Birmingham-based Real Estate Investors plc made a storming return to profit in 2012 and is paying its first dividend.
The AIM-listed property investment business posted a profit before tax of £1.1 million against a 2011 loss of £6.7 million in the year to December 31, 2012.
Highlights include overall occupancy levels up to 86.5 per cent (2011: 85 per cent) and contracted rental income up ten per cent to £6.6 million (2011: £6 million).
Chief executive Paul Bassi reported that 51,623 sq ft of lettings were completed in 2012, adding £700,000 rent per annum.”
REI now has gross property assets valued at £77.4 million, up nine per cent on the 2011 figure of £71.2 million. The IPD Monthly Index All Property declined by 4.2 per cent over the same period.
During 2012 REI made three acquisitions totalling £6.5 million at an average net initial yield of 11.65 per cent, plus additional space to let, and sold land in Birmingham for £350,000, some 22.4 per cent above book value.
Paul Bassi said: “I am delighted to report our results for the year in which we made profit before tax of £1,065,000 (2011: £6,692,000 loss), and paid our inaugural dividend of 0.5 pence for 2012.
“It is intended, but of course subject to future financial performance, that this is the beginning of a progressive dividend policy.
“The economic backdrop has remained fragile, and for most of the year, sentiment has been negative, with property valuations in the regions broadly flat.
“However, we have seen a significant improvement in our occupier inquiries and, for the first time in five years, an improving investor market that is looking to the region for opportunities to attain capital growth and superior yields to those achieved in London and the South East.
“Investors seeking to buy in our region range from insurance companies to traditional funds, opportunity funds, public and private property companies. This investor demand and vastly improved availability of bank debt will, I believe, impact on valuations during 2013/2014, across our region and portfolio. This view is shared by a number of leading surveying firms and expert commentators.
“This year has seen a valuation uplift in a number of our assets, where new lettings, renewals and other asset management initiatives have been implemented. We anticipate further upside yield compression and asset management throughout the portfolio.”
REI chairman John Crabtree said: “We have continued to manage the portfolio actively as well as make further earnings enhancing acquisitions from distressed sellers.
“As a result we have seen real progress in profitability.
“Despite the challenging conditions, our in-depth knowledge of the Midlands market in which we operate resulted in a flat occupancy rate at year end. We expect this figure to improve as a number of lettings which are currently in solicitors’ hands are concluded.
“Our active asset management resulted in valuation uplifts on a number of our properties over the year while overall property valuations in the regions continue to be flat or slightly negative.
“Looking ahead, we are encouraged by the growing level of tenant enquiries we are experiencing. We expect that an improving occupational market coupled with an increasing level of investor demand in our market should impact favourably on valuations in the foreseeable future.”
Paul Bassi added: “New tenants include AFH Financial Group Plc at Avon House in Bromsgrove. The letting is for a term of 11 years, with a tenant break in September 2018, at a commencing rent of £173,000 per annum, rising to £202,000 per annum at the first review.
We maintain our investment spread and diversity, with no excessive exposure to a single tenant or occupier.
“Many of the lettings we have completed over the last few years, have been at relatively ‘soft’ rental levels with a strengthening market and improving demand we anticipate a reduction in incentives and rent free periods which should lead to an uplift in rental values in due course.
“We anticipate further improvement in our occupancy levels throughout the year based upon existing inquiries and viewings in the latter part of 2012 and early 2013.”