REG - Regional REIT Ltd - Q3 2021 Trading Update and Dividend Declaration

Regional REITAnnouncement

11/11/2021 07:00

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RNS Number : 0121S  Regional REIT Limited  11 November 2021

11 November 2021

REGIONAL REIT Limited

("Regional REIT", the "Group" or the "Company")

Q3 2021 Trading Update, Dividend Declaration & ESG Update

 

Regional REIT Limited (LSE: RGL), the regional office specialist, is pleased
to announce a trading update for the period from 1 July 2021 to 30 September
2021 and dividend declaration for the third quarter of 2021.

 

Q3 2021 Trading Update

The Group has exchanged on 35 leases to new tenants since 1 January 2021,
totalling 134,523 sq. ft., of which 11 leases have been exchanged since 30
June 2021, totalling 19,050 sq. ft.. When fully occupied these 35 new leases
will provide £1.7m per annum ("pa") of rental income. The 11 leases exchanged
since 30 June 2021 will provide £0.3m pa of rental income.

 

A number of leases came up for renewal from 1 January 2021. Retention of
occupancy by area remains high at 82.1%*.

 

* includes tenants that are currently holding over, lease renewals, and the
acquisition of new replacement tenants.

 

Portfolio as at 30 September 2021:

·    169 properties, 1,498 units and 1,074 tenants, totalling
c.£915.6m(**) of gross property assets value

·    Offices (by value) were 90.0% of the portfolio (31 December 2020:
83.5%), Industrial sites 5.3% (31 December 2020: 11.1%), Retail 3.3% (31
December 2020: 4.1%), and Other 1.4% (31 December 2020: 1.3%)

·    Rent roll £75.5m (30 June 2021: £61.1m); ERV £94.8m (30 June 2021:
£75.1m)

·    England & Wales represented 82.3% (31 December 2020: 82.7%) of
the portfolio with the remainder in Scotland

·    EPRA Occupancy (by ERV) 83.0% versus 85.7% as at 30 June 2021; 30
September 2021 like-for-like (versus 30 September 2020) EPRA occupancy was
82.5% (88.9%). As expected, EPRA Occupancy was impacted by the £236.0m
portfolio acquisition made in Q3 '21, with an EPRA Occupancy (by ERV) of
78.4%. Asset management plans are in place to improve occupancy.

·    Average lot size c. £5.4m (31 December 2020: c. £4.8m)

·    Net loan-to-value ratio c. 42.5%(**) (31 December 2020: 40.8%). Gross
borrowings £437.5m (31 December 2020; £366.2m); cash and cash equivalent
balances £48.1m (31 December 2020: £67.4m). Cost of debt (including hedging)
of 3.3% pa (31 December 2020: 3.3% pa)

 

** Gross property assets value based upon C&W valuations as at 30 June
2021, adjusted for subsequent acquisitions, disposals and capital expenditure
in the period.

 

Q3 2021 Dividend Declaration

 

As previously indicated, the Company is pleased to declare that it will pay a
dividend of 1.60 pence per share ("pps") for the period 1 July 2021 to 30
September 2021, (1 July 2020 to 30 September 2020: 1.50pps). The entire
dividend will be paid as a REIT property income distribution ("PID").

 

The Company has introduced the option for shareholders to invest their
dividend in a Dividend Reinvestment Plan ("DRIP"), and more details can be
found on the Company's website https://www.regionalreit.com/investors
(https://www.regionalreit.com/investors) .

 

The key dates relating to this dividend are given below:

 

 Ex-dividend date            18 November 2021
 Record date                 19 November 2021
 Last day for DRIP election  17 December 2021
 Payment date                12 January 2022

 

Further to the announcement made on the 16 September 2021, the Board will
target a dividend of 6.5pps for the full year 2021 (2020: 6.4pps), which
equates to an annualised dividend yield of 7.3% at the closing price per share
on 10 November 2021.

 

ESG Update

The Group is pleased to announce that it has achieved Green Star status from
the Global Real Estate Sustainability Benchmark ("GRESB"). Following the
assessment by GRESB, the Company is evaluating the results and intends to take
additional actions going forward to further improve the rating for 2022.

 

A full update on the Company's ESG progress will be provided in the annual
report and accounts, which are due to be published in 2022.

 

Rental Collection Update

As at 5 November 2021, the Company had collected 94.3% of the rent due for Q3
2021. This comprised rent received of 91.1%, monthly rents of 1.4% and agreed
collection plans of 1.8%.

 

Rent received from 1 January 2021 to 5 November 2021 amounted to 97.1%,
comprising of rent received of 94.9%, monthly rents of 0.6% and agreed
collection plans of 1.6%. The rent received of 94.9% compares favourably with
the equivalent period in 2020 of 93.2%.

