REG - Regional REIT Ltd - Q3 2024 Trading Update and Dividend Declaration

Regional REITAnnouncement

13/11/2024 07:15

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RNS Number : 9723L  Regional REIT Limited  13 November 2024

13 November 2024

REGIONAL REIT Limited

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

Q3 2024 Trading Update and Dividend Declaration

 

9.3% Uplift in New Letting Income in 2024

 

 

Regional REIT Limited (LSE: RGL), the regional property specialist, is pleased
to announce a trading update for the three-month period from 1 July 2024 to 30
September 2024 and a dividend declaration for the third quarter of 2024.
Additionally, the Group provides an update on its positive ESG progress, with
a continued strengthening of its EPC and GRESB rating.

 

The Company is now on a much stronger financial footing, following the
successful £110.5m equity fund raise, which was completed in Q3 2024 and
strongly supported by shareholders. Proceeds were used for the repayment of
the £50m retail bond, and of the remaining net proceeds: £26.3m is in the
process of being used to reduce bank facilities; and £28.4m will be used in
repositioning the portfolio to capture the accretive opportunities from
capital expenditure, enhancing earnings in the near term and value in the mid
to long-term, further underpinning dividend payments going forward.

 

Q3 2024 Trading Update

The Group traded well during the period under review and made good progress,
completing a number of lease renewals during Q3 2024. Retention remained high
with 77.7%(*) of rent roll up for renewal remaining let.

 

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

 

Rental uplift of 9.3% against December 2023 ERVs has been achieved. Since 1
January 2024, the Group has exchanged on 55 leases to new tenants totalling
161,668 sq. ft. providing £2.6m per annum ("pa") of rental income when fully
occupied. Of this total, 11 leases have been exchanged since 30 June 2024,
totalling 39,536 sq. ft. and will provide £0.5m pa of additional rental
income.

 

Capital expenditure programme highlights

The deployment of the capital raise proceeds into capital accretive projects
has commenced with eight projects in course for a total investment of £15.0m.

 

A full refurbishment of Ashby Park, Ashby De La Zouch has recently completed
at a cost of £2.7m. These works have already led to a new 10-year lease with
Ashfield Healthcare Ltd. and Q Collection (UK) Ltd. generating an aggregate
£0.5m pa rental income.

 

Q3 2024 Dividend Declaration

As previously indicated, the Company is pleased to declare that it will pay a
dividend of 2.20 pence per share ("pps") for the period 1 July 2024 to 30
September 2024. The entire dividend will be paid as a REIT property income
distribution ("PID").

 

Shareholders have the option 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/investors-dividend/dividend-reinvestment-plan
(https://www.regionalreit.com/investors/investors-dividend/dividend-reinvestment-plan)
.

 

The key dates relating to this dividend are:

 

 Ex-dividend date            21 November 2024
 Record date                 22 November 2024
 Last day for DRIP election  17 December 2024
 Payment date                10 January 2025

 

Prior to the capital raise and share consolidation** the Company declared a Q1
2024 dividend of 1.2pps. Post the capital raise and subsequent share
consolidation the Company declared a Q2 2024 dividend of 2.2pps on 10
September 2024 and is now declaring a Q3 2024 dividend of 2.2pps. The Board
will target a dividend of 2.2pps for Q4 2024.

 

**On 29 July 2024, the shares in issue were consolidated by ratio of 1 new
share for every 10 shares.

 

The level of future payment of dividends will be determined by the Board
having regard to, among other factors, the financial position and performance
of the Group at the relevant time, UK REIT requirements, the interest of
shareholders and the long-term future of the Company.

 

Strong ESG Progress Achieved

During the quarter the portfolio EPC ratings continued to improve following
management action taken, and the Company is on target to achieve EPC B rating
by 2030 in accordance with current guidelines.

