Top 15 Investments (by market value) as at 30 June 2021

 

 

Property	Sector	Anchor tenants	Market value	% of portfolio	Lettable area	EPRA occupancy	Annualised gross rent	% of gross rental income	WAULT to first break
			(£m)	(%)	(Sq. Ft.)	(%)	(£m)		(years)
Tay House, Glasgow	Office	Barclays Execution Services Ltd, University of Glasgow	27.0	3.7	156,853	94.3	2.7	4.4	1.5
Genesis Business Park, Woking	Office	Nuvias (UK & Ireland) Ltd, Fernox Ltd, McCarthy & Stone Retirement Lifestyles Ltd, Walk The Walk Worldwide	23.8	3.3	98,359	80.7	1.3	2.2	2.7
Buildings 2 & 3, Bear Brook Office Park, Aylesbury	Office	Bank Of Scotland Plc, Utmost Life and Pensions Ltd, Agria Pet Insurance Ltd	23.3	3.2	140,791	95.7	2.3	3.7	1.9
Hampshire Corporate Park, Eastleigh	Office	Aviva Central Services UK Ltd, National Westminster Bank Plc, Utilita Energy Ltd, Digital Wholesale Solutions Ltd	19.2	2.6	85,422	99.8	1.5	2.5	2.1
Beeston Business Park, Nottingham	Office/ Industrial	Metropolitan Housing Trust Ltd, SMS Electronics Ltd, Worldwide Clinical Trials Ltd, Heart Internet Ltd	18.4	2.5	215,330	100.0	1.8	2.9	5.8
800 Aztec West, Bristol	Office	Edvance SAS, NNB Generation  Company (HPC) Ltd	18.3	2.5	73,292	100.0	1.5	2.5	2.1
Norfolk House, Smallbrook Queensway, Birmingham	Office	Secretary of State for Communities & Local Government, Spark44 Ltd	18.0	2.5	114,982	85.8	1.4	2.3	1.6
Road 4 Winsford Industrial Estate, Winsford	Industrial	Jiffy Packaging Ltd	15.8	2.2	246,209	100.0	1.0	1.7	13.2
One & Two Newstead Court, Notting-ham	Office	E.ON UK Plc	15.2	2.1	146,262	68.1	0.9	1.5	3.8
Portland Street, Manchester	Office	Darwin Loan Solutions Ltd, New College Manchester Ltd, Mott MacDonald Ltd, Simard Ltd	15.2	2.1	55,787	98.7	0.9	1.5	2.8
Ashby Park, Ashby De La Zouch	Office	Ceva Logistics Ltd, Brush Electrical Machines Ltd, Hill Rom UK Ltd	13.4	1.8	91,034	89.4	1.0	1.6	4.5
Templeton On The Green, Glasgow	Office	The Scottish Ministers, The Scottish Sports Council, Noah Beers Ltd, Cornerstone Community Care	12.7	1.7	142,512	87.2	1.2	1.9	4.2
The Coach Works, Leeds	Office	St James's Place Wealth Management Group Plc	11.9	1.6	41,666	41.7	0.5	0.7	3.2
Columbus House, Coventry	Office	TUI Northern Europe Ltd (Shell Energy)	11.4	1.6	53,253	100.0	1.4	2.3	2.5
Oakland House, Manchester	Office	Please Hold (UK) Ltd, A.M. London Fashion Ltd, HSS Hire Service Finance Ltd, CVS (Commercial Valuers & Surveyors) Ltd	10.8	1.5	161,057	93.6	1.3	2.1	2.2
Total			254.2	34.9	1,822,809	89.7	20.7	33.9	3.3

 

Table may not sum due to rounding

 

Top 15 Tenants (by share of rental income) as at 30 June 2021

 

Tenant	Property	Sector	WAULT to first break	Lettable area	Annualised gross rent	% of Gross rental income
			(years)	(Sq. Ft)	(£m)
Barclays Execution Services Ltd	Tay House, Glasgow Waterfront Business Park, Fleet	Administrative and support service activities	0.4	108,386	2.2	3.7
Secretary of State for Communities & Local Government	1 Burgage Square, Wakefield Albert Edward House, Preston Bennett House, Stoke-On-Trent Norfolk House, Birmingham Oakland House, Manchester Waterside Business Park, Swansea	Public sector	2.1	164,819	2.0	3.2
Bank Of Scotland Plc	Buildings 3, Bear Brook Office Park, Aylesbury, High Street/Bank Street, Dumfries	Banking	1.0	92,978	1.5	2.4
TUI Northern Europe Ltd (Shell Energy)	Columbus House, Coventry	Professional, scientific and technical activities	2.5	53,253	1.4	2.3
The Scottish Ministers	Calton House, Edinburgh, Edinburgh Quadrant House, Dundee Templeton on the Green, Glasgow	Public sector	2.2	106,511	1.3	2.1
Jiffy Packaging Ltd	Road 4 Winsford Industrial Estate, Winsford	Manufacturing	13.2	246,209	1.0	1.7
EON UK Plc	Two Newstead court Nottingham	Electricity, gas, steam and air conditioning supply	3.8	99,142	0.9	1.5
Edvance SAS	800 Aztec West, Bristol	Electricity, gas, steam and air conditioning supply	1.9	41,285	0.9	1.5
John Menzies Plc	2 Lochside Avenue, Edinburgh	Professional, scientific and technical activities	2.1	43,780	0.9	1.4
The Royal Bank Of Scotland Plc	Cyan Building, Rotherham	Banking	0.0	67,458	0.9	1.4
SPD Development Co Ltd	Clearblue Innovation Centre, Bedford	Professional, scientific and technical activities	4.3	58,167	0.8	1.4
Aviva Central Services UK Limited	Hampshire Corporate Park, Chilworth House, Eastleigh	Other services activities	3.4	42,612	0.8	1.3
James Howden & Company Ltd	Howden Site, Renfrew	Manufacturing	10.4	204,414	0.8	1.2
Odeon Cinemas Ltd	Kingscourt Leisure Complex, Dundee	Information and communication	14.3	41,542	0.7	1.2
NNB Generation Company (HPC) Ltd	800 Aztec West, Bristol	Electricity, gas, steam and air conditioning supply	2.5	32,007	0.6	1.0
Total			3.6	1,402,563	16.7	27.3

 

Table may not sum due to rounding

 

 

PROPERTY PORTFOLIO SECTOR AND REGION SPLITS BY VALUATION AND INCOME

 

By Valuation

As at 30 June 2021, 83.2% (30 June 2020: 79.9%, 31 December 2020: 83.5%) of the portfolio by market value was offices and 11.3% (30 June 2020: 14.3%, 31 December 2020: 11.1%) was industrial. The balance was made up of retail, 4.1% (30 June 2020: 4.3%, 31 December 2020: 4.1%) and other, 1.4% (30 June 2020: 1.5%, 31 December 2020: 1.3%). By UK region, as at 30 June 2021, Scotland represented 17.9% (30 June 2020: 17.7%, 31 December 2020: 17.3%) of the portfolio and England 77.7% (30 June 2020: 79.8%, 31 December 2020: 78.3%) the balance of 4.4% (30 June 2020: 2.5%, 31 December 2020: 4.4%) was in Wales. In England, the largest regions were the South East, the Midlands and the North West.

