Real Estate Investors plc (REI) has made property sales totalling £13.4 million so far this year, reflecting the firm’s strategy of an orderly disposal of its portfolio.
Despite a challenging market, the sales to private investors and special purchasers have been at an aggregate uplift of 3.5% on 2023 year-end book values, with a strong pipeline of further sales in process.
The Birmingham-based business has also continued its dividend policy, with a fully covered quarterly dividend of 0.5p per share to be paid for the second quarter of the year.
This brings the total paid to shareholders to £52.4 million since the dividend policy began in 2012.
Figures released for the half year to 30 June 2024 show that REI’s sales include completed disposals of £6.7 million and contracted disposals of £1.6 million, with a further £5.1 million of sales since the half year end.
The company has used the sales proceeds to pay down £6.4 million of debt in the first half of 2024, plus a further £3.6 million paid off since 30 June.
This has reduced total drawn down debt to £44.4 million, compared to the £67.9 million of debt at 30 June 2023.
Paul Bassi, chief executive of REI, said: “This has been a satisfactory period of activity, despite overall negative market sentiment with activity 40% below the five-year average.
“We are likely to now be at or near the bottom of this cyclical property decline and look forward to a period of positive activity.
“This will see the potential for capital and rental growth supported by lower interest rates and improving investor and occupier demand.
“A normalising market backdrop will contribute to more rapid sales and debt repayment, allowing us to execute our strategy and return capital to shareholders, while continuing to pay a covered dividend.
“Additionally, REI management remain open to evaluating any portfolio or corporate transaction that is in the best interests of shareholders, in order to maximise shareholder returns.”
The results for the half year show underlying profits before tax of £1.8 million due to strategic disposals, with a loss before tax of £3.2 million, which includes a non-cash item loss of £4.9 million on property revaluations.
Mr Bassi continued: “REI announced in January 2024 that it would be undertaking an orderly strategic sale of its property portfolio over three years, disposing of assets individually or collectively, at or above book value, to optimise returns to shareholders.
“Looking forward, we will be bringing larger assets to the market in 2025 into an improving property market and potential interest rate reductions.”
The half year figures also show strong rent collection of 99.6%, with 14 completed lease events generating £760,000 per annum of new income and a positive pipeline of lettings in legals.
Total contracted income has reduced from £10.9 million in the first half of 2023 to £10.3 million in 2024 first half due to the disposal programme.
Mr Bassi added: “Looking to the remainder of 2024 and into 2025, we anticipate more normalised investment market conditions on the horizon.
“This comes following the general election, the 0.25% interest rate reduction announced in August and the likelihood of further interest rate reductions, which will see investors take comfort from reducing inflationary pressures and borrowing costs.
“This will likely signal UK funds, property companies, private equity and overseas buyers re-entering the market, enabling us to sell our larger assets at positive pricing levels, eliminate our debt and return capital to shareholders.
“We are already seeing signs of these traditional investors returning to the market and expect this trend to continue into 2025, coupled with a strong occupier market and rental growth.”
