TIDMRGL
RNS Number : 0527F
Regional REIT Limited
12 November 2020
12 November 2020
REGIONAL REIT Limited
("Regional REIT", the "Group" or the "Company")
Q3 2020 Trading Update
&
Dividend Declaration and Outcome of Strategic Review
Regional REIT Limited (LSE: RGL), the regional real estate
investment specialist, focused on building a diverse portfolio of
income producing regional UK core and core plus office assets,
today is pleased to announce a trading update for the period from 1
July 2020 to 30 September 2020, dividend declaration confirmation
for the third quarter of 2020, the outcome of the Board's strategic
review of the Company's investment objectives, and a potential
share buyback.
Q3 2020 Trading Update
The Group has exchanged on 29 leases to new tenants since 1
January 2020, totalling 171,838 sq. ft., of which eight leases have
been exchanged since 30 June 2020, totalling 16,202 sq. ft.. When
fully occupied these 29 new leases will provide GBP1.4m per annum
("pa") of rental income. The eight leases acquired since 30 June
2020 will provide GBP0.2m of rental income pa.
The Group also completed a number of lease renewals during the
quarter, achieving rental uplifts of 12.2% versus previous rent.
Retention of occupancy by area remains high at 90.2% as 83.9% of
units with lease renewals remain occupied(1) .
[1] Including tenants that are currently holding over, lease
renewals, and the acquisition of new replacement tenants.
Portfolio as at 30 September 2020:
-- 150 properties, 1,239 units and 857 tenants, totalling c.
GBP739.9m(2) of gross property assets; with a gross rent roll of c.
GBP62.4m pa
-- Offices (by value) were 80.3% of the portfolio (31 December
2019: 79.9%), industrial sites 13.9% (31 December 2019: 13.7%),
retail 4.3% (31 December 2019: 5.0%), and Other 1.5% (31 December
2019: 1.4%)
-- England & Wales represented 82.7% (31 December 2019:
82.0%) of the portfolio with the remainder in Scotland
-- EPRA Occupancy (by ERV) 88.6% versus 89.0% as at 30 June
2020; 30 September 2020 like-for-like (versus 30 September 2019)
EPRA occupancy remained in line at 88.3% (88.4%)
-- Average lot size c. GBP4.9m (31 December 2019: c. GBP4.9m)
-- Net loan-to-value ratio c. 39.3%(2) (31 December 2019:
38.9%). Gross borrowings GBP361.7m (31 December 2019; GBP344.0);
cash and cash equivalent balances GBP71.0m (31 December 2019:
GBP37.3m). Cost of debt (including hedging) of 3.4% pa (31 December
2019: 3.5% pa)
2 Gross property assets value based upon C&W valuations as
at 30 June 2020, adjusted for subsequent acquisitions, disposals
and capital expenditure in the period.
Q3 2020 Dividend Declaration
As previously indicated, the Company is pleased to declare that
it will pay a dividend of 1.50 pence per share ("pps") for the
period 1 July 2020 to 30 September 2020, (1 July 2019 to 30
September 2019: 1.90pps). The dividend payment will be made on 8
January 2021 to shareholders on the register as at 20 November
2020. The ex-dividend date will be 19 November 2020. The entire
dividend will be paid as a REIT property income distribution
("PID").
Further to the announcement made on the 17 September 2020, the
Board will pay a dividend of 6.4pps for the full year 2020, which
it is expected will be fully covered from EPRA earnings, and
equates to an annualised dividend yield of 8.3% at the close of 11
November 2020.
Outcome of Strategic Review of the Company's Investment
objectives
Due to the current economic backdrop, the Board has undertaken
an internal strategic review of the Company's investment
objectives, to ensure the maximisation of total shareholder
returns. The strategic review encompassed, but was not limited to,
the regional commercial investment and occupational markets, peer
review, the Group's current portfolio composition (80.3% by value
of the portfolio being composed of offices as at 30 September 2020)
and the specialist attributes of the Asset Management operating
platform.
Over the long term the Board is convinced that the supply and
demand imbalance of the office sector, coupled with the Asset
Manager's specialist operating platform and experience, will
maximise total shareholders returns. For the foreseeable future,
the Board has decided that the Company will focus its investment
solely on properties in the office sector in the main regional
centres of the UK outside of the M25 motorway. The Company will in
due course seek to exit all other commercial property sector
investments, including its industrial and remaining retail sites,
while promptly recycling the capital into regional offices. This
will ensure the Group is able to maximise its investment objectives
of delivering shareholders an attractive and sustainable income
focused total return over the long term.
