REG - Regional REIT Ltd - Q4 23 Valuation and Portfolio Update

Regional REITAnnouncement

02/02/2024 07:00

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RNS Number : 7864B  Regional REIT Limited  02 February 2024

2 February 2024

REGIONAL REIT Limited

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

Q4 Trading Update and Year-End Portfolio Valuation

98.6% Rent Collection for 2023

Regional REIT (LSE: RGL) today announces its portfolio valuation as at 31
December 2023 and a positive update for both EPC ratings and rent collections.

Full Year 2023 Valuation and Portfolio Update

·    Portfolio valuation £700.7m (2022: £789.5m)

·   The like-for-like value of the portfolio decreased by 5.9% from 30 June
2023 to 31 December 2023 after adjusting for capital expenditure, acquisitions
and disposals during the period (5.5% excluding capital expenditure
adjustment)

·   Total rent collection for 2023 is currently 98.6% compared with 97.9%
for the equivalent period in 2022

·    Gross annualised rent roll £67.8m (2022: £71.8m); ERV £87.0m
(2022: £92.0m)

·    Equivalent Yield 9.9% (2022: 9.0%)

·    Excellent progress on EPC ratings with c.73% of the portfolio EPC C
or better

·    144 properties (2022: 154); 978 occupiers (2022: 1,076)

·    Total disposals in 2023 of £26.1m (before costs)

·    Portfolio: offices (by value) at 92.1% (2022: 91.8%), industrials
3.2% (2022: 3.1%), retail 3.1% (2022: 3.6%), and Other 1.7% (2022: 1.4%)

·    England represented 78.4% (2022: 78.3%) (by value), Scotland 16.2%
(2022: 16.7%) and Wales 5.4% (2022: 5.0%)

·    EPRA Occupancy (by ERV) at 80.0% (2022: 83.4%)

·    Average lot size c. £4.9m (2022: c. £5.1m)

·    Net loan-to-value ratio 55.1% (2022: 49.5%)

·    Group cost of debt (incl. hedging) 3.5% pa (2022: 3.5% pa) - 100%
fixed and hedged

·    Weighted average debt duration 3.5years (2022: 4.5 years)

 

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

"2023 was one of the most challenging years for REITs in recent memory and
Regional REIT was not immune from the macro-economic difficulties faced by the
sector. Whilst valuations have been impacted, the Asset Manager's active asset
management initiatives continued to mitigate some of the impact on the
portfolio. The leasing market was slower than anticipated largely due to the
uncertainty around working patterns and the geopolitical situation impacting
inflation and interest rates, but with some stability we are witnessing
increasing numbers of enquiries for our assets.

 

"Notably, the Company continued to achieve a strong level of rent collection
thanks to its high-quality tenant base. The ongoing asset disposal programme
continues to achieve the latest valuations.

"It is pleasing to note that substantial progress has been achieved in
improving the EPC rating of the portfolio. Over the course of 2023 the number
of properties rated EPC C and above has improved to in excess of 73% of the
portfolio.

"The LTV continues to be a key focus of the Board and the management have a
plan to reduce LTV to the long term target of 40% through selective sales and
repayment of debt. The senior debt is 100% fixed, swapped or capped and will
not exceed 3.5%. The Company is actively exploring a range of refinancing
options for the retail bond given its near-term maturity date."

Rent Collection 2023 Update

The Company is pleased to report that as at 30 January 2024, Q1 2023
collections amounted to 99.7%, Q2 2023 to 98.5% and Q3 2023 to 98.2%.
Currently, Q4 2023 rent collection, adjusting for monthly rent stands at
98.1%, which is above the equivalent period in 2022, when 95.6% had been
collected. The total rent collection for 2023 is currently at 98.6% (see
below) compared with 97.9% this time last year.

 %                           Q1 2023  Q2 2023  Q3 2023  Q4 2023  YTD
 Rent paid                   99.7     98.4     98.1     97.3     98.4
 Adjusted for monthly rents  0.0      0.0      0.1      0.7      0.2
                             99.7     98.5     98.2     98.1     98.6

 

Table may not sum due to rounding.

 

The Company remains supportive of its tenants and is in ongoing discussions
with occupiers regarding the balance of the outstanding rent. It expects to
collect the vast majority of the outstanding rent in due course.

