REG - Regional REIT Ltd - 2023 Half Year Results
12/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230912:nRSL0719Ma&default-theme=true
RNS Number : 0719M Regional REIT Limited 12 September 2023
12 September 2023
Regional REIT Limited
("Regional REIT", the "Group" or the "Company")
2023 Half Year Results
Resilient operational performance in challenging macroeconomic conditions
Regional REIT (LSE: RGL), the regional office specialist today announces its
half year results for the six months ended 30 June 2023.
Financial highlights:
· Total rent collection for the period was 98.8% of rent due, ahead
of the 97.8% of rent collected for the equivalent period in 2022
· Rent roll broadly unchanged at £69.8m (30 June 2022: £72.0m; 31
December 2022: £71.8m)
· Portfolio valuation £752.2m (31 December 2022: £789.5m). On a
like-for-like basis, portfolio value decreased by 3.8%, after adjusting for
capital expenditure and disposals during the period.
· Net initial yield increased to 6.1% (30 June 2022: 5.7%; 31
December 2022: 6.0%)
· EPRA EPS of 2.5p per share ("pps") for the period (30 June 2022:
EPRA EPS: 2.9p); IFRS EPS: (2.4) pps (30 June 2022: IFRS EPS 5.5pps)
· Operating profit before gains and losses on property assets and
other investments for the period amounted to £20.6m (30 June 2022: £23.4m)
· H1 dividend of 2.85pps (30 June 2022: 3.30pps); due to
challenging macroeconomic conditions, and in accordance with the board's
strategy, the dividend continues to be aligned with earnings going forward
· EPRA NTA per share 66.9pps (31 December 2022: 73.5pps); IFRS NAV
of 72.5pps (31 December 2022: 78.1pps)
· Group's cost of debt (incl. hedging) remained low at 3.5% pa (31
December 2022: 3.5% pa) - 100% fixed, swapped or capped
· Weighted average debt duration 4.0 years (31 December 2022: 4.5
years)
· Net LTV 51.9% (31 December 2022: 49.5%). Currently, a programme
of asset management initiatives and disposals are in train to reduce LTV to
the long term target of 40%.
Operational highlights:
· Good EPC progress continues with the Group weighted average EPC
score improving to C 70 (31 December 2022: C 73)
· At the period end, 92.0% (31 December 2022: 91.8%) of the
portfolio by valuation was offices, 3.5% retail (31 December 2022: 3.6%), 3.0%
industrial (31 December 2022: 3.1%) and 1.5% other (31 December 2022:1.4%)
· By income, office assets accounted for 91.4% of gross rental
income (30 June 2022: 91.5%; 31 December 2022: 91.5%) and 4.6% (June 2022:
4.5%, December 2022: 4.5%) was retail. The balance was made up of industrial,
2.7% (June 2022: 2.6%, December 2022: 2.6%), and other, 1.4% (June 2022: 1.5%,
December 2022: 1.3%)
· Portfolio remained diversified with 150 properties (31 December
2022: 154), 1,535 units (31 December 2022: 1,552) and 1,038 tenants (31
December 2022: 1,076)
· The Group made disposals amounting to £14.6m (before costs)
during the period, yielding 2.4% (9.4% excluding vacant assets). The proceeds
have since been used in part to reduce borrowing and fund capital expenditure.
· At the period end, the portfolio valuation split by region was as
follows: England 78.4% (31 December 2022: 78.3%), Scotland 16.4% (31 December
2022: 16.7%) and the balance of 5.1% (31 December 2022: 5.0%) was in Wales.
· EPRA Occupancy rate of 82.5% (31 December 2022: 83.4%)
· During the period, the Company completed 45 new lettings. When
fully occupied, these will provide an additional gross rental income of
c.£1.2m per annum ("pa"), 13.5% above December 2022 ERV.
Post-Period end highlights:
· On 12 September 2023, the Company declared the Q2 2023 dividend
of 1.20pps (Q2 2022 dividend: 1.65pps), for the period 1 April 2023 to 30 June
2023, to be paid to shareholders on 19 October 2023.
Stephen Inglis, CEO of London and Scottish Property Investment Management, the
Asset Manager, commented:
"It has been another challenging period for the commercial real estate sector
as rapidly rising interest rates continued to impact valuations. During the
six months to 30 June 2023, the Company's portfolio valuation declined on a
like-for-like basis by 3.8%, after adjusting for disposals and capital
expenditure, outperforming the MSCI UK regional office benchmark, which saw a
decline of 7.2% over the same period. This has resulted in the increase of the
Company's loan to value to 51.9%. Thanks to the defensive debt positioning
being 100% fixed, swapped or capped, the weighted average cost of debt remains
at 3.5%. The Asset Manager continues to implement its active asset management
strategy, including a programme of asset sales to reduce net borrowings back
to the Company's long term c.40% target.
"With the challenging economic backdrop our net rental income has been
adversely impacted by higher non-recoverable property costs and lower income
from lease surrender, dilapidations payments and other income. As such the
Board continues to align the dividend with earnings and has today declared the
Q2 2023 dividend of 1.20pps.
"As we look ahead, we remain wholly committed to reducing the LTV, improving
occupancy and the portfolio's weighted average EPC rating as we actively
manage the portfolio. We look forward to updating shareholders on our progress
at the next juncture."
- ENDS -
Enquiries:
Regional REIT Limited
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 regional@buchanan.uk.com
Charles Ryland /Henry Wilson / George Beale
About Regional REIT
Regional REIT Limited ("Regional REIT" or the "Company") and its
subsidiaries(1) (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, the Asset
Manager, and Toscafund Asset Management LLP, the Investment Manager.
Regional REIT's commercial property portfolio is comprised wholly of UK
assets, offices located in regional centres outside of the M25 motorway. The
portfolio is geographically diversified, with 150 properties, 1,535 units and
1,038 tenants as at 30 June 2023, with a valuation of £752.2 million.
Regional REIT pursues its investment objective by investing in, actively
managing and disposing of regional Core Property and Core Plus Property
assets. It aims to deliver an attractive total return to its Shareholders,
targeting greater than 10% per annum ("pa"), with a strong focus on income
supported by additional capital growth prospects.
For more information, please visit the Group's website
at www.regionalreit.com (http://www.regionalreit.com/) .
KEY FINANCIALS
Period ended 30 June 2023
30 31
June December 2022
2023
Portfolio Valuation £752.2m £789.5m
IFRS NAV per Share 72.5p 78.1p
EPRA* NTA per Share 66.9p 73.5p
EPRA* earnings per Share 2.5p 2.9p
Dividend per Share 2.85p 3.3p
Net Loan to Value Ratio** 51.9% 49.5%
Weighted Average Cost of Debt** 3.5% 3.5%
Weighted Average Debt Duration** 4.0 yrs 4.5 yrs
The European Public Real Estate Association ("EPRA")*
The EPRA's mission is to promote, develop and represent the European public
real estate sector. As an EPRA member, we fully support the EPRA Best
Practices Recommendations. Specific EPRA metrics can be found in the Company's
financial and operational highlights, with further disclosures and supporting
calculations in the full Half Year Report.
* The European Public Real Estate Association (EPRA)
** Alternative Performance Measures. Details are provided in the Glossary of
Terms in the full Half-Year Report and the EPRA Performance Measures below.
CHAIRMAN'S STATEMENT
"99% of tenants having returned to the office and rent collections remaining
strong"
Kevin McGrath
Chairman
Overview
I am pleased to report the Group's results for the six months to 30 June 2023,
with 99% of our tenants having returned to the office and rent collections
remaining strong.
The Company has a clear strategy of being the office provider of choice in the
regions outside of London,
offering vibrant places to help tenants thrive at all stages of their business
cycle with tailored offerings to match their requirements. By utilising the
specialised Asset Manager's platform and with its extensive experience in the
regions of the UK, the Company continues to work hard to deliver a robust
income stream and long-term capital growth, whilst encompassing a sustainable
approach. The portfolio weighted average EPC continued to improve to C 70 from
C 73 as at 31 December 2022.
The challenging macroeconomic environment continued to affect all commercial
real estate sectors, with a like- for-like decline in value of 3.8%, after
adjusting for capital expenditure, acquisitions and disposals during the
period. However, the portfolio outperformed versus a decline of 7.2% MSCI UK
regional office values during the period. During the six months to 30 June
2023, disposals of non-core assets amounted to £14.1 million (net of costs)
reflecting a net initial yield of 2.4% (9.4% excluding vacant properties) with
no acquisitions in the period. The programme of disposals reflects our focus
upon de-risking the offering in the short to medium term. The rolling capital
expenditure programme amounted to £6.7 million.
Rent collection remained strong throughout the period to 30 June 2023.
Currently, rent collection for the period to 30 June 2023 amounted to 98.8%
(equivalent period for the six months to 30 June 2022 97.8%), however,
operational costs continue to be impacted by inflationary pressures and
resulted in an EPRA diluted earnings of 2.5 pence per share ("pps") (six
months to 30 June 2022: 2.9pps). IFRS diluted earnings per share were (2.4pps)
(six months to 30 June 2022: 5.5pps).
Financial Resources
As at 30 June 2023 the EPRA* NTA amounted to £344.9 million (31 December
2022: £379.2 million) and a cash balance of £41.2 million (31 December 2022:
£50.1 million), of which £26.0 million is unrestricted (31 December 2022:
£37.8 million).
The defensive debt positioning continues to mitigate rate volatility. The
borrowings are comprised of a 56.4% fixed rate debt, with the balance being
swapped or capped. This proactive and defensive approach ensured that the
weighted average cost of debt remained 3.5% at 30 June 2023 (31 December 2022:
3.5%), with no requirement to refinance until August 2024.
The net loan-to-value at 30 June 2023 amounted to 51.9% (31 December 2022:
49.5%). The Asset Manager continues to implement its active asset management
strategy and disposal programme with the ambition of promptly reducing the net
borrowings back to the Company's long term c.40% target.
* Alternative Performance Measures. Details are provided in the Glossary of
Terms in the full Half Yearly Report and the EPRA Performance Measures below.
Sustainability
We continue to focus upon sustainability within our business model with the
continued membership of UK Green Building Council, Better Buildings
Partnership, EPRA sustainability benchmarking and the Global Real Estate
Sustainability Benchmark (GRESB). We look forward to providing a positive
update on our GRESB accreditation in due course.
Market Environment
The UK regions outside of London attracted £3.0 billion in Q2 2023, 2.3%
above the previous quarter, but 31.6% lower than the five-year quarterly
average. Investment in Q2 brought the H1 2023 total to £6.0 billion, 28.0%
above the level recorded during the first lockdown due to the Covid-19
pandemic. Research by Lambert Smith Hampton ("LSH") highlights the importance
of the regional markets, with the regions outperforming when compared with
London. At £3.0 billion, investment in single assets across the UK regional
markets in Q2 2023 was 26.3% higher than the level of investment in Greater
London - well above the five-year quarterly average margin of 0.6%. Two
regions that experienced robust levels of investment in Q2 2023 were the West
Midlands and the South East. Total investment in the West Midlands reached
£0.6 billion, 10.8% above the five-year quarterly average - the strongest
regional performance relative to trend. Data from LSH shows that £0.5 billion
was invested in the South East. Other regional markets that performed well
relative to trend include Scotland and the North West of England.
The most recent data from LSH shows that investment in UK commercial property
totalled £15.7 billion in the first half of 2023. Although Q2 2023 volumes
were 10.6% below Q1 figures, the number of deals increased by approximately
9.0% over the same period. The most recent Office of National Statistics
figures show that UK inflation dropped to 6.8% in the year to July, from 7.9%
in June. As a result, LSH predict that there will be a considerable rise in
investment volumes, if not in the final quarter of 2023, then at the beginning
of 2024.
Investment volumes in the UK regional office market reached £0.8 billion in
Q2 2023, 27.8% higher than the previous quarter. Overall, investment in
regional offices reached £1.4 billion in H1 2023. Although investment in
regional offices in the first half of 2023 was 43.4% below trend, optimism in
the regional markets continues to be supported by strong employment growth and
a fall in the number of employees exclusively working from home. The most
recent data from the ONS shows that the UK employment rate rose to 76.0% in
the three months to May 2023, up 0.1% for the same period in 2022.
Additionally, data from the ONS shows that despite the rise in hybrid working
as a result of Covid-19, the vast majority of people do not work from home,
with 56.0% of employees reporting that they exclusively travel to the office
and only 16.0% of workers reporting that they worked exclusively from home -
down from 26% in mid-January 20222.
Dividends
For the period under review, the Company declared total dividends of 2.85pps
(six months to June 2022: 3.30pps), comprising one quarterly dividends of
1.65pps and one quarterly dividend of 1.20pps.
Given the challenging economic backdrop, inflationary pressures continue to
impact the net rental income and the cost base. As such the Board continues to
align the dividend with earnings, with the priority remaining to offer an
attractive dividend to shareholders.
Asset Manager Update
As announced on the 13 April 2023, ARA Asset Management Ltd. acquired a
majority shareholding
stake in the Asset Manager, London & Scottish Property Investment
Management, with Stephen Inglis retaining a significant minority interest. The
day-to-day asset management team remains unchanged and are now supported by
the resources of a large global real estate platform, therefore shareholders
can be reassured that the Asset Manager capabilities have been strengthened.
