REG - Real Estate Investrs - Trading Update and Notice of Results

Real Estate InvestorsAnnouncement

26/01/2022 07:05

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RNS Number : 6126Z  Real Estate Investors PLC  26 January 2022

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:

 

2021 Highlights

·      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.

 

ESG

 

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.

 

Enquiries:

 

 Real Estate Investors Plc

 Paul Bassi/Marcus Daly                  +44 (0)121 212 3446

 Cenkos Securities (Nominated Adviser)   +44 (0)20 7397 8900

 Katy Birkin/Ben Jeynes

 Liberum (Broker)                        +44 (0)20 3100 2000

 Jamie Richards/William King

 Novella Communications                  +44 (0)20 3151 7008

 Tim Robertson/Fergus Young

 

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 (http://www.reiplc.com/) .

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