Q1 Trading Update, Dividend and Outlook Statement

21 May 2020

REGIONAL REIT Limited

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

 

Q1 Trading Update, Dividend and Outlook Statement

 

Regional REIT (LSE: RGL), the regional real estate investment specialist focused on building a diverse portfolio of income producing regional UK core and core plus office and industrial property assets, today announces its trading update for the year to date, its dividend declaration for the first quarter of 2020, and provides a statement on the Group's outlook for the full year 2020.

 

Stephen Inglis, Chief Executive Officer of London & Scottish Property Investment Management Limited, the Asset Manager commented: "We are pleased to be able to deliver a reassuring trading update for the first quarter of 2020, particularly in light of increasingly difficult market conditions as the effects of Covid-19 began to impact businesses across the UK in March. We are confident in the outlook for Regional REIT due to the unique features of our asset management platform that ensures a close working relationship with our diverse register of quality occupiers, of which some 50% are providing Government defined 'essential services'.

 

The quality and diversity of our portfolio properties and tenant register, supported by active asset management relationships has directly led to a first quarter 2020 rent collection of 93.9% received by the Company. This revenue strength should ensure that a sector leading level of income will continue to be paid to our shareholders for the foreseeable future."

 

Trading Update

 

The Group has continued to pursue its strategy of providing investors with an attractive return on a sustained and consistent basis from investing in and managing, predominantly, offices and light industrial property in the main regional centres of the UK outside of the M25 motorway.

 

Since 1 January 2020 to date, the Group has exchanged on 18 new leases, totalling 117,012 sq. ft., which, when fully occupied, will provide approximately £0.8m pa of rental income.

 

Capital expenditure year-to-date was £4.8m net.

 

Q1 Rent Collection as at 18 May 2020:

 

93.9% of rent due had been collected (18 May 2019: 92.7%). This comprises of 90.1% of Q1 2020 rent due and agreed collections from occupiers who are now settling monthly amounting to 3.8%.

 

We continue to maintain close working relationships with all our tenants through this difficult period.

   

First Quarter 2020 Dividend Declaration

 

The Company will pay a dividend of 1.90 pence per share ("pps") for the period 1 January 2020 to 31 March 2020. The dividend payment will be made on 17 July 2020 to shareholders on the register as at 5 June 2020. The ex-dividend date will be 4 June 2020. The dividend will be paid as 1.90 pps as a REIT property income distribution ("PID"). This follows the payment on 9 April 2020 of the dividend for Q4 2019 of 2.55pps.

 

In light of recent events, and until we have greater clarity on the economic outlook, future quarterly dividend distributions remain under review by the Board, having regard to, among other things the financial position and performance of the Group, including the levels of rental income received at the relevant time, UK REIT requirements and the interests of shareholders.

 

Balance sheet and liquidity as at 31 March 2020:

·    Net loan-to-value ratio c.38.3% (31 December 2019: 38.9%); gross borrowings £369.1m (31 December 2019: £344.0m);

·    Cash and cash equivalent balances £69.0m* (31 December 2019: £37.2m);

·    Cost of debt (including hedging) of 3.5% pa (31 December 2019: 3.5% pa);

·    No debt maturities before June 2024; weighted average debt duration 7.1 years (31 December 2019: 7.3 years).

 

* Prior to payment of £11.0m in relation to the Q4 2019 dividend on 9 April 2020.

 

Portfolio as at 31 March 2020:

·    154 properties, 1,261 units and 882 tenants, (31 December 2019: 160 properties, 1,251 units, 904 tenants) amounting to £783.6m* of gross property assets (31 December 2019: £787.9m); a rent roll of c. £63.4m pa (31 December 2019: £64.3m);

·    Offices (by value) were 80.3% of the portfolio (31 December 2019: 79.9%) and industrial sites 13.3% (31 December 2019: 13.7%); England & Wales represented 81.6% (31 December 2019: 82.0%) of the portfolio;

·    EPRA Occupancy 88.5%, versus 89.4% at 31 December 2019; 31 March 2020 like-for-like (versus 31 December 2019) occupancy was 88.5% (89.4%);

·    Average lot size increased to c. £5.1m (31 December 2019: £4.9m).

 

*Gross property assets based upon 31 December 2019 C&W valuations, adjusted for subsequent disposals and capital expenditure in the period.

 

Active asset management highlights - Ongoing value optimisation:

 

Summary of activity in the quarter to 31 March 2020:

·    Elmbridge Court, Gloucester: Frazer-Nash Consultancy Ltd. has renewed its leases of Unit C1 and C2 of the property (4,925 sq. ft.) for a further five years from September this year at a rent of £85,000 pa (£17.26/sq. ft.), an uplift of 38% against the previous rent.

·    Oakland House, Talbot Road, Stretford, Greater Manchester: The existing tenant, Greater Manchester Combined Authority, has renewed its lease of the 8^th Floor (East Wing) of the office property (5,481 sq. ft.). The annual rent is £63,032 pa (£11.50/sq. ft.), which is a 27% uplift to the previous rental agreement.

·    Part Ground Floor, Betchworth House, Redhill: Current tenant Man Energy Solutions UK Ltd. has renewed the existing lease of the 1,778 sq. ft. office unit for a further five years at a rent of £42,000 pa (£23.62/sq. ft.), a 12% uplift against the previous rent.

