TIDMRGL
RNS Number : 1622G
Regional REIT Limited
25 May 2017
25 May 2017
Regional REIT Limited
May 2017 Trading Update and Outlook Statement
Strong pace of lettings. Good progress with recent property
portfolio acquisition
Regional REIT Limited (LSE: RGL) ("Regional REIT", "the Group"
or "the Company"), the UK regional office and industrial property
focused REIT, in advance of its Annual General Meeting today,
announces its Trading Update as at 25 May 2017 and provides a
statement on the Group's Outlook for the full year 2017.
Stephen Inglis, Group Property Director and Chief Investment
Officer of London & Scottish Investments Limited, commented:
"We have maintained a strong pace of lettings year-to-date, picking
up on the second-half of 2016, with both industrial units and
regional offices performing well."
"Our active asset management has been reinforced by selective
capital expenditure as we continue to enhance our properties to
build organic growth. The acquisition and embedding of the new
investment properties has gone well and we are achieving good
progress with prospective lettings. At present regional property is
tempered by more limited investment activity, however, we continue
to consider a number of opportunities."
May 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 in and managing, predominantly, offices and
light industrial properties, as well as opportunistic acquisitions,
in the main regional centres of the UK outside of the M25
motorway.
Since 1 January 2017 to date, the Group has exchanged on 26 new
leases, totaling 113,651 sq. ft.; when fully occupied these are
expected to provide approximately GBP0.6m pa of rental income. In
addition, the Group has completed a number of regears, achieving an
average c. 2.8% uplift on the headline rent. The occupier market
remains robust at this time and the pace of enquiries and lettings
has strengthened over the past year.
Regional REIT has also been active and opportunistic with
acquisitions through 2017 to date. On 24 March 2017 the Group
completed the acquisition of c. GBP129m UK regional office,
industrial and retail & retail distribution investment
properties, with a net initial yield of 7.0%, from The Conygar
Investment Company PLC. In part settlement of the acquisition, the
Company issued 26,326,644 new ordinary shares and assumed
additional borrowings of some GBP105m.
In the first quarter of 2017 the Group undertook a number of
minor property disposals amounting to some GBP2.5m net, in line
with book value.
Capital expenditure year-to-date is GBP2.11m gross, amounting to
GBP2.06m net after recoveries and dilapidations, demonstrating our
commitment to invest in and control our asset quality enhancement
programme. To date this year we have commenced or planned gross
capital expenditure (before dilapidations and other recoveries) on
refurbishment of some GBP16m for the full year 2017.
-- Portfolio as at 31 March 2017:
o 150 properties, 1,115 units and 833 tenants, amounting to c.
GBP630m of gross property investments; a contracted rent roll
run-rate of c. GBP54.3m pa.
o Offices were 62.6% (by value) of the portfolio (IPO, November
2015: 58.4%) and industrial sites 25.8% (IPO, November 2015:
25.3%); England & Wales represented 74.5% (IPO November 2015:
64.6%) of the portfolio.
o Occupancy was 82.8% (by value), versus 82.7% at 31 December
2016; 31 March 2017 like-for-like (versus 31 December 2016)
occupancy was steady at 82.9% (by value) (31 December 2016: 82.7%).
(Note: the Group has restated its measurement of occupancy to a
value methodology, as a percentage of Estimated Rental Value
("ERV")).
o Average lot size increased to c. GBP4.2m (31 December 2016:
GBP4.1m).
o Largest tenant c. 3.0% (by gross rental income) (31 December
2016: 3.7%); largest property c. 5.1% (by value) (31 December 2016:
6.4%).
o Net loan-to-value ratio c. 48% (31 December 2016: 40.6%).
Gross borrowings, including zero dividend preference shares of
GBP35.7m, of GBP335.2m (31 December 2016: GBP220.1m); cash and cash
equivalent balances GBP34.3m (31 December 2016: GBP16.2m). Average
cost of debt (including hedging) of 3.7% pa (31 December 2016: 3.7%
pa) (as at 31 March 2017: excluding zero dividend preference
shares, 3.4% pa).