Subsequent Events
On 11 September 2023, the Board of Directors approved a dividend of 1.20 pence
per Share in respect of the period 1 April 2023 to 30 June 2023 for
announcement on 12 September 2023. The dividend will be paid on 19 October
2023 to Shareholders on the register as at 22 September 2023. These condensed
consolidated financial statements do not reflect this dividend.
Performance
For the period under review, the Company's Total Shareholder Return was
-18.5%, versus the return of
-10.3% for the FTSE EPRA NAREIT UK Total Return Index over the same period.
Since listing on 6 November 2015, the Company's EPRA Total Return was 20.8%
and the annualised EPRA Total Return was 2.5%. Total Shareholder Return was
-14.8%, compared with the FTSE EPRA NAREIT UK Total Return Index, which has
generated a return of -23.7% over the same period.
Since listing on 6 November 2015, the Company's EPRA Total Return was 20.8%
and the annualised EPRA Total Return was 2.5%. Total Shareholder Return was
-14.8%, compared with the FTSE EPRA NAREIT UK Total Return Index, which has
generated a return of -23.7% over the same period.
Board And Governance
William Eason, Senior Independent Non-Executive Director and Tim Bee,
Non-Executive Director stepped
down from the Board at the 2023 AGM. The Board thanks both Mr Eason and Mr Bee
for their invaluable input and commitment to the Company over their tenures
and wishes them well in their future endeavours.
Daniel Taylor was appointed as Senior Non-Executive Director and Massy
Larizadeh was appointed Chairman of the Management Engagement and Remuneration
Committee and the Nomination Committee with effect from 25 May 2023.
Outlook
Although the recent outlook for the UK economy has improved, the Board remains
vigilant to the continued macroeconomic uncertainty over the short term. The
Company has continued to perform well operationally and has delivered against
the controllable factors. We continue to see significant opportunities for
value creation over the long-term.
Kevin McGrath
Chairman
11 September 2023
ASSET AND INVESTMENT MANAGERS' REPORT
"It has been another challenging period for the commercial real estate sector
as rapidly rising interest rates continued to impact valuations. During the
six months to 30 June 2023, the Company's portfolio valuation declined on a
like-for-like basis by 3.8%, after adjusting for capital expenditure and
disposals, albeit significantly outperforming the MSCI UK regional office
benchmark, which saw a decline of 7.2% over the same period. This in turn
increased the Company's Loan to Value ("LTV") to 51.9%, whilst the weighted
average cost of debt remained at 3.5% thanks to the defensive positioning and
high rate of fixed, swapped or capped debt. The Asset Manager continues to
implement its active asset management strategy, including a programme of asset
sales to reduce net borrowings back to the Company's long term c.40% target.
The Company's operational performance during the period remained robust,
thanks to our high-quality blue- chip tenant base, which is diversified by
both sector and geography, leading to rent collection of 98.8% and rental
income totalling £69.8m.
As we look ahead to the remainder of 2023, we remain wholly committed to
reducing the LTV, and improving the portfolio's weighted average EPC rating as
we actively manage the portfolio. We look forward to updating Shareholders on
our progress at the next juncture."
Stephen Inglis
CEO of London & Scottish Property Investment Management, Asset Manager
Investment Activity in the UK Commercial Property Market
Investment in the UK commercial property market totalled £54.1 billion in
2022, according to research from LSH. However, due to the impact of further
interest rate hikes as a result of continuing inflation, investment was more
subdued in the first two quarters of 2023 due to more prolonged uncertainty.
The most recent data from LSH shows that investment in UK commercial property
reached £15.7 billion in the first half of 2023. Although Q2 2023 volumes
were 10.6% below Q1 figures, the number of deals increased by approximately
9.0% over the same period. That said, financial markets have begun to settle
following news that inflation slowed substantially to its lowest annual rate
since March 2022. The most recent ONS figures show that UK inflation dropped
to 6.8% in the year to July, from 7.9% in June, ahead of forecasts which
predicted a fall to 8.2%. As a result, LSH predict that there will be a
considerable rise in investment volumes, if not in the final quarter of 2023,
then at the beginning of 2024.
The UK regions outside of London attracted £3.0 billion in Q2 2023, 2.3%
above the previous quarter, but 31.6% lower than the five-year quarterly
average. Investment in Q2 brought the H1 2023 total to £6.0 billion, 28.0%
above the level recorded during the first lockdown due to the Covid-19
pandemic. Research by LSH highlights the importance of the regional markets,
with the regions outperforming when compared with London. At £3.0 billion,
investment in single assets across the UK regional markets in Q2 2023 was
26.3% higher than the level of investment in Greater London - well above the
five-year quarterly average margin of 0.6%. Two regions that experienced
robust levels of investment in Q2 2023 were the West Midlands and the South
East. Total investment in the West Midlands reached £0.6 billion, 10.8% above
the five-year quarterly average - the strongest regional performance relative
to trend. Data from LSH shows that £0.5 billion was invested in the South
East. Other regional markets that performed well relative to trend include
Scotland and the North West of England.
Investment volumes in the UK regional office market reached £0.8 billion in
Q2 2023, 27.8% higher than the previous quarter. Overall, investment in
regional offices reached £1.4 billion in H1 2023. Although investment in
regional offices in the first half of 2023 was 43.4% below trend, optimism in
the regional markets continues to be supported by strong employment growth and
a fall in the number of employees exclusively working from home. The most
recent data from the ONS shows that the UK employment rate rose to 76.0% in
the three months to May 2023, up 0.1% for the same period in 2022(1).
Additionally, data from the ONS shows that despite the rise in hybrid working
as a result of Covid-19, the vast majority of people do not work from home,
with 56.0% of employees reporting that they exclusively travel to the office
and only 16.0% of workers reporting that they worked exclusively from home -
down from 26% in mid- January 2022(2).
1 ONS, Labour Market Overview, UK, July 2023
2 ONS, Opinions and Lifestyle Survey, February 2023
Overseas investment in the UK commercial property market accounted for 54.5%
of total investment in Q2 2023 and drove overall investment at the larger end
of the market, accounting for 78.6% of the £100m plus deals in Q2 2023.
Figures indicate that overseas investment reached £4.0 billion in Q2 2023,
despite being 3.6% higher than the previous quarter, overseas investment was
35.8% below the five-year quarterly average. International investment in the
second quarter of the year brought the H1 2023 total to £7.9 billion.
However, overseas investment was largely supported by the North American
buyers - the only net buyer of UK commercial property in Q2 2023, which
accounted for approximately 62.0% of all overseas investment. LSH research
suggests that North American investors were the most acquisitive net buyers at
£2.5 billion. Conversely, inflows from Far East and European investors stood
at only one third of the quarterly average.
Occupational Demand in the UK Regional Office Market
Avison Young estimate that take-up of office space across the nine regional
markets(3) reached 1.6 million sq. ft. in Q2 2023, bringing the half year
total to 3.3 million sq. ft., 3.6% below the five year average take-up for the
first six months of the year. City centre activity accounted for the largest
proportion of take-up (58.5%) in H1 2023 at 1.9 million sq. ft. However, when
comparing this to previous years, city centre take-up as a proportion of total
take-up has steadily declined from a high of 63.8% in 2019. In the first half
of 2023 approximately 1.4 million sq. ft. was transacted in the out of town
market, 3.0% above the five year average, and accounting for 41.5% of total H1
2023 take-up - the highest proportion recorded over the last decade(4). The
Asset Manager believes that there is scope for take-up to increase throughout
the remainder of 2023 as there continues to be a drive among employers to get
more workers back into the office in order to increase productivity.
Additionally, many of the large tech companies like Google, Amazon, Zoom and
Lyft have moved away from fully remote working, with some mandating at least
three days in the office. Meanwhile, JP Morgan and Goldman Sachs have
curtailed remote working. Furthermore, encouraging research from the Centre
for Cities(5) think tank suggests that in the next two years, working five
days a week from the office will become the norm again.
Occupational demand in the regional office markets continued to be driven by
the professional services sector, which accounted for the highest proportion
of take-up at 16.9% in the first six months of 2023. Moreover, public
services, education & health, and technology, media & telecoms sectors
accounted for the second and third largest proportion of take-up in the
regional cities, accounting for 18.4% and 14.7%, respectively(6). Savills
research indicates that although office market sentiment is going through a
period of change, the same key sectors continue to drive demand for UK office
stock as the three most active sectors prior to the Covid-19 pandemic remain
in the top three in the first half of 2023.
According to Savills, there was a rise in availability for regional office
stock across ten regional UK markets(7), with total availability in H1 2023 to
15.3 million sq. ft. Despite the uptick in availability in the first half of
2023 supply across the ten regional markets remains 1.2% below the long-term
average.
In terms of speculative development, it is estimated that approximately 3.7
million sq. ft. of office space is currently under construction in the Big
Nine regional markets, down from 4.7 million sq. ft. for the same period last
year, with Manchester, Bristol, and Glasgow accounting for 25.3%, 18.4% and
17.2%, respectively. Approximately 30.7% of office buildings currently under
construction are already pre-let.
3 Nine regional office markets mentioned by Avison Young include: Birmingham,
Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle
4 Avison Young, The Big Nine, Q2 2023
5 Centre for Cities, Office Politics, May 2023
6 Savills, The Regional Office Market Review, Q2 2023
7 Ten regional office markets mentioned by Savills includes: Aberdeen,
Birmingham, Bristol, Cambridge, Cardiff, Edinburgh, Glasgow, Leeds,
Manchester, and Oxford
Rental Growth in the UK Regional Office Market
According to monthly data from MSCI, rental value growth held up well for the
rest of UK office markets in the 12 months ended June 2023 with growth of
2.7%. Conversely, central London offices experienced modest growth of 1.3%
over the same period. The most recent figures from MSCI shows that there is
evidence of sustained rental growth in the majority of the regional office
markets. By region, the strongest regional rental growth in June (year-on-year
comparison) was recorded in the South West of England at 3.3%(8). Avison Young
expects rental growth to continue across most markets for the remainder of
2023 and into 2024. Demand for quality office space has put an upward pressure
on rents, with growth of 4.3% recorded across the Big Nine regional markets in
the first half of 2023, with average headline rents now sitting at £35.39 per
sq. ft., according to research from Avison Young.
8 Colliers International, Property Snapshot, June 2023
Regional REIT's Office Assets
EPRA occupancy of the Group's regional offices as at 30 June 2023 was 81.6%
(30 June 2022: 83.3%). A like-for- like comparison of the Group's regional
offices EPRA occupancy, 30 June 2023 versus 30 June 2022, shows occupancy of
81.6% (30 June 2022: 84.7%).
WAULT to first break was 2.8 years (30 June 2022: 2.6 years); like-for-like
WAULT to first break was 2.8 years (30 June 2022: 2.6 years).
Property Portfolio
As at 30 June 2023, the Group's property portfolio was valued at £752.2
million (30 June 2022: £918.2 million; 31 December 2022: £789.5 million),
with rent roll of £69.8 million (30 June 2022: £72.0 million; 31 December
2022: £71.8 million), and an EPRA occupancy rate of 82.5% (30 June 2022:
83.8%; 31 December 2022: 83.4%). On a like-for-like basis, 30 June 2023 versus
30 June 2022 EPRA occupancy was 82.5% (30 June 2022: 85.2%).
There were 150 properties (30 June 2022: 159; 31 December 2022: 154), in the
portfolio, with 1,535 units (30 June 2022: 1,517; 31 December 2022: 1,552) and
1,038 tenants (30 June 2022: 1,086; 31 December 2022: 1,076). If the portfolio
was fully occupied at Colliers view of market rents, the rental income would
be £88.9 million per annum (30 June 2022: £94.1 million; 31 December 2022:
£92.0
million).
As at 30 June 2023, the net initial yield on the portfolio was 6.1% (30 June
2022: 5.7%; 31 December 2022: 6.0%), the equivalent yield was 9.5% (30 June
2022: 8.6%; 31 December 2022: 9.0%) and the reversionary yield was 10.4% (30
June 2022: 9.2%; 31 December 2022: 10.2%).