 

By Income

As at 30 June 2021, 82.5% (30 June 2020: 79.8%, 31 December 2020: 82.3%) of the portfolio by income was offices and 9.8% (30 June 2020: 12.3%, 31 December 2020: 10.3%) was industrial. The balance was made up of retail, 6.3% (30 June 2020: 6.6%, 31 December 2020: 6.0%), and other, 1.4% (30 June 2020: 1.4%, 31 December 2020: 1.3%). By UK region, as at 30 June 2021, Scotland represented 20.5% (30 June 2020: 20.6%, 31 December 2020: 20.4%) of the portfolio and England 74.3% (30 June 2020: 76.4%, 31 December 2020: 74.6%); the balance of 5.2% was in Wales (30 June 2020: 3.0%, 31 December 2020: 5.0%). In England, the largest regions were the South East, the Midlands and the South West.

 

LEASE EXPIRY PROFILE

The WAULT on the portfolio is 5.0 years (30 June 2020: 5.3 years; 31 December 2020: 5.1 years); WAULT to first break is 3.2 years (30 June 2020: 3.4 years; 31 December 2020: 3.2 years). As at 30 June 2021, 14.6% (30 June 2020: 6.3%; 31 December 2020: 14.2%) of income was from leases, which will expire within one year, 10.1% (30 June 2020: 14.9%; 31 December 2020: 9.1%) between one and two years, 34.1% (30 June 2020: 34.5%; 31 December 2020: 35.8%) between two and five years and 41.2% (30 June 2020: 44.3%; 31 December 2020: 40.9%) after five years.

 

Lease Expiry Profile

0-1 year	14.6%
1-2 years	10.1%
2-5 years	34.1%
5+ years	41.2%

 

Tenants by Standard Industrial Classification

As at 30 June 2021, 14.0% of income was from tenants in the professional, scientific and technical activities sector (30 June 2020: 13.0%; 31 December 2020: 13.5%), 13.2% from the administrative and support service activities sector (30 June 2020: 12.8%; 31 December 2020: 12.9%), 10.1% from the manufacturing sector (30 June 2020: 8.9%; 31 December 2020: 10.3%), 8.7% from the information and communication sector (30 June 2020: 8.3%; 31 December 2020: 8.3%), and 8.0% from the public sector (30 June 2020: 8.1%; 31 December 2020: 8.8%). The remaining exposure is broadly spread.

 

Tenants by SIC Codes (% of gross rent)

 

Professional, scientific and technical activities	14.0%
Administrative and support service activities	13.2%
Manufacturing	10.1%
Information and communication	8.7%
Public sector	8.0%
Financial and insurance activities	7.9%
Wholesale and retail trade	7.7%
Banking	5.3%
Electricity, gas, steam and air conditioning supply	4.7%
Other service activities	3.5%
Human health and social work activities	2.7%
Other*	14.1%

 

*Other - Accommodation and food service activities, activities of extraterritorial organisations and bodies, arts, entertainment and recreation, charity, construction, education, mining and quarrying, not specified, public administration and defence; compulsory social security. real estate activities, registered society, residential, transportation and storage, water supply, sewerage, waste management and remediation activities.

 

Tables may not sum due to rounding.

No tenant represents more than 4% of the Group's gross rent roll as at 30 June 2021, the largest being 3.7%. (30 June 2020: 3.6%; 31 December 2020: 3.5%).

 

Financial Review

 

Net Asset Value

Between 1 January 2021 and 30 June 2021, the EPRA NTA* of the Group increased to £427.7m (IFRS: £425.2m) from £425.6m (IFRS: £420.6m) as at 31 December 2020, resulting in an increase of the EPRA NTA to 99.1pps (30 June 2020: 102.5pps; 31 December 2020: 98.6pps). This is after the declaration of dividends in the period amounting to 3.10pps.

 

* Alternative Performance Measure. Details are provided in the Glossary of Terms and the EPRA Performance Measures in the full half-yearly report.

 

In the six months to 30 June 2021, the investment property revaluation amounted to £2.0m for the properties held as at 30 June 2021. Net capital expenditure amounted to £4.3m, which is yet to be fully reflected in the valuation and the realised gain of £0.6m on the disposal of investment properties.

 

The investment property portfolio was valued at a total of £729.1m as at 30 June 2021 (30 June 2020: £742.3m; 31 December 2020: £732.4m). The marginal decrease since the 2020 year-end is primarily attributable to property disposals of £10.2m, which are offset by an unrecognised investment property portfolio revaluation of £2.0m and net capital expenditure of £4.3m. Overall, on a like-for-like basis, the portfolio increased by 0.4%.

 

The table below sets out the acquisitions, disposals and capital expenditure for the respective periods:

 

		Six months to 30 June 2021	Six months to June 2020	Year ended 31 December 2020
		£m	£m	£m
Acquisitions
	Net (after costs)	0.6	0.1	45.0
	Gross (before costs)	-	-	42.4
Disposals
	Net (after costs)	10.8	15.1	53.4
	Gross (before costs)	11.2	15.5	56.4
Capital Expenditure
	Net (after dilapidations)	4.3	4.5	8.8
	Gross (before dilapidations)	4.9	5.5	13.1

 

The diluted EPRA NAV per share increased to 99.1pps (31 December 2020: 98.6pps) over the period. The EPRA NTA is reconciled in the table below:

 

	Six months to 30 June 2021
	£m		pence per share
Opening EPRA NTA (31 December 2020)	425.6		98.6
Net rental and property income	25.4		5.9
Administration and other expenses	(5.5)		(1.3)
Gain on the disposal of investment properties	0.6		0.1
Change in the fair value of investment properties	2.0		0.5
Change in value of right of use	(0.1)		-
EPRA NTA after operating profit	448.0		103.8
Net finance expense	(6.9)		(1.6)
Taxation	-		-
EPRA NTA before dividends paid	441.1		102.2
Dividends paid	(13.4)		(3.1)
Closing EPRA NTA (30 June 2021)	427.7		99.1
Table may not sum due to rounding.

 

INCOME STATEMENT

Operating profit before gains and losses on property assets and other investments for the six months ended 30 June 2021 amounted to £19.9m (six months to 30 June 2020: £18.1m). Profit after finance items and before taxation was £18.0m (six months to 30 June 2020: loss £27.0m). This increase is predominately the result of two factors: firstly, a gain in the fair value of investment properties in the six months to June 2021; and secondly, a gain on the disposal of investment properties. The six months to 30 June 2021 included a full rent roll for properties held as at 31 December 2020, plus the partial rent roll for properties disposed of during the period.

 

Rental and property income amounted to £29.5m, excluding recoverable service charge income and other similar items (six months to 30 June 2020: £29.4m).

 

Currently more than 80% of rental income is collected within 30 days of the due date and bad debts in the period were £0.6m (six months to 30 June 2020: £0.6m).

 

Non-recoverable property costs, excluding recoverable service charge income and other similar costs, amounted to £4.2m (six months to 30 June 2020: £5.4m) and the rent roll decreased to £61.1m (six months to 30 June 2020: £62.9m).

 

The realised gain on the disposal of investment properties amounted to £0.6m (six months to 30 June 2020: loss £2.0m). The disposal gains 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 gain of £2.0m (six months to 30 June 2020: loss of £33.2m). The change in value of right of use asset amounted to a charge of £0.1m (six months to 30 June 2020: £0.1m); with a minimal gain on the associated disposal of a right of use.

 

Finance expenses amounted to £6.9m (six months to 30 June 2020: £7.1m). The Group continued to hold a larger than usual cash balance during the period, ensuring ample liquidity during the current period of economic uncertainty.