-- Asset Management Activity Highlights, year to date:
o 9 Portland Street, Manchester - Completion of Letting
Programme. Final available floor space let to an existent tenant,
Mott MacDonald Limited, along with the removal of a break in their
existing letting; Mott MacDonald is secured for an 8-year term.
With 100% occupancy, the property yields an annual rental income of
GBP756,150 pa. The property was acquired vacant from receivership
in December 2013, for GBP3.75m, followed by a GBP1.1m
refurbishment. Since refurbishment the rental value has been
improved 44%, to GBP19.50 psf. With a current average rental of
GBP13.75 psf there is the potential for significant reversionary
growth on lease renewals and rent reviews.
o Tokenspire Business Park, Beverley - Multiple New lettings.
Letting of 28,527 sq. ft. of space in January-February 2017,
comprised five separate deals ranging from 2,000 sq. ft. to 9,626
sq. ft., to produce a headline rent of GBP63,500 pa.
o Hampshire House, Hampshire Corporate Park, Chandlers Ford,
Eastleigh - Commencement of Final Stage of Refurbishment and
Completion of Lettings. Refurbishment of the 20,000 sq. ft. first
floor. Building was re-branded as part of the refurbishment works.
Final phase of refurbishment follows the expiry of the lease to
Aviva in December 2016 and will conclude a GBP1.5m investment in
the building. Most recently completed lettings of the vacant
first-floor to internet and telecoms provider, Daisy, and to
Utilita Energy, the leading supplier of 'pay as you go' energy in
the UK. Each will occupy 10,000 sq. ft. on new 10-year leases, at a
rent of GBP19.75 psf.
o Donegal House, Bromley - Completion of Letting. Following
completion of a full refurbishment programme, amounting to
GBP825,000, the letting of available units has been completed with
an ERV uplift to GBP20 psf, from GBP15 psf.
o 'Blue Leanie', Aylesbury - Commencement of Refurbishment
Programme. A comprehensive refurbishment of all floors following
the expiry of the previous lease to Scottish Widows, an investment
amounting to GBP3.27m. Strong tenant interest in the vacant two
floors.
o Llansamalet Retail Park, Swansea - Letting of Final Unit.
Completed the letting of the last remaining unit to Tapi Carpets
& Floors Limited. Tapi will take a 10-year lease of the 10,235
sq. ft. retail warehouse unit at a headline rent of GBP150,290 pa,
subject to a break option at the fifth anniversary. Have also
secured outline planning consent for a 2,500 sq. ft. drive-thru
food service unit on the retail park and in advanced negotiations
with a multi-national operator.
o 800 Aztec West Park Avenue, Bristol - Commencement of
Refurbishment Programme. A comprehensive refurbishment, investing
GBP5.5m, in the 71,651 sq. ft. three storey office building,
acquired as part of the GBP80m "Rainbow Portfolio" acquisition in
March 2016.
o Arena Point, Leeds - Commencement of the Refurbishment.
Commencement of the first phase of refurbishment of the 20-storey
office, initially investing GBP1.1m. The building was originally
acquired in March 2016 as part of the "Wing Portfolio".
Outlook Statement
We remain positive on the prospects for the Group in 2017. The
strength of business activity evident throughout the UK's regions
is sustaining a positive momentum of office and industrial
occupancy and we are well positioned for growth in rental income
whilst maintaining tight control of costs and of our debt. We are
confident of meeting our stated objectives for the longer-term
growth of NAV and returns to our Shareholders.
-S -
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 PR
Toscafund Asset Management LLP Tel: +44 (0) 20 7845 6100
Investment Manager to the Group
James S Johnson, Investor Relations, Regional REIT Limited
London & Scottish Investments Limited Tel: +44 (0) 141 248 4155
Asset Manager to the Group
Stephen Inglis
Headland PR Consultancy LLP Tel: +44 (0) 20 7367 5222
Financial PR
Francesca Tuckett
About Regional REIT
Regional REIT Limited (LSE: RGL) 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 combination of two existing funds
previously created 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 31 December 2016, was
spread across 123 regional properties, 941 units and 717 tenants.
As at 31 December 2016, the investment portfolio had a value of
GBP502.4m and a net initial yield of 6.7%. The weighted average
unexpired lease term to first break was 3.6 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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