Property Portfolio by Sector as at 30 June 2023
Sector Valuation Sq. ft. Occupancy (EPRA) WAULT to first break Gross rental income Average rent ERV Capital rate Yield
EPRA Net initial
(%)
% by valuation Equivalent Reversionary
Properties (£m) (m) (%) (yrs) (£m) (£psf) (£m) (£psf) (%) (%)
Office 125 692.3 92.0 5.6 81.6 2.8 63.7 14.60 83.0 123.92 6.0 9.6 10.5
Retail 18 26.4 3.5 0.3 93.1 3.8 3.2 11.16 2.9 79.69 9.3 9.5 9.6
Industrial 4 22.3 3.0 0.4 97.0 5.5 1.9 5.27 2.1 53.17 6.5 7.6 8.0
Other 3 11.2 1.5 0.1 100.0 9.8 1.0 15.57 0.9 116.20 7.3 8.7 7.1
Total 150 752.2 100.0 6.4 82.5 3.0 69.8 13.76 88.9 116.91 6.1 9.5 10.4
Property Portfolio by Region as at 30 June 2023
Region Valuation Sq. ft. Occupancy (EPRA) WAULT to first break Gross rental income Average rent ERV Capital rate Yield
Properties (£m) % by valuation (m) (%) (yrs) (£m) (£psf) (£m) (£psf) EPRA Net initial (%) Equivalent Reversionary
(%) (%)
Scotland 36 123.7 16.4 1.2 76.9 4.8 11.5 13.66 17.5 101.93 5.6 10.0 11.4
South East 26 138.9 18.5 0.9 82.9 2.4 12.4 16.24 15.6 147.98 5.8 9.1 9.9
North East 23 122.1 16.2 1.0 80.3 3.2 10.5 12.75 13.7 117.52 5.8 9.5 10.4
Midlands 26 151.4 20.1 1.4 86.5 2.9 15.0 13.05 17.9 107.76 6.2 9.4 10.3
North West 19 103.0 13.7 0.9 75.7 2.2 9.4 13.55 12.3 110.99 5.8 9.7 10.6
South West 14 74.6 9.9 0.5 91.9 2.1 7.1 16.83 7.9 157.48 7.8 9.3 9.7
Wales 6 38.5 5.1 0.4 97.0 3.8 3.8 10.23 4.0 88.34 7.6 8.8 9.0
Total 150 752.2 100.0 6.4 82.5 3.0 69.8 13.76 88.9 116.91 6.1 9.5 10.4
Tables may not sum due to rounding.
Top 15 Investments (market value) as at 30 June 2023
Market % of Lettable EPRA Annualised % of gross rental income WAULT
value (£m) portfolio area Occupancy gross rent (£m) to
(%) first
break
300 Bath Street, Office University of Glasgow, 21.4 2.8% 156,853 87.6% 1.2 1.8% 2.4
Glasgow Glasgow Tay House Centre
Ltd, Fairhurst Group LLP,
London & Scottish Property
Investment Management
Eagle Court, Office Virgin Media Ltd, Rexel UK Ltd 20.2 2.7% 132,979 67.6% 1.6 2.3% 0.6
Coventry Road,
Birmingham
Hampshire Office Aviva Central Services UK 19.8 2.6% 84,043 100.0% 1.7 2.4% 3.5
Corporate Park, Ltd, Lloyd's Register EMEA,
Eastleigh Complete Fertility Ltd,
National Westminster Bank
Plc
Beeston Business Office/ Metropolitan Housing Trust 17.2 2.3% 215,330 100.0% 1.4 2.0% 5.1
Park, Nottingham Industrial Ltd, SMS Electronics Ltd,
Heart Internet Ltd, SMS
Product Services Ltd
800 Aztec West, Office NNB Generation Company 16.5 2.2% 73,292 100.0% 1.5 2.2% 0.9
Bristol (HPC) Ltd, Edvance SAS
Manchester Green, Office Chiesi Ltd, Ingredion UK 16.5 2.2% 107,760 79.1% 1.4 2.0% 3.1
Manchester Ltd, Assetz SME Capital
Ltd, Contemporary Travel
Solutions Ltd
Orbis 1, 2 & 3, Pride Office First Source Solutions UK 16.2 2.1% 121,883 100.0% 1.8 2.6% 3.9
Park, Derby Ltd, DHU Health Care C.I.C.,
Tentamus Pharma (UK) Ltd
Norfolk House, Office Global Banking School Ltd, 15.3 2.0% 115,780 97.7% 1.4 1.9% 6.8
Smallbrook Accenture (UK) Ltd
Queensway,
Birmingham
Linford Wood Office IMServ Europe Ltd, Market 15.2 2.0% 107,352 91.1% 1.5 2.1% 2.1
Business Park, Force Information (Europe)
Milton Keynes Ltd, Aztech IT Solutions Ltd
Capitol Park, Leeds Office Hermes Parcelnet Ltd, BDW 13.4 1.8% 98,340 45.9% 0.7 1.0% 4.6
Trading Ltd
Portland Street, Office Evolution Money Group Ltd, 12.9 1.7% 55,787 95.9% 1.1 1.5% 2.4
Manchester Mott MacDonald Ltd, NCG
(Manchester) Ltd, Simard Ltd
Oakland House, Office Please Hold (UK) Ltd, 12.9 1.7% 161,502 78.5% 1.0 1.5% 2.1
Manchester A.M.London Fashion Ltd,
CVS (Commercial Valuers &
Surveyors) Ltd
Templeton On The Office The Scottish Ministers, The 12.0 1.6% 142,520 92.7% 1.3 1.9% 3.9
Green, Glasgow Scottish Sports Council, Noah
Beers Ltd, The Wise Group
Origin 1 & 2, Office Knights Professional Services 11.7 1.6% 45,855 100.0% 1.1 1.6% 1.5
Crawley Ltd, DMH Stallard LLP,
Spirent Communications Plc,
Travelopia Holdings Ltd
Buildings 2, Bear Office Utmost Life and Pensions Ltd, 11.3 1.5% 61,642 94.5% 1.0 1.5% 4.0
Brook Office Park, Musarubra UK Subsidiary 3
Aylesbury Ltd, Agria Pet Insurance Ltd
Total 232.4 30.9% 1,680,918 87.4% 19.8 28.4% 3.1
Tables may not sum due to rounding
Top 15 Tenants (share of rental income) as at 30 June 2023
WAULT to first break Lettable area Annualised gross rent % of gross rental income
Tenant Property Sector (years) (Sq. Ft) (£m)
Virgin Media Ltd Eagle Court, Birmingham Southgate Park, Peterborough Information and communication 0.7 107,830 1.8 2.5%
Shell Energy Retail Ltd Columbus House, Coventry Electricity, gas, steam 0.5 53,253 1.4 2.0%
and air conditioning
supply
Secretary of State for 1 Burgage Square, Merchant Square, Public sector 4.1 108,915 1.1 1.5%
Communities & Local Wakefield
Government Ltd Albert Edward House, Preston
Bennett House, Stoke-On-Trent
Oakland House, Manchester
Waterside Business Park, Swansea
EDF Energy Ltd Endeavour House, Sunderland Electricity, gas, steam 7.2 77,565 1.0 1.5%
and air conditioning
supply
First Source Solutions Orbis 1, 2 & 3, Pride Park, Derby Administrative and 3.8 62,433 1.0 1.4%
UK Ltd support service
activities
E.ON UK Plc Two Newstead Court, Nottingham Electricity, gas, steam 1.8 99,142 0.9 1.4%
and air conditioning
supply
John Menzies Plc 2 Lochside Avenue, Edinburgh Professional, scientific 0.1 43,780 0.9 1.3%
and technical activities
NNB Generation 800 Aztec West, Bristol Electricity, gas, steam 0.7 41,743 0.9 1.2%
Company (HPC) Ltd and air conditioning
supply
Global Banking School Norfolk House, Birmingham Education 9.4 44,245 0.8 1.2%
Ltd
SPD Development Co Clearblue Innovation Centre, Bedford Professional, scientific 2.3 58,167 0.8 1.2%
Ltd and technical activities
Aviva Central Services Hampshire Corporate Park, Eastleigh Other service activities 1.4 42,612 0.8 1.1%
UK Ltd
Odeon Cinemas Ltd Kingscourt Leisure Complex, Dundee Information and 12.3 41,542 0.8 1.1%
communication
SpaMedica Ltd 1175 Century Way, Thorpe Park, Leeds Human health and 2.9 50,656 0.7 1.0%
Albert Edward House, Preston social work activities
Fairfax House, Wolverhampton
lll Acre, Princeton Drive, Stockton On Tees
Southgate Park, Peterborough
The Foundation Chester Business Park, Chester
Edvance SAS 800 Aztec West, Bristol Electricity, gas, steam 1.1 31,549 0.7 1.0%
and air conditioning
supply
Care Inspectorate Compass House, Dundee Public sector 4.8 51,852 0.7 1.0%
Quadrant House, Dundee
Total 3.3 915,284 14.2 20.3%
Table may not sum due to rounding
PROPERTY PORTFOLIO SECTOR AND REGION SPLITS BY VALUATION AND INCOME AS AT 30
JUNE 2023
By Valuation
As at 30 June 2023, 92.0% (June 2022: 92.0%, December 2022: 91.8%) of the
portfolio by market value was offices and 3.5% (June 2022: 3.5%, December
2022: 3.6%) was retail. The balance was made up of industrial, 3.0% (June
2022: 3.1%, December 2022: 3.1%) and other, 1.5% (June 2022: 1.4%, December
2022: 1.4%). By UK region, as at 30 June 2023, Scotland represented 16.4%
(June 2022: 16.9%, December 2022: 16.7%) of the portfolio and England 78.4%
(June 2022: 78.3%, December 2022: 78.3%) the balance of 5.1% (June 2022: 4.8%,
December 2022: 5.0%) was in Wales. In England, the largest regions were the
Midlands, South East and the North East.
By Income
As at 30 June 2023, 91.4% (June 2022: 91.5%, December 2022: 91.5%) of the
portfolio by income was offices and 4.6% (June 2022: 4.5%, December 2022:
4.5%) was retail. The balance was made up of industrial, 2.7% (June 2022:
2.6%, December 2022: 2.6%), and other, 1.4% (June 2022: 1.5%, December 2022:
1.3%). By UK region, as at 30 June 2023, Scotland represented 16.5% (June
2022: 17.6%, December 2022: 16.5%) of the portfolio and England 78.0% (June
2022: 77.1%, December 2022: 78.2%); the balance of 5.5% was in Wales (June
2022: 5.3%, December 2022: 5.3%). In England, the largest regions were the
Midlands, the South East and the North East.
LEASE EXPIRY PROFILE
The WAULT on the portfolio is 4.8 years (30 June 2022: 4.7; 31 December 2022:
4.7); WAULT to first break is 3.0 years (30 June 2022: 2.9; 31 December 2022:
3.0). As at 30 June 2023, 14.0% (30 June 2022: 11.9%; 31 December 2022: 14.5%)
of income was from leases, which will expire within one year, 12.6% (30 June
2022: 14.8%; 31 December 2022: 14.0%) between one and two years, 30.9% (30
June 2022: 31.4%; 31 December 2022: 29.5%) between two and five years and
42.5% (30 June 2022: 41.8%; 31 December 2022: 42.0%) after five years.
Lease Expiry Income Profile
0-1 year 14.0%
1-2 years 12.6%
2-5 years 30.9%
5+ years 42.5%
Tenants by Standard Industrial Classification ("SIC") as at 30 June 2023
SIC Code % of Headline Rent
Information and communication 12.9%
Professional, scientific and technical activities 12.5%
Administrative and support services activities 10.9%
Financial and insurance activities 8.3%
Wholesale and retail trade 7.8%
Electricity, gas, steam and air conditioning supply 7.2%
Human health and social work activities 5.2%
Public Sector 5.0%
Manufacturing 4.8%
Education 4.6%
Construction 4.1%
Not Specified 3.3%
Other* 13.3%
Total 100.0%
* Other - Accommodation and food service activities, activities of
extraterritorial organisations and bodies, activities of households as
employers; undifferentiated goods, arts, entertainment and recreation,
charity, mining and quarrying, other service activities, overseas company,
public administration and defence; compulsory social security. real estate
activities, registered society, transportation and storage, water supply,
sewerage, waste management and remediation activities.
FINANCIAL REVIEW
Net Asset Value
Between 1 January 2023 and 30 June 2023, the EPRA NTA* of the Group decreased
to £344.9 million (IFRS NAV: £373.8 million) from £379.2 million (IFRS NAV:
£402.9 million) as at 31 December 2022, equating to a decrease in the diluted
EPRA NTA of 6.6pps to 66.9pps (IFRS: 72.5pps). This is after the dividends
declared in the period amounting to 3.3pps.
In the six months to 30 June 2023, the investment property revaluation
decrease amounted to £29.5 million, for the properties held as at 30 June
2023.
The investment property portfolio was valued at £752.2 million (30 June 2022:
£918.2 million; 31 December 2022: £789.5 million). The decrease of £37.3
million since the December 2022 year-end is a reflection of revaluation
movement loss of £29.5 million, £14.1 million of net property disposals and
£0.4 million loss on the disposal of investment properties, offset by
subsequent expenditure of £6.8 million. Overall, on a like-for-like basis,
the portfolio value decreased by 3.8%, after adjusting for capital
expenditure, acquisitions and disposals during the period.