 

The EPRA cost ratio, including direct vacancy costs, was 32.6% (six months to 30 June 2020: 38.4%). The decrease in the cost ratio is ostensibly a reflection of the decrease in non recoverable property costs. The EPRA cost ratio, excluding direct vacancy costs was 19.9% (six months to 30 June 2020: 21.4%).

 

The ongoing charges for the period ended 30 June 2021 were 4.6% (30 June 2020: 4.9%).

 

The EPRA Total Return from 6 November 2015 (date of IPO) to 30 June 2021 was 39.9% (30 June 2020: 37.3%), an annualised rate of 6.1% pa (30 June 2020: 7.0% pa).

 

Dividend

During the period from 1 January 2021 to 30 June 2021, the Company declared dividends totalling 3.10pps (2020: 4.45pps). Since the end of the period, the Company has declared a dividend for the second quarter of 2021 of 1.60pps. A schedule of dividends can be found in the Report.

 

DEBT FINANCING AND GEARING

Borrowings comprise third-party bank debt which is secured over properties owned by the Group and repayable over the next 3 to 8 years, with a weighted average maturity of 6.0 years (six months to 30 June 2020: 6.8 years; 31 December 2020 6.4 years).

 

The Group's borrowing facilities are with the Royal Bank of Scotland, Scottish Widows Limited & Aviva Investors Real Estate Finance, Scottish Widows Limited and Santander UK. Total bank borrowing facilities at 30 June 2021 amounted to £315.7m (30 June 2020: £312.7m; 31 December 2020: £316.2m) (before unamortised debt issuance costs), with £6.2m available to be drawn.

 

During the period, the maturity date of the Company's facility with the Royal Bank of Scotland was extended from June 2024 to June 2025 by invoking a pre-agreed extension option.

 

In addition to bank borrowings, the Group has a £50m 4.5% retail eligible bond which is due for repayment in August 2024. In aggregate, the total debt available at 30 June 2021 amounted to £371.9m (30 June 2020: £371.9m; 31 December 2020: £371.9m).

 

At 30 June 2021, the Group's cash and cash equivalent balances amounted to £75.3m (30 June 2020: £67.9m; 31 December 2020: £67.4m).

 

The Group's net LTV ratio stands at 39.8% (30 June 2020: 39.7%; 31 December 2020: 40.8%) before unamortised costs. The Board continues to target a net LTV ratio of 40%, with a maximum limit of 50%.

 

Debt Profile and Loan-to-Value Ratios as at 30 June 2021

 

Lender	Original facility	Outstanding debt*	Maturity date	Gross  loan-to-value**	Annual interest rate
	£'000	£'000		%	%
Royal Bank of Scotland	55,000	51,024	Jun-2025	40.3	2.15 over                    3 months £ LIBOR
Scottish Widows Ltd & Aviva Investors Real Estate Finance	165,000	165,000	Dec-2027	46.6	3.28 Fixed
Scottish Widows	36,000	36,000	Dec-2028	40.9	3.37 Fixed
Santander UK	65,870	63,686	Jun-2029	38.1	2.20 over             3 months   £ LIBOR
	321,870	315,710
Retail Eligible Bond	50,000	50,000	Aug-2024	N/A	4.50 Fixed
Total	371,870	365,710
* Before unamortised debt issue costs ** Based on Cushman & Wakefield property valuations

Table may not sum due to rounding.

 

The Managers continue to monitor the borrowing requirements of the Group. As at 30 June 2021, the Group had substantial headroom against its applicable borrowing covenants.

 

The net gearing ratio (net debt to Ordinary Shareholders' equity (diluted)) of the Group was 68.3% as at 30 June 2021 (30 June 2020: 67.4%; 31 December 2020: 71.0%).

 

Interest cover, excluding amortised costs and finance lease interest, stands at 3.3 times (30 June 2020: 2.9 times; 31 December 2020: 3.4 times) and including amortised and finance lease interest costs stands at 2.9 times (30 June 2020: 2.5 times; 31 December 2020: 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 Jun 2021	30 Jun 2020	31 Dec 2020
	(%)	(%)	(%)
Borrowings interest rate hedged	101.7	102.5	101.6
Thereof :
Fixed	68.6	69.2	68.6
Swap	16.5	16.7	16.5
Cap	16.5	16.7	16.5
WACD*	3.3	3.4	3.3

 

^* Weighted Average Cost of Debt - Weighted Average Effective Interest Rate including the cost of hedging

 

Table may not sum due to rounding.

 

The over hedged position has arisen due to the entire Royal Bank of Scotland and Santander UK facilities, including any undrawn balances, being hedged by interest rate cap derivatives which have no ongoing cost to the Group.

 

Tax

The Group entered the UK REIT regime on 7 November 2015 and all of the Group's UK 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.

 

At 30 June 2021, the Group recognised a nil tax balance.

 

DIRECTORS' STATEMENT OF 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 risks and uncertainties the Group faces are summarised below and described in detail on pages 47 to 57 of the 2020 Annual Report, which is available on the Group's website: www.regionalreit.com - Annual Report 2020. The Audit Committee, which assists the Board with its responsibilities for managing risk, considers that there have been no substantial changes to these principal risks. However, several principal risks continue to be elevated (as set out in the 2020 Annual Report & Accounts), as a result of COVID-19 restrictions and the level of economic uncertainty associated with the UK's departure from the European Union.

 

A summary of the Group's principal risks for the second half of the year is provided below.

 

Strategic

Investment decisions could result in lower dividend income and capital returns to our Shareholders.

 

Valuation

The valuation of the Group's portfolio, undertaken by the external valuer, Cushman & Wakefield, could impact the Group's profitability and net assets.

 

COVID-19

The economic disruption resulting from COVID-19 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, especially if restrictions remain in place for a prolonged period of time.

 

Economic and political

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. There is a risk that the UK's departure from the European Union could impact property valuations whilst this period of uncertainty is navigated.

 

Funding

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 rise accompanying higher inflation.

 

Tenant

Structural changes in the occupational markets, coupled with the 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

Changes to UK financial legislation and the tax regime could result in lower earnings.

 

Operational

Business disruption could impinge on normal operations of the Group.

 

Accounting, legal and regulatory

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 and associated legal requirements 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 2020 and are summarised above.

 

The condensed consolidated financial statements for the period from 1 January 2021 to 30 June 2021 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 below), 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 15 September 2021 and the above responsibility statement was signed on its behalf by:

 

Kevin McGrath

Chairman

15 September 2021

 

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2021

 

	Notes	Six months ended 30 June 2021 (unaudited) £'000	Six months ended 30 June 2020  (unaudited) £'000	Year ended 31 December 2020 (audited) £'000
Continuing Operations
Revenue
Rental and property income	5	36,335	36,964	75,941
Property costs	6	(10,966)	(12,886)	(22,662)
Net rental and property income		25,369	24,078	53,279
Administrative and other expenses	7	(5,477)	(5,945)	(11,329)
Operating profit before gains and losses on property assets and other investments		19,892	18,133	41,950
Gain/(loss) on disposal of investment properties	13	585	(1,965)	(1,073)
Change in fair value of investment properties	13	1,985	(33,218)	(54,793)
Gain on disposal of right of use assets		2	-	-
Change in fair value of right of use assets		(97)	(98)	(195)
Operating profit/(loss)		22,367	(17,148)	(14,111)
Finance income	8	10	80	99
Finance expenses	9	(6,927)	(7,117)	(14,108)
Impairment of goodwill	14	-	(279)	(558)
Net movement in fair value of derivative financial instruments	17	2,563	(2,562)	(2,523)
Profit/(loss) before tax		18,013	(27,026)	(31,201)
Taxation	10	-	65	203
Total comprehensive income/(loss) for the period (attributable to owners of the parent Company)		18,013	(26,961)	(30,998)

 

Total comprehensive income arises from continuing operations.

