TIDMRGL
RNS Number : 3977H
Regional REIT Limited
15 November 2018
15 November 2018
REGIONAL REIT Limited
Q3 2018 Trading Update, Outlook Statement and Dividend
Announcement
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 for the period
from 1 July to 14 November 2018, and its dividend declaration for
the third quarter of 2018.
Stephen Inglis, Chief Executive Officer of London & Scottish
Investments Limited, commented: "We are extremely pleased with the
REIT's continued progress in 2018. Having undertaken the majority
of our trading in the first three quarters, we benefitted from
substantial gains over valuation.
As we recycle the remaining sale proceeds, we are able to take
advantage of an investment market that has slightly softened ahead
of the outcome of the Brexit negotiations, creating a buyer's
market. Contrastingly we continue to see little change in
occupational demand for our assets and we are undertaking a number
of lettings across the country at good rental levels.
These developments once again demonstrate our strategy of
refreshing the portfolio to ensure robust and diverse income
streams, with which to pay and enhance dividend returns to
investors.
Q3 2018 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 and asset managing, in predominantly, offices
and light industrial property in the main regional centres of the
UK outside of the M25 motorway.
From 1 January 2018 to date, the Group has exchanged on 54
leases to new tenants, including 21 since 30 June 2018, totalling
195,005 sq. ft. When fully occupied these will provide
approximately GBP2.4m pa of headline rental income. In addition,
the Group has completed a number of lease re-gearings in the
quarter. The acquisition of replacement tenants and existing
tenants, who continue to hold over in the properties for which the
leases have come up for renewal, has resulted in c. 84% of headline
rent being retained and c. 89% of the units with lease renewals
remaining occupied.
Capital expenditure to 30 September 2018 was GBP5.7m gross
(GBP5.4m net of recoveries and dilapidations), consistent with our
targeted asset quality enhancement strategy.
Portfolio as at 30 September 2018:
-- 153 properties, 1,246 units and 915 tenants, amounting to c.
GBP723.2m of gross property assets; with a contracted rent roll of
c. GBP59.4m pa.
-- Offices (by value) were 75.0% of the portfolio (31 December
2017: 67.3%), industrial sites 16.2% (31 December 2017: 23.3%),
retail 7.4% (31 December 2017 8.1%), and Other 1.4% (31 December
2017:1.3%); England & Wales represented 82.4% (31 December
2017: 77.6%) of the portfolio with the remainder in Scotland.
-- Occupancy (by value) increased to 85.8%, versus 85.5% at 30
June 2018; 30 September 2018 like-for-like (versus 30 September
2017) occupancy fell slightly to 83.7% (84.3%).
-- Average lot size c. GBP4.7m (31 December 2017: GBP4.5m).
-- Net loan-to-value ratio c. 37.1% (31 December 2017: 45.0%).
Gross borrowings GBP360.3m; cash and cash equivalent balances
GBP92.0m. Cost of debt (including hedging) of 3.9% pa (31 December
2017: 3.7% pa), and 3.4% excluding the ZDP shares (31 December
2017: 3.5%). The ZDP shares are scheduled for repayment on the 9
January 2019.
Summary of activity in the quarter to 30 September 2018:
The Group undertook several asset management projects,
generating new lettings and maintaining and improving income
through lease renewals and re-gears:
-- 800 Aztec West, Bristol - following the completion of a
comprehensive refurbishment of all floors, the first floor was let
to Edvance SAS (31,549 sq. ft.) for 10 years with an option to
break in 2020 for 16,709 sq. ft. of the space, and an option to
break in 2024 for the remaining 14,840 sq. ft. The combined annual
rent is GBP678,304 (c. GBP22psf). We are seeing an encouraging
level of tenant enquiries for the outstanding 41,743 sq. ft. of
vacant space.
-- Century Way, Thorpe Park, Leeds - following the expiry of the
lease to W S Atkins (Services) Ltd, the first floor (10,748 sq.
ft.) was let to Sodexo Ltd for 5 years, with an option to break on
the third anniversary. The company also took an additional 47 car
parking spaces, resulting in a combined headline rental income of
GBP227,996pa. The rent of c. GBP17psf is a 5.9% increase on the
previous level achieved.
-- Miller Court, Tewkesbury - a new 10-year lease was agreed
with Weird Fish Ltd with a 5-year break at a headline rent of
GBP140,980pa for 10,070 sq. ft. (c. GBP14psf). The lease provides a
5-month rent free period from the start date of the lease.
-- Manor Road, Erith - letting of 9,730 sq. ft of space to
Aquaflow Drainage Services Ltd on a 10-year lease commencing
September 2018, subject to a break option at the fifth anniversary
and no rent free at a headline rent of GBP65,000pa. (c.
GBP7psf).
-- Vantage Point, Edinburgh - regear of leases to Adobe Systems
Europe Ltd for first and second floor totalling 21,741 sq. ft. The
leases provide a combined rental income of GBP347,147pa, (averaging
c. GBP16psf) with varying lease terms. The lease for the first
floor (8,413 sq. ft.) is for a 5-year term, subject to a break
option in 2019. The lease for 13,328 sq. ft. of space on the second
floor is let on a 10-year lease with the option to break at the
fifth anniversary.
