A successful year of property sales has raised nearly £18m for Real Estate Investors plc (REI) which today confirmed its strategy to continue disposals to maximise returns to shareholders.
Delivering a trading update, REI chief executive Paul Bassi explained that sales of £17.97 million in 2023 were made with an aggregate 2.93% uplift (pre-costs) on 31 December 2022 book values.
He said that there were now further sales in solicitors’ hands, aligned with REI’s focus on accelerating the sales programme and reducing portfolio debt further.
REI’s receipts from sales during 2023 have been used to repay £17.1 million of debt, with total drawn debt now reduced to £54.3 million, down from £71.4 million in 2022 and from £89.4 million in 2021.
The update noted that REI was experiencing continued demand from private investors, leading to the strong pipeline of sales.
REI’s occupancy in its current property portfolio was at 83%, while contracted rents are £10.9m, predominantly due to sales.
A major letting due to complete in April 2024 is expected to boost existing occupancy to 85.91% and rental income to £11.2m per annum, subject to sales and other lease activity.
The company highlighted its continued robust rent collection levels, with overall rent collection for 2023 of 99.82%.
Mr Bassi said: “Against a backdrop of high interest rates and stubborn inflation, political instability and unrest in Ukraine and the Middle East, the REI portfolio remains stable, with robust rent collection levels.
“The portfolio is well managed and remains sheltered from wider economic pressures due to its diverse nature and lack of exposure to large office schemes and other challenging sectors.
“Having finalised our strategic plan, our priority is to continue disposing of assets at or above book value, maximising returns to shareholders.
“With the benefit of our unique market insight, we will continue to capitalise on ongoing buyer demand for our smaller lot sizes from private investors and special purchasers.
“We have identified other larger assets that are ready for disposal, some of which we will hold for income until corporate and institutional buyer demand returns.
“In the meantime, the business is operationally robust and we will continue intensively managing assets to maximise income and reduce vacancy levels, supporting our fully covered dividend.
“Despite a strong year of sales to private investors and special purchasers, market sentiment remains weak and we anticipate valuation decline across the industry.
“This is due to the lowest level of transactions since the financial crisis of 2008, high interest rates and the political uncertainty in an election year.
“However, we are confident that our diversification will outperform market benchmarks.
“The Board is committed to maximising shareholder returns, whilst remaining open to a corporate transaction that is in the best interest of the shareholders.
“In the meantime, it is the Board’s intention to continue paying a fully covered quarterly dividend payment, subject to the pace of disposals.”
REI will release its results for the year ended 31 December 2023 on 26 March 2024.