 

Earnings/(losses) per share - basic and diluted

11

4.2p

(6.2)p

(7.2)p

 

The notes below are an integral part of these condensed consolidated financial statements.

 

Condensed Consolidated Statement of Financial Position

As at 30 June 2021

 

	Notes	30 June 2021 (unaudited) £'000	30 June 2020 (unaudited) £'000	31 December  2020 (audited) £'000
Assets
Non-current assets
Investment properties	13	729,115	742,300	732,380
Right of use assets		15,956	16,253	16,156
Goodwill	14	-	279	-
Non-current receivables on tenant loan		915	1,108	1,011
		745,986	759,940	749,547
Current assets
Trade and other receivables		30,819	35,973	33,690
Cash and cash equivalents		75,331	67,913	67,373
		106,150	103,886	101,063
Total assets		852,136	863,826	850,610
Liabilities
Current liabilities
Trade and other payables		(37,838)	(36,071)	(33,809)
Deferred income		(10,359)	(12,408)	(14,584)
Taxation liabilities		(690)	(633)	(690)
		(48,887)	(49,112)	(49,083)
Non-current liabilities
Bank and loan borrowings	15	(310,388)	(306,917)	(310,692)
Retail eligible bonds	16	(49,518)	(49,363)	(49,441)
Derivative financial instruments	17	(1,776)	(4,378)	(4,339)
Lease liabilities		(16,349)	(16,491)	(16,473)
		(378,041)	(377,149)	(380,945)
Total liabilities		(426,918)	(426,261)	(430,028)
Net assets		425,218	437,565	420,582
Equity
Stated capital	18	430,819	430,819	430,819
(Accumulated losses)/retained earnings		(5,601)	6,746	(10,237)
Total equity attributable to owners of the parent Company		425,218	437,565	420,582

 

Net asset value per share - basic and diluted

19

98.5p

101.4p

97.5p

 

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 2021

 

		Attributable to owners of the parent company
	Notes	Stated capital £'000	Accumulated  losses  £'000	Total  £'000
Balance at 1 January 2021		430,819	(10,237)	420,582
Total comprehensive income		-	18,013	18,013
Dividends paid	12	-	(13,377)	(13,377)
Balance at 30 June 2021		430,819	(5,601)	425,218

 

For the six months ended 30 June 2020

 

		Attributable to owners of the parent company
	Notes	Stated capital £'000	Retained  earnings  £'000	Total  £'000
Balance at 1 January 2020		430,819	52,909	483,728
Total comprehensive loss		-	(26,961)	(26,961)
Dividends paid	12	-	(19,202)	(19,202)
Balance at 30 June 2020		430,819	6,746	437,565

 

For the year ended 31 December 2020

 

		Attributable to owners of the parent company
	Notes	Stated capital £'000	Retained earnings/ (Accumulated losses £'000	Total £'000
Balance at 1 January 2020		430,819	52,909	483,728
Total comprehensive loss		-	(30,998)	(30,998)
Dividends paid	12	-	(32,148)	(32,148)
Balance at 31 December 2020		430,819	(10,237)	420,582

 

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 2021

 

		Six months  ended  30 June  2021  (unaudited) £'000	Six months  ended  30 June  2020  (unaudited) £'000	Year  ended  31 December  2020 (audited) £'000
Cash flows from operating activities
Profit/(loss) for the period before taxation		18,013	(27,026)	(31,201)
- Change in fair value of investment properties		(1,985)	33,218	54,793
- Change in fair value of financial derivative instruments		(2,563)	2,562	2,523
- (Gain)/loss on disposal of investment properties		(585)	1,965	1,073
- Gain on disposal of right of use assets		(2)	-	-
- Change in fair value of right of use assets		97	97	195
Impairment of goodwill		-	279	558
Finance income		(10)	(80)	(99)
Finance expenses		6,927	7,117	14,108
Decrease/(Increase) in trade and other receivables		2,967	(5,244)	(2,821)
(Decrease)/increase in trade and other payables and deferred income		(631)	6,754	8,878
Cash generated from operations		22,228	19,642	48,007
Finance costs		(6,109)	(6,325)	(12,515)
Taxation received		-	32	174
Net cash flow generated from operating activities		16,119	13,349	35,666
Investing activities
Purchase of investment properties and subsequent expenditure		(4,993)	(4,625)	(53,759)
Sale of investment properties		10,828	15,057	53,428
Interest received		11	73	101
Net cash flow generated from/(used in) investing activities		5,846	10,505	(230)
Financing activities
Dividends paid		(12,943)	(11,516)	(26,672)
Bank borrowings advanced		1,109	30,698	39,200
Bank borrowings repaid		(1,570)	(11,967)	(17,029)
Bank borrowing costs paid		(296)	(95)	(192)
Lease repayments		(307)	(309)	(618)
Net cash flow (used in)/ generated financing activities		(14,007)	6,811	(5,311)
Net increase in cash and cash equivalents for the period		7,958	30,665	30,125
Cash and cash equivalents at the start of the period		67,373	37,248	37,248
Cash and cash equivalents at the end of the period		75,331	67,913	67,373

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 2021

 

1. Corporate information

The condensed consolidated financial statements of the Group for the six months ended 30 June 2021 comprise the results of the Company and its subsidiaries (together constituting the "Group") and were approved by the Board and authorised for issue on 15 September 2021.

 

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, and, traded on the Official List of 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, 1987, as amended, and the Registered Collective Investment Schemes Rules 2018.

 

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 2021 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 2020, 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 six months ended 30 June 2020 and year ended 31 December 2020 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 2020 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 current uncertainties created by COVID-19, coupled with 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 £75.3m of cash and cash equivalents, of which £61.3m was unrestricted cash, providing ample liquidity.

 

Borrowing facilities decreased from £366.2m at 31 December 2020 to £365.7m as at 30 June 2021, with an LTV of 39.8%, based upon the value of Company's investment properties as at 30 June 2021. In respect of the Company's borrowings, the first of its facilities to mature is for £55.0m in June 2025, which is held with the Royal Bank of Scotland.

 

Following the subsequent event on 31 August 2021 of the £236m property acquisition (see Note 22), the Directors are satisfied that the Company has adequate resources to continue in operational existence for a period no less than 12 months from the date of these Financial Statements. 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 property

The fair value of investment property, which has a carrying value at the reporting date of £729,115,000 (30 June 2020: £742,300,000; 31 December 2020: £732,380,000) 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 valuations have been prepared in accordance with the requirements of the RICS Valuation - Global Standards which incorporate the International Valuation Standards ("IVS") and the RICS Valuation UK National Supplement (the "RICS Red Book") edition current at the Valuation Date. It follows that the valuations are compliant with "IVS". Factors reflected include current market conditions, annual rentals, lease lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property are set out in note 13.

