Birmingham and the West Midlands is set to enter a new golden era, according to the head of one of the region’s most successful property investment companies.
Paul Bassi, chief executive officer of Real Estate Investors plc (REI), was speaking as he announced REI’s annual results for 2016.
“We firmly believe that London and the South East have enjoyed over 50 years of exceptional economic prosperity, but we are now seeing a political, social and economic re-balancing within the UK.
“The regions, in particular Birmingham and the West Midlands, look set to enter a new golden era, propelled in part by the arrival of major projects such as HSBC’s HQ move and HS2, but also by the continued commercial growth in the area.”
The results confirm REI’s position as one of Birmingham’s major success stories following the financial and property crash.
They reveal a major surge in underlying profits before tax from £1.4 million (2015) to £5.2 million – up 271 per cent.
Revenue was £13.5 million, a 60.7 per cent increase on £8.4 million in 2015.
And REI now sits on gross property assets of £201.9 million, a 28.2 per cent increase on 2015’s figure of £155.5 million.
He announced a total dividend per share of 2.625p, up 31.3 per cent, with a final quarterly dividend of 0.75p.
“This has been another excellent year of progress, despite an uncertain economic and political backdrop, during which we secured record property ownership, record revenue and contracted rental income.
“These figures, and our 271 per cent surge in underlying profits to £5.2 million, are set to grow further as we start to see the full contribution from the acquisitions made in the prior year.
“Our like-for-like portfolio valuation was up 3.9 per cent, reflecting the active asset management that we have undertaken,” he said.
Other highlights of a record year include contracted rental income of £14.9 million, up by 25.2 per cent from 2015’s figures of £11.9 million and pre-tax profits of £8.2 million.
Overall occupancy was up to 93 per cent from 2015’s 89 per cent.
As at 31 December 2016, REI had cash and available facilities of £17 million.
Paul Bassi said: “With the benefit of our clear pathway for future income in rental growth, we also anticipate further growth in our dividend payments.
He added that the marketplace had been dominated by the European Referendum which resulted in uncertainty that provided a small window of opportunity shortly before and after the referendum result.
“Since then, strong demand for investment property within our region has resulted in valuations holding firm or rising, due to the level of demand from a cross section of investors.
“These investors have been property companies with access to debt, quoted REITs and high net worth individuals. Foreign investment represented 21 per cent of volume, but equally there has been limited demand from institutional investors,” he said.
REI is operating in a strong regional investment market, with demand outstripping supply against the background of a resurgent regional economy which has been boosted by the fall in sterling” he pointed out.
“Major factors driving this regional resurgence include the availability of capital and investors who are increasingly recognising the attractiveness of the commercial property market in the Midlands,” he said.
During 2016, REI paid £38.6 million for criteria compliant properties, during the period of uncertainty, and as demand returned, sold £5.2 million of assets into a strong investment market – sales that were exchanged in 2016 but completed in 2017.
REI acquired Market Square Shopping Centre, Crewe for £20 million and West Plaza, West Bromwich for £8 million.
Other notable acquisitions included Titan House, Telford (£2.75 million), Boundary House, Birmingham (£2.45 million), Commodore Court, Nottingham, (£2.38 million), and 62/68 High Street, Bromsgrove (£1.275 million).
In addition, REI paid £1.1 million for land at Bourne Street, Coseley, which has been acquired with a view to securing planning approval for approximately 100 residential units for subsequent sale.
New tenants during the year included Holland & Barrett, Viva Brazil, Footasylum, Costa Coffee and Poundworld.
In conclusion, Paul Bassi said: “We anticipate some volatility and uncertainty around Brexit discussions, but also opportunities.
“We believe there will be windows that enable us to secure property on favourable terms where we know we can add value.
“At the same time, we also anticipate a strong marketplace for making strategic sales where we can secure a premium, mindful of our need to retain income for our dividend capability.”
He added: “In overall terms, the combination of our market reputation, financial strength, access to capital, regional knowledge, and the foundation of our existing portfolio and the income derived from it, places us in an excellent position to continue to grow the rent roll and deliver on our commitment to pay a progressive dividend.”