Regional Reit Ltd. · LSE:RGL
Regional Reit — H1 2022 Earnings Presentation
55 slides from Regional Reit's earnings presentation, September 2022
Slide 1: Investor Presentation – Half Year to 30 June 2022
Investor Presentation – Half Year to 30 June 2022 Delivering a reliable high dividend 1
Slide 2: Introduction
Stephen Inglis Chief Executive Officer Introduction • Overview and Portfolio a Derek McDonald Chief Operating Officer • Appendix Simon Marriott Investment Director Offices held at London and Scottish Property Investment Management, Asset Manager to Regional REIT 2
Slide 3: H1 22 Summary – Shares Yielding 9.5%
H1 22 Summary – Shares Yielding 9.5% Performance Total Shareholder Return FTSE EPRA NAREIT UK Index • Since IPO* +18.2% -1.4% • Annualised +2.6% -0.2% Total Accounting Return • Since IPO +44.4% • Annualised +5.7% Dividend • Dividend 3.3p (Jun 21: 3.2p) Targeting a FY 2022 6.6p dividend Prosp
Slide 4: Diversified portfolio – delivering income
Office Yields Diversified portfolio – delivering income 14% EPRA Net Initial Yield 12% Reversionary Yield Proactive property asset management 10% 8% 9.4% • £74.7m of assets acquired (before costs) Focus on regional properties outside 6% – NIY 8.4% M25 4% 5.6% 2% • £71.4m of disposals (net of costs
Slide 5: £918.2m Property Portfolio
£918.2m Property Portfolio (H1 21 £729.1m) IPO – November 2015 30 June 2021 30 June 2022 Sector Split (% by value) 1.4% 5.0% 11.3% 3.1% 1.4% Office 3.5% Retail 25.3% Industrial 4.1% Other £386.1m £729.1m £918.2m 58.4% 11.3% 83.2% 92.0% Regional Split (% by value) 4.4% 4.8% 3.9% 12.7% South East 8.2%
Slide 6: Blue Chip Tenants
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Slide 7: Increased de-risking through diversification – Occupier Base
Increased de-risking through diversification – Occupier Base • Diversified income - large tenant mix across £918.2m of assets • Spread of assets – 159 properties 13.1% 14.5% • 1,086 tenants across 1,517 units 3.0% • Broad spread of tenant businesses 3.2% • A broad geographic spread 12.4% 3.9% Occupi
Slide 8: Driving Value in Action – Squarestone Update
Driving Value in Action – Squarestone Update Portfolio at 31 properties located entirely outside of the M25 Acquisition • Acquisition price of £236.0m • Capital value of £133.54/ sq. ft. • Rental Income of £21.9m Eagle Court Birmingham Newburn & Gateway House, Newcastle • 208 tenants • EPRA Occupanc
Slide 9: Disposals
Regional (< REIT THE OFFICE SPECIALISTS Disposals regionalreit.com 9
Slide 10: Summary – Disposals during H1 2022
Summary – Disposals during H1 2022 5.7% • Disposals totalled £75.5m (before costs) reflecting an uplift Sector Split 26.2% against valuation (Dec 21) of 0.9% Office Industrial • Reflecting an average net initial yield of 5.5% (6.4% Retail excluding vacant assets). • 15 assets and 1 part sales in tot
Slide 11: Howdens, Renfrew
Howdens, Renfrew Acquired in November 2020 for £7.05m The 204,414 sq. ft. industrial, warehouse is fully let to James Howden & Company Ltd Over the period of ownership of this property, the asset manager completed an early regear on the tenant’s 2025 lease expiry. The existing tenant extended the te
Slide 12: Newport Retail Park, Newport
Newport Retail Park, Newport Acquired in August 2021 as part of a major portfolio of 31 assets from Squarestone LLP The 55,770 sq. ft. multi-let industrial, retail warehouse was purchased for £5.45m Two fully let retail units that have separate customer and service access. The site is adjacent to a
Slide 13: Acquisitions
Regional (< REIT THE OFFICE SPECIALISTS Acquisitions regionalreit.com 13
Slide 14: Acquisition of £74.7m of Property Assets
Acquisition of £74.7m of Property Assets Summary Regional Split (% by acquisition price) • Diversified income – 97 tenants across 6 office properties 26.5% 38.0% • Geographic spread by rental income: South East (39.2%), North East (33.7%), Midlands (27.2%) South East North East • EPRA occupancy (by
Slide 15: Orbis 1, 2 & 3, Pride Park, Derby
Orbis 1, 2 & 3, Pride Park, Derby Acquisition of office property for £19.8m, reflecting a net initial yield of 8.6% Purchased in May 2022, the property is located in the heart of Pride Park, which is a substantial 180 acre business park, and is Derby’s premier business location. The site extends to
Slide 16: Portfolio Acquisition - Accretive 8.0% Yield
Portfolio Acquisition - Accretive 8.0% Yield Three Yorkshire office assets were purchased for £26.5m in June 2022 1 North Bank, Sheffield (totalling 58,893 sq. ft.) o Five floors of recently refurbished Grade A office space; BREEAM 'Very Good'; EPC C with a clear plan to enhance the ratings further
Slide 17: Linford Wood Business Park, Milton Keynes
Linford Wood Business Park, Milton Keynes Acquisition of office property for £15.9m, reflecting a net initial yield of 8.9% The acquisition price is underpinned by increasing residential and industrial land values Purchased in May 2022, the property is a freehold 5- building business park comprising
Slide 18: Origin 1 & 2, Crawley
Origin 1 & 2, Crawley Acquisition of office property for £12.5m, reflecting a net initial yield of 8.4% The freehold asset is prominently located on a corner site in Crawley Town Centre, a strong south east commercial centre close to London Gatwick Airport The property is situated on the High Street
Slide 19: Debt Facilities – Defensive Debt Profile
Debt Facilities – Defensive Debt Profile Original Outstanding Gross Loan Annual Swaps\Caps: Swap Rates Maturity Lender Facility Debt* to Value** Interest Rate Notional Blend Date £'000 £'000 % % £’000 % Royal Bank of Scotland, Over 3mth £ 73,000 0.97 Bank of Scotland & 128,000 127,445 Aug-26 43.7 2.
