Real Estate Investors plc · LSE:RLE
Real Estate Investors — H1 2018 Earnings Presentation
31 slides from Real Estate Investors's earnings presentation, September 2018
Slide 1: The UK's only Midlands focused REIT
THE UK’S ONLY MIDLANDS FOCUSED REIT RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2018 INVESTOR & ANALYST PRESENTATION
Slide 2: Midlands focused/Birmingham based UK REIT
• Midlands focused/Birmingham based UK REIT • Portfolio of £200 million+ and a growing income stream • Multi-sector diversification, no material reliance on any sector, asset or occupier – 250 occupiers • Internally managed REIT with proven track record and over 100 years of combined experience • RE
Slide 3: Highly experienced Board & Proven track record
Highly experienced Board & Proven track record NON-EXECUTIVE EXECUTIVE John Crabtree OBE D.UNIV Paul Bassi CBE DL D.UNIV DSC Chief Marcus Daly FCA William Wyatt Peter London Non Executive Chairman Non Executive Director Executive Officer Finance Director Non Executive Director • Joined REI Board in
Slide 4: REI PLC Building a business of substance
REI PLC Building a business of substance 2010 2006 John Crabtree 2016 PB & MD 2015 joins as Gross join as REI Plc NEC and property NED’s, converted William assets top taking a to a REIT Wyatt as £200m 29% stake NED 2004 H1 2018 Company 2006 2014 2016 Portfolio of listed on PB CEO Peter Quarterly £21
Slide 5: The REI Business Model: Active investor approach
THE REI BUSINESS MODEL Active investor approach GENERATING VALUE THROUGH ASSET MANAGEMENT Buys REI Market Expertise Sells/Holds Institutional sales VALUE ADD Institutional quality 12 - 24 months of assets Retail Asset Management HNW/investors/ Offices • Lease renewals pension funds - • Rent reviews
Slide 6: H1 2018 Operational Highlights
H1 2018 Operational Highlights G R O S S PR O PE R T Y A S S E T S £M 217.8 213.1 201.9 157.5 104.4 75.2 Gross property assets: £217.8 million (FY 2017: £213.1 million), up 2.2% Contracted rental income: £15.8 million (FY 2017: £16.2 million) FY FY FY FY FY H1 Acquisitions of £7.6 million (net of co
Slide 7: H1 2018 Financial Highlights
H1 2018 E PR A N A V Financial Highlights 70.1 68.9 66.2 64.5 61.3 59.1 EPRA NAV per share of 70.1p (FY 2017: 68.9p), up 1.7% FY FY FY FY FY H1 2013 2014 2015 2016 2017 2018 EPRA EPS 1.8p (FY 2017: 1.6p), up 12.5% H1 Total Dividend per share of 1.75p, up 16.7% E PR A E PS Revenue £7.4 million (H1 20
Slide 8: H1 2018 Financials: Growing Income
H1 2018 Financials Growing Income Income Statement H1 2018 H1 2017 Change £m £m Revenue of £7.4 million – up 4.2% Underlying profit before tax of £3.4 million – up 9.7%* Revenue 7.4 7.1 +4.2% EPRA EPS of 1.8p - up 12.5% Cost of sales (0.7) (0.9) +22.2% Pre-tax profit of £5.3 million (H1 2017: £6.4 m
Slide 9: H1 2018 Financials: Strong Balance Sheet
H1 2018 Financials Strong Balance Sheet Balance Sheet H1 2018 FY 2017 Change £m £m Property 217.8 213.1 +2.2% Gross property assets increased to £217.8 million, up 2.2% Cash 7.9 4.3 +83.7% Debt (89.0) (84.6) -5.2% Net assets increased to £129.2 million Other (7.5) (5.7) -31.6% Net assets 129.2 127.1
Slide 10: Movement in EPRA NAV per share
Movement in EPRA NAV per share 72 0.7 (1.7) 1.8 0.4 70.1 70 68.9 68 Pence 66 64 62 60 10 01 Jan 2018 Underlying Profit Revaluation of Properties Dividend Other revaluations 30 Jun 2018
Slide 11: Movement in EPRA earnings per share
Movement in EPRA earnings per share 4.0 0.2 (0.1) 3.5 0.3 3.5 3.1 3.0 2.5 Pence 2.0 1.5 1.0 0.5 11 0.0 1 Jul 2017 Rental Income Other Expenses & Interest Admin Expenses 30 Jun 2018
Slide 12: H1 2018 Financials: Debt Structure
H1 2018 Financials: Debt Structure % At 30 Jun 2018 Simplified Debt Position • Cost of debt 4.1% at 30 June 2018 (H1 2017: 4.0%) • Cost of debt now reduced to 3.7% post period end • Property net LTV 37.9% (FY 2017: 38.3%) (We aim to keep LTV below 40%) • 86% of debt is fixed • Fixed £41 million of f
Slide 13: Growing, fully covered dividend
H1 2018 Financials: Growing, fully covered dividend Dividend Total Announcement Payment • REI adopted a quarterly dividend policy with effect from the financial year beginning 1 January 2016 Q1 2018 0.875p June 2018 July 2018 • Dividend is fully covered by EPRA earnings Q2 2018 0.875p September 2018
Slide 14: Midlands regeneration and infrastructure investment
Host of the Coventry Coventry 2022 2021 UK’s largest independent vehicle Commonwealth Games City of Culture HS2 battery manufacturer to open in Coventry in 2019 reduces the journey times to HSBC around 49 minutes between will transfer 1,000 jobs from London to Birmingham and London Andy Birmingham’s
Slide 15: The Next London? Midlands economic powerhouse
The Next London? - Midlands is emerging as a UK economic powerhouse - outperforming it’s peers and gaining the title as the strongest economy outside London Resident Employment Migration – No 1 destination for those migrating from London – boosted by HS2/ major business Q1 2018 New business start up
Slide 16: Active Capital Recycling: Making capital work
Active Capital Recycling Acquisitions & Disposals Making capital work 70 60 Acquisitions of £7.6 million (net of acquisition costs), 50 with a combined income of £618,364, at an average 40 Net Initial Yield of 7.66% and a Reversionary Yield of 30 8.31% 20 Sales of £5.0 million, which produced a comb
