2019 PORTFOLIO VALUATION INCREASE AND POSITIVE 2020 ASSET MANAGEMENT UPDATE

29 JANUARY 2020

  • 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, is pleased to announce the valuation of the Group's 2019 property portfolio, and asset management update.

    As at 31 December 2019 the portfolio valuation increased by 9.7% from the prior year. The like-for-like value of the Group's core office and industrial segment (93.6% by value) also increased in 2019 by 1.4%, after adjusting for capital expenditure and disposals during the period. Overall, on a like-for-like basis it was broadly unchanged with a 0.1% decrease. The overall valuation was £787.9m (31 December 2018: £718.4m), consisting of 160 properties (31 December 2018: 150), an increase of 7% and 904 tenants (31 December 2018: 874) an increase of 3%. These increases were achieved following the deployment in the period of the successful £62.5m equity raise.

    The Group's net loan-to-value ratio was c.38.9% as at 31 December 2019 (31 December 2018: 38.3%).

    2019 Calendar Year - Highlights and Outperformance

    • Total shareholder return* during the year of 32.5% significantly outperforming the FTSE EPRA NAREIT UK Index which was at 30.6%
    • Dividends paid of 8.20p, a dividend yield of 7.2%, based on the price of 113.2pps as at 31 December 2019
    • The successful capital raise of £62.5m in July, was followed by the acquisition of 11 attractive office assets for £63.9m, with a combined net initial yield of 8.7%, and transacted on target by the end of December 2019

    *Source: Datastream: Includes dividends reinvested

    2020 Asset Management Update - Continued positive momentum

    Disposals

    • Dysart Way, Leicester: The sale of a petrol filling station on Dysart Way, Leicester, for £1.8m, was 38.5% above the previous valuation of the asset, as at 30 June 2019. This follows the re-gearing of the asset's tenancy agreement to Rontec Service Station 1A Limited on a 20-year lease from October. The sale represents a net initial yield of 5.5%.
    • St. Brendan's Court, Bristow Broadway, Avonmouth, Bristol: This office disposal for £3.0m, represents a 7.7% uplift on 30 June 2019 valuation, which follows the successful execution of its asset management plan to remove the June 2020 break option, with Highways England Company Limited remaining until at least June 2025.

    Lettings Update

    • Power House, Ashby Business Park, Ashby-de-la-Zouch: A successful asset management initiative by London & Scottish Property Asset Management on behalf of Regional REIT has seen Alstom Power Limited surrender their lease with a back to back letting to Brush Electrical Machines Limited on a new 10 year lease at an improved annual rent of £300,000 (£14.09/sq. ft.) representing an improvement of 8.4% in the previous rent and is 12.7% above the ERV of the asset as at June 2019.
    • Unit 130, Heathall Industrial Estate, Dumfries: Plastic Recycling Technology Limited have taken a 10 year lease of this industrial unit of 59,737 sq. ft. at a rent of £125,000 per annum. This lease allows for three yearly reviews with the tenant having the ability to break on the fifth anniversary.
    • Trident Retail Park, Westley Street, Birmingham: City Electrical Factors Limited have taken a 20 year lease of this industrial unit of 4,931 sq. ft. at a rent of £43,100 per annum (£8.74/sq. ft.).

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

    "We are delighted with the positive progress achieved during 2019, continuing our risk averse approach, whereby we have continued to exploit the huge potential of our assets and increase the number of tenants, properties and geographic spread and thereby increasing the diversity of our income and assets.

    Significantly, Regional REIT outperformed the FTSE EPRA NAREIT UK Index in 2019, with our core office and industrial portfolio increasing by 1.4% on a like for like basis.

    Our asset management initiatives and strong letting performance were maintained. We continued with our strategic acquisitions resulting in a 9.7% increase in the 2019 portfolio valuation. Excluding retail, which only represents 5.0% of our portfolio, our like for like valuation increases were strong, and are likely to increase still further, due to the uplift the markets have witnessed following the general election result.

    We expect industrial assets to continue to perform well and we also expect a substantial increase in enquiries during 2020/2021 for regional offices, given the positive supply/demand dynamics, attractive yields and positive rental growth story. We expect this to drive strong returns in this sector.

    Our portfolio of quality office and logistics assets in key economic centres of the UK outside of London, is ideally positioned to benefit from increasing interest and commitments in investment in the regions by the new Government, and we remain confident of securing further attractive investment opportunities.

    We look forward to updating our shareholders further as we continue our programme of value accretive asset management initiatives across our national portfolio."



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