The table below sets out the acquisitions, disposals and capital expenditure
for the respective periods:
Six months to 30 June 2023 Six months to June 2022 Year ended
31 December 2022
(£million) (£million) (£million)
Acquisitions
Net (after costs) 0.1 78.9 79.3
Gross (before costs) 0.0 74.7 74.7
Disposals
Net (after costs) 14.1 71.4 84.1
Gross (before costs) 14.6 75.5 90.0
Capital Expenditure
Net (after dilapidations) 6.7 3.1 10.0
Gross (before dilapidations) 6.8 3.3 10.9
The diluted EPRA NTA per share decreased to 66.9pps (31 December 2022:
73.5pps). The EPRA NTA is reconciled in the table below:
Six months to 30 June 2023
£m Pence per Share
Opening EPRA NTA (31 December 2022) 379.2 73.5
Net rental and property income 26.0 5.0
Administration and other expenses (5.3) (1.0)
Loss on the disposal of investment properties (0.4) (0.1)
Change in the fair value of investment properties (29.5) (5.7)
Change in value of right of use (0.1) (0.0)
EPRA NTA after operating profit 369.9 71.7
Net finance expense (7.9) (1.5)
Taxation 0.0 0.0
EPRA NTA before dividends paid 361.9 70.2
Dividends paid** (17.0) (3.3)
Closing EPRA NTA (30 June 2023) 344.9 66.9
Tables may not sum due to rounding
* The Group has determined that EPRA net tangible assets (NTA) is the most
relevant measure. Further detail on the new EPRA performance measures can be
found in the full Annual Report.
**As at 30 June 2022, there were 515,736,583 Shares in issue.
Income Statement
Operating profit before gains and losses on property assets and other
investments for the six months ended 30 June 2023 amounted to £20.6 million
(six months to 30 June 2022: £23.4 million). Loss after finance and before
taxation of £12.1 million (six months to 30 June 2022: gain £28.3 million).
The six months to 30 June 2023 included the partial rent roll for properties
disposed of during the period. The decrease also includes the loss in the fair
value of investment properties in the six months to June 2023 of £29.5m, the
loss on the disposal of investment properties of £0.4m, and the change in the
value of right of use asset of £0.1million.
Rental and property income amounted to £34.3 million, excluding recoverable
service charge income and other similar items (six months to 30 June 2022
£37.1m million). The decrease was primarily the result of the decrease in the
rent roll being held over the six months to 30 June 2023.
Currently more than 80% of the rental income is collected within 30 days of
the due date and the bad debts provision in the period amounted to only £0.4
million (release in the six months to 30 June 2022: £0.2 million).
Non-recoverable property costs, excluding recoverable service charge income
and other similar costs, amounted to £8.3 million (six months to 30 June
2022: £8.1 million), and the rent roll decreased to £69.8 million (six
months to 30 June 2022: £72.0 million).
Realised loss on the disposal of investment properties amounted to £0.4
million (six months to 30 June 2022: loss £3.3 million). The disposal losses
were from the aggregate disposal of four properties in the period, on which
individual asset management plans had been completed. The change in the fair
value of investment properties amounted to a loss of £29.5 million (six
months to 30 June 2022: gain of £4.8 million). Net capital expenditure
amounted to £6.7 million (six months to 30 June 2022: £3.1 million). The
gain on the disposal of the right of use asset amounted to £nil (six months
to 30 June 2022: £nil). The change in value of right of use asset amounted to
a charge of £0.1 million (six months to 30 June 2022: charge £0.1 million).
Finance expenses amount to £8.0 million (six months to 30 June 2022: £8.4
million).
The EPRA cost ratio, including direct vacancy costs, was 39.9% (30 June 2022:
36.9%). The EPRA cost ratio, excluding direct vacancy costs was 17.3% (30 June
2022: 16.5%). The ongoing charges for the six months ending 30 June 2023 were
7.0% (30 June 2022: 5.4%).
The EPRA Total Return from Listing to 30 June 2023 was 20.8% (30 June 2022:
44.4%), with an annualised rate of 2.5% pa (30 June 2022: 5.7% pa).
Dividend
During the period from 1 January 2023 to 30 June 2023, the Company declared
dividends totalling 3.30pps (six months to 30 June 2022: 3.35pps). A schedule
of dividends can be found on the Company website.
Debt Financing and Gearing
Borrowings comprise third-party bank debt and the retail eligible bond. The
bank debt is secured over properties owned by the Group and repayable over the
next three to six years. The weighted average maturity of the bank debt and
retail eligible bond is 4.0 years (30 June 2022: 5.0 years; 31 December 2022:
4.5 years).
The Group's borrowing facilities are with the Royal Bank of Scotland, Bank of
Scotland & Barclays, Scottish Widows Limited & Aviva Investors Real
Estate Finance, Scottish Widows Limited and Santander UK. The total bank
borrowing facilities at 30 June 2023 amounted to £381.7 million (30 June
2022: £392.9million; 31 December 2022: £390.8 million) (before unamortised
debt issuance costs), with £5.7 million available to be drawn. In addition to
the bank borrowings, the Group has a £50 million 4.5% retail eligible bond,
which is due for repayment in August 2024. In aggregate, the total debt
available at 30 June 2023 amounted to £437.4 million (30 June 2022: £444.9
million; 31 December 2022: £444.9 million).
At 30 June 2023, the Group's cash and cash equivalent balances amounted to
£41.2 million (30 June 2022: £46.2 million; 31 December 2022: £50.1
million), of which £26.0 million (30 June 2022: £43.2 million; 31 December
2022: £37.8 million) was unrestricted cash.
The Group's net loan to value ("LTV") ratio stands at 51.9% (30 June 2022:
43.2%; 31 December 2022: 49.5%) before unamortised costs. A programme of asset
management initiatives and disposals continues to be diligently executed to
ensure the net borrowing reverts to our long- term target of c.40%.
Debt Profile and LTV Ratios as at 30 June 2023
Original facility Outstanding debt* Maturity Gross loan to value** Annual interest rate
Lender £'000 £'000 date % %
Royal Bank of Scotland, Bank of Scotland & Barclays 128,000 125,677 Aug-26 52.7 2.40 over 3 months
£ SONIA
Scottish Widows Ltd. and Aviva Investors Real Estate Finance 157,500 157,500 Dec-27 51.4 3.28 Fixed
Scottish Widows Ltd. 36,000 36,000 Dec-28 43.8 3.37 Fixed
Santander UK 65,870 62,516 Jun-29 47.2 2.20% over 3 months
£ SONIA
387,370 381,693
Retail Eligible Bond 50,000 50,000 Aug-24 N/A
4.50% Fixed
437,370 431,693
Table may not sum due to rounding.
* Before unamortised debt issue costs
** Based on valuation undertaken by Colliers at 30/6/23
The Managers continue to monitor the borrowing requirements of the Group.
The net gearing ratio (net debt to Ordinary Shareholders' equity (diluted) of
the Group was 104.5% as at 30 June 2023 (30 June 2022: 77.3%; 31 December
2022: 96.9%).
Interest cover, excluding amortised costs, stands at 2.8 times (30 June 2022:
3.2 times; 31 December 2022: 3.4 times) and including amortised costs, stands
at 2.6 times (30 June 2022: 2.8 times; 31 December 2022: 3.0 times).
Hedging
The Group applies an interest rate hedging strategy that is aligned to the
property management strategy and aims to mitigate interest rate volatility on
at least 90% of the debt exposure.
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
% % %
Borrowings interest rate hedged
Thereof : 101.6 100.5 100.9
Fixed 56.4 56.7 56.9
Swap 28.4 27.6 27.8
Cap 16.6 16.1 16.2
Weighted Average Cost of Debt ("WACD")(10) 3.5 3.5 3.5
Table may not sum due to rounding
The over-hedged position has arisen due to the entire Royal Bank of Scotland,
Bank of Scotland & Barclays and Santander UK facilities, including any
undrawn balances, being hedged by interest rate cap derivatives which have no
ongoing cost to the Group.
(10) WACD - Group borrowings interest and net derivative costs per annum at
the period end, divided by total Group debt in issue at the period end.
Tax
The Group entered the UK REIT regime on 7 November 2015 and all of the Group's
UK property rental operations became exempt from UK corporation tax from that
date. The exemption remains subject to the Group's continuing compliance with
the UK REIT rules.
On 9 January 2018, the Company registered for VAT purposes in England.
At 30 June 2023, the Group recognised a tax charge of £nil (30 June 2022:
£nil tax charge).
PRINCIPAL RISKS AND UNCERTAINTIES
For Regional REIT, effective risk management is a cornerstone of delivering
our strategy and integral to the achievement of our objective of delivering
long term value through active asset management across the portfolio. The
principal and emerging risks and uncertainties the Group faces are summarised
below and described in detail on pages 49 to 59 of the 2022 Annual Report,
which is available on the Group's website: www.regionalreit.com
(http://www.regionalreit.com) - Annual Report 2022.
The Audit Committee, which assists the Board with its responsibilities for
managing risk, regularly reviews the risk appetite of the Company. Taking into
consideration the latest information available, the Company is able to assess
and respond quickly to new and emerging risks.
Though the principal risks and uncertainties remain substantially unchanged
since the Annual Report and Accounts for the year ended 31 December 2022, the
risks remain heightened in light of concerns around rising inflation, higher
interest rates and the unsettled geopolitical backdrop, all of which may
impact valuations and the wider UK economy.
A summary of the Group's principal risks is provided here.
Strategic risk
Investment decisions could result in lower dividend income and capital returns
to our Shareholders.
Valuation risk
The valuation of the Group's portfolio, undertaken by the external valuer,
Colliers International Property Consultants Ltd, could impact the Group's
profitability and net assets.
Covid risk
The economic disruption after-effects resulting from Covid-19, coupled with
possible new strains and other infectious diseases, could further impact
rental incomes, the Group's property portfolio valuations, the ability to
access funding at competitive rates, maintain a progressive dividend policy
and adhere to the HMRC REIT
regime requirements.
Economic and Political risk
The macro-health of the UK economy could impact on borrowing and hedging
costs, demand by tenants for
suitable properties and the quality of the tenants.
Funding risk
The Group may not be able to secure further debt on acceptable terms, which
could impinge upon investment opportunities and the ability to grow the Group.
Bank reference rates maybe set to continue to become more volatile,
accompanying volatile inflation. Breach of covenants within the Group's
funding structure could lead to a cancellation of debt funding if the Company
is unable to service the debt.
Tenant risk
Type and concentration of tenants could result in a lower rental income. A
higher concentration of lease term maturity and/or break options, could result
in a more volatile rental income.
Financial and Tax Change risk
Changes to UK financial legislation and the tax regime could result in lower
rental income.
Operational risk
Business disruption could result in lower rental income.
Accounting, Legal and Regulatory risk
Changes to accounting, legal and regulatory requirements could affect current
operating processes and the Board's ability to achieve the investment
objectives and provide favourable returns to our Shareholders.
Environmental and Energy Efficiency Standards
Changes to the environment could impact upon the Group's cost base, operations
and legal requirements which need to be adhered too. All of these risks could
impinge upon the profitability of the Group.
INTERIM MANAGEMENT REPORT AND DIRECTORS' RESPONSIBILITY STATEMENT
Interim Management Report
The important events that have occurred during the period under review, the
principal risks and uncertainties and the key factors influencing the
financial statements for the remaining six months of the year are set out in
the Chairman's Statement and the Asset and Investment Managers' Report.
The principal risks and uncertainties faced by the Group are substantially
unchanged since the date of the Annual Report and Accounts for the year ended
31 December 2022 and are summarised above.
The condensed consolidated financial statements for the period from 1 January
2023 to 30 June 2023 have not been audited or reviewed by auditors pursuant to
the Financial Reporting Council guidance on Review of Interim Financial
Information and do not constitute annual statutory accounts for the purposes
of the Law.
Going Concern
The financial statements continue to be prepared on a going concern basis. The
Directors have reviewed areas of potential financial risk and cash flow
forecasts. No material uncertainties have been detected which would influence
the Group's ability to continue as a going concern for a period of not less
than 12 months. Accordingly, the Board of Directors continue to adopt the
going concern basis in preparing the condensed consolidated financial
statements.
Further detail on the assessment of going concern can be found in note 2.3
below.
Responsibility Statement of the Directors in respect of the Half-Yearly Report
In accordance with Disclosure Guidance and Transparency Rule 4.2.10R we, the
Directors of the Company (whose names are listed in full at the end of this
report), confirm that to the best of their knowledge:
· the condensed set of consolidated financial statements has been
prepared in accordance with International Accounting Standard (IAS) 34,
"Interim Financial Reporting", as contained in UK-adopted International
Accounting Standards, as required by Disclosure Guidance and Transparency Rule
DTR 4.2.4R, and gives a true and fair view of the assets, liabilities,
financial position and profit of the Group;
· this Half-Yearly Report includes a fair review, required under
DTR 4.2.7R, of the important events that have occurred during the first six
months of the financial year, their impact on the condensed set of
consolidated financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· this Half-Yearly Report includes a fair review, required under
DTR 4.2.8R, of related party transactions that have taken place in the first
six months of the current financial year and that have materially affected the
financial position and or performance of the Group during that period; and any
changes in the related party transaction described in the last Annual Report
that could do so.
