Slide 1: Investor Presentation - Year to 31 December 2017
Investor Presentation - Year to 31 December 2017 March 2018 High dividend distribution UK REIT, offering exposure to the regional commercial property market with active management by an experienced Asset Manager www.regionalreit.com
Slide 2: Agenda and Presentation Team
Agenda and Presentation Team Stephen Inglis Chief Executive Officer • Headlines London and Scottish Investments, Asset Manager to Regional REIT • Financials and Portfolio • Market Overview and Outlook Derek McDonald Managing Director London and Scottish Investments, Asset Manager to Regional REIT 2
Slide 3: Headlines
Rilo Headlines
Slide 4: Strong momentum in achieving key objectives
Strong momentum in achieving key objectives • Strong returns with a progressive dividend policy – DPS for 2017: 7.85p, up 3% from 2016 and total returns to shareholders since IPO of 19.9%. • Property Portfolio up 47% to £737.3m as REIT continue to build scale and deliver on commitments made at IPO •
Slide 5: Financials and Portfolio
Rilo Financials and Portfolio
Slide 6: Delivery on our Strategy
Delivery on our Strategy Dec 2016 Dec 2017 Change* Portfolio change - Investment Property £502.4m £737.3m £234.9m targeted and opportunistic Acquisitions before costs £133.6m £228.1m £94.5m acquisitions Acquisition Net Initial Yield 8.6% 7.9% (70bps) Disposals net £44.9m £16.9m (£28.0m) Disposal Net
Slide 7: Diversified Property Portfolio
Diversified Property Portfolio Property - £737.3m gross investment properties Gross property assets by value (%)* WAULT to first break (years) & Voids (%) Valuation yields (%)* 100% 4 90% 10% 9.5% 3.6 9.2% 3.5 9% 90% 4 88% 80% 23.3% 86% 8% 29.4% 3 70% 85.0% 84% 7% 6.7% 6.5% 3 82% 60% 82.7% 6% 50% 2
Slide 8: £737.3m Property Portfolio as at 31 December 2017
£737.3m Property Portfolio as at 31 December 2017 Diversified office-led portfolio – unrivalled exposure to the UK regional property market (% by value) - and broad base of business activity 8.1% 1.3% SECTOR SPLIT (% by value) TENANTS BY SIC CODES (% of gross rent) (7.2%) (0.1%) 14.2% 13.8% Wholesal
Slide 9: Momentum of Rental Income
Momentum of Rental Income Year ending 31 December 2016 Year ending 31 December 2017 Rental income £43.0m £52.3m EPRA cost ratio 29.6% 29.7% Adj. EPRA costs ratio (excl. Performance Fee) 29.0% 26.6% Operating profit before gains/losses on property £29.9m £36.4m assets/other investments EPS (fully dil
Slide 10: Financial Position Remains Strong
Financial Position Remains Strong As at 31 December 2016 As at 31 December 2017 Gross property asset value £502.4m £737.3m NAV (fully diluted) 106.3pps 105.1pps EPRA NAV (fully diluted) 106.9pps 105.9pps Bank borrowings (incl. zero dividend preference shares)* £220.1m £376.5m Weighted average cost o
Slide 11: Debt - LTV Management
Debt - LTV Management 800 48% 47.3% 737.3 700 640.4 46% 600 45.0% 502.4 44% 500 £ millions 400 42% 300 40.6% 40% 200 220.1 335.0 376.5 38% 100 44.6 32.2 16.2 0 36% Dec-16 Jun-17 Dec-17 Cash Borrowings Investment Properties Net LTV (rhs) 11
Slide 12: Debt - Profile and LTVs as at 31 December 2017
Debt - Profile and LTVs as at 31 December 2017 Borrowing rationalised, duration extended, hedging costs reduced, coupled with flexibility and increased headroom Lender Original Outstanding Maturity Gross Loan Annual Interest Rate Amortisation Swaps\Caps: Swap Rates Facility Debt* Date to Value** Not
Slide 13: Market Overview and Outlook
Market Overview and Outlook 13
Slide 14: Opportunity for Regional Offices
1) Opportunity for Regional Offices Availability of office by grade (sq. ft.) Demand increasing – Supply limited • Savills estimates that take-up of office space across ten regional office markets reached 10 million sq. ft. in 2017 • Office supply in regional markets remains low, with occupier activ