-- Delta 1200, Delta Business Park, Swindon - regear of existing
lease to CMS Supatrak Ltd complete for 4,919 sq. ft. for a further
5-year term, subject to a break option on the first anniversary,
achieving a 19.2% uplift in the headline rent to GBP76,245pa (c.
GBP15psf).
Acquisitions
On 17 August 2018, Regional REIT completed the acquisition of a
portfolio of eight assets for a consideration of GBP31.4m. The
portfolio consists of offices in eight locations: Hull, High
Wycombe, Stockton-on-Tees, Ipswich, Clevedon, Wakefield, Deeside
and Lincoln. The assets total circa 275,000 sq. ft., let to 24
tenants. The assets are expected to provide a headline rental
income of approximately GBP2.81m pa, which equates to a net initial
yield of 8.66%.
Sales
-- The Point, Glasgow - following completion of asset management
initiatives, the Group completed the sale of the property for
GBP14.1m in July (30 June 2018 valuation GBP14.1m), benefitting
from a strong investment market at a premium to December 2017
valuation of 5.6%.
-- Arena Point, Leeds - disposal of development site to Unite
Students for GBP12.2m (30 June 2018 valuation: GBP3.9m) following
successful planning application. Regional REIT retains the adjacent
19 storey Arena Point office building valued at GBP8.6m 30 June
2018.
-- Wardpark Industrial Estate, Cumbernauld - sold in August 2018
for GBP26.4m. (30 June 2018 valuation: GBP24.5m). The sale price
was 21.1% above the December 2017 year end valuation.
-- Birchwood Park, Warrington - sold in August 2018 for GBP6.1m
(30 June 2018 valuation: GBP6.1m).
-- Imperial Business Park, Gravesend - sold in August 2018 for
GBP3.1m (30 June 2018 valuation: GBP3.1m), as part of the Bluebell
portfolio.
-- Turnford Place, Cheshunt - sold in September 2018 for
GBP17.25m (30 June 2018 valuation: GBP16.3m) reflects a net initial
yield of 5.8%. The 59,176 sq. ft. modern office block site was
originally acquired by Regional REIT on 27 December 2017 as part of
the Newton Portfolio. At that time, the office development was
valued at GBP14.3m. The sale price marks an uplift of 20.6% against
the 31 December 2017 valuation and a 6.2% uplift over 30 June 2018
valuation.
Sales from 30 September 2018 to date:
-- Thames Industrial Estate, Manchester - sold in October 2018 for GBP0.6m
-- Grecian Crescent, Bolton - sold in October 2018 for GBP1.2m
-- Maybrook Industrial Estate, Walsall - sold in November for GBP7.7m
Outlook
The outlook for the Group remains positive. We continue to
reinvest the proceeds from the disposals earlier in the year and
expect this to be concluded in the coming months. As announced in
September 2018, the Group has repaid GBP50m of the GBP65m 5% ICG
Longbow Ltd. loan facility, and remains on course to settle the
balance by the end of November 2018 using disposals proceeds or
through a refinancing. This is expected to result in a reduced
Group weighted average cost of debt and an increased weighted
average debt term.
Although the wider operating environment is uncertain, our
confidence is underpinned by our deliberately diversified regional,
tenant and sector portfolio, coupled with our financial position.
These strengths will allow us to adjust quickly to evolving
conditions and continue to deliver good returns for
shareholders.
Q3 2018 Dividend Declaration
The Company will pay a dividend of 1.85 pence per share ("pps")
for the period 1 July 2018 to 30 September 2018, an increase of c.
3% (1 July 2017 to 30 September 2017: 1.80pps). The dividend
payment will be made on 21 December 2018 to shareholders on the
register as at 23 November 2018. The ex-dividend date will be 22
November 2018.
The payment of dividends will remain subject to market
conditions, the Company's performance, its financial position and
the business outlook.
Forthcoming Events
21 February 2019 Q4 2018 Dividend and Portfolio Valuation
28 March 2019 Full year 2018 Preliminary Results Announcement
23 May 2019 May 2019 Trading Update and Outlook Announcement
Q1 2019 Dividend Declaration Announcement
Annual General Meeting
Note: All dates are provisional and subject to change
-S -
Enquiries:
Regional REIT Limited
Press enquiries through Headland
Toscafund Asset Management Tel: +44 (0) 20 7845
6100
Investment Manager to the Group
Adam Dickinson, Investor Relations, Regional
REIT Limited
London & Scottish Investments Tel: +44 (0) 141
248 4155
Asset Manager to the Group
Stephen Inglis
Headland PR Consultancy LLP Tel: +44 (0) 20 3805
4822
Financial PR
Francesca Tuckett / Jack Gault
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 2018, was spread
across 151 regional properties, 1,294 units and 950 tenants. As at
30 June 2018, the investment portfolio had a value of GBP758.7m and
a net initial yield of 6.4%. The weighted average unexpired lease
term to first break was 3.5 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 document 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.
ESMA Legal Entity Identifier ("LEI"): 549300D8G4NKLRIKBX73
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END
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