·    North Malting & North Kiln, Felaw Street, Ipswich, Suffolk: KCOM Group Ltd. has re-geared its existing lease for the second floor of the office property (11,897 sq. ft.), at a rent of £92,000 pa (£7.73/sq. ft.), with the tenant's break date having now moved out two years to 28 September 2022.

·    Gyleview House, 3 Redheughs Rigg, Edinburgh: Existing tenant Citibase, has renewed the current lease for occupancy of the entire serviced office property (24,503 sq. ft.) for a further five years.

·    Braidhurst House, Lark Way, Strathclyde Business Park, and Bellshill: New letting to ADT Fire and Security PLC on the ground floor office premises (8,416 sq. ft.) at a rent of £109,408 pa (£13.00/sq. ft.) for five years.

·    Commercial Street and Wellington Arcade, Brighouse: Costa Coffee Ltd. has signed a new lease for 10 years for 3,170 sq. ft. of previously vacant retail space at a rent of £40,000 pa (£12.62/sq. ft.).

·    Ashby Park, Ashby De La Zouch: Brush Electrical Machines Ltd. has let Power House (21,289 sq. ft.) for 10 years from January this year at a rent of £300,000 pa (£14.09/sq.ft.).

·    Heathall Industrial Estate, Dumfries: Plastic Recycling Technology Ltd. has signed a new lease for 10 years for 59,737 sq. ft. of previously vacant space at a rent of £125,000 pa.

·    Trident Retail Park, Birmingham: City Electrical Factors Ltd. has signed a new lease for 20 years for 4,931 sq. ft. of previously vacant space at a rent of £43,100 pa (£8.74/sq. ft.).

·    Albert Edward House, Preston: Existing tenant in the building, SpaMedica Ltd., has let additional space (3,793 sq. ft.). The annual rent for this space is £37,930 pa (£10.00/sq. ft.).

·    Miller Court, Tewkesbury: Rehability UK Community Ltd. has let 2,250 sq. ft. of space for five years from February this year at a rent of £35,100 pa (£15.60/sq. ft.).

·    The Brunel Centre, Bletchley: Peacocks Stores Ltd. has signed a five-year lease for 3,302 sq. ft. at a rent of £27,500 pa (£8.33/sq. ft.).

·    The Genesis Centre, Warrington: New letting to General Insurance Distribution Ltd. for 1,946 sq. ft. at a rent of £24,325 pa (£12.50/sq. ft.).

·    City West Business Park, Durham: New letting to Paramount Technical Solutions Ltd. 2,874 sq. ft. at a rent of £23,800 pa (£8.28/sq. ft.).

·    Heathall Industrial Estate, Dumfries: Current tenant Laurmar Ltd. has extended existing lease for a further three years at a rent of £65,000 pa, an 8% uplift against the previous rent.

·    Salamander Quay, Harefield: EDP Health, Safety and Environment Consultants has signed a new lease for 10 years for 1,256 sq. ft. of space at a rent of £22,015 pa (£17.53/sq. ft).

 

Sales since 1 January 2020:

 

January 2020 - Two attractive disposals above book value

·    Total Petrol Filling Station, Dysart Way, Leicester - £1.8m

·    Michigan Drive, Milton Keynes - £3.7m

  

February 2020 - Continuing to reduce retail sector exposure

·    37 Stockwell Gate, Mansfield, Nottingham (retail) - at auction for £110,000 - legal completion on 25 March 2020

·    West Stewart Street, Greenock, Greenock (retail) - at auction for £275,000 - legal completion on 26 March 2020

·    52/66 Newmarket Street, Ayr (retail) - sold prior to auction for £155,000

·    Whittle Court, Stoke-On-Trent (part sale) (office) - sold for £200,000

·    Sheldon Court, Birmingham (office) - sold for £2.4m

 

Outlook

 

Our confidence for the longer term continues to be underpinned by the Group's focus on tenant relationships, asset management initiatives coupled with our robust balance sheet. However, we remain mindful of the backdrop of economic uncertainty and tenant requirements in a structurally evolving property market, which continues to be impacted by Covid-19.

 

Forthcoming Events

Late July/August         Annual General Meeting

17 Sep 2020                Interim 2020 results announcement

12 Nov 2020               Q3 2020 Trading Update

 

Note: All dates are provisional and subject to change

 

- ENDS - 

Enquiries:

Regional REIT Limited
Toscafund Asset Management	Tel: +44 (0) 20 7845 6100
Investment Manager to the Group
Adam Dickinson, Investor Relations, Regional REIT Limited
London & Scottish Property Investment Management	Tel: +44 (0) 141 248 4155
Asset Manager to the Group
Stephen Inglis
Buchanan Communications	Tel: +44 (0) 20 7466 5000
Financial PR	[email protected]
Charles Ryland / Victoria Hayns / Henry Wilson

 

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, offices and industrial units located in the regional centres outside of the M25 motorway. The portfolio is highly diversified, with 160 properties, 904 tenants as at 31 December 2019, with a valuation of £787.9m.

 

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

 

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

 

Cautionary Statement

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

 

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