Slide 15: Opportunity for Regional Offices (continued)
2) Opportunity for Regional Offices (continued) Rental growth accelerating in regional markets • Research from Savills indicates that prime rental growth in regional markets averaged 3.3% in 2017 • Rental growth in regional office markets is set to continue, with Savills forecasting further rental g
Slide 16: Opportunity for Regional Industrial
3) Opportunity for Regional Industrial Growing demand and limited supply for multi-sized, multi-let industrial sites 2017 vs. 2016 • Take-up in 2017 totalled 26.6 million sq. ft. in 2017, with 6.8 million sq. ft. taken up in the final quarter of 2017 (Cushman & Wakefield) • Industrial market experie
Slide 17: Outlook
Outlook • Investment demand for regional assets remains robust Regional commercial • Regional economic and business fundamentals remain positive – continued limited supply of property - an attractive office and industrial properties with continuing demand opportunity • Our core markets continue to e
Slide 18: Appendix
Appendix • Financial and Debt Review • Property Portfolio • Overview of Regional REIT and External Management 18
Slide 19: Financial and Debt Review
RRO Financial and Debt Review 19
Slide 20: Financial - Statement of Comprehensive Income
Financial - Statement of Comprehensive Income Year ended 2016 (£’000) Year ended 2017 (£’000) Change* Rental Income 42,994 52,349 9,355 Non-recoverable property costs (4,866) (6,502) (1,636) Net rental income 38,128 45,847 7,719 Administrative & other expenses (8,217) (9,429) (1,212) Operating profi
Slide 21: Financial - Statement of Financial Position
Financial - Statement of Financial Position Year- end 2016 Year-end 2017 Year-end 2016 Year-end 2017 Change* Change* (£’000) (£’000) (£’000) (£’000) Assets Non-current Assets Liabilities Current liabilities Investment properties 502,425 737,330 234,905 Bank and loan borrowings – current** - (400) (4
Slide 22: Delivering Returns to Shareholders
Delivering Returns to Shareholders EPRA Net Asset Value - diluted Bridge 2017 • EPRA : £395.7 (105.9pps fully diluted) • (31 Dec’16: £293.9m, 106.9pps fully diluted) 125.0 • IFRS: £392.9m (105.1pps fully diluted) 5.2 (31 Dec’16: £291.7m, 106.3pps fully diluted) 120.0 12.3 0.3 115.0 (3.6) (2.1) Chang
Slide 23: Investment Property Activity
Investment Property Activity 23
Slide 24: Property Portfolio
Rilo Property Portfolio
Slide 25: High Yielding Portfolio set for UK Regional Market Recovery
High Yielding Portfolio set for UK Regional Market Recovery Portfolio details at 31 December 2017 Properties Valuation % by Sq. ft. Occupancy (by Occupancy (by WAULT to Gross Net rental Average ERV Capital valuation value) area) first break rental income rent £psf rate Yield (%) income £m (mil) (%)
Slide 26: Top 15 Investments (market value) as at 31 December 2017
Top 15 Investments (market value) as at 31 December 2017 Market % of Lettable Let by Let by rental Annualised WAULT to Property Sector Anchor tenants value portfolio area area value gross rent first break (£m) (Sq Ft) (%) (%) (£m) (years) Tay House, Bath Street Office Barclays Bank Plc, University o
Slide 27: Stable Income Profile - Lease Expiries
Stable Income Profile - Lease Expiries as at 31 December 2017 A large number of tenants offers income diversification and security of lease renewals Lease Expiry Income Profile • Number of units: 1,368 10.2% 14.1% • Number of tenants: 1,026 0-1 years • Contracted rent roll: £61.9m 1-3 years • WAULT
Slide 28: Top 15 Tenants (share of rental income)
Top 15 Tenants (share of rental income) as at 31 December 2017 Stable income profile - income security core to management aims % of Gross WAULT to Lettable Tenant Property Sector rental first break area income (Years) (Sq Ft) Barclays Bank Plc Tay House, Glasgow Financial and insurance activities 3.