 

In relation to Brexit, the recently completed negotiations with regards to the terms of the UK's exit from the EU has meant that property market remains uncertain. There is some uncertainty concerning the impact of COVID 19 however the independent valuers note the following in their report:

 

"The outbreak of Novel Coronavirus (COVID-19), which was declared by the World Health Organisation as a "Global Pandemic" on the 11 March 2020, continues to affect economies and real estate markets globally. Nevertheless, as at the valuation date, property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where enough market evidence exists upon which to base opinions of value. Accordingly - and for the avoidance of doubt - our valuation is not reported as being subject to 'material valuation uncertainty', as defined by VPS 3 and VPGA 10 of the RICS Valuation - Global Standards."

 

3.1.2. Fair valuation of interest rate derivatives

The Group values its interest rate derivatives at fair value. The fair values are estimated by the loan counterparty with a revaluation occurring on a quarterly basis. The counterparties will use a number of assumptions in determining the fair values including estimates of 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 a liability of £1,776,000 (30 June 2020: £4,378,000; 31 December 2020: £4,339,000), as set out on Note 17.

 

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 2021, there were 13 leases with the range of the period left to run being 45 and 104 years. The Directors have determined that the discount rate to use in the calculation for each lease is 3.5% being the Group's weighted average cost of debt at the date of transition.

 

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 lessee 

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. Performance fee

The Asset Manager and the Investment Manager are each entitled to 50% of the 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 performance period 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 performance period.

 

A performance fee is only payable in respect of a performance period where the EPRA NAV per Ordinary Share exceeds the highwater mark which is equal to the greater of the highest year-end EPRA NAV per Ordinary Share in any previous performance period or the placing price (100p per Ordinary Share). The performance fee was calculated initially on 31 December 2018 and will be calculated annually thereafter.

 

In the period to date, the Group has not met the criteria for a performance fee. However, future circumstances may dictate that a performance fee is ultimately due. Further details are disclosed in note 21

 

3.2.3. 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.

 

3.3. 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 2020 and are expected to be consistently applied for the current year ending 31 December 2021. The changes to the condensed consolidated financial statements arising from accounting standards effective for the first time are noted below:

 

Interest Rate Benchmark Reform-Phase 2:

Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial Instruments; Recognition and Measurement', IFRS 7 'Financial Instruments: Disclosures', IFRS 4 'Insurance Contracts' and IFRS 16 'Leases' (effective for periods beginning on or after 1 January 2021) These amendments address issues that might affect financial reporting when an existing interest rate benchmark is replaced with an alternative benchmark interest rate.

The Group's borrowings with Royal Bank of Scotland and Santander UK will be transitioning from the London Interbank Offer Rate (LIBOR) benchmark to Sterling Overnight Index Average (SONIA) benchmark by 31 December 2021. There is expected to be negligible cost involved in the borrowing facility transition and the respective hedge instrument amendments.

The Directors are currently assessing the impact of the changes in accounting standards but as the Group does not apply hedge accounting, it is anticipated that the accounting standard amendments will not have a significant impact on the preparation of the financial statements.

                                 

5. Rental and property income

		Six months ended 30 June 2021 (unaudited) £'000	Six months  ended 30 June 2020  (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Rental income - freehold property		26,636	26,407	55,382
Rental income - long leasehold property		2,891	3,033	6,695
Recoverable service charge income and other similar items		6,808	7,524	13,864
Total		36,335	36,964	75,941

 

6. Property costs

		Six months ended 30 June 2020 (unaudited) £'000	Six months  ended 30 June 2020  (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Other property expenses and irrecoverable costs		4,158	5,362	8,798
Recoverable service charge income and other similar costs		6,808	7,524	13,864
Total		10,966	12,886	22,662

 

Property costs represent direct operating expenses which arise on investment properties generating rental income.

 

7. Administrative and other expenses

		Six months ended 30 June 2021 (unaudited) £'000	Six months  ended 30 June 2020 (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Investment management fees		1,137	1,413	2,577
Property management fees		1,183	1,127	2,266
Asset management fees		1,139	1,430	2,579
Directors' remuneration		125	125	255
Administration fees		339	296	634
Legal and professional fees		839	823	1,674
Marketing and promotion		35	30	69
Other administrative costs (including bad debts)		658	690	1,257
Bank charges		22	11	18
Total		5,477	5,945	11,329

 

8. Finance income

		Six months ended 30 June 2021 (unaudited) £'000	Six months  ended 30 June 2020 (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Interest income		10	80	99
Total		10	80	99

 

9. Finance expenses

		Six months ended 30 June 2021 (unaudited) £'000	Six months  ended 30 June 2020 (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Interest payable on bank borrowings		4,980	5,208	10,257
Amortisation of loan arrangement fees		453	425	857
Bond interest		1,125	1,113	2,250
Bond issue costs amortised		77	77	155
Bond expenses		4	4	8
Lease interest		288	290	581
Total		6,927	7,117	14,108

 

10. Taxation

		Six months ended 30 June 2021 (unaudited) £'000	Six months  ended 30 June 2020 (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Corporation tax		-	(26)	(157)
(Decrease)/increase in deferred tax creditor		-	(39)	(46)
Total		-	(65)	(203)

 

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 ended 30 June 2021 (unaudited) £'000	Six months ended    30 June 2020 (unaudited)    £'000	Year ended 31 December 2020 (audited) £'000
Calculation of earnings per share
Net profit/(loss) attributable to Ordinary Shareholders		18,013	(26,961)	(30,998)
Adjustments to remove:
Changes in value of investment properties		(1,985)	33,218	54,793
Changes in fair value of interest rate derivatives and financial assets		(2,563)	2,562	2,523
(Gain)/loss on disposal of investment property		(585)	1,965	1,073
Impairment of goodwill		-	279	558
Deferred tax credit		-	(39)	(46)
EPRA net profit attributable to Ordinary Shareholders		12,880	11,024	27,903
Add performance fee		-	-	-
Company specific adjusted earnings		12,880	11,024	27,903
Weighted average number of Ordinary Shares		431,506,583	431,506,583	431,506,583
Earnings/(Losses) per share - basic and diluted		4.2p	(6.2p)	(7.2)p
EPRA Earnings per share - basic and diluted		3.0p	2.6p	6.5p
Company specific adjusted earnings per share:
- basic and diluted		3.0p	2.6p	6.5p

The Company specific adjusted earnings per share excludes the performance fee.

 

12. Dividends

		Six months ended 30 June  2021 (unaudited) £'000	Six months ended 30 June 2020 (unaudited) £'000	Year ended 31 December 2020 (audited) £'000
Dividends
Dividend of 1.50 (2020 2.55) pence per Ordinary share for the period 1 October - 31 December		6,473	11,004	11,004
Dividend of 1.60 (2020: 1.90) pence per Ordinary share for the period 1 January - 31 March		6,904	8,198	8,198
Dividend of - (2020: 1.50 pence per Ordinary share for the period 1 April - 30 June		-	-	6,473
Dividend of  - (2020: 1.50) per Ordinary share for the period 1 July - 30 September		-	-	6,473
Total		13,377	19,202	32,148

 

On 25 February 2021, the Company declared a dividend of 1.50 pence per share in respect of the period 1 October 2020 to 31 December 2020. The dividend payment was made on 9 April 2021 to Shareholders on the register as at 5 March 2021.

 

On 19 May 2021, the Company declared a dividend of 1.60 pence per share in respect of the period 1 January 2021 to 31 March 2021. The dividend payment was made on 16 July 2021 to Shareholders on the register as at 28 May 2021.

