TIDMRGL
RNS Number : 3780W
Regional REIT Limited
14 November 2017
14 November 2017
Regional REIT Limited
Q3 2017 Trading Update, Outlook Statement and Q3 2017 Dividend
Declaration
Business continues to make good progress; in-line with
management's expectations
Q3 2017 dividend 1.80pps
Regional REIT Limited (LSE: RGL) ("Regional REIT", "the Group"
or "the Company"), the UK regional office and industrial property
focused REIT, today announces its trading update for the period
from 1 July 2017 to 13 November 2017 and its dividend declaration
for the third quarter of 2017.
Stephen Inglis, Chief Executive Officer of London & Scottish
Investments Limited, commented:
"After only two years into life as a listed entity, we are very
encouraged with progress. This was another healthy quarter for
Regional REIT. The Group maintained a strong pace of lettings in
the third quarter of 2017. We continue to see a good level of
interest in both our office and industrial properties, and expect
this to improve occupancy rates across the portfolio in the near
term.
"The key focus for our business remains income - and the ability
to pay and improve dividends - underpinned by occupancy and rental
growth.
"Investor appetite remains strong for stabilised income assets
and we are taking advantage of this by some selective selling of
assets where asset management initiatives have been completed but
have not been recognised in valuation improvements. Valuation
levels remain below values being achieved on sales in the
marketplace.
"Whilst well positioned for organic growth the Company remains
opportunistic and is continuing to explore specific opportunities,
using its strong reputation and presence it has in the regions to
further grow the business and enhance income and earnings."
Q3 2017 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 and asset managing, predominantly, offices and
light industrial property in the main regional centres of the UK
outside of the M25 motorway.
Since 1 January 2017 to date, the Group has exchanged on 66
leases to new tenants, including 22 since 30 June 2017, totalling
391,459 sq. ft.; when fully occupied these will provide
approximately GBP2.9m pa of gross rental income. In addition, the
Group has completed a number of re-gears, achieving an average of
c. 3.8% uplift on the headline rent. Including these re-gears, the
acquisition of replacement tenants and existing tenants who
continue to hold-over in the properties, where there has been a
lease event, c. 70% of the headline rent has been retained.
Capital expenditure to 30 September 2017 was GBP9.5m gross,
demonstrating our commitment to invest, refurbish and enhance the
portfolio which is expected to be reflected in increased rental
income and property values in due course.
Earlier this month, London & Scottish Investments announced
the appointment of Simon Marriott to the position of Investment
Director. He will work closely with Stephen Inglis on Regional
REIT, as the Company continues to build on the positive momentum of
the last two years.
The Group is in advanced discussions to replace 5 existing
secured debt facilities of GBP164.2m from The Royal Bank of
Scotland, Lloyds Banking Group and Santander UK with a new 10 year
secured single facility from 2 well-known UK Lenders. In addition,
the Group has reached agreement, subject to documentation, with
Santander UK regarding the refinancing of the Toscafund Glasgow
debt facility with a new 5 year facility. Both of these new
facilities have been credit approved and will increase the weighted
average debt maturity to 6.3 years from 2.0 years.
Portfolio as at 30 September 2017:
-- 151 properties, 1,113 units and 838 tenants, amounting to c.
GBP651m of gross property assets; contracted rental income of c.
GBP55.9m pa.
-- Offices (by value) were 63.2% of the portfolio (31 December
2016: 63.3%) and industrial sites 25.7% (31 December 2016: 29.4%);
England & Wales represented 75.4% (31 December 2016: 73.2%) of
the portfolio.
-- Occupancy (value) was 82.8%, versus 83.3% at 30 June 2017; 30
September 2017 like-for-like (versus 30 September 2016) occupancy
was broadly in-line at 81.4% (82.0%).
-- Average lot size increased to c. GBP4.3m (31 December 2016: GBP4.1m).
-- Net loan-to-value ratio c. 48.1% (31 December 2016: 40.6%).