Share Buyback
The Board constantly monitors the Company's share price, and as
part of the strategic review of the Company's investment
objectives, the Board also considered the Company's recent share
price discount rating against the latest net asset value. The
Company's financial position remains strong, with a cash balance of
GBP71.0m, as at 30 September 2020. Where the Board considers it to
be accretive to do so, the Company may undertake a buyback of its
own shares using proceeds from asset sales. However, the Company
will take a balanced approach, continuing to seek to identify
attractive new acquisitions which present long term shareholder
value.
Outlook
Our business model continues to remain resilient, despite the
current uncertain economic outlook. The Company's Asset Management
platform continues to actively engage with our diversified
occupiers to ensure strong rent collections, whilst maintaining the
momentum of ongoing asset management initiatives to increase
capital values. These attributes continue to underpin the Company's
uninterrupted quarterly dividend distributions and will ensure the
growth of capital returns to our shareholders over the long
term.
Stephen Inglis, CEO of London & Scottish Property Investment
Management, the Asset Manager of Regional REIT commented:
"Following a busy and productive period for the Company, which
has seen robust momentum maintained in the collection of rents, a
number of attractive acquisitions completed, and a strategic review
finalised, I am pleased to confirm the Q3 dividend of 1.50 pence
per share. As previously announced, the Company will distribute a
full year 2020 dividend of 6.4pps that should be fully covered by
EPRA earnings, and which offers a highly attractive dividend yield
at the current share price.
The conclusion of the Board's internal strategic review to
dispose in due course of the remaining non-office assets in order
to focus investment in the regional office market, will allow the
Company to take full advantage of the current sector inefficiencies
being observed and that I outlined in detail at the Company's
recent capital markets day. It is envisaged that the Company's
decision to focus solely on quality office assets for the
foreseeable future will drive considerable value creation for
shareholders by leveraging the manager's key expertise whilst also
serving as a major factor of differentiation for the Company from
existing London listed REITs.
In light of the Company' performance throughout Covid-19, the
Board is of the opinion that the market is undervaluing the
Company. Should a persistent and significant share discount rating
be observed, the Board will take a balanced approach to the buyback
of the Company's own shares where it is considered accretive to do
so, using proceeds from asset sales, versus the opportunities in
the regional office market which offer income and growth for our
shareholders over the long term."
Summary of Activity in the Quarter to 30 September 2020:
The Group undertook several asset management projects,
generating new lettings and maintaining and improving income
through lease renewals and re-gears:
-- Ashby Business Park, Ashby De La Zouch - A lease agreement
has been signed with Ceva Logistics Ltd. to renew an existing lease
for a further five years at a rent of GBP405,132 (GBP13.17/ sq.
ft.) representing an uplift of 13.5% from the previous rent. The
works being undertaken by the landlord, as part of this agreement,
are likely to complete by the end of the year, ahead of
schedule
-- Miller Court, Tewkesbury - The remaining available space was
let to Amiosec Ltd. (10,070 sq. ft.) at a rent of GBP151,050 pa (c.
GBP15.00/sq. ft.) on a five-year lease with the option to break in
2023
-- Leo House, Wallington - A new rent of GBP132,000 pa
(GBP17.00/sq.ft.) with existing tenant Crimestoppers Trust, has
been agreed, representing an uplift of 19.7% against the previous
rent. The lease has been renewed for a further 10 years to July
2030
-- Elmbridge Court, Gloucester - Buyline Ltd. has leased 1,610
sq. ft. for a period of five years with the option to break in 2023
at a rent of GBP29,785 pa (GBP18.50/sq.ft.)
-- Silver Court, Watchmead, Welwyn Garden City - 1,224 sq. ft.
of space has been let to G-DAK Cyber Solution Ltd. at a rent of
GBP22,650 pa (GBP18.50 sq. ft.) for a period of five years with the
option to break in 2023
-- Telford Court, Chester - Close Brothers Ltd. has renewed its
lease for a further 10 years to August 2030 at a rental income of
GBP75,000 pa (GBP14.76/sq.ft.) on 5,083 sq. ft.
-- Elmbridge Court, Gloucester - Frazer-Nash Consultancy Ltd.
has renewed its two leases for a further five years to September
2025 at a combined rental income of GBP85,000 pa (GBP17.26 sq. ft.)
on 4,925 sq. ft. of space, this represents an increase of 38.2%
against the previous rental income
-- Venlaw Building, Glasgow - The Health & Social Care
Alliance Scotland renewed its lease for 5,134 sq. ft. plus car
parking for a further 10 years to September 2028 at a rental income
of GBP72,000 (GBP14.02/sq. ft.), which is an increase of 3.6%
against previous rental income
Sales
Total disposals in the three months to 30 September 2020
amounted to GBP5.0m, reflecting an uplift of 15.4% against most
recent valuation (June 2020).