Slide 20: ESG – Focused on delivering sustainability
ESG – Focused on delivering sustainability Environment • On target to achieve EPC B rating by 2030 • EPC ratings progressing Rating 30 December 2021 30 June 2022 Movement A-B 9.9% 13.2% +330bps C 33.7% 33.8% +10bps D-E 50.4% 47.7% (270)bps Other 5.9% 5.2% (70)bps Table may not sum due to rounding. •
Slide 21: Summary & Outlook
Regional (~ REIT THE OFFICE SPECIALISTS Summary & Outlook regionalreit.com 21
Slide 22: The future of the office – What we are seeing
The future of the office – What we are seeing Is this the end for working from • Majority of tenants back in the office home? • 98.6% of our office tenants (by rental income) have retuned either on Daily Mail (30 August 2022) a full-time or hybrid basis • Only 13 out of 1,004 office tenants have not
Slide 23: The future of the office – What we are seeing
Worked from home only (not travelled to work) The future of the office – What we are seeing 40% 35% 30% • No substitute for in-person collaboration 25% • Culture, community, creativity, value - add productivity 20% • Collaborative working 15% • Training 10% • Talk of recession will draw people back
Slide 24: Outlook – Positioned for long term income and value
Outlook – Positioned for long term income and value Quarterly income • Increased quarterly dividend 1.65p (1.60p) stream to our shareholders • Continues to be one of the highest yielding REITS • Committed to paying regular quarterly dividends to our shareholders Underpinned by • Rent Collection stro
Slide 25: Appendix
Appendix • Portfolio Activity – Asset Management Initiatives (CAPEX) • Financial Information • Property Portfolio • Performance • Glossary 25
Slide 26: Asset Management Initiatives (CAPEX)
Asset Management Initiatives (CAPEX) 26
Slide 27: 300 Bath Street, Glasgow
300 Bath Street, Glasgow Before After Acquired in 2013, 300 Bath Street is the largest single asset (by value) in the portfolio at £27.6m (3.0% of the portfolio) Landmark Grade A office building in Glasgow City Centre offering column free floor plates up to 30,000 sq. ft. At acquisition, the buildin
Slide 28: 300 Bath Street, Glasgow
300 Bath Street, Glasgow Works on the proposed refurbishment commenced in February 2022 and are forecast to complete in January 2023 (basement works in March 2023). The works will present an opportunity for comprehensive repositioning of the asset in a market with limited supply of high-quality larg
Slide 29: 30-34 Hounds Gate, Nottingham
30-34 Hounds Gate, Nottingham Before After Acquired in May 2016. 30/34 Hounds Gate comprises an attractive converted former Victorian mill with original frontage. The property has been extended at the rear under a part pitched and part flat roof with glazed curtain wall side elevations to provide la
Slide 30: Financial Information
Financial Information Appendix 30
Slide 31: Delivering on Strategy
Delivering on Strategy Dec 2021 Jun 2022 Change Investment Property £906.1m £918.2m +£12.1m Acquisitions before costs £236.0m £74.7m (£161.3m) Acquisition Net Initial Yield 7.8% 8.4% 60bpps Portfolio – Active management Disposals net of costs £76.9m £71.4m (£5.5m) Disposal Net Initial Yield 6.5% 5.5
Slide 32: Financial – Statement of Comprehensive Income
Financial – Statement of Comprehensive Income Half year end 2021 Half year end 2022 Change (£’000) (£’000) (£’000) Rental and property income 36,335 45,211 8,876 Property costs (10,966) (16,267) (5,301) Net rental and property income 25,369 28,944 3,575 Administrative & other expenses (5,477) (5,568
Slide 33: Financial – Statement of Financial Position
Financial – Statement of Financial Position Year-end Half year-end Half year-end Year-end Dec 2021 Dec 2021 Jun 2022 Change Jun 2022 Change (£’000 (£’000) (£’000) (£’000) Assets Non-current Assets Liabilities Current liabilities Current liabilities Investment properties 906,149 918,200 12,051 (58,42
Slide 34: Cash Flow – Ample Liquidity
Cash Flow – Ample Liquidity Table may not sum due to rounding. 34 34
Slide 35: Income and Costs