Gross borrowings GBP335.4m; cash and cash equivalent balances
GBP22.1m. Cost of debt (including hedging) of 3.7% pa (31 December
2016: 3.7% pa).
Summary of activity in the quarter to 30 September 2017:
The Group undertook several asset management projects,
generating additional income through new lettings and maintaining
and improving income through lease renewals and re-gears:
-- Arena Point, Leeds - new lease commenced with Interserve
Working Futures Limited for the 6th and 7th floor totalling 8,134
sq. ft. at an annual headline rent of GBP101,900 pa for 5 years.
Additional space was let on the 15th floor (plus car parking
spaces) to Go Ballistic Limited totalling 1,916 sq. ft. at rent of
GBP26,590 pa with a lease term of 6 years.
-- Juniper Park, Basildon - the letting of Unit 1 (65,603sq.
ft.), completed in September to A Share & Sons t/a SCS on a 10
year lease, with break at year 5, at an average headline rent of
GBP328,015 pa for the first 5 years.
-- Marston Business Park, Tockwith - a 15 year lease commenced
in July 2017 to Stage One Creative Services, totalling 13,940 sq.
ft. at an annual headline rent of GBP63,103 pa.
-- Wardpark Industrial Estate (Wardpark Place), Cumbernauld -
re-gear of lease to Vital Pet Products Limited completed in August
on a 5 year term, at a headline rent of GBP80,772 pa (24,853 sq.
ft.).
-- Atlantic House, Milton Keynes - the lease on this industrial
unit has been renewed with the existing tenant for a further 12
months from 1st November 2017 at rent of GBP280,000 pa. The tenant
has the option to purchase the building for GBP3.6m, which is
significantly ahead of valuation, on 31st October 2018.
-- Delta Business Park, Swindon - a lease renewal of the first
floor (10,402 sq. ft.) has been agreed with TM Group (UK) Limited
for 5 years without break at a headline rent of GBP148,243 pa.
-- Templeton on the Green, Glasgow - previously vacant unit of
4,183 sq. ft. let to Front Page 2012 Limited on a 10 year lease,
subject to a tenant break option in 2022, at a headline rent of
GBP50,196 pa.
-- Grecian Crescent, Bolton - following refurbishment this
industrial unit (25,550 sq. ft.) was re-let to Servelite UK Limited
for 10 years from August, subject to a tenant break option in 2022,
at an improved annual rent of GBP121,645 pa.
-- Murdostoun House, Bellshill - the ground floor space (5,997
sq. ft.) was let to Technology Services Group Limited on a 5 year
lease without break for GBP74,962 pa.
-- Manor Road, Erith - new 10 year lease agreed with ACOMS
Limited for Unit D (9,370 sq. ft.), subject to a tenant break
option in 2022, at a headline rental income of GBP65,000 pa.
Acquisitions
Two acquisitions completed in Almondsbury, North Bristol during
the period:
-- Woodlands Court, a 1988 development of four single storey
office buildings, subdivided and currently providing 9 units
totalling 37,952 sq. ft., which was acquired for approximately
GBP6.55m (Freehold) reflecting a net initial yield of 8.1%. The
unit sizes range from 2,031 sq. ft. to 8,889 sq. ft. and provide
income of GBP556,629 pa (GBP14.67 per sq. ft.).
-- Equinox North was acquired at a purchase price of GBP4.8m
(Freehold), reflecting a net initial yield of 8.64%. This is a 1991
development being a two storey office building totalling 32,469 sq.
ft. presently divided into 6 separate lettable units ranging from
1,524 sq. ft. to 12,078 sq. ft. with parking for 183 vehicles, and
provides an income of GBP442,920 pa (GBP13.67 per sq. ft.).
Sale
-- St James House, Bath - having successfully completed its
business plan, Regional REIT completed the sale of the property in
August 2017 at a sale price of GBP4,560,000, reflecting net initial
yield of 5.75%, an improvement of over 44% on the December 2016 y/e
valuation.
