LONDON (ShareCast) - (Sharecast News) - Midlands-focussed real estate investment trust Real Estate Investors updated the market on its trading in 2019 on Wednesday, reporting that its 1.59 million square foot portfolio with 280 occupiers across 53 assets remained "well-balanced", with additional value being created via asset management initiatives.

The AIM-traded firm said that in 2019, it completed 53 lease events, consisting of 44 new lettings and nine lease renewals.

It said it maintained a diversified portfolio, with no material reliance on any single occupier, asset or sector, which had provided REI with "excellent" occupancy of more than 96%.

The company experienced "strong" occupier demand for offices in a "vibrant" regional economy, with that sector representing the largest component within its portfolio at 37%.

Low levels of new build and existing stock being squeezed by conversion to residential under permitted development rights was leading to strong rental increases as well, with the Topaz Business Park in Bromsgrove achieving an 18.6% per annum rental increase.

REI said it continued its retail focus on convenience and neighbourhood shopping, had no department stores, indoor shopping centres or out of town stand-alone retail, and only two of its small retail units were affected by insolvency in the year, representing 0.56% of income.

The board described "excellent" embedded value, with 250,000 square feet of space, with the potential for conversion to residential within the portfolio under permitted development rights.

It acquired prime mixed-use investment properties for £9.25m, with a net initial yield of 8.13%, in Leamington Spa, Warwickshire, with established occupiers including O2, Toni & Guy, McDonald's, Tiger UK, Moss Bros and Timpson, and "significant potential" to improve rental income and capital valuations.

REI's overall cost of debt had reduced to 3.4%, with 72% of its debt now fixed.

The firm said it remained multi-banked across six funders, including a new Barclays Bank £8.5m four-year facility at 1.95% above LIBOR, secured against a portfolio of assets, drawn down on 30 December.

"Despite high levels of economic and political uncertainty creating a relatively static market in 2019, we have increased our revenues and covered our dividend payments, with contracted rents rising to £17.66m, up 3.85% over the year," said chief executive Paul Bassi.

"Looking ahead into 2020, we anticipate the pent-up requirement to trade that has been accumulating over the last 12 months being released which is likely to stimulate our markets and create further opportunities for REI."

The company's fully covered dividend, paid quarterly, had now seen year-on-year growth for seven consecutive years, with the board noting that total dividends paid to date came to £27.3m.

During 2019, it paid a pro-rata dividend of 3.75p per share, and said it expected announcing an increase in its final dividend payment, thus setting the level for its 2020 dividend.

"We have tended to trade well during periods of instability by having the flexibility to respond to opportunities," Paul Bassi added.

"With £15m of cash and bank facilities to deploy, we are well placed to continue to do so and we also anticipate further growth in our portfolio and revenues to support our progressive dividend policy, whilst maintaining our diverse portfolio.

"Consolidation within the real estate sector is likely to create corporate activity during 2020, to follow the recent acquisitions of Mucklow and Hansteen and we remain alert to opportunities that are in the best interests of our shareholders."

At 1435 GMT, shares in Real Estate Investors were up 0.19% at 53.1p.

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