This Half-Yearly Report was approved and authorised for issue by the Board of
Directors on 11 September2023 and the above responsibility statement was
signed on its behalf by:
Kevin McGrath
Chairman
11 September 2023
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Continuing Operations
Revenue
Rental and property income 5 44,415 45,211 93,318
Property costs 6 (18,438) (16,267) (30,672)
Net rental and property income 25,977 28,944 62,646
Administrative and other expenses 7 (5,341) (5,568) (11,421)
Operating profit before gains and losses on property assets and other 20,636 23,376 51,225
investments
Loss on disposal of investment properties 13 (403) (3,281)
(8,636)
Change in fair value of investment properties 13 (29,491) 4,785 (113,233)
Gain on disposal of right of use assets - 36 76
Change in fair value of right of use assets (69) (112) (185)
Operating (loss)/profit (9,327) 24,804 (70,753)
Finance income 8 17 34 126
Finance expenses 9 (7,953) (8,437) (17,285)
Net movement in fair value of derivative financial instruments 5,128 11,851
16 22,743
(Loss)/profit before tax (12,135) 28,252 (65,169)
Taxation 10 - - 6
Total comprehensive (loss)/income for the period (attributable to owners of (12,135) 28,252 (65,163)
the parent Company)
(Losses)/earnings per Share - basic and diluted (2.4)p 5.5p (12.6)p
11
Total comprehensive (loss)/income arises from continuing operations.
The notes below are an integral part of these condensed consolidated financial
statements.
Condensed Consolidated Statement of Financial Position
As at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Assets
Non-current assets
Investment properties 13 752,226 918,200 789,480
Right of use assets 11,057 12,402 11,126
Non-current receivables on tenant loan 452 674 578
Derivative financial instruments 16 29,577 13,557 24,449
793,312 944,833 825,633
Current assets
Trade and other receivables 33,068 32,181 30,274
Cash and cash equivalents 41,231 46,158 50,148
74,299 78,339 80,422
Total assets 867,611 1,023,172 906,055
Liabilities
Current liabilities
Trade and other payables (38,230) (47,188) (39,231)
Deferred income (17,244) (12,537) (16,661)
Deferred tax liabilities (699) (705) (699)
(56,173) (60,430) (56,591)
Non-current liabilities
Bank and loan borrowings 14 (376,331) (386,932) (385,265)
Retail eligible bonds 15 (49,829) (49,673) (49,752)
Lease liabilities (11,490) (12,762) (11,505)
(437,650) (449,367) (446,522)
Total liabilities (493,823) (509,797) (503,113)
Net assets 373,788 513,375 402,942
Equity
Stated capital 17 513,762 513,762 513,762
Accumulated losses (139,974) (387) (110,820)
Total equity attributable to owners of the parent Company
373,788 513,375 402,942
Net asset value per Share - basic and diluted
18 72.5p 99.5p 78.1p
The notes below are an integral part of these condensed consolidated financial
statements.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Attributable to owners of the parent company
Stated Accumulated
capital losses Total
Notes £'000 £'000 £'000
Balance at 1 January 2023 513,762 (110,820) 402,942
Total comprehensive loss - (12,135) (12,135)
Dividends paid 12 - (17,019) (17,019)
Balance at 30 June 2023 513,762 (139,974) 373,788
For the six months ended 30 June 2022
Attributable to owners of the parent company
Stated Accumulated losses
capital £'000 Total
Notes £'000 £'000
Balance at 1 January 2022 513,762 (11,361) 502,401
Total comprehensive income - 28,252 28,252
Dividends paid 12 - (17,278) (17,278)
Balance at 30 June 2022 513,762 (387) 513,375
For the year ended 31 December 2022
Attributable to owners of the parent company
Stated Accumulated losses
capital £'000 Total
Notes £'000 £'000
Balance at 1 January 2022 513,762 (11,361) 502,401
Total comprehensive loss - (65,163) (65,163)
Dividends paid 12 - (34,296) (34,296)
Balance at 31 December 2022 513,762 (110,820) 402,942
The notes below are an integral part of these condensed consolidated financial
statements.
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2023
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
(Loss)/profit for the year before taxation (12,135) 28,252 (65,169)
- Change in fair value of investment properties 24,491 (4,785) 113,233
- Change in fair value of financial derivative instruments (5,128) (11,851) (22,743)
Loss on disposal of investment properties 403 3,281 8,636
- Gain on disposal of right of use assets - (36) (76)
- Change in fair value of right of use assets 69 112 185
Finance income (17) (34) (126)
Finance expense 7,953 8,437 17,285
(Increase) in trade and other receivables (2,679) (2,631) (619)
(Decrease)/increase in trade and other payables and deferred income (433) 1,686
(2,150)
Cash generated from operations 17,524 22,431 48,456
Finance costs (7,430) (7,406) (15,198)
Net cash flow generated from operating activities 10,094 15,025 33,258
Investing activities
Purchase of investment properties and subsequent expenditure (6,755) (81,970) (89,287)
Sale of investment properties 14,115 71,423 84,087
Interest received 28 33 116
Net cash flow from/(used in) operating activities 7,388 (10,514) (5,084)
Financing activities
Dividends paid (17,004) (16,956) (33,971)
Bank borrowings advanced 1,944 14,322 14,322
Bank borrowings repaid (11,043) (11,370) (13,467)
Bank borrowing costs paid (78) (153) (485)
Lease repayments (218) (324) (553)
Net cash flow (used in)/generated from financing activities (26,399) (14,481) (34,154)
Net decrease in cash and cash equivalents for (8,917) (9,970) (5,980)
the period
Cash and cash equivalents at the start of the period 50,148 56,128 56,128
Cash and cash equivalents at the end of the period 41,231 46,158 50,148
The notes below are an integral part of these condensed consolidated financial
statements.
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2023
1. Corporate information
The condensed consolidated financial statements of the Group for the six
months ended 30 June 2023 comprise the results of the Company and its
subsidiaries (together constituting the "Group") and were approved by the
Board and authorised for issue on 11 September 2023.
The Company is a company limited by shares incorporated in Guernsey under The
Companies (Guernsey) Law,
2008, as amended (the "Law"). The Company's Ordinary Shares are admitted to
the Official List of the Financial
Conduct Authority ("FCA") and traded on the London Stock Exchange ("LSE").
The Company was incorporated on 22 June 2015 and is registered with the
Guernsey Financial Services
Commission as a Registered Closed-Ended Collective Investment Scheme pursuant
to The Protection of
Investors (Bailiwick of Guernsey) Law, 2020, as amended, and the Registered
Collective Investment Scheme Rules & Guidance 2021.
The Company did not begin trading until 6 November 2015 when its shares were
admitted to trading on the LSE.
The nature of the Group's operations and its principal activities are set out
in the Chairman's Statement.
The address of the registered office is: Mont Crevelt House, Bulwer Avenue,
St. Sampson, Guernsey, GY2 4LH.
2. Basis of preparation
The condensed consolidated financial statements for the six months ended 30
June 2023 have been prepared on a going concern basis in accordance with the
Disclosure Guidance and Transparency Rules of the FCA and with IAS 34, Interim
Financial Reporting, as contained in UK-adopted International Accounting
Standards.
The condensed consolidated financial statements have been prepared on a
historical cost basis, as modified for the Group's investment properties and
certain financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss.
The condensed consolidated interim financial information should be read in
conjunction with the Group's audited financial statements for the year ended
31 December 2022, which have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as contained in UK-adopted
International Accounting
Standards.
2.1. Comparative period
The comparative financial information presented herein for the year ended 31
December 2022 do not constitute full statutory accounts within the meaning of
the Law. The Group's Annual Report and Accounts for the year ended 31 December
2022 were delivered to the Guernsey Financial Services Commission. The Group's
independent Auditor's report on those Accounts was unqualified and did not
include references to any matters to which the Auditors drew attention by way
of emphasis without qualifying their report.
2.2. Functional and presentation currency
The consolidated financial information is presented in Pounds Sterling which
is also the Group's functional currency, and all values are rounded to the
nearest thousand (£'000s) pounds, except where otherwise indicated.
2.3. Going concern
The Directors have made an assessment of the Group's ability to continue as a
going concern. This assessment
included consideration of the Group's cash resources, borrowing facilities,
rental income, acquisition and disposals of investment properties, elective
and committed capital expenditure and dividend distributions.
The Group ended the period under review with £41.2m of cash and cash
equivalents, of which £26.0m was unrestricted cash, providing ample
liquidity. Borrowing facilities decreased from £440.8m at 31 December 2022 to
£431.7m as at 30 June 2023, with an LTV of 51.9%, based upon the value of the
Group's investment properties as at 30 June 2023. In respect of the Group's
borrowings the first bank facility to mature is £125.7m facility in August
2026 which is held with the Royal Bank of Scotland, and the Retail eligible
bond matures August 2024. The Directors believe that should financing be
required at the bond maturity date then appropriate borrowings will be
in-place in adequate time.
The Directors are satisfied that the Group has adequate resources to continue
in operational existence for a
period of at least 12 months from the date these Financial Statements were
approved. This is underpinned by the robust rent collections and the limited
level of committed capital expenditure in the forthcoming 12 months.
Furthermore, the Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as a going
concern. Accordingly, the Directors consider that it is appropriate to prepare
the Financial Statements on a going concern basis.
2.4. Business combinations
At the time of acquisition, the Group considers whether each acquisition
represents the acquisition of a business or the acquisition of an asset. For
an acquisition of a business where an integrated set of activities are
acquired in addition to the property, the Group accounts for the acquisition
as a business combination under IFRS 3 Business Combinations.
Where such acquisitions are not judged to be the acquisition of a business,
they are not treated as business combinations. Rather, the cost to acquire the
corporate entity is allocated between the identifiable assets and liabilities
of the entity based upon their relative fair values at the acquisition date.
Accordingly, no goodwill or additional deferred tax arises.
3. Significant accounting judgements, estimates and assumptions
The preparation of the condensed consolidated financial statements requires
management to make judgements, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities and the
disclosure of contingent liabilities at the reporting date. However,
uncertainty about these assumptions and estimates could result in outcomes
that require a material adjustment to the carrying amount of the asset or
liability affected in future periods.
3.1. Critical accounting estimates and assumptions
The principal estimates that may be material to the carrying amount of assets
and liabilities are as follows:
3.1.1. Valuation of investment properties
The fair value of investment property, which has a carrying value at the
reporting date of £752,226,000 (30 June 2022: £918,200,000; 31 December
2022: £789,480,000) is determined, by independent property valuation experts,
to be the estimated amount for which a property should exchange on the date of
the valuation in an arm's length transaction. Properties have been valued on
an individual basis. The valuation experts use recognised valuation techniques
applying the principles of both IAS 40 Investment Property and IFRS 13 Fair
Value Measurement.
The value of the properties has been assessed in accordance with the relevant
parts of the current RICS Red Book. In particular, we have assessed the fair
value as referred to in VPS4 item 7 of the RICS Red Book. Under these
provisions, the term "Fair Value" means the definition adopted by the
International Accounting Standards Board ("IASB") in IFRS 13, namely "The
price that would be received to sell an asset, or paid to transfer a liability
in an orderly transaction between market participants at the measurement
date". Factors reflected include current market conditions, annual rentals,
lease lengths and location. The significant methods and assumptions used by
the valuers in estimating the fair value of investment property are set out in
note 13.
3.1.2. Fair valuation of interest rate derivatives
In accordance with IFRS 13, the Group values its interest rate derivatives at
fair value. The fair values are estimated by the respective counterparties
with revaluation occurring on a quarterly basis. The counterparties will use a
number of assumptions in determining the fair values, including estimations
over future interest rates and therefore future cash flows. The fair value
represents the net present value of the difference between the cash flows
produced by the contracted rate and the valuation rate. The carrying value of
the derivatives at the reporting date was £29,577,000 asset (30 June 2022:
£13,557,000; 31 December 2022: £24,449,000). The significant methods and
assumptions used in estimating the fair value of the interest rate derivatives
are set out in note 16.
3.1.3. Dilapidation income
The Group recognises dilapidation income in the Group's Statement of
Comprehensive Income when the right to receive the income arises. In
determining accrued dilapidations, the Group has considered historic recovery
rates, while also factoring in expected costs associated with recovery.
3.1.4. Operating lease contracts - the Group as lessee
The Group has a number of leases concerning the long-term lease of land
associated with its long leasehold investment properties. Under IFRS16, the
Group calculates the lease liability at each reporting date and at the
inception of each lease and at 1 January 2019 when the standard was first
adopted. The liability is calculated using present value of future lease
payments using the Group's incremental borrowing rate as the discount rate.
At 30 June 2023, there were ten leases with the range of the period left to
run being 25 and 95 years. The
Directors have determined that the discount rate to use in the calculation for
each lease is 4% being the Group's weighted average cost of debt at the date
of transition. Any new leases entered in to following the transition date will
apply a discount rate based on the Group's weighted average cost of debt at
the date the lease is entered into.
3.2. Critical judgements in applying the Group's accounting policies
In the process of applying the Group's accounting policies, management has
made the following judgements, which have the most significant effect on the
amounts recognised in the condensed consolidated financial statements:
3.2.1 Leases - the Group as lessor
The Group has acquired investment properties that are subject to commercial
property leases with tenants. The Group has determined, based on an evaluation
of the terms and conditions of the arrangements, particularly the duration of
the lease terms and minimum lease payments, that it retains all of the
significant risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
3.2.2. Recognition of income
Service charges and other similar receipts are included in net rental and
property income gross of the related costs as the Directors consider the Group
acts as principal in this respect.
