Positive Trading Update & Joint Broker Appointment

5 August 2020

REGIONAL REIT Limited

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

 

Positive Trading Update

and

Appointment of Joint Broker

 

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 Group property portfolio valuation as at 30 June 2020 which again demonstrates the strength of the portfolio in the face of Covid-19, and an asset management update.

Additionally, the Group announces that Panmure Gordon (UK) Ltd. has been appointed as joint corporate broker and joint financial adviser, alongside Peel Hunt, with immediate effect.

30 June 2020 valuation - Highly diversified portfolio

The overall valuation was £742.3m* (31 December 2019: £787.9m), only a 3.7% portfolio decrease from 31 December 2019. Very encouragingly, after adjusting for capital expenditure of £4.5m and disposals of £15.1m during the period, the portfolio only decreased 4.3% on a like-for-like basis from the 31 December 2019 valuation, and the Group's core office and industrial segment (94.2% by value) only decreased by 3.6% on a like-for-like basis.

The highly diversified and extensive portfolio, the diversification of which has long been an integral part of the Group's strategy to mitigate any risk, contains 151 properties (31 December 2019: 160).

The Group's net loan-to-value ratio is below the Company's stated target of 40% at c.39.7% as at 30 June 2020 (31 December 2019: 38.9%).

 

Rent Collection Update - Remains strong in the current economic climate

 

As at 31 July 2020 Q1 rent collection has continued to increase to c. 98%. This comprises of 96% of Q1 rent paid and agreed collections with occupiers amounting to 2%, which is ahead of management expectations at this point in time given the current backdrop. We anticipate collecting additional Q1 rent in due course.

 

Further to the 27 July 2020 Q2 rent collection announcement, further good progress has been achieved with an increase to c. 93%. This comprises of 84% of Q2 rent paid, 4% who have agreed to pay monthly and collection plans agreed with occupiers amounting to a further 5%. The Group anticipates collecting the vast majority of the balance of outstanding Q2 rent in due course as usual.

 

*As at the valuation date, the Cushman & Wakefield portfolio valuation is subject to "material valuation uncertainty" as set out in VPS 3 and VPGA 10 of the RICS Red Book Valuation - Global Standards, due to the unprecedented circumstances surrounding COVID-19. The industrial and logistics properties are not subject to material valuation uncertainty within the Cushman & Wakefield portfolio valuation as at the valuation date. This set of circumstances is not unique to the Company and the material valuation uncertainty reported within the Cushman & Wakefield portfolio valuation is in line with the RICS material valuation uncertainty recommendation to all RICS registered property valuers as at the valuation date.

 

Asset Management Update - Further Good Progress Achieved

The Company's Asset Manager, London & Scottish Property Investment Management, has continued to successfully manage the assets proactively through this period, and the Company provides the following update:

9 Portland Street, Manchester: A new rent of £251,679 (£21.50/sq.ft.) with Darwin Loan Solutions has been agreed, representing an uplift of 59.7% against the previous rent.

Leo House, Wallington: A new rental of £132,000 (£17.00/sq.ft.) with Crimestoppers Trust, an uplift of 19.7% against the previous rent.

30-34 Hounds Gate, Nottingham: A new letting agreement has been signed with Ensek Ltd. for a 10-year lease (subject to break option at year five) at a rent of £270,865 (£17.50/ sq. ft.).

Ashby Business Park, Ashby De La Zouch: An agreement for lease has been signed with Ceva Logistics Ltd. to renew an existing lease at a rent of £405,132 (£13.17/ sq. ft.) an uplift of 13.5% against the previous rent.

Templeton Business Centre, Glasgow: An agreement has been signed with the Trustees of Mental Health Network (Greater Glasgow) to extend the lease for four years until 2024 at a rent of £13,768 (£8.00/sq. ft.).

Minton Place, Station Road, Swindon: A new rent of £20,790 (£13.50/sq.ft.) has been agreed with Optical Express Ltd until April 2025.

Milburn House, Dean Street, Newcastle: Two leases have been signed with Newcastle NE1 Ltd. at a combined rent of £25,503 (£9.26/sq. ft.) an uplift of 21.7% against the previous rent.

Stephen Inglis, Chief Executive Officer of London & Scottish Property Investment Management Limited, the Asset Manager commented:

 

"Regional REIT is performing well and our highly diversified portfolio continues to demonstrate its resilience. In July, we announced positive rent collection for Q2 which has continued to grow and is now at 93%. With Q1 now at 98% we continue to demonstrate the effectiveness of the unique management platform that has been developed. Given the current economic and political backdrop, these are exceptional collection rates and the management team continues to work with our occupiers on the outstanding sums due. We will be announcing further updates in due course.

 

On a general note I would comment that demand remains strong for the Group's core office and industrial properties with regional office and industrial availability reported as being at record low levels. This shortage, partly caused by a lack of new product coming to market, coupled with some major organisations considering moving to a "hub and spoke" model, comprising a large city centre presence supported by smaller multiple regional offices, leaves Regional REIT very well positioned for the long term.

 

We are now increasingly confident that our consistently strong performance during this difficult period, resulting in sector leading income maintenance and generation, will see the portfolio valuation (valuers are currently adjusting down based largely on sentiment rather than transactional evidence) rewarded in the long-term as we return to a more normal operating investment environment.

 

I would also like to take this opportunity to welcome Panmure Gordon as Regional REIT's appointed joint corporate broker."

 

- 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

 

Peel Hunt	Tel: +44 (0)20 7418 8900
Joint Corporate Broker and Financial Adviser
Capel Irwin, Carl Gough and Harry Nicholas (Corporate)
Panmure Gordon (UK) Limited	Tel: +44 (0)20 7886 2500
Joint Corporate Broker and Financial Adviser
Chloe Ponsonby (Corporate Broking) / Sapna Shah (Corporate Finance)

 

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 151 properties, as at 30 June 2020, with a valuation of £742.3m.

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