REI poised to take advantage of strong residential demand

Chief executive officer Paul Bassi said: “We always have in mind the potential for change of use and any uplift this might provide.

“We have reviewed our 1.5 million sq ft portfolio and estimate that approximately 250,000 sq ft has the potential for ‘permitted development’ conversion to residential.

Mr Bassi said REI has monitored for some time the rising value of Midlands residential property, which has outperformed most other UK regions on a number of key factors, with further growth expected.

He cited in particular, the latest Halifax house price index has confirmed that the West Midlands recorded the fastest growth in the UK, with prices increasing by seven per cent year-on-year since 2013.

According to Knight Frank’s 2018-2022 UK Residential Market Forecasts the West Midlands looks set to enjoy 14.8% overall growth over the period.

REI is well positioned to gradually target vacant possession of certain assets, with the view to converting them for residential use, for resale or retention for rental income.

“We believe this could provide significant capital uplift that is not presently recognised in the existing use of certain assets as office buildings.” Bassi said.

Additionally, the Birmingham-based, AIM-listed business has amassed a war chest of £30m of existing cash and banking facilities to make opportunistic acquisitions in the event of any Brexit unrest.

The company was on track for record contracted income by the year end and that in the second quarter of 2018, REI completed acquisitions totalling £7.58m. Two purchases, Topaz Business Park near Bromsgrove, and Molineux House in Wolverhampton have provided an average initial yield of 7.66% and reversionary potential to 8.3% and capital growth potential through asset management initiatives.

Mr Bassi said: “These opportunities have been secured favourable due to REI’s local knowledge, established market reputation and track record as a cash buyer.”

Capitalising on a strong investor appetite for regional real estate, REI has completed the sale of 24 Bennett’s Hill in Birmingham City Centre and a parade of shops on High Street, West Bromwich for a total of £5.04m.

Additionally, contracts have been exchanged at £2.8m on the sale of retail and offices at 158 Marlowes, Hemel Hempstead, and vacant offices at Metro Court, High Street, West Bromwich. Proceeds from these sales will be recycled to secure further criteria compliant assets.

“Our region continues to enjoy strong economic activity across all sectors, with the West Midlands in particular set to prosper further from the major relocations of HSBC, HMRC, PwC to name a few, with preparations already underway for Birmingham to host the Commonwealth Games in 2022, while Coventry looks forward to being the City of Culture in 2021.

“We anticipate further opportunities being made available to us and have £30 million in cash and bank facilities to capture criteria compliant assets, particularly in the event of any ‘Brexit’ unrest.

“We are positive about our continued performance and remain committed and well positioned to continue growing the company’s dividend payments which have now grown consecutively for the past five years,” he said.