Q3 2021 Trading Update and Dividend Declaration

11 November 2021

REGIONAL REIT Limited

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

Q3 2021 Trading Update, Dividend Declaration & ESG Update

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

Q3 2021 Trading Update

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

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

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

Portfolio as at 30 September 2021:

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

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

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

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

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

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

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

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

Q3 2021 Dividend Declaration

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

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

The key dates relating to this dividend are given below:

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

ESG Update

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

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

Rental Collection Update

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

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

Outlook

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

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

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

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

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

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

Summary of Activity in the Quarter to 30 September 2021:

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

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

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

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

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

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

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

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

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

Acquisitions

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

Portfolio Highlights

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

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

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

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

·    Contracted rent roll amounts to £21.9m pa

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

Sales

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

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

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

Subsequent Events post 30 September 2021:

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

Lettings

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

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

Sales

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

Forthcoming Events

Note: All dates are provisional and subject to change

- ENDS -

Enquiries:

About Regional REIT

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

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

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

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

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