Slide 17: Portfolio by sector
30 June 2018 31 Dec 2017 Change Sector £ % by Income % by Income 6,155,963 39.05% 37.89% +1.16% Office Office 0% 3,623,982 22.99% 23.79% -0.80% 0% Traditional Retail Traditional Retail 1,210,290 7.68% 7.46% +0.22% Discount Retail Discount Retail 1,011,150 6.41% 6.45% -0.04% Food Stores Food Stores 3
Slide 18: Midlands focused: 1.5m sq ft ownership
Midlands focused: 1.5m sq ft ownership H1 2018 Acquisitions • Molineux House, Wolverhampton • Topaz Business Park, Bromsgrove • High Street, Kings Heath (Post Half Year) H1 2018 Disposals • 24 Bennetts Hill, Birmingham • High Street, West Bromwich 18 • Metro Court, West Bromwich (completion due Dece
Slide 19: Top 10 Tenants by Income: No material exposure
Top 10 Tenants by Income No material Exposure Rent Rank Tenant £’000 % Sector Property 22.56% 1 519 3.28 Discounted Retail Crewe Shopping Centre, Acocks Green & Wythall Top 10 tenants represent only 22.56% of REI’s 2 518 3.28 Office Birch House, Oldbury contracted income 3 450 2.85 Traditional Retai
Slide 20: Untapped Residential Value: Permitted development rights
Untapped Residential Value: Permitted development rights • Identified 250,000 sq ft of possible permitted development • Permitted development rights allow owners of a building to make certain building changes and changes of use without having to make a planning application. The new rules allow the c
Slide 21: Spotlight on: Midlands Residential Market
Spotlight on: Midlands Residential Market Source: Rightmove Performance • House prices in the West Midlands rose the fastest in the UK, with annual growth in property values in the region at 5.8% by June 2018, according to ONS. The biggest fall was in London Home asking price increases in the year t
Slide 22: Acquisition: Molineux House, Wolverhampton
ACQUISITION: MOLINEUX HOUSE, WOLVERHAMPTON • A city centre office which is let to the Secretary of State, Department for Communities and Local Government on a recently re-geared 10-year full repairing and insuring lease with a tenant break at the fifth year. The building is well located and comprise
Slide 23: Acquisition: Topaz Business Park, Bromsgrove
ACQUISITION: TOPAZ BUSINESS PARK, BROMSGROVE • A prominent high-quality office business park incorporating ten self-contained office buildings, located close to Junction 1 of the M42 and comprising a total of 45,071 square feet of high specification office accommodation. • Acquired for £4.00 million
Slide 24: Acquisition since half year: Kings Heath, Birmingham
ACQUISITION SINCE HALF YEAR : KINGS HEATH, BIRMINGHAM • A prominent High Street parade in a popular and busy residential suburb of Birmingham • Acquired for £4.8 million in September 2018 (excluding costs) from a pension fund, with a current rental income of £445,860 per annum and a net initial yiel
Slide 25: Sale: 24 Bennetts Hill, Birmingham
SALE: 24 BENNETTS HILL, BIRMINGHAM • Purchased off-market in December 2014 for the sum of £2.06 million (excluding costs) from a private local investor at a net initial yield of 10.8% • Following office refurbishment we reduced void and increased the overall rental tone within the building. • We wer
Slide 26: Asset Management Case Studies: Peat House, Leicester
ASSET MANAGEMENT CASE STUDIES: ENHANCING PORTFOLIO VALUE PEAT HOUSE, LEICESTER • Prime Leicester City centre office building • Acquired from Aviva for £4.4 million in December 2011 (excluding costs) • WAULT is 3.73 years to break and 8.12 years to expiry • Weightmans dilapidations settled at £85,000
Slide 27: Asset Management Case Studies: Citygate House, Leicester
ASSET MANAGEMENT CASE STUDIES: VALUE ADD – NOT PASSIVE INVESTORS CITYGATE HOUSE, LEICESTER • The property occupies a prominent position on a main route to Leicester City Centre and comprises a self- contained, four storey office building with parking • Acquired from receivers for £1.8 million in 201
Slide 28: Why REI? Platform, Outlook & Opportunities
Why REI? Platform, Outlook & Opportunities Platform Outlook Opportunities Operating in a transformational region in Selective Investment Sales – where asset Management with proven track record management has been completed and the process of rebirth value fully enhanced Diversified multi-sector port
Slide 29: REI management team
Anna Durnford Ian Clark BSc (Hons) MRICS Andrew Osborne BSc (Hons) Jack Sears BSc (Hons) MRICS Catherine Gee Donna Mooney Investor Relations Senior Asset Manager Investment Manager Asset Management Property Management Receptionist/Administrator • Joined REI in 2007 • Joined REI in 2011 • Joined REI
Slide 30: Deloitte Real Estate Crane Survey
“Birmingham is undoubtedly in a new era of redevelopment and repurposing, spurred on by the Deloitte Real Estate Crane Survey arrival of HS2” Deloitte Real Estate Crane Survey “An uplift in job creation and amenity should underpin demand for homes in Birmingham. Improvements to transport infrastruct
Slide 31: Booming Midlands
Booming Midlands: 31 SOURCES: SAVILLS & DELOITTE REAL ESTATE RESEARCH
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