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RNS Number : 3918P
Regional REIT Limited
17 November 2016
17 November 2016
Regional REIT Limited
November 2016 Trading Update, Outlook Statement and Q3 2016
Dividend Declaration
Continued steady progress of the business; in line with
management's expectations
Q3 2016 dividend 1.75pps
Regional REIT Limited (LSE: RGL) ("Regional REIT", "the Group"
or "the Company"), the UK regional office and industrial property
focused REIT, today announces its Trading Update as at 17 November
2016 and its dividend declaration for the third quarter of
2016.
Stephen Inglis, Group Property Director and Chief Investment
Officer of London & Scottish Investments Limited, commented:
"The Group has continued to deliver on its strategy and the
commitments that were made with the IPO last year. The business has
maintained its progress in the third quarter of 2016 as occupancy
in the UK's principal regional office and industrial markets has
proved to be positive. Most evidently we can see this progress with
the Wing and Rainbow Portfolios, which were acquired by the Group
in the first quarter.
"The key focus for our business remains income - and the ability
to pay dividends - underpinned by occupancy and rental growth.
Whilst well positioned for organic development the Company remains
opportunistic and will continue to explore opportunities to further
exploit the strong presence we have in the regions."
November 2016 Trading Update
The Group has continued to pursue its strategy of providing
investors with an attractive return on a sustained and consistent
basis from investing in and managing, predominantly, offices and
light industrial property in the main regional centres of the UK
outside of the M25 motorway.
Since 1 January 2016 to date, the Group has exchanged on 90 new
leases, including 43 since 30 June 2016, totalling 603,471 sq. ft.;
when fully occupied these will provide approximately GBP4.5m pa of
rental income. In addition, the Group has completed 33 regears, c.
40% of the leases that have come up for renewal in the period,
achieving a 1.2% uplift on the headline rent. Including these
regears, the acquisition of new replacement tenants and ongoing
discussions with existing tenants who continue to hold over in the
properties for which the leases have come up for renewal, c. 75% of
the headline rent has been retained.
Capital expenditure year-to-date is GBP9.2m gross, amounting to
GBP6.1m net after recoveries and dilapidations, demonstrating our
commitment to invest in and control our asset quality enhancement
programme.
Outlook
The Group has seen a good performance being maintained in the
industrial and office occupancy markets of the UK's regions,
remains confident as to its own growth prospects and is trading
in-line with management's expectations for 2016. Regional REIT's
active asset management is delivering results with both recent
acquisitions and the established portfolio, underpinning income
growth prospects. Management expect an occupancy rate of around 85%
to be achieved by the year end.
-- Portfolio as at 30 September 2016:
o 126 properties, 964 units and 718 tenants, amounting to c.
GBP505m of gross property assets; a contracted rent roll run-rate
of c. GBP44.9m pa.
o Offices (by value) were 63.1% of the portfolio (IPO November
2015: 58.4%) and industrial sites 28.6% (IPO November 2015: 25.3%);
England & Wales represented 72.7% (IPO November 2015: 64.6%) of
the portfolio.
o Occupancy (by area) was 83.4%, versus 81.8% at 30 June 2016;
30 September 2016 like-for-like (versus 31 December 2015) occupancy
was broadly in-line at 84.4% (83.9%).
o Average lot size increased to c. GBP4.0m (IPO: GBP3.0m).
o Net loan-to-value ratio c. 40.0% (IPO: 26.4%). Gross
borrowings GBP217.8m; cash and cash equivalent balances GBP15.1m.
Cost of debt (including hedging) of 3.7% pa (IPO: 4.8% pa).
-- Summary of the Third Quarter to 30 September 2016:
o The Group has undertaken several asset management projects,
generating additional income through new lettings and maintaining
and improving income through lease renewals and re-gears.
1. Tay House, Glasgow. As already announced in the first half of 2016 a 10-year management agreement was secured
with Regus on 29,020 sq. ft.. Regus will commence occupation in February 2017, following completion of a
refurbishment and fit-out programme. The outstanding 19,200 sq. ft. of space at Tay House is seeing an
encouraging level of enquiries.
2. Aylesbury, Building 2. Leases of the first and second floors (28,424 sq. ft.) agreed with Equitable Life -
10-years from November 2016 (GBP426,360 pa). The leases provide for tenant breaks in November 2019 and November
2022 but impose a financial penalty on the tenant at first break.
