exchanged) which will provide REI with income until
the completion date, scheduled for later this year. As these
transactions complete, they will provide further valuation
comparables to support valuation recovery. In the meantime, we are
also seeing valuation gains on certain assets from asset management
initiatives.
Rent Collection Normalising
Following a robust rent collection during 2020, we are pleased
to confirm that the business has continued to benefit from its
tenant, sector and asset diversification across the portfolio,
resulting in strong rental collection performance in H1 2021
despite the challenges of continued lockdowns.
Our proactive property team have maintained positive dialogue
with our occupiers and as anticipated, the overall rent collection
for 2020 has recently improved further from 96.35% to 98.75%
(adjusted for monthly and deferred agreements) as outstanding rents
from tenants who have recently recommenced trading in 2021 have now
been collected and attributed to the relevant rental periods in
2020. For the current quarter (June to September 2021), rent
collection to date stands at 90.20%, which will improve
further.
As previously announced, there remain a number of tenants who
have the ability to pay but have continued to take advantage of
government legislation on overdue rents. In these cases, despite
the disappointing extension of the moratorium announced by the
government in June 2021, we have taken permitted measures towards
enforcing rent collection, which in some cases has resulted in
overdue rents being collected.
Occupancy
Our portfolio diversification has underpinned our operational
resilience during a challenging period and our portfolio remains
stable with 250 occupiers across 47 assets.
Our occupancy now sits at 83.43%, with a further 4.72% in the
pipeline (YE 2020: 91.60% occupancy). This reduction is almost
entirely due to known lease events and, whilst we continue to see
an understandable level of caution due to COVID-19 uncertainty, Q2
has seen demand for our neighbourhood and convenience assets
continue to strengthen, often surpassing local market expectations
and interest in non-City centre offices improve.
We currently have 16.57% void space, which includes the former
Premier Inn at West Bromwich, Npower at Oldbury and Titan House in
Telford (where we have already let the ground floor to the
Department of Work and Pensions) where we have interest and
discussions and we are hopeful of concluding new lettings. We would
normally have seen these units re-let earlier and we remain
confident that, as lockdown rules relax, occupiers will make
decisions which will lead to an increase in occupancy. The
successful letting of these will further improve our occupancy,
WAULT and will assist in further capital value recovery, all of
which will add to the Company's NAV.
Furthermore, the change in planning legislation in October 2020
has led to a renewed interest from a new class of occupiers
(predominantly medical, pharmaceutical, restaurant and bar
occupiers to date) for retail space that, prior to the legislative
change, they would have been unable to occupy without a lengthy and
risky planning process and this has, in some instances, led to
lettings which have exceeded our ERV.
New tenants to newly let space within the portfolio in H1
include JD Sports Gyms Limited; Department of Work and Pensions,
Community Health and Eyecare Limited (NHS Contract) and Merkur
Slots UK Limited.
WAULT
REI completed 15 value-add lease events (including 5 lease
renewals) in 2021. As a result of these initiatives, our WAULT has
improved to 5.01 years to break and 6.70 years to expiry (YE 2020:
4.84 years to break and 6.54 years to expiry), as at 30 June
2021.
Banking & Capital
We recently announced that we had taken advantage of the low
interest rate environment and fixed GBP35 million of our GBP51
million NatWest facility (taken out in March 2021) to preserve our
low interest costs. With a contribution from sales, we have already
repaid GBP4.1 million of the GBP51 million NatWest facility. The
fixing is with effect from 1 January 2022, increasing our fixed
debt ratio from that date to 82% with our average cost of debt
remaining at 3.4%.
The Board is pleased with securing this facility, which further
limits the Company's exposure to rising interest rates and the
confidence lenders have in our strong covenant cover and asset
management track record.
All banking covenants continue to be met with headroom available
and as at 1 July 2021 our hedge facility has improved by GBP716,000
for the half year to 30 June 2021.
The Board's objective remains to maintain responsible gearing
and a secure cost of debt and we anticipate valuation recovery
going forward during 2021/2022, that will reduce our gearing.
Dividend Payment
As announced on 21 June 2021, a fully covered dividend payment
in respect of Q1 2021 of 0.75p per share (Q1 2020: 0.5p per share)
will be paid on 23 July 2021 as a Property Income Distribution
(PID), to all shareholders on the register as at 2 July 2021. The
ex-dividend date is 1 July 2021.
It is the intention of the Company to continue with a dividend
payment of 0.75p per quarter for 2021, (representing a minimum
annual payment of 3p per share for 2021) and reflecting a yield of
7.5% based on a mid-market closing price of 40.0p on 2 July
2021.
Management remains committed to a progressive dividend
policy.
Directorate Changes
As a result of our Non-Executive succession planning, we
recently announced the retirement of John Crabtree OBE as
Non-Executive Chairman who departed with our sincere thanks for his
many years of leadership and guidance. At the AGM 2021, we welcomed
our incoming Non-Executive Chairman, William Wyatt, (CEO of
Caledonia Investments) who is very well placed to assist in driving
the business forward.
We also announced the appointment of a new independent
Non-Executive Director to the Board, Ian Stringer, former
Non-Executive Chairman of GVA and current Principal of Avison
Young. Ian is a highly respected figure in the Midlands property
market who brings a wealth of experience and a first-class
reputation with him.
Enquiries:
Real Estate Investors Plc
Paul Bassi/Marcus Daly +44 (0)121 212 3446
Cenkos Securities
Katy Birkin/Ben Jeynes +44 (0)20 7397 8900
Liberum
Jamie Richards/William Hall +44 (0)20 3100 2000
Allenby Capital
Nick Naylor +44 (0)20 3328 5656
Novella Communications
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
1.6 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 .
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END
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