Real Estate Investors (REI), the UK’s only Midlands-focused Real Estate Investment Trust (REIT), has has completed or conditionally exchanged on a further £11.9 million of sales in the year to date.
In a trading update ahead of the announcement of its interim results on 23 September, REI said it has been utilising the receipts from completed disposals to continue its policy to pay down debt.
Paul Bassi, chief executive of REI, said: “We are pleased with the performance of the business in the year-to-date and remain on track with our strategy to make targeted sales to private investors and special purchasers during 2024, repaying debt with the proceeds.
“Despite the known uncertain market conditions, particularly in the investment market where transaction levels are 40% below the five year average, in 2024 so far, we have completed or exchanged contracts on £11.9 million of assets, repaying £7.3 million of debt with the proceeds from completions.”
And he said there was a strong sales pipeline in legals that was expected to complete in the second half of 2024.
The Birmingham-based business has now reduced its total drawn down debt to £47.1 million from £54.4 million at 31 December 2023 year end, and seen a hedge facility improvement of £190,000 in the year to date at 31 July 2024.
Emphasising REI’s stable portfolio and highlighting improving occupancy, the company now has contracted rental income of £10 million, down from £10.9 million in December 2023, with the loss of income predominantly due to disposals and taking vacant possession on specific assets to fulfil sales obligations.
So far, 2024 has seen new lettings to 31 July 2024 of £760,000, with a further £150,000 of lettings in legals in the pipeline.
Occupancy currently sits at 84%, which could improve further with pipeline lettings and the disposal of vacant or part-vacant assets in the coming months. Rent collection for the first half of 2024 of 99.6%, demonstrates strong covenants across the portfolio.
Mr Bassi said the fully covered dividend for the first quarter of 2024 of 0.5p was despite the loss of income from 2023 and 2024 disposals to date.
REI has now paid a total of £51.5 million in dividends to shareholders since the commencement of the dividend policy in 2012.
Mr Bassi added: “The management of REI is committed to an ongoing covered dividend, subject to the pace of the sales programme.
“Sentiment so far in the second half of the year has been positive with business confidence in our region growing by 15 points since the result of the election in July.
“We believe the recent 0.25% interest rate reduction, announced by the Bank of England last week, will further enhance confidence and support a return to more normalised investment market conditions that will allow us to start to sell our larger assets, utilising funds more rapidly to eliminate our debt with a view to then returning surplus capital to our shareholders.
“The occupier market remains stable with our asset management team completing 16 lease transactions since the year end – 11 new lettings and 5 lease renewals.
“We continue to focus on maximising income across the remainder of the portfolio, with a view to potentially improving valuations and occupancy levels further and supporting our ongoing dividend which has been uninterrupted and fully-covered despite the sales programme.”
REI will release its interim results for the six months to 30 June 2024 on 23 September 2024.