 

 Rating             30 June 2024  30 September 2024  Movement
 B plus and Exempt  56.3%         57.0%              +70bps
 C                  25.5%         25.1%              (40)bps
 D                  11.5%         11.5%              -
 E and below        6.7%          6.3%               (40)bps

 

Following the assessment by Global Real Estate Sustainability Benchmark
("GRESB"), the Group has increased its score noticeably to 73 in 2024 from 66
in 2023, achieving two Green Star status. The Company continues to improve and
embed ESG processes throughout its operations and looks forward to achieving
further improvements to the rating for 2024.

 

A full update on the Company's ESG progress will be provided in the annual
report and accounts, which is due to be published in 2025.

 

Outlook

During the period under review, the challenging economic backdrop remained
evident with a subdued investment market; and although positive leasing
momentum continued across the portfolio, the time to completion continues to
remain untypically long.

 

In the near term, the Board remains focused on a controlled disposal programme
and repositioning the portfolio to capture the accretive opportunities from
increasingly undertaking the planning consent activities, whilst maintaining
dividend distributions.

 

 

Stephen Inglis, Head of ESR Europe LSPIM, Asset Manager commented:

"The Group continued to trade well, achieving strong rent collection and lease
retention for the quarter, with an average rental income uplift of 9.3% for
the year to 30 September 2024, against a backdrop of uncertain market
conditions.

 

The deployment of the capital raise proceeds into capital accretive projects
has commenced at a pace with eight projects in course for a total investment
of £15.0m. We have already completed the full refurbishment project at Ashby
Park, Ashby De La Zouch leading to a new 10-year lease generating £0.5m pa
rental income. We look forward to providing further updates on accretive
capital expenditure projects."

 

Additional Background Information

 

Portfolio Highlights as at 30 September 2024:

·      131 properties, 1,303 units and 808 tenants, totalling
c.£648.8m(***) of gross property assets value

·      Offices (by value) were 91.4% of the portfolio (31 December 2023:
92.1%), Retail 3.1% (31 December 2023: 3.1%), Industrial 3.4% (31 December
2023: 3.2%) and Other 2.1% (31 December 2023: 1.6%)

·      Rent roll of £62.1m (30 June 2024: £63.5m); ERV £83.5m (30
June 2024: £83.7m)

·      EPRA Occupancy (by ERV) 77.5% (30 June 2024: 78.0%);
like-for-like EPRA occupancy was 77.5% (30 September 2023: 82.0%)

·      Average lot size c. £5.0m (31 December 2023: c. £4.9m)

·      Group cost of debt (incl. hedging) 3.4% pa (31 December 2023:
3.5% pa) - 100% fixed and hedged ensuring the maximum cost of debt will not
exceed 3.4%

·      Net loan-to-value ratio c. 41.4%(***) (31 December 2023: 55.1%)

·      Weighted average debt duration 3.1 years, with the earliest
borrowing maturity date being August 2026

·      Cash and cash equivalent balances £85.1m (31 December 2023:
£34.5m)

·      Gross borrowings £353.3m (31 December 2023: £420.8m)

·      Q3 2024 rent collected as at 7 November 2024 amounted to 96.7%

 

*** Gross property assets value based upon Colliers valuations as at 30 June
2024, adjusted for subsequent acquisitions, disposals and capital expenditure
in the period.

 

Summary of Activity in the Quarter to 30 September 2024:

The Group undertook several asset management projects, generating new lettings
and maintaining and improving income through lease renewals and re-gears:
During the third quarter of 2024, the Group has exchanged on eight notable
leases and renewals totalling 65,326 sq. ft., amounting to £1.3m per annum
("pa") of rental income when fully occupied.

 

·      Ashby Park, Ashby De La Zouch - Q Collection (UK) Ltd. has let
7,254 sq. ft. of office space to October 2034 with the option to break in
2027, at a rental income of £134,199 pa (£18.50 / sq. ft.).

·      The Courtyard, Macclesfield - Elior UK Services Ltd. has renewed
existing lease for 23,100 sq. ft. of space to August 2028, at a rental income
of £542,700 pa (£23.49/ sq. ft.).