Summary Post 30 September 2017 to date:
New Lettings
-- Tay House, Glasgow - terms agreed with a major corporate
occupier to take the remaining available first floor (19,730 sq.
ft.) from November 2017 at an annual rent of GBP382,505. The lease
will run until 2025 subject to a tenant break option in 2021. This
will take Tay House, the largest asset by value in the Company's
property portfolio, to 100% occupation.
-- Building 2, Aylesbury - terms agreed with Agria Pet Insurance
for the first floor (13,823 sq. ft.) for 10 years at a headline
rent of GBP235,000 pa.
-- Colwick - terms have been agreed for the letting of this
84,000 sq. ft. industrial unit for 10 years, subject to tenant
break at the 7(th) anniversary at an annual headline rent of
GBP275,000.
Sales
-- Arena Point, Leeds - contracts have been exchanged with Unite
Students for the sale of the podium site for GBP10.5m subject to
Unite securing planning. On completion, this will produce a profit
of c. GBP9m on this asset since purchase in March 2016. The deal
will see Regional REIT retain the office tower block.
-- Thames Trading Estate, Fairhills Road, Irlam - contracts have
been exchanged for the sale of this 18 unit industrial estate at a
sale price of GBP2.2m, reflecting a net initial yield of 6%
following the successful conclusion of the business plan for the
asset, an improvement of over 40% on the 31 December 2016
valuation.
Outlook
The Group continues to see good performance in the industrial
and office occupancy markets of the UK's regions, and remains
confident of its own growth prospects. It is trading in-line with
management's expectations for 2017. Regional REIT's active asset
management is delivering results within both recent acquisitions
and the established portfolio, underpinning income growth
prospects.
Q3 2017 Dividend Declaration
The Company will pay a dividend of 1.80 pence per share ("pps")
for the period 1 July 2017 to 30 September 2017, an increase of c.
3% (1 July 2016 to 30 September 2016: 1.75pps). The dividend
payment will be made on 22 December 2017 to shareholders on the
register as at 24 November 2017. The ex-dividend date will be 23
November 2017.
It has been the Company's intention to pay three quarterly
dividends at approximately this level in relation to the financial
year 2017, of which this is the third, and then a fourth quarter
dividend to at least manage compliance with the REIT distribution
requirement.
The payment of dividends will remain subject to market
conditions, the Company's performance, its financial position and
the business outlook.
- ENDS -
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulation that came into
effect on 3 July 2016.
Enquiries:
Regional REIT Limited
Press enquiries through Headland
Toscafund Asset Management Tel: +44 (0) 20 7845 6100
Investment Manager to the Group
Adam Dickinson, Investor Relations, Regional REIT Limited
London & Scottish Investments Tel: +44 (0) 141 248 4155
Asset Manager to the Group
Stephen Inglis
Headland Tel: +44 (0) 20 3805 4222
Financial PR
Francesca Tuckett
About Regional REIT
Regional REIT Limited (LSE: RGL) ("Regional REIT", "the Group"
or "the Company") is a London Stock Exchange Main Market traded
specialist real estate investment trust focused on office and
industrial property interests in the principal regional locations
of the United Kingdom outside of the M25 motorway.
Regional REIT is managed by London & Scottish Investments,
the Asset Manager, and Toscafund Asset Management, the Investment
Manager, and was formed by the Managers as a differentiated play on
the expected recovery in UK regional property, to deliver an
attractive total return to Shareholders and with a strong focus on
income.
The Group's investment portfolio, as at 30 June 2017, was spread
across 150 regional properties, 1,093 units and 823 tenants. As at
30 June 2017, the investment portfolio had a value of GBP640.4m and
a net initial yield of 6.7%. The weighted average unexpired lease
term to first break was 3.5 years.
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.
www.regionalreit.com
LEI: 549300D8G4NKLRIKBX73
This information is provided by RNS
The company news service from the London Stock Exchange
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