Real Estate Investors
Plc
("REI", the "Company" or the
"Group")
TRADING & STRATEGIC
UPDATE
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 update as at 31 December
2023:
DISPOSALS - ACCELERATED SALES PROGRAMME
·
Sales in 2023 of £17.97 million at an aggregate
uplift of 2.93% (pre-costs) to 31 December 2022 book
value
·
Further pipeline sales in legals, with focus on
reducing portfolio debt further
DEBT REDUCTION & REFINANCING
·
Receipts from sales during 2023 have been used to
repay £17.1 million of debt
·
Total drawn debt reduced to £54.3 million (FY
2022: £71.4 million / FY 2021: £89.4 million)
·
Aviva facility fully paid - lenders are now
National Westminster Bank Plc, Barclays plc and Lloyds Bank
plc
·
Average cost of debt maintained at 3.7% (H1 2023:
3.7%)
·
Discussions well advanced with lenders to renew
facilities due to expire in May, June, and December 2024
PORTFOLIO SUMMARY
·
Occupancy levels at 83.03% (FY 2022:
84.54%)
·
Contracted rental income of £10.9 million p.a. (FY
2022: £12.6 million p.a.)
·
Major letting contracted to complete in April
2024. This will improve existing occupancy to 85.91% and
boost contracted rental income to £11.2 million p.a. (subject to
sales and other lease activity)
·
Portfolio WAULT improved to 5.24 years to break
and 6.01 years to expiry (FY 2022: 4.98 years & 6.29
years)
·
Continued robust rent collection levels with
overall rent collection for 2023 of 99.82%
STRATEGIC UPDATE
The Board has previously stated
an intention to accelerate its sales programme, through the
sale of assets either on an individual or collective basis, on
terms that represent value for shareholders. Given the ongoing
substantial discount between the share price and NAV, combined with
a lack of liquidity in its shares, the Board has concluded that it
will conduct an orderly strategic sale of the Company's portfolio
over the next 3 years with the objective of maximising the return
of capital to shareholders (the "Disposal Strategy"). To
achieve this outcome, assets will be sold individually, as smaller
portfolios or as a whole portfolio sale, with the initial priority
to repay the Company's debt.
Over the last 3 years, the Company
has sold £56.4 million of assets, on an aggregate basis, at or
above book value, and significantly reduced drawn debt from £101
million to £54.3 million (as at 31 December 2023).
The ongoing pace of the disposals
will depend on market conditions however, it is the Company's
intention to secure disposals at book value or higher, maximising
returns to shareholders.
To support the Disposal Strategy and
the return of capital to shareholders, the Company is implementing
a new Shorter Term Incentive Plan ("STIP"). The STIP will replace
the existing Long Term Incentive Plan ("LTIP"), help to retain Paul
Bassi, Chief Executive Officer and Marcus Daly, Finance Director
(the "Executives"), and the wider management team and incentivise
them to achieve an orderly and timely disposal of the Company's
assets to maximise the capital return to
shareholders.
In addition, the Company's
Remuneration Committee has approved changes to the Executives'
remuneration to align the policy with the wider Company
strategy.
REVISED REMUNERATION POLICY (EFFECTIVE 1 JANUARY
2024)
1.
Basic
salary: Executive salaries to be
reduced by one third. New salaries - Paul Bassi, CEO reduced to
£367k (previously £550k) and Marcus Daly, CFO reduced to £229k
(previously £344k) amounting to a cost saving of approximately
£330k (including National Insurance contributions). In
addition, Non-Executive Directors' fees also to be reduced by one
third
2.
Annual
discretionary bonus: The Executives'
bonus is reduced from up to a maximum of 100% of basic salary to a
maximum of 50% of the new reduced basic salary
3.
Executives'
service contracts: If contracts are
to be paid up following a corporate transaction or equivalent, then
compensation under the Executives' service contracts reverts to old
salary levels
4.
LTIP
Awards: The Executives' entitlement
to awards under the Company's existing LTIP scheme have been
amended as follows:
·
Unvested awards granted re: FY2020 - to be reduced
by one third
·
Unvested awards granted re: FY2021 - to be reduced
by two thirds
·
Unvested awards granted re: FY2022 - to be
cancelled
·
No further awards under the LTIP going
forward
·
The approximate value in the reduction in the
awards equates to approximately 4 million Ordinary Shares, which at
a share price of 30p equates to £1.2 million
5.
