A rapidly improving regional property market has helped Birmingham AIM-listed Real Estate Investors plc (REI) to report record half year results.
The business, which is now a Real Estate Investment Trust (REIT), recorded a pre-tax profit increase of 211 per cent and a 31 per cent increase in revenue.
The pre-tax profit increase up from £2.6 million for the first half of 2014 to £8.1 million includes a surplus on the revaluation of interest rate swaps of £690,000 (2014 – £68,000 loss) and a revaluation surplus of £5.9 million (2014 – £2.4 million).
Revenue increased from £2.9 million for the half year to £3.8 million.
The board is proposing to increase the interim dividend 33 per cent from 0.75p to 1p.
The record contracted rental income of £9.3 million p.a is up 21 per cent since December 31, 2014.
And the firm has broken through the one million square feet barrier, with total ownership of 1,004,459 sq ft, up 26 per cent since December 31, 2014 (799,112 sq ft), with 225 tenants, up from the previous period’s figure of 175.
Paul Bassi described them as an “excellent set of results”.
“Our acquisition strategy is beginning to show positive capital growth and strong cash flows.
“The £45 million placing in April has provided additional capital, to allow us to capitalise on market opportunities, in a rapidly improving regional market. I anticipate continued growth in our rental income, profitability, dividend payment and with our current available resources establishing a £200 million portfolio within the next six months, subject to sales.
“Birmingham and the wider Midlands is re-emerging as a major UK economic powerhouse and while manufacturing and in particular the automotive sector remains strong, the regeneration of the local economy is underpinned by the growing industries of tourism, education, retail, digital media and technology.”
He added that REI had a strong pipeline of potential new purchases and a very healthy pipeline of new lettings within its portfolio.
New acquisitions included , St Paul’s Square, Birmingham (offices – £3.75 million), Acocks Green, Birmingham (retail – £8.0 million), Bearwood Shopping Centre, Birmingham (retail – £8.65 million), Virginia House, Worcester (£1.2 million), Castlegate House, Dudley (£2.44 million) and 150 Birmingham Road, West Bromwich (offices – £925,000).
Mr Bassi said: “All of these assets provide asset management potential, which will provide income and capital growth.”
New tenants to the portfolio include Footman James, Aldi Stores, Poundland, Greggs, Scrivens, Specsavers, Lloyds Pharmacy, Store Twenty One, CAFCASS, Worcester College of Technology, Remploy, Wheelchair Basketball Association, Wilkinson, Boots, Argos, Post Office, Lloyds Bank, Willis Group, ISG Regions, BHP Design, OLR (UK) and Coltham Developments.
He added: “We have also capitalised on investor demand and our ability to make tax-free sales from our investment properties and sold 85-89 Colmore Row, Birmingham to Fidelity for £7.3 million, Bristol Road South, Northfield for £1.4 million and West Bromwich for £250,000.
“Since the half year end, we have sold two further unencumbered properties from our non-core portfolio, producing further capital receipts of £4 million.
“These sales comprise a property in Surrey for £2.5 million and a property in Watford for £1.5 million, both of which are located outside our core markets of central Birmingham and the Midlands.
“Additionally, we made an opportunistic sale of 36 Great Charles Street, Birmingham for £2.5 million, having purchased it in April 2015 for £1.85 million. All sales were made at levels above our December 2014 book values or cost.”
With £23.8 million in cash, plus bank facilities, he reiterated that the target over the next six months was to grow the portfolio to £200 million, subject to making strategic sales, and grow REI’s rental income, allowing the board to continue with the objective of growing the dividend payments in line with the stated progressive dividend policy.