Birmingham-based property group Real Estate Investors plc (REI) has reported record contracted rent and a rise in overall occupancy in its latest trading update.
The AIM-listed real estate investment trust has also announced nearly £10m of successfully completed acquisitions.
REI chief executive Paul Bassi said: “These acquisitions have come through our longstanding regional network and against a stock-starved marketplace.”
They total £9.48m, providing a combined initial yield of 9.86%.
They include:
Market Place, Nuneaton, which was acquired for £1.98m, reflecting a net initial yield of 9.03% and comprises a 100% prime retail investment on the pedestrianised section of Market Place.
The property provides 29,051 sq ft of flexible retail accommodation and is let to Poundland Ltd until August 2022.
Venture Court, Wolverhampton was acquired for £2.5m at a net initial yield of 8.37% producing £222,565 per annum.
The property comprises a modern office on a busy business park and is let to Santander and Persimmon Homes with 1,952 sq ft of vacant offices to let and a WAULT of 4.0 years.
1-11 Park Street & 82-87 Bradford Street, Walsall was acquired for £5m at a net initial yield of 10.93%. The property comprises a prominent, unbroken retail parade on the prime pedestrianised retail pitch in Walsall town centre.
Approximately 85% of income is secured against multiple national tenants, with a WAULT of 6.10 years to expiry. The investment is fully let with a current passing rent of £582,720 per annum.
New tenants include Thomas Cook, Smart Ideas, Game Retail Ltd, Luda Bingo Ltd (guaranteed by Mecca Bingo Ltd), Shoe Zone Ltd, Robsco Solutions Ltd (Cash Converters), Paddy Power, Toni & Guy (North) Ltd.
REI has also sold £1.24m of property, bringing total 2017 sales to date to £13.64m.
These include:
1 Dutton Road, Coventry to Coventry City Council for a total consideration of £944,000 at a net initial yield of 8%. REI recently completed a five year lease extension with the occupational tenant (Personal Hygiene Services). The property was held on a long leasehold basis to Coventry City Council with 69 years remaining.
And 46 High Street, Bromsgrove, which was sold for £300,000.
Paul Bassi said: “We have additional properties under offer and anticipate completing further sales by the year end at book value or above.
“After allowing for £13.64m sales in 2017 and with the benefit of new acquisition and lettings from within our existing portfolio, our contracted rent has risen to a record £16.481 million per annum, up 10.6% since 31 December 2016.
“Overall occupancy is up at 95.1%, which compares favourably with 92.6% as at December 2016.”
He added that REI had fixed its existing variable £41m RBS facility at 2.75% until 20 January 2021, secured against a portfolio of property.
“This provides us with stability of cost, and 87% of our debt is now fixed. We are also in discussion to restructure our existing £20m Lloyds facility,” he said.
And he was particularly upbeat in his assessment of the vibrant Birmingham and Midlands economy
“Overall the Company’s portfolio is performing well and a significant part of our portfolio which was acquired during the downturn has excellent potential to add value from rental growth to current market levels.
“Furthermore, the regional investment market remains strong and we anticipate further sales in Q4, on properties upon which we have completed our asset management initiatives.”
“We continue to benefit from our investment strategy of investing in Birmingham and the Midlands into asset management opportunities for income and capital growth against the backdrop of a vibrant Birmingham and Midlands regional economy that is in the process of rebirth following decades of stagnation,” he said.
He pointed out that Inward investment, the relocation of HSBC headquarters, HS2, The Inland Revenue, the Commonwealth Games nomination, significant transport and infrastructure improvement at Birmingham Airport and Birmingham’s Grand Central Station, together with a growing economy, which is benefiting from Sterling depreciation, all provided a positive outlook for REI’s strategy and its ability to deliver a progressive dividend, which has grown year-on-year over the last five years.
He said: “With the benefit of sales, existing cash and bank facilities, we remain well positioned to capitalise on any market unrest due to Brexit negotiations and continue to purchase criteria compliant property acquisitions to grow our portfolio further.”