·      The Coach Works, Leeds - St James's Place Wealth Management Group
Ltd. has renewed existing lease for 9,818 sq. ft. of space to September 2025,
at a rental income of £297,900 pa (£30.34/ sq. ft.).

·      Global Reach, Cardiff - Active Quote Ltd. has renewed existing
lease for 4,318 sq. ft. of space to August 2025, at a rental income of
£62,568 pa (£14.49/ sq. ft.).

·      1175 Century Way, Thorpe Park, Leeds - Greenbelt Group Ltd. has
let 2,670 sq. ft. of office space to July 2029, at a rental income of £64,080
pa (£24.00 / sq. ft.).

·      Mandale Business Park, Durham - Avove Ltd. has let 5,000 sq. ft.
of office space to July 2034 with the option to break in 2029, at a rental
income of £58,750 pa (£11.75 / sq. ft.).

·      St James Business Park, Paisley - Maximus UK Services Ltd. has
let 5,456 sq. ft. of office space to September 2029 with the option to break
in 2025, at a rental income of £76,384 pa (£14.00 / sq. ft.).

·      Buchanan Gate, Stepps, Glasgow - RPS Environmental Management
Ltd. has let 7,710 sq. ft. of office space to September 2029 with the option
to break in 2027, at a rental income of £88,665 pa (£11.50 / sq. ft.).

 

Sales

Total disposals in the three months to 30 September 2024 amounted to £1.75m
(before costs), reflecting an uplift of 2.9% against the 30 June 2024
valuation.

 

Future asset disposal programme comprises of 48 assets valued at c £72.7m in
aggregate:

 

Subsequent Events summary post 30 September 2024:

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

 

Lettings

·      14-16 Rossmore Business Village, Ellesmere Port - The Alexander
Beard Group of Companies Ltd. has renewed existing lease for 4,369 sq. ft. of
space to October 2034 with a break option in 2030, at a rental income of
£61,200 pa (£14.00/ sq. ft.).

·      The Royals, Altrincham Road, Manchester - The Golfers Club U.K.
Ltd. has renewed existing lease for 5,470 sq. ft. of space to December 2025
with a break option in March 2025, at a rental income of £82,050 pa (£15.00/
sq. ft.).

·      Bear Brook Office Park, Aylesbury- Ulrich Attachments Ltd. has
let 3,347 sq. ft. of office space to November 2034 with the option to break in
2029, at a rental income of £51,500 pa (£15.39 / sq. ft.).

·      Mandale Business Park, Durham - NHS Property Services Ltd. has
renewed existing lease for 5,100 sq. ft. of space to November 2034 with a
break option in 2029, at a rental income of £58,750 pa (£11.52/ sq. ft.).

 

 

Forthcoming Events

 

 20 February 2025  Q4 2024 Dividend Declaration and Portfolio Valuation
 25 March 2025     Full year 2024 Preliminary Results Announcement
 21 May 2025       May 2025 Trading Update and Outlook Announcement
                   Q1 2025 Dividend Declaration Announcement
 22 May 2025       Annual General Meeting

 

Note: All dates are provisional and subject to change

 

- ENDS -

 

Enquiries:

 

 Regional REIT Limited
 Press enquiries through Burson Buchanan

 ESR Europe Private Markets Limited                         Tel: +44 (0) 203 831 9776
 Investment Adviser to the Group
 Adam Dickinson, Investor Relations, Regional REIT Limited

 ESR Europe LSPIM Limited                                   Tel: +44 (0) 141 248 4155
 Asset Manager to the Group
 Stephen Inglis

 Burson Buchanan Communications                             Tel: +44 (0) 20 7466 5000
 Financial Communications
 Charles Ryland, Henry Wilson, Sam Adams

 

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 ESR Europe Private Markets Limited, the Investment Adviser.

 

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 131 properties, 1,303 units and 808 tenants as at 30
September 2024, with a valuation of c.£648.8m.

 

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/) .

 

LEI: 549300D8G4NKLRIKBX73

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