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Real Estate Investors (LON:RLE) chief Paul Bassi Wednesday set out bold plans to increase the value of the firm’s commercial property portfolio to the £200mln mark in six months – underscoring his confidence in the economic revival of Birmingham and the wider West Midlands area.
The landmark, which would represent a near doubling in the size of firm’s holdings in just over a year, will be funded from a £45mln stock placing completed in April, which revealed investors share his vision.
REI’s gross property assets were just over £130mln by June 30, giving a net asset value of 63.6p for a rise of 4% year on year.
The interim results revealed a 211% rise in pre-tax profits to £8.1mln, though this figure was boosted by the revaluation of some of its properties and a surplus on the recalculation of financial instruments called rate swaps. Underlying profits – net of these one-offs – were £1.5mln, which represents a year on year rise of almost 300%.
Revenues were up 31% at £3.8mln, while investors were rewarded with a 33% boost to the half-time dividend, which weighs in at 1p a share.
The firm, which earlier this year made the transition to become a tax-efficient real estate investment trust, was sitting on cash and equivalents of just shy of £24mln at the period-end.
CEO Bassi told investors: “I anticipate continued growth in our rental income, profitability, dividend payment and, with our current available resources, establishing a £200mln portfolio within the next six months, subject to sales.
"Birmingham and the wider Midlands is re-emerging as a major UK economic powerhouse and whilst manufacturing and in particular the automotive sector remains strong, the regeneration of the local economy is underpinned by the growing industries of tourism, education, retail, digital media and technology. "
The shares, up 25% in the past year, marked time in early afternoon trade at 66p.
Broker Liberum raised its price target to 70p in the wake of the results. Repeating its ‘buy’ advice, analyst David Brockton said: “While yields are expected to settle for prime city centre assets, REI expects further compression in secondary offices and describes the outlook as excellent.”