 

On 25 August 2021, the Company declared a dividend in respect of the period 1 April 2021 to 30 June 2021 of 1.60 pence per share, which will be paid on 15 October 2021 to Shareholders on the register as at 10 September 2021. These condensed consolidated financial statements do not reflect this dividend.

 

13. INVESTMENT PROPERTIES

In accordance with International Accounting Standard, IAS 40, 'Investment Property', investment property has been independently valued at fair value by Cushman & Wakefield, 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.

 

In relation to Brexit, the recently completed negotiations with regards to the terms of the UK's exit from the EU has meant that the property market remains uncertain. There is some uncertainty concerning the impact of COVID-19 however, the independent valuers note the following in their report:

 

"The outbreak of Novel Coronavirus (COVID-19), which was declared by the World Health Organisation as a "Global Pandemic" on the 11 March 2020, continues to affect economies and real estate markets globally. Nevertheless, as at the valuation date, property markets are mostly functioning again, with transaction volumes and other relevant evidence at levels where enough market evidence exists upon which to base opinions of value. Accordingly - and for the avoidance of doubt - our valuation is not reported as being subject to 'material valuation uncertainty',  as defined by VPS 3 and VPGA 10 of the RICS Valuation - Global Standards."

 

The valuation is the ultimate responsibility of the Directors. Accordingly, the critical assumptions used in establishing the independent valuation are reviewed by the Board.

 

All corporate acquisitions during the period have been treated as properties purchased rather than business combinations.

 

Movement in investment properties for the six months ended 30 June 2021		Freehold   property  £'000	Long Leasehold   property  £'000	Total £'000
Valuation at 1 January 2021		659,432	72,948	732,380
Property additions - acquisitions		645	-	645
Property additions - subsequent expenditure		2,341	2,007	4,348
Property disposals		(10,828)	-	(10,828)
Gain on the disposal of investment properties		585	-	585
Change in fair value during the period		1,394	591	1,985
Valuation at 30 June 2021 (unaudited)		653,569	75,546	729,115
Movement in investment properties for the six months ended 30 June 2020		Freehold  property  £'000	Long Leasehold property £'000	Total £'000
Valuation at 1 January 2020		697,908	90,007	787,915
Property additions - acquisitions		83	-	83
Property additions - subsequent expenditure		4,519	23	4,542
Property disposals		(14,793)	(264)	(15,057)
Loss on the disposal of investment properties		(1,714)	(251)	(1,965)
Change in fair value during the period		(26,223)	(6,995)	(33,218)
Valuation at 30 June 2020 (unaudited)		659,780	82,520	742,300
Movement in investment properties for the year ended 31 December 2020		Freehold  property  £'000	Long Leasehold  property  £'000	Total £'000
Valuation at 1 January 2020		697,908	90,007	787,915
Property additions - acquisitions		44,956	-	44,956
Property additions - subsequent expenditure		8,446	357	8,803
Property disposals		(47,035)	(6,393)	(53,428)
Gain/(Loss) on the disposal of investment properties		(1,128)	55	(1,073)
Change in fair value during the period		(43,715)	(11,078)	(54,793)
Valuation at 31 December 2020 (audited)		659,432	72,948	732,380

The historic cost of the properties was £752,029,000 (30 June 2020: £739,576,000, 31 December 2020: £759,705,000).

 

The following table provides the fair value measurement hierarchy for investment properties:

Date of valuation:	Total £'000	Quoted active prices (level 1) £'000	Significant observable inputs (level 2) £'000	Significant unobservable inputs  (level 3) £'000
30 June 2021	729,115	-	-	729,115
30 June 2020	742,300	-	-	742,300
31 December 2020	732,380	-	-	732,380

The hierarchy levels are defined in note 17.

 

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.

 

In arriving at their estimates of fair values as at 30 June 2021, 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 (range: £9,000 - £3,087,591 per annum (30 June 2020: £9,000 - £3,092,291 per annum; 31 December 2020: £9,000 - £3,092,291 per annum)).

 

Observable input: rental growth

The estimated average increase in rent is based on both market estimations and contractual agreements.

Observable Input: net initial yield

 

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 (range: 0% - 27.26%; (30 June 2020: 0% - 23.90%; 31 December 2020: 0.00% to 25.64%)).

 

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.

 

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.

 

14. Goodwill

	30 June  2021  (unaudited) £'000	30 June  2020  (unaudited) £'000	31 December   2020  (audited) £'000
At start of period	-	558	558
Impairment	-	(279)	(558)
At end of period	-	279	-

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration is transferred, non-controlling interest recognised and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the Group's Condensed Consolidated Statement of Comprehensive Income.

 

Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. As at 31 December 2020, the goodwill had been fully impaired.

 

15. 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  2021  (unaudited) £'000	30 June  2020  (unaudited) £'000	31 December   2020  (audited) £'000
Bank borrowings drawn at start of period	316,171	294,000	294,000
Bank borrowings drawn	1,109	30,698	39,200
Bank borrowings repaid	(1,570)	(11,967)	(17,029)
Bank borrowings drawn at end of period	315,710	312,731	316,171
Less: unamortised costs at start of period	(5,479)	(6,144)	(6,144)
Less: loan issue costs incurred in the period	(296)	(95)	(192)
Add: loan issue costs amortised in the period	453	425	857
At end of period	310,388	306,917	310,692
Maturity of bank borrowings
Repayable within 1 year	-	-	-
Repayable between 1 to 2 years	-	-	-
Repayable between 2 to 5 years	51,024	53,328	52,349
Repayable after more than 5 years	264,686	259,403	263,822
Unamortised loan issue costs	(5,322)	(5,814)	(5,479)
	310,388	306,917	310,692

 

The table below lists the Group's borrowings.

Lender	Original facility	Outstanding debt*	Maturity date	Gross Loan to Value**	Annual interest rate	Amortisation
	£'000	£'000		%	%
Royal Bank of Scotland	55,000	51,024	Jun 2025	40.3	2.15 over 3 months £ LIBOR	Mandatory prepayment
Scottish Widows Ltd. & Aviva Investors Real Estate Finance	165,000	165,000	Dec 2027	46.6	3.28 Fixed	None
Scottish Widows Ltd	36,000	36,000	Dec 2028	40.9	3.37 Fixed	None
Santander UK	65,870	63,686	Jun 2029	38.1	2.20 over 3 months £ LIBOR	Mandatory prepayment
Total bank borrowings	321,870	315,710
Retail eligible bond	50,000	50,000	Aug 2024	n/a	4.50 Fixed	none
Total	371,870	365,710

LIBOR = London Interbank Offered Rate (Sterling)

* Before unamortised debt issue costs.

** Based upon the Cushman & Wakefield property valuation.

 

The weighted average term to maturity of the Group's debt at the period end was 6.0 years (30 June 2020: 6.8 years; 31 December 2020: 6.4 years). The weighted average interest rate payable by the Group on its debt portfolio, excluding hedging costs, as at the period end was 3.1% per annum (30 June 2020: 3.2% per annum; 31 December 2020: 3.1% 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 17, 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.

 

In line with recent announcements from the Bank of England and the FCA, the Royal Bank of Scotland and Santander UK borrowings will be transitioning from the London Interbank Offer Rate (LIBOR) benchmark to Sterling Overnight Index Average (SONIA) benchmark by 31 December 2021. There is expected to be negligible cost involved in the borrowing facility transition and the respective hedge instrument amendments.