3. Building 1, Newstead Court, Sherwood Park, Annesley, Nottingham. A new lease was agreed with E.ON, a 10-year term
with a 5-year break and no rent free at GBP10.50 per sq. ft. on 47,120 sq. ft. (GBP494,760 pa). The adjacent
99,000 sq. ft. of floor space was previously agreed at GBP9.50 per sq. ft., providing a proven rent reversion of
10.5%.
4. The Wing Portfolio, its acquisition completed in March 2016, has seen strong progress with its active asset
management programme including refurbishments, lettings of vacant space and an application for a change of use.
Occupancy increased to 85.2% at 30 September 2016, versus 78.2% at acquisition.
5. The Rainbow Portfolio, also acquired in March 2016, has seen good progress with its active asset management
programme including lease regears, new lettings and significant refurbishments of vacant space, lettings and an
application for a change of use. Occupancy increased to 78.2% at 30 September 2016, versus 77.2% at acquisition.
At Juniper Park, Basildon (81,923 sq. ft.), a vacant industrial
unit on the site is currently under offer for letting and is
expected to complete in the next few weeks.
o On 20 September 2016 Regional REIT completed the acquisition
of a portfolio of 6 office pavilions at Strathclyde Business Park,
Bellshill, Scotland (the 'Wallace Portfolio') from London &
Scottish Investments Limited, the Asset Manager, for GBP5,500,000
in cash. The buildings cover 90,000 sq. ft. and provide a net
income of GBP762,000 pa with a net initial yield of 12.0% after the
deduction of costs.
o In the third-quarter of 2016 the Group disposed of 3 small
properties, with proceeds amounting to GBP0.34m.
In addition there has been a large number of smaller lettings
and there remain many potential deals to be completed. In the view
of the Asset Manager the occupational market continues to hold up
in the aftermath of the EU referendum vote and the immediate
environment remains encouraging.
Third Quarter 2016 Dividend Declaration
The Company will pay a dividend of 1.75 pence per share ("pps")
for the period 1 July 2016 to 30 September 2016. The dividend
payment will be made on 22 December 2016 to shareholders on the
register as at 25 November 2016. The ex-dividend date will be 24
November 2016.
It has been the Company's intention to pay three quarterly
dividends at approximately this level in relation to the financial
year 2016, of which this is the third, and then a fourth quarter
dividend to at least manage compliance with the REIT distribution
requirement.
The payment of dividends will remain subject to market
conditions, the Company's performance, its financial position and
the business outlook.
-S -
Note: Regional REIT Limited was incorporated on 22 June 2015 but
did not begin trading until 6 November 2015 when an acquisition was
completed and its shares were admitted to trading on the premium
segment of the London Stock Exchange.
Enquiries:
Regional REIT Limited
Press enquiries through Headland
Toscafund Asset Management Tel: +44 (0) 20 7845 6100
Investment Manager to the Group
James S Johnson, Investor Relations, Regional REIT Limited
London & Scottish Investments Tel: +44 (0) 141 248 4155
Asset Manager to the Group
Stephen Inglis
Headland Tel: +44 (0) 20 7367 5222
Financial PR
Francesca Tuckett
About Regional REIT
Regional REIT Limited (LSE: RGL) is a London Stock Exchange Main
Market traded specialist real estate investment trust focused on
office and industrial property interests in the principal regional
locations of the United Kingdom outside of the M25 motorway.
Regional REIT is managed by London & Scottish Investments,
the Asset Manager, and Toscafund Asset Management, the Investment
Manager, and was formed by the combination of two existing funds
previously created by the Managers as a differentiated play on the
expected recovery in UK regional property, to deliver an attractive
total return to Shareholders and with a strong focus on income.
The Group's investment portfolio, as at 30 June 2016, was spread
across 128 regional properties, 974 units and 719 tenants. As at 30
June 2016, the investment portfolio had a value of GBP501.3m and a
net initial yield of 7.1%. The weighted average unexpired lease
term to first break was approximately 3.6 years.
The Company's shares were admitted to the Official List of the
UK's Financial Conduct Authority and to trading on the London Stock
Exchange on 6 November 2015. For more information, please visit the
Group's website at www.regionalreit.com.
Cautionary Statement
This announcement has been prepared solely to provide additional
information to Shareholders to assess the Group's performance in
relation to its operations and growth potential. The document
should not be relied upon by any other party or for any other
reason. Any forward looking statements made in this document are
done so by the Directors in good faith based on the information
available to them up to the time of their approval of this
document. However, such statements should be treated with caution
due to the inherent uncertainties, including both economic and
business risk factors, underlying any such forward-looking
information.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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