3.2.3 Acquisition of subsidiary companies
For each acquisition, the Directors consider whether the acquisition met the
definition of the acquisition of a business or the acquisition of a group of
assets and liabilities.
A business is defined in IFRS 3 as an integrated set of activities and assets
that is capable of being conducted and managed for the purpose of providing a
return in the form of dividends, lower costs or other economic benefits
directly to investors or other owners, members or participants. Furthermore, a
business consists of inputs and processes applied to those inputs that have
the ability to create outputs.
The companies acquired in the year have comprised portfolios of investment
properties and existing leases with multiple tenants over varying periods,
with little in the way of processes acquired. It has therefore concluded in
each case that the acquisitions did not meet the criteria for the acquisition
of a business as outlined above.
3.3. Consolidation of entities in which the Group holds less than 50%
Management considered that up until 9 November 2018, the Group had de facto
control of View Castle Limited and its 27 subsidiaries (the "View Castle Sub
Group") by virtue of the amended and restated Call Option Agreement dated 3
November 2015. Following a restructure of the View Castle Sub Group, the
majority of properties held within the View Castle Sub Group were transferred
into two new special purpose vehicles ("SPVs") with two additional properties
to be transferred into these SPVs at a later date. A new call option was
entered into dated 9 November 2018 with View Castle Limited and five of its
subsidiaries (the "View Castle Group"). As per the previous amended and
restated Call Option Agreement, under this new option the Group may acquire
any of the properties held by the View Castle Group for a fixed nominal
consideration. Despite having no equity holding, the Group is deemed to have
control over the View Castle Group as the Option Agreement means that the
Group is exposed to, and has rights to, variable returns from its involvement
with the View Castle Group, through its power to control.
4. Summary of significant accounting policies
With the exception of new accounting standards listed below, the accounting
policies adopted in this report are consistent with those applied in the
Group's statutory accounts for the year ended 31 December 2022 and are
expected to be consistently applied for the current year ending 31 December
2023. The changes to the condensed consolidated financial statements arising
from accounting standards effective for the first time are noted below:
• IFRIC Agenda Item: Following clarification by IFRIC on the classification
of monies held in restricted accounts, monies that are restricted by use only
are classified at 31 March 2023 as "Cash and cash equivalents". The
clarification has not had a material impact on the financial statements.
• IFRIC Agenda Item: In October 2022, the IFRIC issued an agenda decision in
respect of 'Lessor forgiveness of
lease payments (IFRS 9 and IFRS 16)' ('the IFRIC Decision on Concessions').
This concluded that losses incurred on granting retrospective rent concessions
should be charged to the income statement on the date that the legal rights to
income are conceded (i.e. immediate recognition in full rather than smoothed
over the life of the lease). The clarification has not had a material impact
on the financial statements.
• Amendments to IAS 12 'Income Taxes' (effective for periods beginning on or
after 1 January 2023) - clarify
how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The
amendments have not had a significant impact on the preparation of the
financial statements.
• Amendments to IAS 1 'Presentation of Financial Statements' (effective for
periods beginning on or after
1 January 2023) - are intended to help entities in deciding which accounting
policies to disclose in their financial
statements. The amendments have not had a significant impact on the
preparation of the financial statements.
• Amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates
and Errors' (effective for
periods beginning on or after 1 January 2023) - introduce the definition of an
accounting estimate and include
other amendments to help entities distinguish changes in accounting estimates
from changes in accounting policies. The amendments have not had a significant
impact on the preparation of the financial statements.
5. Rental and property income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rental income - freehold property 28,360 31,255 61,458
Rental income - long leasehold property 5,949 5,801 14,861
Recoverable service charge income and other similar items 10,106 8,155 16,999
Total 44,415 45,211 93,318
6. Property costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Other property expenses and irrecoverable costs 8,332 8,112 13,673
Recoverable service charge expenditure and other similar costs 10,106 8,155 16,999
Total 18,438 16,267 30,672
Property costs represent direct operating expenses which arise on investment
properties generating rental income.
7. Administrative and other expenses
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment management fees 1,035 1,469 2,687
Property management fees 1,324 1,284 3,044
Asset management fees 1,034 1,494 2,691
Directors' remuneration 157 134 302
Administration fees 317 315 697
Legal and professional fees 914 939 2,083
Marketing and promotion 38 43 111
Other administrative costs 111 82 195
Bank debt cost/(credit) 397 (199) (405)
Bank charges 14 7 16
Total 5,341 5,568 11,421
8. Finance income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest income 17 34 126
Total 17 34 126
9. Finance expense
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest payable on bank borrowings 6,301 6,277 12,940
Amortisation of loan arrangement fees 243 659 1,421
Bond interest 1,125 1,125 2,250
Bond issue costs amortised 77 77 156
Bond expenses 4 4 8
Lease interest 203 295 510
Total 7,953 8,437 17,285
10. Taxation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Corporation tax charge - - -
Decrease in deferred tax creditor - - (6)
Total - - (6)
The Group elected to be treated as a UK REIT with effect from 7 November 2015.
The UK REIT rules exempt the profits of the Group's UK property rental
business from corporation tax. Gains on UK properties are also exempt from
tax, provided that they are not held for trading or sold in the three years
after completion of development. The Group is otherwise subject to UK
corporation tax.
Income tax, corporation tax and deferred tax above arise on entities which
form part of the Group's condensed consolidated accounts but do not form part
of the REIT group.
Due to the Group's REIT status and its intention to continue meeting the
conditions required to obtain approval in the foreseeable future, no provision
has been made for deferred tax on any capital gains or losses arising on the
revaluation or disposal of investments held by entities within the REIT group.
No deferred tax asset has been recognised in respect of losses carried forward
due to unpredictability of future taxable profits.
As a REIT, Regional REIT Ltd is required to pay PIDs equal to at least 90% of
the Group's exempted net income. To retain UK REIT status, there are a number
of conditions to be met in respect of the principal company of the Group, the
Group's qualifying activity and its balance of business. The Group continues
to meet these conditions.
11. Earnings per Share
Earnings per share ("EPS") amounts are calculated by dividing profits for the
period attributable to ordinary equity holders of the Company by the weighted
average number of Ordinary Shares in issue during the period.
The calculation of basic and diluted earnings per share is based on the
following:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Calculation of earnings per Share
Net (loss)/profit attributable to Ordinary Shareholders (12,135) 28,252 (65,163)
Adjustments to remove:
Changes in value of investment properties 29,491 (4,785) 113,233
Changes in fair value of right of use assets 69 112 185
Loss on disposal of investment property 403 3,281 8,636
Gain on the disposal of right of use assets - (36) (76)
Change in fair value of interest rate derivates and financial assets
(5,128) (11,851) (22,743)
Deferred tax credit - - (6)
12,700 14,973 34,066
EPRA net profit attributable to Ordinary Shareholders
Weighted average number of Ordinary Shares 515,736,853 515,736,853 515,736,583
(Loss)/ earnings per Share - basic and diluted (2.4)p 5.5p (12.6)p
EPRA earnings per Share - basic and diluted 2.5p 2.9p 6.6p
12. Dividends
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Dividends
Dividend of 1.65 (2022: 1.70) pence per Ordinary Share for the period 1 8,510 8,768 8,768
October - 31 December
Dividend of 1.65 (2022: 1.65) pence per Ordinary Share for the period 1 8,509 8,510 8,510
January - 31 March
Dividend of nil (2022: 1.65) pence per Ordinary Share for the period 1 April - - - 8,509
30 June
Dividend of nil (2022: 1.65) pence per Ordinary Share for the period 1 July - - - 8,509
30 September
Total 17,019 17,278 34,296
On 23 February 2023, the Company announced a dividend of 1.65 pence per Share
in respect of the period 1 October 2022 to 31 December 2022. The dividend was
paid on 6 April 2023 to Shareholders on the register as at 3 March 2023.
On 24 May 2023, the Company announced a dividend of 1.65 pence per Share in
respect of the period 1 January 2023 to 31 March 2023. The dividend was paid
on 4 August 2023 to Shareholders on the register as at 2 June 2023.
13. Investment properties
In accordance with International Accounting Standard, IAS 40, 'Investment
Property', investment property has been independently valued at fair value by
Colliers International Property Consultants Ltd, a Chartered Surveyor who is
an accredited independent valuer with recognised and relevant professional
qualifications and with recent experience in the locations and categories of
the investment properties being valued. The valuation has been prepared in
accordance with the Red Book and incorporates the recommendations of the
International Valuation Standards Committee which are consistent with the
principles set out in IFRS 13.
Investment property valuations in comparative periods were carried out by
Cushman & Wakefield.
The valuation is the ultimate responsibility of the Directors. Accordingly,
the critical assumptions used in
establishing the independent valuation are reviewed by the Board.
Group Movement in investment properties for the Freehold Long Leasehold Total
six months ended 30 June 2023 (unaudited) property property £'000
£'000 £'000
Valuation at 1 January 2023 643,630 145,850 789,480
Property additions - acquisitions 6 85 91
Property additions - subsequent expenditure 4,631 2,033 6,664
Property disposals (14,168) 53 (14,115)
Loss on the disposal of investment properties (350) (53) (403)
Change in fair value during the period (28,543) (948) (29,491)
Valuation at 30 June 2023 (unaudited) 605,206 147,020 752,226
Group Movement in investment properties for the
six months ended 30 June 2022 (unaudited)
Valuation at 1 January 2022 751,440 154,709 906,149
Property additions - acquisitions 64,709 14,207 78,916
Property additions - subsequent expenditure 1,735 1,319 3,054
Property disposals (67,097) (3,516) (71,423)
Loss on the disposal of investment properties (2,792) (489) (3,281)
Change in fair value during the period 1,940 2,845 4,785
Valuation at 30 June 2022 (unaudited) 749,125 169,075 918,200
Group Movement in investment properties for the year ended 31 December 2022
(audited)
Valuation at 1 January 2022 751,440 154,709 906,149
Property additions - acquisitions 70,322 8,948 79,270
Property additions - subsequent expenditure 5,994 4,023 10,017
Property disposals (80,436) (3,651) (84,087)
Gain/(loss) on the disposal of investment properties (8,032) (604) (8,636)
Change in fair value during the period (95,658) (17,575) (113,233)
Valuation at 31 December 2022 (audited) 643,630 145,850 789,480
The historic cost of the properties was £908,464,000 (30 June 2022:
£944,480,000; 31 December 2022: £92,723,000).
The following table provides the fair value measurement hierarchy for
investment properties:
Significant observable inputs Significant unobservable inputs
Quoted (level 2) (level 3)
active prices £'000 £'000
Total (level 1)
Date of valuation: £'000 £'000
30 June 2023 752,226 - - 752,226
30 June 2022 918,200 - - 918,200
31 December 2022 789,480 - - 789,480
The hierarchy levels are defined in note 16.
It has been determined that the entire investment properties portfolio should
be classified under the level 3
category.
There have been no transfers between levels during the period.
The determination of the fair value of the investment properties held by each
consolidated subsidiary requires
the use of estimates such as future cash flows from investment properties,
which take into consideration
lettings, tenants' profiles, future revenue streams, capital values of
fixtures and fittings, any environmental matters and the overall repair and
condition of the property, and discount rates applicable to those assets.
Future revenue streams comprise contracted rent (passing rent) and estimated
rental value after the contract period. In calculating ERV, the potential
impact of future lease incentives to be granted to secure new contracts is
taken into consideration. All these estimates are based on local market
conditions existing at the reporting date.
As at 30 June 2023, the estimated fair value of each property has been
primarily derived using comparable
recent market transactions on arm's length terms and assessed in accordance
with the relevant parts of the RICS Valuation - Global Standards and the RICS
Valuation UK National Supplement.
In arriving at their estimates of fair values as at 30 June 2023, the valuers
used their market knowledge
and professional judgement and did not rely solely on historical transactional
comparables.
Techniques used for valuing investment properties
The following descriptions and definitions relate to valuation techniques and
key unobservable inputs made
in determining the fair values:
Valuation technique: market comparable method
Under the market comparable method (or market approach), a property fair value
is estimated based on
comparable transactions in the market.
Observable input: market rental
The rent at which space could be let in the market conditions prevailing at
the date of valuation £12,500 - £3,589,000 per annum (30 June 2022: £9,000
- £3,317,000 per annum; 31 December 2022: £12,500-£3,317,000).
Observable input: rental growth
The decrease in rent is based on contractual agreements: -3.18%( 30 June 2022:
-1.2%; 31 December 2022: -5.08%). There is a gross contracted rent reduction,
as per normal operations it is a combination of property disposals, space
under refurbishment and lease expires.
Observable Input: net initial yield
The initial net income from a property at the accounting date, expressed as a
percentage of the gross purchase price including the costs of purchase 0% -
21.4%; (30 June 2022: 0% - 21.81%; 31 December 2022: 0% to 22.58%).
Unobservable inputs:
The significant unobservable input (level 3) are sensitive to the changes in
the estimated future cash flows from investment properties such as increases
and decreases in contract rents, operating expenses and capital expenditure,
plus transactional activity in the real estate market.