Subsequent Events post 30 September 2020:
Since the quarter end, the Group has successfully completed the
following lettings, sales and acquisitions:
Lettings
-- 1 Burgage Square, Merchant Square, Wakefield - Unit 1 (17,629
sq. ft.) has been successfully let on a back-to-back basis to the
Secretary of State for Housing Communities & Local Government.
This has been let on a 17-year lease with the option to break in
2032 at a rental income of GBP196,222 pa (GBP11.13/sq. ft.). This
follows a surrender of the lease to The West Yorkshire Community
Rehabilitation Company Ltd.
-- Unit B, Fleming Court, Castleford - Wakefield & District
Housing Ltd. has renewed its lease for 5,095 sq. ft. of space for a
further six months at a rental income of GBP68,000 pa (GBP13.35/sq.
ft.)
-- Norfolk House, Smallbrook Queensway, Birmingham - A 12-month
reversionary lease has been signed with The Secretary of State for
Housing Communities and Local Government for 19,420 sq. ft. at a
rent of GBP258,626 pa (GBP13.32/sq.ft)
Sales
-- Juniper Park, Basildon, was sold on 1 October 2020 for
GBP32.7m, reflecting a 59.4% uplift from the acquisition price,
including subsequent capital expenditure and 3.9% above the
valuation as at the 30 June 2020
Acquisitions
Total acquisitions from 30 September 2020 to date amounted to
GBP25.6m, with rent of GBP2.7m, reflecting a NIY of 9.7%, and
weighted average unexpired lease term ("WAULT") to first break of
3.7 years
-- Waterside Business Park, Swansea, and 2410 Aztec West,
Bristol, both these two-floor offices assets were acquired on 2
October 2020 for a total of GBP10.2m, with a combined rent of
GBP1.1m pa, reflecting a NIY of 10.1% and a WAULT to first break of
4.2 years
-- Global Reach, Cardiff, a four-floor office asset was acquired
on 28 October 2020 for GBP8.4m, with a rent of GBP0.8m pa
reflecting a NIY of 8.9%, and WAULT to first break of 2.6 years
-- Braehead, Scotland, a manufacturing facility with associated
yard space and an office asset was acquired on 5 November 2020 for
GBP7.1m, with a rent of GBP0.8m pa, reflecting a NIY of 10.1%, and
a WAULT to first break of 4.3 years
Forthcoming Events
25 February 2021 Q4 2020 Dividend Declaration and Portfolio
Valuation
25 March 2021 Full year 2020 Preliminary Results Announcement
19 May 2021 May 2020 Trading Update and Outlook Announcement
Q1 2021 Dividend Declaration Announcement
Annual General Meeting
Note: All dates are provisional and subject to change
- ENDS -
Enquiries:
Regional REIT Limited
Press enquiries through Buchanan
Toscafund Asset Management Tel: +44 (0) 20 7845 6100
Investment Manager to the Group
Adam Dickinson, Investor Relations, Regional REIT Limited
London & Scottish Property Investment Management Tel: +44 (0) 141 248 4155
Asset Manager to the Group
Stephen Inglis
Buchanan Communications Tel: +44 (0) 20 7466 5000
Financial PR
Charles Ryland, Henry Wilson, George Beale
About Regional REIT
Regional REIT Limited ("Regional REIT" or the "Company") and its
subsidiaries (the "Group") is a United Kingdom ("UK") based real
estate investment trust that launched in November 2015. It is
managed by London & Scottish Property Investment Management
Limited ("LSPIM"), the Asset Manager, and Toscafund Asset
Management LLP ("Toscafund"), the Investment Manager.
Regional REIT's commercial property portfolio is comprised
wholly of income producing UK assets and comprises, predominantly,
offices and industrial units located in the regional centres
outside of the M25 motorway. The portfolio is highly diversified,
with 150 properties, 857 tenants as at 30 September 2020, with a
valuation of GBP739.9m.
Regional REIT pursues its investment objective by investing in,
actively managing and disposing of regional core and core plus
property assets. It aims to deliver an attractive total return to
its Shareholders, targeting greater than 10% per annum, with a
strong focus on income supported by additional capital growth
prospects.
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.
LEI: 549300D8G4NKLRIKBX73
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END
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