Shorter Term
Incentive Plan ("STIP"): To
compensate the Executives (albeit not to the same extent) for the
retrospective reduction in LTIPs in relation to FY2020 and FY2021,
the cancelling of awards relating to FY2022 and no further issuing
of awards under the LTIP in relation to FY2023 or going forward,
the Executives will be entitled to participate in the
STIP.
SHORTER TERM INCENTIVE PLAN
The STIP is being implemented to
compensate the Executives for the retrospective reduction in awards
and cancellation of future awards under the
LTIP.
1. Under the
STIP, the participants will receive a proportion of a notional cash
pool (the "Pool") which will be created from the excess ("Gain") of
Total Shareholder Return ("TSR") over the market value of the
Company as at 31 December 2023.
2.
TSR is cash per Ordinary Share returned to
shareholders, excluding ordinary dividends.
3.
To ensure the timely disposal of assets, the Gain
attributable to the Pool will be reduced over time.
4. If the
Company's sell down strategy is completed in 2024 then the Pool is
calculated as 10% of the Gain. If the strategy is completed in 2025
the Pool reduces to 7.5% and if by 2026, the Pool reduces to
5%.
5. Of the
Pool, a minimum figure of £410k is ringfenced for the management
team (excluding the Executives) equivalent to a bonus of 100%
salary.
6. The STIP
will pay out as soon as reasonably practicable after the earliest
of (1) the sale of all the assets, (2) a takeover of the Company or
(3) when the Remuneration Committee determine that a sufficient
proportion of the assets have been sold and that the STIP has
achieved its original purpose.
In determining the revised
remuneration policy and STIP, the Company's Remuneration Committee
has consulted with REI's largest institutional
shareholders.
NOTICE OF FINAL RESULTS
The Company will release its results
for the year ended 31 December 2023 on 26 March 2024.
PAUL BASSI, CHIEF EXECUTIVE, COMMENTED:
"Against a backdrop of high interest
rates and stubborn inflation, political instability and unrest in
Ukraine and the Middle East, the REI portfolio remains stable, with
robust rent collection levels. The portfolio is well managed
and remains sheltered from wider economic pressures due to its
diverse nature and lack of exposure to large office schemes and
other challenging sectors.
Having finalised our strategic plan,
our priority is to continue disposing of assets at or above book
value, maximising returns to shareholders. During 2023,
despite an inactive property market, we made sales of £17.97
million (predominantly to private investors) and receipts from
these disposals were utilised to reduce debt by £17.1
million. We currently have a further healthy pipeline of
sales in legals, which we anticipate to complete in H1
2024.
With the benefit of our unique
market insight, we will continue to capitalise on ongoing buyer
demand for our smaller lot sizes from private investors and special
purchasers. We have identified other larger assets that are
ready for disposal, some of which we will hold for income until
corporate and institutional buyer demand returns. In the
meantime, the business is operationally robust and we will continue
intensively managing assets to maximise income and reduce vacancy
levels, supporting our fully covered dividend.
Despite a strong year of sales to
private investors and special purchasers, market sentiment remains
weak and we anticipate valuation decline across the industry.
This is due to the lowest level of transactions since the financial
crisis of 2008, high interest rates and the political uncertainty
in an election year. However, we are confident that our
diversification will outperform market benchmarks.
The Board is committed to maximising
shareholder returns, whilst remaining open to a corporate
transaction that is in the best interest of the shareholders.
In the meantime, it is the Board's intention to continue paying a
fully covered quarterly dividend payment, subject to the pace of
disposals."
Enquiries:
Real
Estate Investors Plc
Paul Bassi/Marcus Daly
|
+44 (0)121 212 3446
|
Cavendish Capital Markets Limited (Nominated
Adviser)
Katy Birkin/Ben Jeynes
|
+44 (0)20 7220 0500
|
Liberum (Broker)
Jamie Richards/William
King
|
+44 (0)20 3100 2000
|
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 dividend
policy. Further information on the Company can be found
at www.reiplc.com.