Geographical and sector specific market evidence reviewed in the course of
preparing the June 2023 valuation had an initial yield range of 5.59% to 9.33%
(31 December 2022: 5.20% to 17.55%). As set out within the significant
accounting estimates and judgements, the Group's property portfolio valuation
is open to judgement and is inherently subjective by nature, and actual values
can only be determined in a sales transaction.
As set out within the significant accounting estimates and judgements above,
the Group's property portfolio
valuation is open to judgement and is inherently subjective by nature, and
actual values can only be determined in a sales transaction.
The impact of changes to the significant unobservable inputs:
30 June 2023 30 June 2023 31 December 2022 31 December 2022
Impact on Impact on Impact on Impact on
statement of statement of statement of statement of
comprehensive financial position comprehensive financial position
income £'000 income £'000
£'000 £'000
Improvement in ERV by 5% 32,721 32,721 39,166 39,166
Worsening in ERV by 5% (32,199) (32,199) (38,625) (38,625)
Improvement in yield by 0.125% 12,174 12,174 16,066 16,066
Worsening in yield by 0.125% (1,012) (1,012) (15,558) (15,558)
14. Bank and loan borrowings
Bank borrowings are secured by charges over individual investment properties
held by certain asset-holding subsidiaries. The banks also hold charges over
the shares of certain subsidiaries and any intermediary holding companies of
those subsidiaries.
Any associated fees in arranging the bank borrowings unamortised as at the
period end are offset against amounts drawn on the facilities as shown in the
table below:
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Bank borrowings drawn at start of period 390,792 389,937 389,937
Bank borrowings drawn 1,944 14,322 14,322
Bank borrowings repaid (11,043) (11,370) (13,467)
Bank borrowings drawn at end of period 381,693 392,889 390,792
Less: unamortised costs at start of period (5,527) (6,463) (6,463)
Less: loan issue costs incurred in the period (78) (153) (485)
Add: loan issue costs amortised in the period 243 659 1,421
At end of period 376,331 386,932 385,265
Maturity of bank borrowings
Repayable within 1 year - - -
Repayable between 1 to 2 years - - -
Repayable between 2 to 5 years 283,177 127,445 290,677
Repayable after more than 5 years 98,516 265,444 100,115
Unamortised loan issue costs (5,362) (5,957) (5,527)
376,331 386,932 385,265
The table below lists the Group's borrowings.
Gross
Original Outstanding debt* Maturity loan to value** Annual interest rate Amortisation
Lender facility date
£'000 £'000
128,000 125,677 August 2026 52.70% 2.40% over 3 months £ SONIA Mandatory prepayment
Royal Bank of Scotland, Bank of Scotland and Barclays
157,500 157,500 December 2027 51.40%
Scottish Widows Ltd & Aviva Investors Real Estate Finance
3.28% Fixed None
36,000 36,000 December 2028 43.80% 3.37% Fixed None
Scottish Widows Ltd
65,870 62,516 June 2029 47.20% 2.20% over 3 Mandatory prepayment
months £ SONIA
Santander UK
387,370
Total bank borrowings 381,693
50,000 50,000 August 2024 4.50% Fixed None
Retail eligible bond
Total 437,370 431,693
SONIA = Sterling Over Night Indexed Average
* Before unamortised debt issue costs.
** Based upon Colliers property valuations.
The weighted average term to maturity of the Group's debt at the period end
was 4.0 years (30 June 2022: 5.0
years; 31 December 2022: 4.5 years).
The weighted average interest rate payable by the Group on its debt portfolio,
excluding hedging, as at the period
end was 4.9% per annum (30 June 2022: 3.4% per annum; 31 December 2022: 3.5%
per annum).
The Group has been in compliance with all of the financial covenants of the
above facilities as applicable throughout the period covered by these
condensed consolidated financial statements. Each facility has distinct
covenants which generally include: historic interest cover, projected interest
cover, loan-to-value cover and debt to rent cover. A breach of agreed covenant
levels would typically result in an event of default of the respective
facility, giving the lender the right, but not the obligation, to declare the
loan immediately due and payable. Where a loan is repaid in these
circumstances, early repayment fees will apply, which are generally based on
percentage of the loan repaid or calculated with reference to the interest
income foregone by the lenders as a result of the repayment.
As shown in note 16, the Group uses a combination of interest rate swaps and
fixed rate bearing loans to hedge
against interest rate risks. The Group's exposure to interest rate volatility
is minimal.
15. Retail eligible bonds
The Company has in issue £50,000,000 of 4.5% retail eligible bonds with a
maturity date of 6 August 2024. The bonds are listed on the LSE ORB platform.
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Bond principal at start of period 50,000 50,000 50,000
Unamortised issue costs at start of period (248) (404) (404)
Amortisation of issue costs 77 77 156
At end of period 49,829 49,673 49,752
16. Derivative financial instruments
Interest rate caps and swaps are in place to mitigate the interest rate risk
that arises as a result of entering into variable rate borrowings.
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Fair value at start of period 24,449 1,706 1,706
Revaluation in the period 5,128 11,851 22,743
Fair value at end of period 29,577 13,557 24,449
The calculation of fair value of interest rate caps and swaps is based on the
following calculation: the notional amount multiplied by the difference
between the swap rate and the current market rate and then multiplied by the
number of years remaining on the contract and discounted.
The fair value of interest rate caps and swaps represents the net present
value of the difference between the cash flows produced by the contracted rate
and the current market rate over the life of the instrument.
The table below details the hedging and swap notional amounts and rates
against the details of the Group's loan facilities.
Original facility Outstanding debt* Notional amount
Lender £'000 £'000 Maturity Annual interest rate £'000 Rate
date
Royal Bank of Scotland, Bank of Scotland and Barclays 128,000 125,677 August 2026 swap £73,000 0.97%
2.40% over 3months £ SONIA cap £55,000 0.97%
Scottish Widows Ltd. & Aviva Investors Real Estate Finance 157,500 157,500 December 2027
3.28% Fixed n/a n/a
Scottish Widows Ltd 36,000 36,000 December 2028 n/a n/a
3.37% Fixed
Santander UK 65,870 62,516 June 2029 swap £49,403 1.39%
2.20% over 3 months £ SONIA cap £16,468 1.39%
Total 387,370 381,693
SONIA = Sterling Over Night Indexed Average
As at 30 June 2023, the swap arrangements were £122.4m (30 June 2022:
£122.4m; 31 December 2022: £122.4m) and the cap notional arrangements
amounted to £71.5m (30 June 2022: £71.5m; 31 December 2022: £71.5m).
The Group weighted average cost of debt of 3.5% (30 June 2022: 3.5%; 31
December 2022: 3.5%) is inclusive of hedging costs.
The maximum exposure to credit risk at the reporting date is the fair value of
the derivative liabilities.
It is the Group's target to hedge at least 90% of the total loan portfolio
using fixed-rate facilities or interest rate
derivatives. The hedging on all of the facilities matches the term. As at the
period end date, the total proportion of hedged debt equated to 101.6% (30
June 2022: 100.5%; 31 December 2022: 100.9%), as shown below.
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total bank borrowings 381,693 392,889 390,792
Notional value of interest rate caps and swaps 193,870 193,870 193,871
Value of fixed rate debts 193,500 201,000 201,000
387,370 394,870 394,871
Proportion of hedged debt 101.6% 100.5% 100.9%
Fair value hierarchy
The following table provides the fair value measurement hierarchy for interest
rate derivatives. The different levels are defined as follows.
Level 1: Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the condensed consolidated
financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing
categorisation at the end of each reporting period.
Significant observable inputs Significant unobservable inputs
Quoted active prices (level 2) (level 3)
(level 1) £'000 £'000
Total £'000
Date of valuation: £'000
30 June 2023 29,577 - 29,577 -
30 June 2022 13,557 - 13,557 -
31 December 2022 24,449 - 24,449 -
The fair values of these contracts are recorded in the Condensed Consolidated
Statement of Financial Position and are determined by forming an expectation
that interest rates will exceed strike rates and by discounting these future
cash flows at the prevailing market rates as at the period end.
There have been no transfers between levels during the period.
The Group has not adopted hedge accounting.
17. Stated capital
Stated capital represents the consideration received by the Company for the
issue of Ordinary Shares.
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Issued and fully paid Shares of no par value
At start of the period 513,762 513,762 513,762
Number of Shares in issue 515,736,583 515,736,583 515,736,583
At start and end of period
18. Net asset value per Share (NAV)
Basic NAV per share is calculated by dividing the net assets in the Condensed
Consolidated Statement of Financial Position attributable to ordinary equity
holders of the parent by the number of Ordinary Shares in issue at the end of
the period.
EPRA net asset value is a key performance measure used in the real estate
industry which highlights the fair value of net assets on an ongoing long-term
basis. Assets and liabilities that are not expected to crystallise in normal
circumstances such as the fair value of derivatives and deferred taxes on
property valuation surpluses are therefore excluded.
Net asset values have been calculated as follows:
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net asset value per Condensed Consolidated Statement of Financial Position 373,788 513,375 402,942
Adjustment for calculating EPRA net tangible assets:
Derivative financial instruments (29,577) (13,557) (24,449)
Deferred tax liability 699 705 699
EPRA Net Tangible Assets 344,910 500,523 379,192
Number of Ordinary Shares in issue 515,736,583 515,736,583 515,736,583
Net asset value per Share - basic and diluted 72.5p 99.5p 78.1p
EPRA Net Tangible Assets per Share - basic and diluted 66.9p 97.1p 73.5p
19. Segmental information
After a review of the information provided for management purposes, it was
determined that the Group had one operating segment and therefore segmental
information is not disclosed in these condensed consolidated financial
statements.
20. Transactions with related parties
Transactions with the Asset Manager, London & Scottish Property Investment
Management Limited and the Property Manager, London & Scottish Property
Asset Management Limited.
Stephen Inglis is a non-executive Director of the Company, as well as being
the Chief Executive Officer of London & Scottish Property Investment
Management Limited ("LSPIM"), which is the parent company of L&S PM
Limited. LSPIM has been contracted to act as the Asset Manager of the Group
and L&S PM Limited contracted as the Property Manager.
In consideration for the provision of services provided, the Asset Manager is
entitled in each financial year (or part thereof) to 50% of an annual
management fee on a scaled rate of (i) 1.1% of the EPRA NTA up to and equal to
£500,000,000; (ii) 0.9% of EPRA NTA above £500,000,000 and up to or equal to
£1,000,000,000; (iii) 0.7% of EPRA NTA above £1,000,000,000 and up to or
equal to £1,500,000,000; and (iv) 0.5% of EPRA NTA above £1,500,000,000.
In respect of each portfolio property the Investment Manager has procured and
shall, with the Company in future, procure that London & Scottish Property
Investment Management Limited is appointed as the Property Manager. A property
management fee of 4% per annum is charged by the Property Manager on a
quarterly basis: 31 March, 30 June, 30 September and 31 December, based upon
the gross rental yield. Gross rental yield means the rents due under the
property's lease for the peaceful enjoyment of the property, including any
value paid in respect of rental renunciations, but excluding any sums paid in
connection with service charges or insurance costs.
The Investment Manager is also entitled to a performance fee. Details of the
performance fee are given below. The following tables show the fees charged in
the period and the amount outstanding at the end of the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Asset management fees charged(1) 1,034 1,494 2,691
Property management fees charged(1) 1,324 1,284 3,044
2,358 2,778 5,735
Total
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total fees outstanding(1) 1,279 1,474 1,642
(1) Including irrecoverable VAT charged where appropriate
Transactions with the Investment Manager, Toscafund Asset Management LLP
In consideration for the provision of services provided, the Investment
Manager is entitled in each financial year (or part thereof) to 50% of an
annual management fee on a scaled rate of (i) 1.1% of the EPRA NTA up to and
equal to £500,000,000; (ii) 0.9% of EPRA NTA above £500,000,000 and up to or
equal to £1,000,000,000; (iii) 0.7% of EPRA NTA above £1,000,000,000 and up
to or equal to £1,500,000,000; and (iv) 0.5% of EPRA NTA above
£1,500,000,000.
The Investment Manager is also entitled to a Performance Fee. Details of the
Performance Fee are given below.
The following tables show the fees charged in the period and the amount
outstanding at the end of the period:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment management fees charged 1,035 1,469 2,687
Total 1,035 1,469 2,687
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total fees outstanding 519 687 524
Performance fee
The Asset Manager and the Investment Manager are each entitled to 50% of a
performance fee. The fee is calculated at a rate of 15% of the total
shareholder return in excess of the hurdle rate of 8% per annum for the
relevant performance period. Total shareholder return for any financial year
consists of the sum of any increase or decrease in EPRA NAV per Ordinary Share
and the total dividends per Ordinary Share declared in the financial year. A
performance fee is only payable in respect of a performance period where the
EPRA NAV per Ordinary Share exceeds the high water mark which is equal to the
greater of the highest year-end EPRA NAV Ordinary Share in any previous
performance period. The performance fee was calculated initially on 31
December 2018 and annually thereafter.