 

16. Retail eligible bonds

The Company launched £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  2021  (unaudited) £'000	30 June  2020  (unaudited) £'000	31 December   2020  (audited) £'000
Broad principal at start of period	50,000	50,000	50,000
Unamortised issue costs at start of period	(559)	(714)	(714)
Amortisation of issue costs	77	77	155
At end of period	49,518	49,363	49,441

 

17. 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 2021 (unaudited) £'000	30 June 2020 (unaudited) £'000	31 December  2020 (audited) £'000
Fair value at start of period	(4,339)	(1,816)	(1,816)
Revaluation in the period	2,563	(2,562)	(2,523)
Fair value at end of period	(1,776)	(4,378)	(4,339)

 

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.

Lender	Original facility	Outstanding debt	Maturity date	Annual interest rate	Notional amount	Rate
	£'000	£'000		%	£'000	%
Royal Bank of Scotland	55,000	51,024	Jun 2025	2.15 over 3 months £ LIBOR	Swap £27,500 Cap £27,500	1.26 1.26
Scottish Widows Ltd. & Aviva Investors Real Estate Finance	165,000	165,000	Dec 2027	3.28 Fixed	n/a	n/a
Scottish Widows Ltd	36,000	36,000	Dec 2028	3.37 Fixed	n/a	n/a
Santander UK	65,870	63,686	Jun 2029	2.20 over 3 months £ LIBOR	Swap £32,935 Cap £32,935	1.45 1.45
Total bank borrowings	321,870	315,710

 

LIBOR = London Interbank Offered Rate (Sterling)

 

As at 30 June 2021, the swap and the cap notional arrangements were £60.44m (30 June 2020: £60.44m; 31 December 2020: £60.44m).

 

The Group weighted average cost of debt of 3.3%, (30 June 2020: 3.4%; 31 December 2020: 3.3%) 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 102.0% (30 June 2020: 102.9%; 31 December 2020: 101.8%), as shown below.

 

	30 June     2021     (unaudited)    £'000	30 June     2020     (unaudited)    £'000	31 December      2020     (audited)    £'000
Total bank borrowings	315,710	312,731	316,171
Notional value of interest rate caps and swaps	120,870	120,870	120,870
Value of fixed rate debts	201,000	201,000	201,000
	321,870	321,870	321,870
Proportion of hedged debt	102.0%	102.9%	101.8%

 

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.

 

Date of valuation:	Total £'000	Quoted active prices (level 1) £'000	Significant observable inputs (level 2) £'000	Significant unobservable inputs  (level 3) £'000
30 June 2021	(1,776)	-	(1,776)	-
30 June 2020	(4,378)	-	(4,378)	-
31 December 2020	(4,339)	-	(4,399)	-

 

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.

 

18. Stated capital

Stated capital represents the consideration received by the Company for the issue of Ordinary shares.

 

	30 June 2021 (unaudited) £'000	30 June 2020 (unaudited) £'000	31 December   2020  (audited) £'000
Issued and fully paid shares at no par value
At start of the period	430,819	430,819	430,819
At end of the period	430,819	430,819	430,819
Number of shares in issue
At start of the period	431,506,583	431,506,583	431,506,583
At end of the period	431,506,583	431,506,583	431,506,583

 

19. 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 NAV 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     2021     (unaudited)  £'000	30 June   2020   (unaudited) £'000	31 December   2020   (audited)  £'000
Net asset value per Condensed Consolidated Statement of Financial Position		425,218	437,565	420,582
Adjustment for calculating EPRA Net Tangible Assets:
Derivative financial instruments		1,776	4,378	4,339
Deferred tax liability		690	698	690
Goodwill		-	(279)	-
EPRA Net Tangible Assets		427,684	442,362	425,611
Number of Ordinary Shares in issue		431,506,583	431,506,583	431,506,583
Net asset value per share - basic and diluted		98.5p	101.4p	97.5p
EPRA net tangible assets per share - basic and diluted		99.1p	102.5p	98.6p

 

20. 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.

 

21. 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") and a director of London & Scottish Property Asset Management Limited. The former company has been contracted to act as the Asset Manager of the Group and the latter 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 1.1% of the EPRA NAV, reducing to 0.9% on net assets over £500,000,000. The fee shall be payable in cash quarterly in arrears.

 

In respect of each portfolio property the Asset Manager has procured and shall, with the Company in future, procure that London & Scottish Property Asset 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 Asset Manager is also entitled to a performance fee. Details of the performance fee are given below.

 

	Six months ended 30 June 2021 (unaudited) £'000	Six months  ended 30 June 2020 (unaudited) £'000	Year  ended 31 December 2020 (audited) £'000
Asset management fees charged*	1,139	1,430	2,579
Property management fees charged*	1,183	1,127	2,266
Performance fee	-	-	-
Total	2,322	2,557	4,845
	30 June 2021 (unaudited) £'000	30 June 2020 (unaudited) £'000	31 December  2020 (audited) £'000
Total fees outstanding*	1,186	1,347	612

 

* Including irrecoverable VAT charged where appropriate

 

Transactions with the Investment Manager, Toscafund Asset Management LLP

Tim Bee is a non-executive Director of the Company, as well as being Chief Legal Counsel of the Investment Manager.

 

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 1.1% of the EPRA net asset value, reducing to 0.9% on net assets over £500,000,000. The fee is payable in cash quarterly in arrears.

 

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 ended 30 June 2021 (unaudited) £'000	Six months ended 30 June 2020 (unaudited) £'000	Year ended 31 December 2020 (audited) £'000
Investment management fees charged	1,137	1,413	2,577
Performance fees charged	-	-	-
Total	1,137	1,413	2,577
	30 June 2021 (unaudited) £'000	30 June 2020 (unaudited) £'000	31 December  2020 (audited) £'000
Total fees outstanding	584	665	1,190

 

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 ending 30 June 2021 or 30 June 2020 or the year ending 31 December 2020

 

22. Subsequent events

On 31 August 2021, the Company announced the acquisition of 31 high quality, predominately multi-let office assets for a consideration price of £236.0m, reflecting a net initial yield of 7.8%. The consideration was satisfied by three components: the issuance of 84,230,000 new ordinary shares in the Company at 98.6 pence per share (being the EPRA Net Tangible Asset Value per share as at 31 December 2020) equivalent to £83.1m, £76.7m of existing cash resources and additional borrowings of £76.2m.

