REG - Real Estate Investrs - Trading Update

Real Estate InvestorsAnnouncement

13/12/2022 07:00

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RNS Number : 5068J  Real Estate Investors PLC  13 December 2022

Real Estate Investors Plc

("REI", the "Company" or the "Group")

 

TRADING UPDATE

 

£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:

 

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.

 

DISPOSALS UPDATE

 

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.

 

DEBT REDUCTION

 

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.

 

DIVIDEND

 

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.

 

ASSET MANAGEMENT

 

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.

 

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/Safia Colebrook

 

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

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