Real Estate Investors

West Midlands property developer Real Estate Investors (REI), which is capitalising on the turmoil of the property and financial markets, is valued at less than half its portfolio’s worth.

Steered by prominent West Midlands entrepreneur Paul Bassi, founder of leading property auctioneer Bond Wolfe and currently vice-president of the Birmingham Chamber of Commerce, the company makes the most of its vast and detailed local knowledge and contacts, with Bond Wolfe a key piece of the puzzle.

The West Bromwich-based team target local commercial properties, most often distressed, part-let buildings with strong tenant covenants and long leases. The group puts in a sizeable chunk of its own cash to attain favourable rates on its debt and then energetically manages these assets – refurbishing them and installing new tenants – to lift rental yields and the capital values.

In the half to June 2008, as the domestic property market apparently collapsed around it, REI achieved both of these aims, lifting rents and values. Keeping its powder dry for bargains in the new year, the focus was on quickly renovating its existing estate to achieve new lettings.

At the halfway stage, the company still had significant funding headroom in place with its banks and backers, claiming the ability to establish a £150m portfolio over the next few years. Conditions this year and next are expected to provide ‘an ideal environment in which to significantly grow the group’ and the company has begun by completing the acquisition of a retail parade in November and an office block in December as well as raising new loan capital.

The shares hit a low of 3.88p in January and have perked up recently in expectation of late May’s results. Buy for value.

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