Q3 2022 Trading Update and Dividend Declaration

RNS Number : 9045F

Regional REIT Limited

10 November 2022

 

10 November 2022

REGIONAL REIT Limited

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

Q3 2022 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 2022 to 30 September 2022 and a dividend declaration for the third quarter of 2022.

Q3 2022 Trading Update

The Group has traded well during the period under review and continued to make good progress. Since 1 January 2022, the Group has exchanged on 83 leases to new tenants totalling 221,446 sq. ft. and £3.8m per annum ("pa") of rental income when fully occupied. Of this total, 36 leases have been exchanged since 30 June 2022, totalling 75,877 sq. ft. and will provide £1.2m pa of rental income.

The Group completed a number of lease renewals during the quarter with retention remaining high at 70.3% * of units remain let.

The Group is pleased to note that EPRA occupancy overall has increased to 84.6%, versus 83.8% at 30 June 2022, with advanced asset management plans in place to further improve this figure.

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

Portfolio as at 30 September 2022:

· 156 properties, 1,556 units and 1,042 tenants, totalling c.£914.9m^** of gross property assets value

· Offices (by value) were 92.8% of the portfolio (31 December 2021: 89.8%), Retail 3.5% (31 December 2021: 3.7%), Industrial 2.3% (31 December 2021: 5.1%) and Other 1.4% (31 December 2021: 1.4%)

· Group cost of debt (incl. hedging) 3.5% pa (31 December 2021: 3.3% pa) - 100% fixed and hedged ensuring the maximum cost of debt will not exceed 3.5%

· Rent roll of £72.2m (30 June 2022: £72.0m); ERV £93.3m (30 June 2022: £94.1m)

· England & Wales represented 82.9% (31 December 2021: 81.0%) of the portfolio with the remainder in Scotland

· EPRA Occupancy (by ERV) 84.6% versus 83.8% as at 30 June 2022; 30 September 2022 like-for-like (versus 30 September 2021) EPRA occupancy was 83.3% (85.1%)

· Average lot size c. £5.9m (31 December 2021: c. £5.4m)

· Net loan-to-value ratio c. 43.1%^** (31 December 2021: 42.4%)

· Weighted average debt duration 4.8years, with the earliest borrowing maturity date being August 2024

· Cash and cash equivalent balances £48.4m (31 December 2021: £56.1m)

· Gross borrowings £442.7m (31 December 2021; £439.9m)

** Gross property assets value based upon C&W valuations as at 30 June 2022, adjusted for subsequent acquisitions, disposals and capital expenditure in the period.

Q3 2022 Dividend Declaration

As previously indicated, the Company is pleased to declare that it will pay a dividend of 1.65 pence per share ("pps") for the period 1 July 2022 to 30 September 2022, an increase of c. 3% (1 July 2021 to 30 September 2021: 1.60pps). 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/investors-dividend/dividend-reinvestment-plan .

The key dates relating to this dividend are given below:

Ex-dividend date	17 November 2022
Record date	18 November 2022
Last day for DRIP election	19 December 2022
Payment date	12 January 2023

Further to the announcement made on the 15 September 2022, the Board will target a dividend of 6.6pps for the full year 2022 (2021: 6.5pps), which equates to an annualised dividend yield of 10.5% at the closing price per share on 9 November 2022.

ESG Update

Following the assessment by Global Real Estate Sustainability Benchmark ("GRESB"), the Group has increased its score noticeably to 60 from 52 in 2021, achieving a Green Star status. The Company is evaluating the results and intends to take additional actions going forward to further improve the rating for 2023.

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 2023.

Rental Collection Update

As at 3 November 2022, the Company had collected 94.7% of the rent due for Q3 2022. This comprised rent received of 94.1%, monthly rents of 0.5% and agreed collection plans of 0.1%.

Rent received from 1 January 2022 to 3 November 2022 amounted to 97.4%, comprising of rent received of 97.2%, monthly rents of 0.2% and agreed collection plans of 0.0%. The rent received of 97.4% compares favourably with the equivalent period in 2021 of 94.8%.

Outlook

The outlook for the Company remains positive. Despite the challenging and uncertain economic outlook, the Company's business model continues to perform strongly in the year to date. Continually robust rent collections, underpinned by geographical and occupier diversification and a further increase in occupancy has positioned the Company well.

These attributes continue to underpin the Company's uninterrupted quarterly dividend distributions to our shareholders.

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

"I am pleased to report another robust period of trading for the Company, with several positive increases across key areas as Regional REIT continued to make good progress. It was a busy quarter for new lettings, with 36 completed during the period, providing the Group with £1.2m in income. Additionally, the Company achieved an increase in both occupancy levels, now at 84.6%, and rent roll, totalling £72.2m for the period. Good progress was also made in ESG implementation, highlighted by our increased GRESB score, an area of our asset management in which we continue to make significant strides.

Whilst the economic backdrop clearly remains challenging, the Company is optimistic that it will continue to deliver a high level of dividend income, and continues to enhance the portfolio of high-quality assets across the UK. The diversification by geography and occupier has positioned the Group well to benefit from the return to the office, which continues to accelerate.