 

Outlook

The Company's business model continues to perform strongly in the year to
date, despite the testing and uncertain economic outlook. The Company's asset
management platform continues to engage actively with our occupiers ensuring
strong rent collections whilst maintaining the momentum of ongoing asset
management initiatives to increase capital values.

 

These attributes continue to underpin the Company's uninterrupted quarterly
dividend distributions and will ensure the continued growth of capital returns
to our shareholders over the long term.

 

Stephen Inglis, CEO of London & Scottish Property Investment Management,
Asset Manager commented:

 

I am delighted to report another strong quarter of trading, which saw robust
momentum maintained in rent collections, the sale of the majority of our
remaining industrial assets, and a large portfolio acquisition from which we
see long-term shareholder value accretion. Given the covid-19 pandemic,
transactions in the occupational market remain subdued, however, we are now
seeing an increase in the level of enquiries, which we anticipate will flow
through to lettings in due course.

 

Our strong ongoing relationships with tenants and our active asset management
approach has supported our tenant retention and occupancy remains high,
against a competitive market backdrop.

 

Additionally, I am pleased to confirm the Q3 dividend of 1.60 pence per share.
As previously announced, the Company is targeting a full year 2021 dividend of
6.5p, which offers a highly attractive dividend yield at the current share
price.

 

Summary of Activity in the Quarter to 30 September 2021:

The Group undertook several asset management projects, generating new lettings
and maintaining and improving income through lease renewals and re-gears:

 

·    Cyan Building, Rotherham - National Westminster Bank Plc renewed its
lease for 67,458 sq. ft. for a further two years at a rental income of
£425,000 pa (£6.30/ sq. ft.).

·    Ashby Business Park, Ashby De La Zouch - Hill Rom UK Ltd. (29,358 sq.
ft.) has renewed its lease for a further nine months at a rent of £366,975 pa
(£12.50/ sq. ft.) representing an uplift of 27.9% from the previous rent.

·    Logic House, Waterfront Business Park, Fleet- Barclays Execution
Services Ltd. (19,361 sq. ft.) has renewed its lease for a further ten years
with the option to break in 2024. The lease will provide a rental income of
£348,500 pa (£18.00/ sq. ft.).

·    Advantage House, Reading - Barrett & Co. Solicitors LLP leased
3,255 sq. ft. for a period of ten years with the option to break in 2027 at a
rent of £87,288 pa (£26.81/ sq. ft.).

·    The Coach Works, The Calls, Leeds - 3,304 sq. ft. of space has been
let to Pentest People Ltd. following refurbishment at a rent of £84,600 pa
(£25.61/ sq. ft.) for a period of five years with the option to break in
2024.

·    Genesis Business Park, Woking - Metamark (UK) Ltd. has leased 2,622
sq. ft. for five years with the option to break in 2024 at a rent of £61,617
pa (£23.50/ sq. ft.).

·    Milburn House, Newcastle - Burnetts Solicitors have renewed their
lease for a further five years with a break option in 2024 at a rental income
of £56,131 pa (£11.75/ sq.ft.) on 4,777 sq. ft..

·    Mandale Business Park, Durham - A new tenancy agreement has been
signed with Partner Construction Ltd. for 5,000 sq. ft.. The lease is for five
years with a break option in 2024 at a rental income of £57,500 pa (£11.50/
sq. ft.).

 

Acquisitions

The Group acquired a major portfolio of 31 high quality, predominately
multi-let office assets during the quarter for £236.0m.

 

Portfolio Highlights

·    27 office assets providing over 1.6m sq. ft. for 192 tenants; two
industrial units (120,020 sq. ft.) with three tenants; a residential asset
with 12 tenants (10,672 sq. ft.); and a Tim Horton's Drive-Thru restaurant
(2,010 sq. ft.)

·    Regional offices (by value) constitute 93.3% of the portfolio;
industrial 4.9%; residential 1.1%; retail 0.7%

·    Located entirely outside of the M25, 78.2% in England; 17.1% in
Scotland; and the remaining 4.7% in Wales

·    Net initial yield of 7.8%, and a reversionary yield of 11.0%

·    Contracted rent roll amounts to £21.9m pa

 

Further to the announcement made on 31 August 2021, the landlord at Quantum
Court, Edinburgh has now provided consent to transfer the lease. This
acquisition, comprising of seven modern multi-let office pavilions (38,328 sq.
ft.), with car parking, including electric car charging points, completes the
£236.0m portfolio acquisition.