 

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	Definition	EPRA Performance Measure	30 June 2021	31 December 2020
EPRA EARNINGS	Earnings from operational activities	EPRA Earnings	£12,881,000	£27,903,000
		EPRA Earnings per share (basic and diluted)	3.0p	6.5p
Company Adjusted Earnings	Company Specific Earnings Measure which adds back the performance fee charged in the accounts	Adjusted Earnings	£12,881,000	£27,903,000
		EPRA Earnings per share (basic and diluted)	3.0p	6.5p
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 Reinstatement Value	EPRA NAV metric which assumes that entities never sell assets and aims to represent the value required to rebuild the entity.	EPRA Net Reinstatement Value	£427,684,000	£425,611,000
		EPRA Net Reinstatement Value per share (diluted)	99.1p	98.6p
EPRA Net Tangible Assets	EPRA NAV metric which assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax.	EPRA Net Tangible Assets	£427,684,000	£425,611,000
		EPRA Net Tangible Assets per share (diluted)	99.1p	98.6p
EPRA Net Disposal Value	EPRA NAV metric which represents the Shareholders' value under a disposal scenario, where deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax.	EPRA Net Disposal Value	£415,303,000	£404,365,000
		EPRA Net Disposal Value per share (diluted)	96.2p	93.7p
EPRA Net Initial Yield	Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property with (estimated) purchasers' costs.	EPRA Net Initial Yield	6.7%	6.9%
EPRA 'Topped-up' NIY	This measure incorporates an adjustment to the ERA NIY in respect of the expiration of rent-free-periods (or other unexpired lease incentives such as discounted rent periods and stepped rents).	EPRA 'Topped-up' Net Initial Yield	6.8%	7.4%
EPRA Vacancy Rate	Estimated Market Rental Value (ERV) of vacancy space divided by ERV of the whole portfolio	EPRA Vacancy Rate	14.3%	10.6%
EPRA Costs Ratio	Administrative and operating costs (including and excluding costs of direct vacancy) divided by gross rental income	EPRA Costs Ratio	32.6%	32.4%
		EPRA Costs Ratio (excluding direct vacancy costs)	19.9%	19.6%

 

NOTES TO THE CALCULATION OF THE EPRA PERFORMANCE MEASURES

 

1.    EPRA earnings

For calculations, please refer to note 11 to the financial statements.

 

2.    EPRA Net Reinstatement Value

	30 June   2021   £'000		31 December   2020   £'000
NAV per the financial statements	425,218		420,582
Fair value of derivative financial instruments	1,776		4,339
Deferred tax liability	690		690
EPRA Net Reinstatement Value	427,684		425,611
Dilutive number of shares	431,506,583		431,506,583
EPRA Net Reinstatement Value per share	99.1p		98.6p

 

3.    EPRA Net Tangible Assets

	30 June   2021   £'000		31 December   2020   £'000
NAV per the financial statements	425,218		420,582
Fair value of derivative financial instruments	1,776		4,339
Deferred tax liability	690		690
EPRA Net Tangible Assets	427,684		425,611
Dilutive number of shares	431,506,583		431,506,583
EPRA Net Tangible Assets per share	99.1p		98.6p

 

4.    EPRA Net Disposal Value

	30 June   2021   £'000		31 December   2020  £'000
NAV per the financial statements	425,218		420,582
Adjustment for the fair value of bank borrowings	(8,850)		(16,717)
Adjustment for the fair value of retail eligible bonds	(1,065)		500
EPRA Net Disposal Value	415,303		404,365
Dilutive number of shares	431,506,583		431,506,583
EPRA Net Disposal Value per share	96.2p		93.7p

 

5.      EPRA Net Initial Yield

Calculated as the value of investment properties divided by annualised net rents:

	30 June     2021     £'000		31 December     2020     £'000
Investment properties	729,115		732,380
Purchaser costs	47,897		48,068
	777,012		780,448
Annualised cash passing rental income	58,252		59,754
Property outgoings	(6,279)		(5,586)
Annualised net rents	51,973		54,168
Add notional rent expiration of rent free periods or other lease incentives	591		3,198
Topped-up net annualised rent	52,564		57,366
EPRA NIY	6.7%		6.9%
EPRA topped up NIY	6.8%		7.4%

 

6.      EPRA Vacancy Rate

	30 June     2021     £'000		31 December  2020  £'000
Estimated Market Rental Value (ERV) of vacant space	10,230		7,733
Estimated Market Rental value (ERV) of whole portfolio	71,549		72,874
EPRA Vacancy Rate	14.3%		10.6%

 

7.      EPRA Cost Ratios

	30 June    2021    £'000		31 December     2020     £'000
Property costs	10,966		22,662
Less recoverable service charge income and other similar costs	(6,809)		(13,864)
Add administrative and other expenses	5,477		11,329
EPRA costs (including direct vacancy costs)	9,634		20,127
Direct vacancy costs	(3,766)		(7,967)
EPRA costs (excluding direct vacancy costs)	5,868		12,160
Gross rental income	36,335		75,941
Less recoverable service charge income and other similar items	(6,809)		(13,864)
Gross rental income less ground rents	29,526		62,077
EPRA Cost Ratio (including direct vacancy costs)	32.6%		32.4%
EPRA Cost Ratio (excluding direct vacancy costs)	19.9%		19.6%

The Group has not capitalised any overhead or operating expenses in the accounting years disclosed above.

 

PROPERTY RELATED CAPITAL EXPENDITURE ANALYSIS

 

	30 June 2021 £'000		31 December 2020 £'000
Acquisitions	645		44,956
Subsequent capital expenditure	4,348		8,803
Total capital expenditure	4,993		53,759

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.

 

SHAREHOLDER INFORMATION

 

Share register enquiries: Link Group.

 

For any questions about:

• Changing your address or other details;

• Questions about your shares;

• Buying and selling shares.

 

Phone: 0371 664 0300

 

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 9.00am - 5.30pm, Monday to Friday excluding public holidays in England and Wales. For Shareholder enquiries please email 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 9.00am and 5.30pm, Monday to Friday (excluding public holidays in England and Wales).

 

By email:  enquiries@linkgroup.co.uk

 

By post:

Link Group

Shareholder Services

10th Floor

Central Square

29 Wellington Street

Leeds

LS1 4DL

 

Forthcoming events

October 2021	Q2 2021 Dividend Payment
November 2021	Q3 2021 Trading Update and Dividend Declaration
February 2022	Q4 2021 Dividend Declaration
March 2022	2021 Preliminary Results
May 2022	Q1 2022 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)

William Eason (Senior Independent Non-Executive Director, Management Engagement and Remuneration Committee Chairman)

Daniel Taylor (Independent Non-Executive Director)

Frances Daley (Independent Non-Executive Director and Audit Committee Chairman)

Stephen Inglis (Non-Executive Director)

Timothy Bee (Non-Executive Director)

 

Administrator Jupiter Fund Services Limited Mont Crevelt House Bulwer Avenue St. Sampson Guernsey GY2 4LH	Independent Auditor RSM UK Audit LLP Third Floor Centenary House 69 Wellington Street Glasgow G2 6HG	Registrar Link Market Services (Guernsey) Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Asset Manager London & Scottish Property Investment Management Limited Venlaw 349 Bath Street Glasgow G2 4AA	Investment Manager Toscafund Asset Management LLP 5th Floor 15 Marylebone Road London NW1 5JD	Sub-Administrator Link Alternative Fund Administrators Limited Beaufort House 51 New North Road Exeter Devon EX4 4EP
Company Secretary Link Company Matters Limited Beaufort House 51 New North Road Exeter Devon EX4 4EP	Legal Adviser to the Company Macfarlanes LLP 20 Cursitor Street London EC4A 1LT	Tax Adviser Grant Thornton UK LLP 110 Queen Street Glasgow GI 3BX
Depositary Ocorian Depositary (UK) Limited 20 Fenchurch Street London EC3M 3BY	Public Relations Buchanan Communications Limited 107 Cheapside London EC2V 6DN	Registered office Regional REIT Limited Mont Crevelt House Bulwer Avenue St. Sampson Guernsey GY2 4LH
Financial Adviser and Joint Broker Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET	Joint Broker Panmure Gordon 1 New Change London EC4M 9AF	Property Valuers Cushman & Wakefield Debenham Tie Leung Limited (trading as Cushman & Wakefield) 125 Old Broad Street London EC2N 2BQ

 

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