Real Estate Investors plc · LSE:RLE
Real Estate Investors — FY2020 Earnings Presentation
28 slides from Real Estate Investors's earnings presentation, March 2021
Slide 1: The UK's Only Midlands Focused REIT
THE UK’S ONLY MIDLANDS FOCUSED REIT Results for the year ended 31 December 2020 Investor and Analyst Presentation THE MIDLANDS INVESTOR REI PLC
Slide 2: Introduction
REAL ESTATE INVESTORS PLC INTRODUCTION REI Diversified Active Asset Multi- Attractive Today Portfolio Management banked Returns • UK’s only Midlands • Multi-sector • Value creation rent • Multi-banked across 5 • Progressive dividend focused/ REIT diversification, no reviews, lease renewals, lenders
Slide 3: Highly Experienced Board & Proven Track Record
HIGHLY EXPERIENCED BOARD & PROVEN TRACK RECORD Non-Executive Executive John Crabtree OBE D.UNIV William Wyatt Peter London Paul Bassi CBE DL D.UNIV DSC Marcus Daly FCA Non-Executive Chairman Non-Executive Director Non-Executive Director Chief Executive Officer Finance Director • Joined REI Board in
Slide 4: REIT Responsibility - Dividend Maintained Through Challenging Times
REIT RESPONSIBILITY - DIVIDEND MAINTAINED THROUGH CHALLENGING TIMES IN LINE WITH THE COMPANY’S PROGRESSIVE DIVIDEND POLICY SINCE 2012 TOTAL DIVIDENDS DECLARED/PAID TO SHAREHOLDERS = £36.4 MILLION Financial Crisis / General Election / Scottish Referendum / European Referendum / BREXIT / COVID19 2004
Slide 5: The REI Business Model: Active Asset Management
THE REI BUSINESS MODEL ACTIVE ASSET MANAGEMENT Generating value through asset management Buys REI market expertise Sells/holds Institutional sales VALUE ADD 12 - 24 months of Institutional quality assets Offices Asset Management Value & convenience retail Lease renewals HNW/investors/pension funds –
Slide 6: Highlights & Financials
HIGHLIGHTS & FINANCIALS Birmingham Commonwealth Games 2022 Image courtesy of Birmingham City Council REI PLC 5
Slide 7: FY 2020 Operational Highlights
FY 2020 OPERATIONAL HIGHLIGHTS • Strong overall rent collection for 2020 (adjusted for monthly and Contracted Rental Income £m deferred agreements) of 96.35% despite pandemic 17.0 17.7 16.7 16.2 • Contracted rental income: £16.7 million p.a. 14.9 11.9 (FY 2019: £17.7 million p.a.) 7.7 5.8 • Gross pr
Slide 8: FY 2020 Financial Highlights
FY 2020 FINANCIAL HIGHLIGHTS • Underlying profit before tax* of £8.1 million EPRA EPS (FY 2019: £8.0 million) up 1.2% • Revenue £16.4 million (FY 2019: £16.6 million) 4.3 4.5 3.9 3.3 • EPRA EPS 4.5p (FY 2019: 4.3p) up 4.7% 0.8 2.8 0.4 0.3 • Total Dividend for 2020 of 3p per share (FY 2019: 3.8125p)
Slide 9: Valuation Analysis: COVID19 Impact
VALUATION ANALYSIS COVID19 IMPACT Valuation Reduction Valuation Recovery • 12.0% valuation decline - across most of the portfolio as a • End of lockdown – return to work - occupier decisions - improve result of negative market sentiment (£27.9 million) occupancy/capital value gain (new lettings in l
Slide 10: What the Experts Say…
WHAT THE EXPERTS SAY… “Convenience and neighbourhood sectors “Savills highlighted five sectors where they appear to have shown greater levels of believe yield hardening is imminent, including resilience than some other subsectors. The retail warehouse and foodstores. Savills requirement to stay loca
Slide 11: FY 2020 Financials: Growing Earnings & Income
FY 2020 FINANCIALS GROWING EARNINGS & INCOME • Revenue of £16.4 million (FY 2019: £16.6 million) FY 2020 FY 2019 Income Statement £m £m • Underlying profit before tax of £8.1 million – up 1.2%* Revenue 16.4 16.6 • Pre-tax loss of £20.2 million (FY 2019: profit £3.7 million) after deficit on revaluat
Slide 12: FY 2020 Financials: Strong Balance Sheet
FY 2020 FINANCIALS STRONG BALANCE SHEET Gross property assets Net assets FY 2020 FY 2019 Balance Sheet £m £m Property 201.3 228.9 £201.3m £97.7m Cash 4.2 10.1 Debt (101.4) (105.2) Other (6.4) (8.4) Net assets 97.7 125.4 EPRA NAV per share Net LTV Adjustments 3.5 2.7 55.2p 49.2% EPRA NAV 101.2 128.1
Slide 13: Movement in EPRA NAV per Share
MOVEMENT IN EPRA NAV PER SHARE Valuation declines in the following assets, (principally due to retail sentiment) 6 assets dropped in total by £13.3m (Acocks Green / Tunstall / Birch/ Crewe / Bradford St Walsall / 33 Bennetts Hill) Balance of £14.6 million spread across the remainder of our retail an
Slide 14: Movement in EPRA Earnings per Share
MOVEMENT IN EPRA EARNINGS PER SHARE Note: Chart based on 12 months of EPRA EPS from 1 Jan 2020 to 31 Dec 2020 REI PLC 13