Slide 29: Case Study Update – Mixed Use: Wing Portfolio
Case Study Update – Mixed Use: Wing Portfolio Arena Point, Leeds • Marketing campaign launched with new name (formerly Tower North Central) and branding. Planning consent for high-level illuminated signage received and installation completed • Design, specification and tender completed and in respec
Slide 30: Case Study – Mixed Use: Rainbow Portfolio
Case Study – Mixed Use: Rainbow Portfolio Aylesbury • Building 2 – concurrent re-letting of first and second floors to Equitable Life completed November 2016 for 10-years subject to tenant break options at £426,360 pa following expiry of the Lloyds Banking Group lease • Building 2 – coffee shop inst
Slide 31: Case Study – Offices: St James House, Bath
Case Study – Offices: St James House, Bath Lease surrender with re-letting and refurbishment of vacant space and active management of tenants providing enhancement to the capital value Investment Overview • Modern four story office building located to the south of Bath and within walking distance of
Slide 32: Case Study – Office: Lonsdale House, Birmingham
Case Study – Office: Lonsdale House, Birmingham Sale of asset in advance of lease event Investment Overview • Acquired February 2015 as part of Garnet Portfolio • Five storey city centre office extending to 29,955 sq. ft. • Let to Citibase plc as serviced offices until December 2018 at an annual ren
Slide 33: Case Study – Office: Aspect Court, Sheffield
Case Study – Office: Aspect Court, Sheffield Early re-letting of vacated floors Investment Overview • Acquired May 2016 • Well located, City Centre office investment fully let to Sheffield Hallam University and SDL Plc on acquisition extending to 56,983 sq. ft. with 37 on site car parking spaces and
Slide 34: Case Study – Office: Integration House, Fleet
Case Study – Office: Integration House, Fleet Letting to undertenant following head lease expiry Investment Overview • Acquired March 2018 as part of Conygar Portfolio • Modern headquarters office facility arranged over ground and two upper floors extending to 11,679 sq. ft. • Let to Gleeson Homes (
Slide 35: Case Study – Industrial: Manor Road, Erith
Case Study – Industrial: Manor Road, Erith Refurbishment of vacant units and re-letting into strong market at significantly improved rental tone Investment Overview • Multi-let industrial estate comprising of four units, 15 miles to the south-east of London • Three units vacant on acquisition by Reg
Slide 36: Case Study – Industrial Warehouse: The Point, Glasgow
Case Study – Industrial Warehouse: The Point, Glasgow Income improvement by active asset management Investment Overview • Multi let trade counter investment located to north of Glasgow City Centre extending to 159,190 sq. ft. providing 8 units ranging from 5,319 sq. ft. to 88,150 sq. ft. • Tenants i
Slide 37: Case Study – Industrial: Thames Trading Estate, Irlam
Case Study – Industrial: Thames Trading Estate, Irlam Successful completion of asset management plan Investment Overview • Industrial site acquired with the “Empire” portfolio, August 2014 • At acquisition the Estate had occupancy (by area) of 54% and a net rental income of only £76,350 pa, with 11
Slide 38: Overview of Regional REIT and External Management
Overview of Regional REIT and External Management 38
Slide 39: Timeline
oy. REGIONAL Timeline R REIT February December Sale of £12m Churchill End fune 27 December A < acquisition of hte sont sees eses Plaza, Basingstoke Gros investrent Announced completion i peels and industrial unit property ‘properties valued at ‘ofacquisition of two portfolio (completed March 2016) M
Slide 40: Overview to Regional REIT Limited
Overview to Regional REIT Limited • Listed in November 2015; initial portfolio £386m - 128 properties, 512 tenants and 713 units • Combination of 2 commercial property investment funds • Joint venture between London & Scottish Investments and Toscafund Asset Management • Strategy is to take advantag
Slide 41: Management Contract
Management Contract Term Initial period: Fixed for 5-years with 12-month notice period (ie, notice period will run from end of year 5 for 12 months) Thereafter: 3-years with 12-month minimum notice period (ie, notice has to be given before the end of year 2) Management Fees 1.1% of EPRA NAV up to £5
Slide 42: Asset Manager, Investment Criteria & Management Approach
Asset Manager, Investment Criteria & Management Approach Highly experienced management with strict investment criteria and a hands-on approach London & Scottish Investments – Asset Manager • A long established property investment management company • Senior management collectively have 150+ years of
Slide 43: Disclaimer
Disclaimer This document (“Document”) (references to which shall be deemed to include any information which has been made or may be supplied orally in connection with this Document or in connection with any further enquiries) has been prepared by and is the sole responsibility of Toscafund Asset Man