 

Sales

Total disposals in the three months to 30 September 2021 amounted to £57.2m,
reflecting a net initial yield of 6.9% and an uplift of 4.0% against the
December 2020 valuation. Key disposals included:

 

·    Industrial Portfolio - Significant £45.0m industrial portfolio sale
to ARA Dunedin. This reflects a net initial yield of 6.75% and is 7.5% above
the valuation as at 31 December 2020. After capital expenditure, the sale
represents an uplift of 18.0% from the acquisition price. During the Company's
ownership of the seven industrial properties (801,787 sq. ft.) located in
Bromborough, Erith, Nottingham, Scunthorpe, Telford, Winsford and Wisbech,
several asset management initiatives have been actioned to increase value.
These initiatives included a series of renovations and the subdivision of some
of the larger units, which assisted in improving occupancy rates, rental
income and in turn, capital values.

 

·    Arena Point, Leeds - Disposal of office property for £10.6m. The
purchaser intends to demolish the 19-storey office block (76,176 sq. ft.) to
make way for a 43-storey tower, providing accommodation for 705 students. The
disposal represents the final part of the long term business plan for this
asset, which the Company acquired with the adjacent two-storey casino and pub,
known as the Podium Buildings, in March 2016 for £10.5m. In July 2018, the
Podium Buildings were sold to Unite Students for £12.2m for development into
what is now the 16 and 27-storey tower, named White Rose View. The final
disposal of Arena Point has now secured profits after all costs for the site
of some £9.3m.

 

Subsequent Events post 30 September 2021:

Since the quarter end, the Group has successfully completed the following
lettings and sales:

 

Lettings

·    Commercial Road, Bromborough - A new lease has been signed with Albea
Creative Ltd. for 126,689 sq. ft. of space for ten years with the option to
break in 2026 at a rent of £543,270 pa (£4.29/ sq. ft.) with this asset
forming part of the industrial sale to ARA Dunedin.

·    300 Bath Street, Glasgow - A lease agreement for ten years, with a
five year break option, has been signed with London & Scottish Property
Investment Management, the Company's asset manager, for the first floor suite
at 300 Bath Street, Glasgow, for £182,621 pa (£18.50 / sq. ft.) on 9,439 sq.
ft., plus four car parking spaces for £2,000 pa. The Company was advised by
independent commercial property advisor: Ryden.

 

Sales

·    James House, Leicester - Largely vacant property was sold on 8
October 2021 for £3.6m, in line with the most recent valuation.

 

Forthcoming Events

 

 24 February 2022  Q4 2021 Dividend Declaration and Portfolio Valuation
 29 March 2022     Full year 2021 Preliminary Results Announcement
 25 May 2022       May 2022 Trading Update and Outlook Announcement
                   Q1 2022 Dividend Declaration Announcement
                   Annual General Meeting

 

Note: All dates are provisional and subject to change

 

- ENDS -

 

 

Enquiries:

 

 Regional REIT Limited
 Press enquiries through Buchanan

 Toscafund Asset Management                                 Tel: +44 (0) 20 7845 6100
 Investment Manager to the Group
 Adam Dickinson, Investor Relations, Regional REIT Limited

 London & Scottish Property Investment Management           Tel: +44 (0) 141 248 4155
 Asset Manager to the Group
 Stephen Inglis

 Buchanan Communications                                    Tel: +44 (0) 20 7466 5000
 Financial PR
 Charles Ryland, Henry Wilson, George Beale

 

About Regional REIT

Regional REIT Limited ("Regional REIT" or the "Company") and its
subsidiaries (the "Group") is a United Kingdom ("UK") based real estate
investment trust that launched in November 2015. It is managed
by London & Scottish Property Investment Management Limited, the Asset
Manager, and Toscafund Asset Management LLP, the Investment Manager.

Regional REIT's commercial property portfolio is comprised wholly of income
producing UK assets and comprises, predominantly of offices located in the
regional centres outside of the M25 motorway. The portfolio is geographically
diversified, with 169 properties, 1,074 occupiers as at 30 September 2021,
with a valuation of c.£915.6m.

Regional REIT pursues its investment objective by investing in, actively
managing and disposing of regional core and core plus property assets. It aims
to deliver an attractive total return to its Shareholders, targeting greater
than 10% per annum, with a strong focus on income supported by additional
capital growth prospects.

The Company's shares were admitted to the Official List of
the UK's Financial Conduct Authority and to trading on the London Stock
Exchange on 6 November 2015. For more information, please visit the Group's
website at www.regionalreit.com (http://www.regionalreit.com/)  .

Cautionary Statement

This document has been prepared solely to provide additional information to
Shareholders to assess the Group's performance in relation to its operations
and growth potential. The document should not be relied upon by any other
party or for any other reason. Any forward looking statements made in this
document are done so by the Directors in good faith based on the information
available to them up to the time of their approval of this document. However,
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors, underlying
any such forward-looking information.

ESMA Legal Entity Identifier ("LEI"): 549300D8G4NKLRIKBX73

 

 

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