Additionally, I am pleased to confirm a 3% increase in the Q3 dividend, to 1.65 pence per share. As previously announced, the Company is targeting a full year 2022 dividend of 6.6 pence per share, which offers a highly attractive dividend yield of 10.5% at the current share price."

Summary of Activity in the Quarter to 30 September 2022:

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

· Portland Street, Manchester - Evolution Money Group Ltd. renewed its lease for a further ten years, with the option to break in 2027, at a rental income of £290,000 pa (£24.77/ sq. ft.) on 11,706 sq. ft. of space, representing an uplift of 15.2% from previous rent.

· The Coach Works, Leeds - 5,330 sq. ft. of space has been let to Abstract Tech Ltd. for six years with the option to break in 2026 at a rent of £143,225 pa (£26.87/ sq. ft.).

· 1&2 Rivermead Court Buildings, Bristol - 9,485 sq. ft. of space has been let to Hydro International Ltd. on a ten year lease with the option to break in 2027 at a rent of £137,634 (£14.51/ sq. ft.).

· Forge House, Carbrook Bus Park, Sheffield - Steel City Interactive Ltd. has let the entire property (10,047 sq. ft.) for a period of five years with the option to break in 2025 at a rent of £128,201 pa (£12.76/ sq. ft.).

· The Coach Works, Leeds - 4,560 sq. ft. of space has been let to the Canal & River Trust following refurbishment at a rent of £118,000 pa (£25.88/ sq. ft.) for a period of ten years with the option to break in 2027. An additional 3,304 sq. ft. has been let to the Worker's Educational Association for ten years with the option to break in 2028 at a rent of £82,600 pa (£25.00/ sq. ft.)

· Manchester Green, Manchester - Compass Financial (UK) Ltd. has leased 4,972 sq. ft. for a period of five years with the option to break in 2025 at a rent of £94,468 pa (£19.00/ sq. ft.).

· Betchworth House, Redhill - 4,050 sq. ft. of space has been let to Pentasia Ltd. at a rent of £89,100 pa (£22.00/ sq. ft.) for a period of five years. Moreover, Pentasia Ltd. has let car parking spaces at a rent of £3,200 pa.

· Aqueous One, Birmingham - A new tenancy agreement has been signed with Specsavers Optical Superstores Ltd. for 6,414 sq. ft.. The lease is for ten years with a break option in 2027 at a rental income of £83,382 pa (£13.00/ sq. ft.).

· The Royals, Altrincham Road, Manchester - The Golfers Club U.K. Ltd. renewed its lease for a further two years, to December 2024, at a rental income of £82,050 pa (£15.00/ sq. ft.) on 5,470 sq. ft. of space, representing an uplift of 1.9% from previous rent.

· Eagle Court, Coventry Road, Birmingham - 4,492 sq. ft. of space has been let to Enerveo Ltd. at a rent of £80,856 pa (£18.00/ sq. ft.) for a period of five years with the option to break in 2025.

· Bellhaven House, Bellshill - Focus 4 U Ltd. has leased 6,055 sq. ft. for five years with the option to break in 2025 at a rent of £75,569 pa (£12.48/ sq. ft.).

· 84 Albion Street, Leeds - Paradine Ltd. have renewed their lease for a further six months at a rental income of £66,010 pa (£19.16/ sq.ft.) on 3,445 sq. ft..

· Ridge House, Stoke-On-Trent - A new tenancy agreement has been signed with Caretech Community Services Ltd. for 4,358 sq. ft.. The lease is for six years with a break option in 2025 at a rental income of £50,117 pa (£11.50/ sq. ft.).

Sales

Total disposals in the three months to 30 September 2022 amounted to £7.2m (before costs), reflecting a net initial yield of 4.6% 1 and in line with the 30 June 2022 valuation.

Subsequent Events summary post 30 September 2022:

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

Lettings

· Buildings 2, Bear Brook Office Park, Aylesbury - A lease agreement for five years, with a break option at year three, has been signed with Musarubra UK Subsidiary 3 Ltd., for the entire second floor across two separate leases at a combined estimated rent of c. £230,000 pa for c. 13,000 sq. ft. of space (final rent figures will be determined subject to final measurement of floor area on completion of works to split the floor).

Sales

· Brennan House, Farnborough - Vacant property was sold for £4.7m.

Forthcoming Events

23 February 2023	Q4 2022 Dividend Declaration and Portfolio Valuation
28 March 2023	Full year 2022 Preliminary Results Announcement
25 May 2023	May 2023 Trading Update and Outlook Announcement
	Q1 2023 Dividend Declaration Announcement
	Annual General Meeting

Note: All dates are provisional and subject to change

- ENDS -

1 Excluding vacant properties

Enquiries:

Regional REIT Limited
Press enquiries through Buchanan
Toscafund Asset Management	Tel: [phone]
Investment Manager to the Group
Adam Dickinson, Investor Relations, Regional REIT Limited
London & Scottish Property Investment Management	Tel: [phone]
Asset Manager to the Group
Stephen Inglis
Buchanan Communications	Tel: [phone]
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 156 properties, 1,042 occupiers as at 30 September 2022, with a valuation of c.£914.9m.

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

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

Cautionary Statement

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

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

 

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