The performance fees are now payable 34% in cash and 66% in Ordinary Shares,
at the prevailing price per share, with 50% of the shares locked-in for one
year and 50% of the shares locked-in for two years.
No performance fee has been earned for the six months ended 30 June 2023 or 30
June 2022 or the year ended
31 December 2022.
21. Subsequent events
On 11 September 2023, the Board of Directors approved a dividend of 1.20 pps
in respect of the period 1 April 2023 to 30 June 2023 for announcement on 12
September 2023. The dividend will be paid on 19 October 2023 to Shareholders
on the register as at 22 September 2023. These condensed consolidated
financial statements do not reflect this dividend.
EPRA PERFORMANCE MEASURES
The Group is a member of the European Public Real Estate Association ("EPRA").
EPRA has developed and defined the following performance measures to give
transparency, comparability and relevance of financial reporting across
entities which may use different accounting standards. The Group is pleased to
disclose the following measures which are calculated in accordance with EPRA
guidance:
EPRA Performance Measure EPRA Performance Measure Period ended 30 June Period ended 31 December
2023 2022
Definition
EPRA EARNINGS Earnings from operational activities
EPRA Earnings £12,700,000 £34,066,000
EPRA Earnings per Share (basic and diluted) 2.5p 6.6p
The EPRA NAV set of metrics make adjustments to the NAV per the IFRS financial
statements to provide stakeholders with the most relevant information on the
fair value of the assets and liabilities of a real estate investment company,
under different scenarios.
EPRA Net EPRA Net Reinstatement £379,192,000
Reinstatement Value EPRA NAV metric which assumes that entities never sell assets and aims to Value £344,910,000
represent the value
required to rebuild the entity.
EPRA Net Reinstatement 73.5p
Value per Share (diluted)
66.9p
EPRA Net Tangible Assets
EPRA NAV metric which assumes that entities buy and sell assets, thereby £379,192,000
crystallising certain levels of unavoidable deferred tax.
EPRA Net Tangible Assets £344,910,000
EPRA Net Tangible 66.9p 73.5p
Assets per Share
(diluted)
EPRA Net Disposal Value EPRA NAV metric which represents the £422,226,000
Shareholders' value under a disposal scenario, where deferred tax, financial EPRA Net Disposal Value
instruments and certain other adjustments are calculated to the full
extent of their liability, net of any resulting tax.
£400,226,000
EPRA Net Disposal Value per Share (diluted) 81.9p
77.6p
EPRA Net Initial Yield (NIY) Annualised rental income based on the cash rents passing at the balance sheet EPRA Net Initial Yield
date, less non-recoverable property operating expenses, divided by the market
value of the property with (estimated) purchasers' costs. 6.4%
6.5%
EPRA 'Topped-up' NIY This measure incorporates an adjustment to the EPRA 'Topped-up' Net Initial Yield
EPRA NIY in respect of the expiration of rent-free-periods 7.2%
(or other unexpired lease incentives such as discounted rent periods and
stepped rents).
7.2%
EPRA Vacancy Rate Estimated Market Rental Value (ERV) of vacancy space divided by ERV of the EPRA Vacancy Rate
whole portfolio.
16.6%
16.2%
EPRA Costs Ratio Administrative and operating costs (including and excluding costs of direct
vacancy) divided by gross rental income.
EPRA Costs Ratio
39.9% 32.8%
EPRA Costs Ratio
(excluding direct
vacancy costs) 17.3% 16.28%
EPRA LTV Debt divided by the market value of property EPRA LTV 52.8%
55.0%
NOTES TO THE CALCULATION OF THE EPRA PERFORMANCE MEASURES
1. EPRA earnings and Company Adjusted Earnings
For calculations, please refer to note 11 to the financial statements.
2. EPRA Net Reinstatement Value
30 June 31 December
2023 2022
£'000 £'000
NAV per the financial statements 373,788 402,942
Fair value of derivative financial instruments (29,577) (24,449)
Deferred tax liability 699 699
EPRA Net Reinstatement Value 344,910 379,192
Dilutive number of Shares 515,736,583 515,736,583
EPRA Net Reinstatement Value per share 66.9p 73.5p
3. EPRA Net Tangible Assets
30 June 31 December
2023 2022
£'000 £'000
NAV per the financial statements 373,788 402,942
Fair value of derivative financial instruments (29,577) (24,449)
Deferred tax liability 699 699
EPRA Net Tangible Assets 344,910 379,192
Dilutive number of Shares 515,736,583 515,736,583
66.9p 73.5p
EPRA Net Tangible Assets per Share
4. EPRA Net Disposal Value
30 June 31 December
2023 2022
£'000 £'000
NAV per the financial statements 373,788 402,942
Adjustment for the fair value of bank borrowings 24,109 18,867
Adjustment for the fair value of retail eligible bonds 2,329 417
EPRA Net Disposal Value 400,226 422,226
Dilutive number of Shares 515,736,583 515,736,583
EPRA Net Disposal Value per Share 77.6p 81.9p
5. EPRA Net Initial Yield
Calculated as the value of investment properties divided by annualised net
rents:
30 June 31 December
2023 2022
£'000 £'000
Investment properties 752,226 789,480
Purchaser costs 49,633 51,993
801,859 841,473
Annualised cash passing rental income 61,663 63,687
Property outgoings (9,694) (9,705)
Annualised net rents 51,969 53,982
Add notional rent expiration of rent-free periods or other lease incentives 5,985 6,402
Topped-up net annualised rent 57,954 60,384
EPRA NIY 6.5% 6.4%
EPRA topped up NIY 7.2% 7.2%
6. EPRA Vacancy Rate
Six months ended Year ended 31 December
30 June 2022
2023 £'000
£'000
Estimated Market Rental Value (ERV) of vacant space 14,729 14,579
Estimated Market Rental value (ERV) of whole portfolio 84,260 87,652
EPRA Vacancy Rate 17.5% 16.6%
7. EPRA Cost Ratios
Six month ended 30 June Year ended 31 December
2023 2022
£'000 £'000
Property costs 18,438 30,672
Less recoverable service charge income and other similar costs (10,106) (16,999)
Add administrative and other expenses 5,341 11,421
EPRA costs (including direct vacancy costs) 13,673 25,094
Direct vacancy costs (7,723) (12,712)
EPRA costs (excluding direct vacancy costs) 5,950 12,382
Gross rental income 44,415 93,318
Less recoverable service charge income and other similar items (10,106) (16,999)
Gross rental income less ground rents 34,309 76,319
EPRA Cost Ratio (including direct vacancy costs) 39.9% 32.8%
EPRA Cost Ratio (excluding direct vacancy costs) 17.3% 16.2%
The Group has not capitalised any overhead or operating expenses in the
accounting years disclosed above.
8. EPRA LTV
30 June 31 December
2023 2022
£'000 £'000
Borrowings from financial institutions 381,693 390,792
Bond loans 50,000 50,000
Net payables 23,731 26,888
Cash and cash equivalents (41,231) (50,148)
EPRA Net debt 414,193 417,532
Investment properties at fair value 752,226 789,480
Financial Assets - loans 645 770
Total property value 752,871 790,250
EPRA LTV 55.0% 52.8%
PROPERTY RELATED CAPITAL EXPENDITURE ANALYSIS
Six months ended 30 June Year ended 31 December
2023 2022
£'000 £'000
Acquisitions 91 79,270
Development - -
Investment properties -
Incremental lettable space - -
Enhancing lettable space 6,664 10,017
Tenant incentives - -
Other material non-allocated types of expenditure - -
Capitalised interest - -
Total Capital Expenditure 6,755 89,287
Conversion from accruals to cash basis - -
Total Capital Expenditure on cash basis 6,755 89,287
Acquisitions - this represents the purchase cost of investment properties and
associated incidental purchase expenses such as stamp duty land tax, legal
fees, agents' fees, valuations and surveys.
Subsequent capital expenditure - this represents capital expenditure which has
taken place post the initial acquisition of an investment property.
OTHER PERFORMANCE MEASURES
Net LTV
30 June 31 December
2023 2022
£'000 £'000
Borrowings from financial institutions 381,693 390,792
Bond loans 50,000 50,000
Cash and cash equivalents (41,231) (50,148)
Net debt 390,462 390,644
Investment properties at fair value 752,226 789,480
Net LTV 51.9% 49.5%
SHAREHOLDER INFORMATION
Share register enquiries: Link Group.
Please phone: 0371 664 0300 for any questions about:
• changing your address or other details
• your Shares
• buying and selling Shares.
Calls are charged at the standard geographic rate and will vary by provider.
Calls outside the United Kingdom will be charged at the applicable
international rate. The Registrar is open between 9.00 and - 17.30, Monday to
Friday excluding public holidays in England and Wales. For Shareholder
enquiries please email shareholderenquiries@linkgroup.co.uk
(mailto:enquiries@linkgroup.co.uk) .
POSTAL ADDRESS
Link Group
Shareholder Services
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Electronic Communications from the Company
Shareholders now have the opportunity to be notified by email when the
Company's annual reports, interim reports and other formal communications are
available on the Company's website, instead of receiving printed copies by
post. This has environmental benefits in the reduction of paper, printing,
energy and water usage, as well as reducing costs to the Company. If you have
not already elected to receive electronic communications from the Company and
wish to do so, visit www.signalshares.com. To register, you will need your
investor code, which can be found on your share certificate.
Alternatively, you can contact Link's Customer Support Centre, which is
available to answer any queries you have in relation to your shareholding:
By phone: call +44 (0) 371 664 0300. Calls from outside the UK will be
charged at the applicable international rate. Lines are open between 9.00 and
17.30, Monday to Friday (excluding public holidays in England and Wales).
By email: shareholderenquiries@linkgroup.co.uk
(mailto:enquiries@linkgroup.co.uk)
By post:
Link Group
Shareholder Services
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Forthcoming events
October 2023 Q2 2023 Dividend Payment
November 2023 Q3 Trading Update and Dividend Declaration
February 2024 Q4 Dividend Declaration
March 2024 2023 Preliminary Results
May 2024 Q1 2024 Trading Update and Dividend Declaration
Note: all future dates are provisional and subject to change.
Website: www.regionalreit.com
Other Information
Listing (ticker):
LSE
Main Market (RGL)
Date of
listing:
6 November 2015
Joint Brokers:
Peel Hunt LLP and Panmure Gordon (UK) Limited
Financial
PR:
Buchanan Communications
Incorporated:
Guernsey
ISIN:
GG00BYV2ZQ34
SEDOL:
BYV2ZQ3
Legal Entity Identifier:
549300D8G4NKLRIKBX73
COMPANY INFORMATION
Directors
Kevin McGrath (Chairman and Independent Non-Executive Director)
Daniel Taylor (Senior Independent Non-Executive Director)
Frances Daley (Independent Non-Executive Director and Audit Committee
Chairman)
Massy Larizadeh (Independent Non-Executive Director, Nomination Committee and
Management Engagement Committee Chairman)
Stephen Inglis (Non-Executive Director)
Administrator Independent Auditor Registrar
Jupiter Fund Services Limited RSM UK Audit LLP Link Market Services (Guernsey)
Mont Crevelt House Third Floor Limited
Bulwer Avenue Centenary House 10th Floor Central Square
St. Sampson 69 Wellington Street 29 Wellington Street
Guernsey GY2 4LH Glasgow G2 6HG Leeds LS1 4DL
Asset Manager Investment Manager Sub-Administrator
London & Scottish Property Investment Management Limited Toscafund Asset Management LLP Link Alternative Fund Administrators Limited
300 Bath Street, Glasgow 5th Floor Broadwalk House
G2 4JR 15 Marylebone Road Southernhay West
London NW1 5JD Exeter
EX1 1TS
Company Secretary Legal Adviser to the Company Tax Adviser
Link Company Matters Limited Macfarlanes LLP KPMG LLP
65 Gresham Street 20 Cursitor Street 319 St Vincent Street
London London EC4A 1LT Glasgow G2 5AS
EC2V 7NQ
Depositary Public Relations Registered office
Ocorian Depositary (UK) Limited Buchanan Communications Limited Regional REIT Limited
20 Fenchurch Street 107 Cheapside Mont Crevelt House
London London EC2V 6DN Bulwer Avenue
EC3M 3BY St. Sampson
Guernsey GY2 4LH
Financial Adviser and Joint Broker Joint Broker Property Valuers
Peel Hunt LLP Panmure Gordon Colliers International Property
7th Floor 1 New Change Consultants Limited
100 Liverpool Street London London 95 Wigmore Street
EC2M 2AT EC4M 9AF London
W1U 1DJ
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of this announcement.
National Storage Mechanism
A copy of the Half-Yearly Report will be submitted shortly to the National
Storage Mechanism ("NSM") and will
be available for inspection at the NSM, which is situated at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR EAKNFFDNDEFARecent news on Regional REIT
See all newsREG - Regional REIT Ltd - Holding(s) in Company
AnnouncementREG - Regional REIT Ltd - Positive Letting Update
AnnouncementREG - Regional REIT Ltd - 2023 Full Year Results
AnnouncementREG - Regional REIT Ltd - Response to Press Speculation
AnnouncementREG - Regional REIT Ltd - Dividend Declaration
Announcement