Real Estate Investors plc · LSE:RLE
Real Estate Investors — H1 2017 Earnings Presentation
28 slides from Real Estate Investors's earnings presentation, September 2017
Slide 1: Half Year Results 2017 Investor & Analyst Presentation
The Midlands Investor REAL ESTATE INVESTORS PLC HALF YEAR RESULTS 2017 INVESTOR & ANALYST PRESENTATION
Slide 2: Real Estate Investors Plc
REAL ESTATE INVESTORS PLC AIM Listed Property Investment Company and REIT Strict Acquisition Criteria • Committed to progressive, fully covered, quarterly dividend • Asset management potential or compelling valuations • Internally managed with proven track record • Lot size: £2m-20m, with target yie
Slide 3: The Midlands in Context
THE MIDLANDS IN CONTEXT The West Midlands attracted more foreign businesses than anywhere outside of London/South East in 2016/17 House prices continue to rise in the West Midlands with 31% of RICS chartered surveyors reporting an uplift, according to the August 2017 UK Residential Market Survey, a
Slide 4: H1 2017 Financial Highlights
H1 2017 FINANCIAL HIGHLIGHTS EPRA NAV of 67.6p (FY 2016: 66.2p) - up 2.1% Revenue of £7.1 million (H1 2016: £6.0 million) – up 19.9% Underlying Profit before Tax of £3.1 million (H1 2016: £2.4 million) – up 29.2%* EPRA Earnings per share of 1.6p (H1 2016: 1.3p) – up 23.1% Two quarterly dividends per
Slide 5: Financial Growth
FINANCIAL GROWTH Gross Property Assets £m Revenue £m 209.4 13.5 201.9 157.5 8.4 8 7.1 104.4 FY 2014 FY 2015 FY 2016 HY 2017 FY 2014 FY 2015 FY 2016 HY 2017 EPRA EPS Dividend p 2.8 2.625 2 1.6 1.5 1.5 0.3 0.8 FY 2014 FY 2015 FY 2016 HY 2017 FY 2014 FY 2015 FY 2016 HY 2017 5
Slide 6: H1 2017 Operational Highlights
H1 2017 OPERATIONAL HIGHLIGHTS Increase in portfolio to £209.4 million (FY 2016: £201.9 million) up 3.7% Acquisitions of £8.9 million (net of acquisition costs), with a combined income of £708,575p.a. (NIY 7.48%) Sales of £12.4 million (of which £7.2 million completed in Q3 2017) which provided a co
Slide 7: Operational Growth
OPERATIONAL GROWTH Contracted Rental Income Occupancy % 14.9 15.2 93 94.8 11.9 89 7.7 84.6 FY 2014 FY 2015 FY 2016 HY 2017 FY 2014 FY 2015 FY 2016 HY 2017 Number of Tenants Total Ownership (MILLION SQ FT) 232 235 211 175 1.4 1.4 1.1 0.9 FY 2014 FY 2015 FY 2016 HY 2017 FY 2014 FY 2015 FY 2016 HY 2017
Slide 8: H1 2017 Financials
H1 2017 FINANCIALS Revenue of £7.1 million – up 19.9% Income Statement H1 2017 H1 2016 Change Underlying profit before tax of £3.1 million – up 29.2%* £m £m EPRA EPS of 1.6p - up 23.1% Revenue 7.1 6.0 + 20% Pre-tax profit of £6.4 million (HY 2016: loss £560,000) Cost of sales (0.9) (0.6) - 50% due t
Slide 9: H1 2017 Balance Sheet
H1 2017 BALANCE SHEET Balance Sheet H1 2017 FY 2016 Change £m £m Gross property assets increased to £209.4 million Property 209.4 201.9 +3.7% Cash 7.4 11.8 - 37.2% Net assets increased to £125.0 million Debt (85.3) (85.5) + 0.2% Other (6.5) (7.0) + 7.1% EPRA NAV per share increased by 2.1% to 67.6p
Slide 10: Movement in EPRA NAV per Share
MOVEMENT IN EPRA NAV PER SHARE 70 1.5 (1.5) 69 1.6 (0.2) 67.6 68 67 66.2 66 Pence 65 64 63 62 61 60 01 Jan 2017 Underlying Profit Revaluation of Properties Dividend Other revaluations 30 Jun 2017 10
Slide 11: Movement in EPRA Earnings per Share
MOVEMENT IN EPRA EARNINGS PER SHARE 2.0 0.6 (0.4) 1.8 0.1 1.6 1.6 1.4 1.3 1.2 Pence 1.0 0.8 0.6 0.4 0.2 0.0 30 June 2016 Rental Income Other Expenses & Interest Admin Expenses 30 June 2017 11
Slide 12: Debt Position
DEBT POSITION Net Debt (£m) 30 Jun 2017 31 Dec 2016 • Cost of debt reduced to 4.0% (FY 2016: 4.1%) • Property net LTV 37.8% (FY 2016: 37.2%) Borrowings 85.3 85.5 • £27.6 million of unencumbered assets Cash (7.4) (11.8) • £20 million facility with Lloyds due to be renewed in 77.9 73.7 Jan 2018 • Expl
Slide 13: Growing, Fully Covered Dividend
GROWING, FULLY COVERED DIVIDEND Dividend Total Announcement Payment Q1 2017 0.75p June 2017 July 2017 • REI adopted a quarterly dividend policy with effect from the financial year beginning 1 January 2016 Q2 2017 0.75p September 2017 October 2017 • Timings for quarterly payments are indicative only
Slide 14: Diversified Midlands Portfolio, Resilient Tenant Base