Slide 15: FY 2020 Financials: Simplified Debt Position
FY 2020 FINANCIALS SIMPLIFIED DEBT POSITION Debt Structure % Debt Maturity £m • Cost of debt of 3.4% at 31 Dec 2020 (FY 2019: 3.4%) Fixed Floating 31-Dec-20 01-Mar-21 • Property net LTV 49.2% and 86% of debt is fixed 51 • Interest cover of 3.2x (FY 2019: 3.3x) 45 14% 42 • Multi-banked across 5 lende
Slide 16: Attractive Spread Between NIY & Cost of Debt
ATTRACTIVE SPREAD BETWEEN NIY & COST OF DEBT 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2014 2015 2016 2017 2018 2019 2020 Cost of Debt NIY Reversionary Yield REI PLC 15
Slide 17: Quarterly Dividend Payments Continued Despite Pandemic
QUARTERLY DIVIDEND PAYMENTS CONTINUED DESPITE PANDEMIC COVID19 - the Board took the decision to reduce the quarterly Shareholder Distribution Year on Year dividend payments with a view to preserving cash £36.4 million total dividends declared/paid since 2012 +7% Uptick in final dividend paymen
Slide 18: Rent Collection Robust Despite COVID19 Backdrop
RENT COLLECTION ROBUST DESPITE COVID19 BACKDROP • Overall rent collection for the year was strong Rent Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 (adjusted for monthly and deferred agreements) at Collections (to date) 96.35% (improved from 95.29% previously stated in Jan 2021) • This was possible due t
Slide 19: Diverse and Attractive Portfolio
DIVERSE AND ATTRACTIVE PORTFOLIO FS % by 5.29% Sector £ per annum Income Office Office 5,982,801 35.64% 71.83% of FIN 4.62% TR Traditional Retail 3,234,897 20.27% our offices Other Office DR Discount Retail - Poundland/B&M etc 1,751,402 9.87% are ‘out of 10.78% 35.64% town’ Medical and Pharmaceutica
Slide 20: Top Tenants by Income: No Material Exposure
TOP 10 TENANTS BY INCOME NO MATERIAL EXPOSURE Rank Tenant Rent £’000 % Sector Property 24.8% 1 572 3.42 Discount Retail Crewe Shopping Centre, Acocks Green & Kings Heath Top 10 tenants represent only 24.8% of REI’s 2 535 3.20 Office Westgate House & Kingston House contracted income 3 518 3.09 Office
Slide 21: Planning Gains: Change of Use Opportunities
PLANNING GAINS CHANGE OF USE OPPORTUNITIES Material Change of Use Upside Potential In addition to the permitted development potential of approximately 250,000 sq ft, from 1 September 2020, a new Use Class E (Commercial, Business and Service) was introduced by the Government. The changes provide for
Slide 22: Diversification: Improvement in WAULT - Lease Events
DIVERSIFICATION IMPROVEMENT IN WAULT – 34 LEASE EVENTS Virginia House, Worcester • Pro-active asset management work allowed the building to be delivered to the tenant with vacant possession secured • The tenant signed a 125-year lease and commenced fit-out • When the pandemic hit, discussions took p
Slide 23: Active Capital Recycling: Acquisitions & Disposals
ACTIVE CAPITAL RECYCLING ACQUISITIONS & DISPOSALS Acquisitions & Disposals 70 Acquisitions 2020 Disposals 60 • No acquisitions made during period due to pandemic with priority being to protect the 50 balance sheet and preserve cash 40 • Ended the period with £9.725 million of properties unconditiona
Slide 24: Why REI? Outlook & Opportunities
WHY REI? OUTLOOK & OPPORTUNITIES Outlook • Stability – Normalise income frequency post COVID-19 (improve rent collection) • Dividend – Maintain progressive dividend policy • Opportunities – To re-let lease expiries to improve income/WAULT/capital values to secure valuation recovery • Change of use –
Slide 25: The Midlands: Regional Resilience & Recovery
THE MIDLANDS REGIONAL RESILIENCE & RECOVERY High Speed Rail 2: • Enhanced national/international connectivity • Creation of more than 175,000 new jobs • Europe’s largest infrastructure project • Expected to deliver additional £20bn GVA • New City centre terminal at Curzon Street • New Interchange St
Slide 26: Operational Team
OPERATIONAL TEAM Ian Clark Andrew Osborne Jack Sears Anna Durnford BSc (Hons) MRICS BSc (Hons) BSc (Hons) MRICS Donna Mooney Head of Investor Relations Senior Asset Manager Investment Manager Asset Management Receptionist/Administrator • Joined REI in 2007 • Joined REI in 2011 • Joined REI in 2014 •
Slide 27: Environmental & Social Governance
ENVIRONMENTAL & SOCIAL GOVERNANCE REI PLC 26
Slide 28: Real Estate Investors Plc
REAL ESTATE INVESTORS PLC 2nd Floor 75–77 Colmore Row Birmingham B3 2AP Telephone: 0121 212 3446 Fax: 0121 212 1415 www.reiplc.com