 

Quarterly rental collection refers to all invoices issued during the calendar
quarters:

Q1: 1 January 2023 to 31 March 2023

Q2: 1 April 2023 to 30 June 2023

Q3: 1 July 2023 to 30 September 2023

Q4: 1 October 2023 to 31 December 2023

 

EPC update

During the quarter we have continued to improve the portfolio EPC ratings and
the Company remains on target to achieve EPC B rating by 2030 in accordance
with current guidelines.

 

 Rating             31-Dec-22  31-Dec-23  Movement
 B plus and Exempt  23.6%      42.1%      +18.50pps
 C                  33.3%      31.6%      (1.70)pps
 D                  27.2%      15.7%      (11.50)pps
 E and below        16.0%      10.6%      (5.40)pps

 

Excluding Scotland:

 Rating             31-Dec-22  31-Dec-23  Movement
 B plus and Exempt  25.1%      42.9%      +17.80pps
 C                  33.5%      32.4%      (1.10)pps
 D                  28.0%      15.8%      (12.20)pps
 E and below        13.4%      9.0%       (4.40)pps

 

pps: percentage points

 

Sales

Total disposals in the year to 31 December 2023 amounted to £26.1m (before
costs), broadly in line with the respective valuation points and reflecting a
net initial yield of 4.5% (7.9% excluding vacant units).

 

Further Background Information

 

Lettings Update - Summary of Activity since 30 September 2023:

Since 30 September 2023, notable new lettings in aggregate amounted to
c.£0.9m of new rent and aggregate lease renewals amounted to c. £1.5m,
reflecting in aggregate an increase of a 6.7% above 30 June 2023 ERV.

·    Columbus House, Coventry - Shell Energy Retail Ltd. has taken
assignment of lease and renewed for a further two years from January 2024, at
a rental income of £908,500 pa (£17.06/ sq. ft.) on 53,253 sq. ft. of
space.

·    Norfolk House, Birmingham - Existing tenant Global Banking School
Ltd. has let an additional 29,383 sq. ft. of space at a rental income
of £558,277 (19.00/ sq. ft.). The lease is to December 2037, with a break
option in 2032 to be coterminous with the existing lease of ground, first and
third floors.

·    Kingscourt Leisure Complex, Dundee - 29,626 sq. ft. of previously
vacant space has been let to The Original Bowling Company Ltd. The annual rent
amounts to £166,000 pa (£5.60/ sq. ft.), with a 15-year lease.

·    Hampshire Corporate Park, Eastleigh - Silverstream Technologies (UK)
Ltd. has leased 4,400 sq. ft. of space for 10 years with a break option in
2028 at a rent of £127,339 pa (£28.94/ sq. ft.).

·    Aspect House, Bennerley Road, Nottingham - Nottingham Citycare
Partnership CIC has leased 3,750 sq. ft. of space until May 2024 at a rent of
£132,768 pa (£35.40/ sq. ft.).

·    Lightyear - Glasgow Airport, Glasgow - Loganair Ltd. renewed its
lease for a further 10 years, to November 2033, at a rental income of
£259,445 pa (£18.11/ sq. ft.) on 14,330 sq. ft. of space.

·    St James Court, Bristol - Thomas Silvey Ltd. renewed its lease for a
further five years, to December 2028, at a rental income of £82,624 pa
(£16.00/ sq. ft.) on 5,164 sq. ft. of space.

·    Salamander Quay, Bankside, Harefield - Alcatel IP Networks Ltd.
renewed its lease for a further 10 years, to October 2033 with a break option
in 2028 at a rental income of £136,000 pa (£20.12/ sq. ft.) on 6,759 sq. ft.
of space.

·    The Royals, Altrincham Road, Manchester - Match Me Finance Ltd. has
leased 5,814 sq. ft. of space for 10 years with a break option in 2028 at a
rent of £92,553 pa (£15.92/ sq. ft.).

 

 

Forthcoming Events

22 February 2024        Q4 2023 Dividend Declaration Announcement

26 March 2024            Full year 2023 Preliminary Results
Announcement

22 May 2024               May 2024 Trading Update and Outlook
Announcement

                                    Q1 2024
Dividend Declaration Announcement

23 May 2024               Annual General Meeting

 

Note: All dates are provisional and subject to change.

 

- ENDS -

 

 

Enquiries:

 

 Regional REIT Limited
 Press enquiries through Buchanan

 ARA Europe Private Markets Limited                      Tel: +44 (0) 20 7845 6100
 Investment Adviser to the Group
 Adam Dickinson, Investor Relations

 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 ARA 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 144 properties, 978 occupiers as at 31 December 2023, with a
valuation of c.£700.7m.

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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