DIVERSIFIED MIDLANDS PORTFOLIO, RESILIENT TENANT BASE • Core portfolio of offices, retail and opportunistic properties within the West Midlands / Central England • Gross property assets of £209.4 million • Occupancy of 94.8% with 235 tenants (FY 2016: 93% and 232 tenants) • WAULT of 5.1 years (to br
Slide 15: Top 10 Tenants by Income – No Material Exposure
TOP 10 TENANTS BY INCOME – NO MATERIAL EXPOSURE Rank Tenant Rent £’000 % Property Crewe Shopping Centre, Acocks Green & 1 Wilko Retail Limited (2 locations) 519 3.41 Wythall 2 Npower 518 3.41 Birch House, Oldbury 3 Matalan 450 2.96 Jasper, Tunstall 4 Premier Inn 310 2.04 West Plaza, West Bromwich 5
Slide 16: City Centre – Asset Management & Capital Recycling
CITY CENTRE – ASSET MANAGEMENT & CAPITAL RECYCLING 16
Slide 17: Active Approach to Capital Recycling
ACTIVE APPROACH TO CAPITAL RECYCLING Active Capital Recycling 2011 2012 2013 2014 2015 2016 H1 2017 Acquisitions £13.1m £6.2m £1.8m £25.1m £57.7m £38.6m £8.9m* Disposal - - £7.5m £5.0m £15.3m - £5.2* proceeds Rent Roll £6.0m £6.6m £5.8m £7.7m £11.9m £14.9m £15.2m *Acquisitions of £8.9 million (net o
Slide 18: Acquisitions: Maypole
ACQUISITIONS: MAYPOLE Acquired in an off market transaction from a private investor in February 2017 for £6.1 million (exc costs), representing a Net Initial Yield of 7.22%. The property incorporates a sixty-bed hotel, together with six ground floor retail units, with a combined contracted rental in
Slide 19: Sale: Bennetts Hill & Colmore Row
SALE: 6 BENNETTS HILL, 102 & 104/106 COLMORE ROW Following a number of lettings, the three adjoining City centre offices sold for a total consideration of £7.2 million Combined sale reflects a net initial yield of 4.36% Transaction completed on 2nd August 2017 Properties sold at a premium to valuati
Slide 20: Asset Management: Gateway House, Birmingham
ASSET MANAGEMENT: GATEWAY HOUSE, BIRMINGHAM Acquired from Aviva for £3.85 million in December 2011 Building consists of a mixed retail and office scheme of 27,071 sq ft over seven floors Following the refurbishment of the second floor offices, Instant Offices has taken two floors in the building at
Slide 21: Asset Management: Peat House, Leicester
ASSET MANAGEMENT: PEAT HOUSE, LEICESTER Acquired from Aviva for £4.4 million in December 2011 Prime City centre office building WAULT is 3.61 years Weightmans dilapidations settled at £85,000 Innes England have taken part of the second floor at £13.50psq on a 10 year term First and second floor comm
Slide 22: Opportunities
OPPORTUNITIES Opportunities - £20m under offer Nuneaton – purchased for £1.98m / NI yield of 9.03% / completed 18th August / let to Poundland Limited Wolverhampton - in solicitors hands / due to exchange imminently for £2.5m / NI yield of 8.37% / let to Persimmon Homes Limited and Santander UK Plc C
Slide 23: Strategy & Outlook
STRATEGY & OUTLOOK Rent reviews/lease renewals/planning/change of use/refurbishments Add value Rental income benefit from acquisitions Maintain dividend growth Reducing property holding costs – due to improving occupancy Brexit opportunity (preferred buyer status/cliff edge moments) Grow property as
Slide 24: Appendices
APPENDICES 24
Slide 25: The REI Business Model
THE REI BUSINESS MODEL Generating value through asset management Buys REI Market Expertise Sells/Holds Institutional sales Institutional quality assets Retail 12 - 24 months of Asset Management HNW/investors/pension Offices funds - buyers now • Lease renewals active in this segment • Rent reviews Va
Slide 26: Peer Group Dividend Comparison
PEER GROUP DIVIDEND COMPARISON 26
Slide 27: Highly Experienced Management, Proven Track Record
HIGHLY EXPERIENCED MANAGEMENT, PROVEN TRACK RECORD John Crabtree OBE DL D.UNIV, Non Executive Chairman • Joined REI Board in 2010 • 0.12% shareholder in REI • Chairman of Glenn Howells Architects, Staffline Group plc, SLR Management Limited, Brandauer Holdings Ltd, Birmingham Hippodrome Theatre Trus
Slide 28: Specialist Asset Management & Investment Team
SPECIALIST ASSET MANAGEMENT & INVESTMENT TEAM Ian Clark BSc (Hons) MRICS Senior Asset Manager • Joined REI in 2011 • Responsible for the portfolio asset management strategy and the overall portfolio • Qualified chartered surveyor with over 20 years experience in the property market. • Previously wor
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