Income and Costs Half year ending 30 June 2021 Half year ending 30 June 2022 Change* Net rental and property income £29.5m £37.1m +£7.6m Operating profit before gains/losses on property assets/other investments £19.9m £23.4m +£3.5m IFRS EPS 4.2p 5.5p +1.3p EPRA EPS 3.0p 2.9p (0.1p) EPRA cost ratio (
Slide 36: Financial Position Remains Strong, Flexible and Defensive
Financial Position Remains Strong, Flexible and Defensive Year ending 31 December 2021 Half year ending 30 June 2022 Change Investment Property £906.1m £918.2m +£12.1m IFRS NAV 97.4p 99.5p +2.1p EPRA NTA* 97.2p 97.1p (0.1p) Borrowings (incl. retail eligible bond) £439.9m £442.9m +£3.0m Weighted aver
Slide 37: Positioned to Unlock Shareholder Value over the Long Term
• EPRA NTA*: £500.5 (97.1p fully diluted) Positioned to Unlock Shareholder Value over the Long Term (31 Dec 21: £501.4m, 97.2p fully diluted) • IFRS: £513.5m (99.5p fully diluted) (31 Dec 21: £502.4m, 97.4p fully diluted) *EPRA Net Reinstatement Value(NRV): 30 June 2022 97.1p (31 December 2021: 97.2
Slide 38: Property Portfolio
Regional (< REIT THE OFFICE SPECIALISTS Property Portfolio
Slide 39: Overview – Specialised Platform and Geographically Diverse Portfolio
Overview – Specialised Platform and Geographically Diverse Portfolio UK property locations Portfolio details as at 30 June 2022 as at 30 June 2022 Valuation Capital Values Sector Properties % by valuation (£m) (£psf) Office 133 844.8 92.0 142.92 Industrial 4 28.5 3.1 67.99 Retail 19 32.4 3.5 96.15 O
Slide 40: Regional REIT – Specialised Office Platform
Regional REIT – Specialised Office Platform Specialised Asset Management Team 76 Staff (fully recruited)* Expert • Hugely experienced senior Proven operational platform Management management team, managing Unique vertically integrated Team assets over the past 30 years, manager including previ
Slide 41: Diversified Income Stream
Diversified Income Stream Portfolio details at 30 June 2022 Gross % by Occupancy WAULT to Average Sector Properties Valuation Sq. ft. rental ERV Capital rate Yield (%) valuation (EPRA) first break rent income (£m) (mil) (%) (yrs) (£m) (£psf) (£m) (£psf) Net initial Equivalent Reversionary Office 133
Slide 42: Top 15 Occupiers (Share of Rental Income)
Top 15 Occupiers (Share of Rental Income) WAULT % of Lettable Annualised to first Gross Tenant Property Sector area gross rent break rental (Sq Ft) (£m) (years) income Virgin Media Ltd Eagle Court, Coventry Road, Birmingham Information and communication 1.5 107,830 1.7 2.4 Southgate Park, Peterborou
Slide 43: Top 15 Investments (Market Value)
Top 15 Investments (Market Value) Market EPRA Annualised % of Lettable area WAULT to value % of Occupancy gross rent gross Property Sector Anchor tenants first break portfolio rental (£m) (Sq Ft) (%) (£m) (years) income University of Glasgow, Glasgow Tay House Centre 300 Bath Street, Glasgow Office
Slide 44: Geographically Diversified Office Led Portfolio Focused on the UK Regions
Geographically Diversified Office Led Portfolio Focused on the UK Regions Gross office assets by value - %* WAULT - years Average Rent & Capital rate - £psf 100% 5 £16 £160 £13.78 £14.07 £14.28 £142.92 90% £14 £134.77 £140 £132.23 4.7 80% 4 4.5 4.5 £12 £120 70% £10 £100 60% 3 50% 2.9 £8 £80 89.8% 92
Slide 45: HY 2022 Portfolio Highlights
HY 2022 Portfolio Highlights Major lettings and renewals successfully secured across the regions The Coach Works, Leeds 5,330 sq. ft. of space has been let to Abstract 300 Bath Street, Glasgow Tech Ltd for 6 years with the option to break in The Firm of Fairhurst Consulting Structural and 2026 at a
Slide 46: New Lettings by Industry Type (% of Gross Rent)
New Lettings by Industry Type (% of Gross Rent) Registered Society 19.3% Information and communication 29.6% 14.7% Professional, scientific and technical activities 14.5% 14.2% Manufacturing 10.0% Not specified 8.9% Human health and social work activities 8.8% Construction 2.1% 6.8% 14.0% H1 2021 H1
Slide 47: Diverse Customer Base
Diverse Customer Base Tenant by SIC Code as at June 2020, June 2021 and June 2022 (% of gross rent) RR Portfolio H1 2020 RR Portfolio H1 2021 RR Portfolio H1 2022 16% 14% 12% 10% 8% 6% 4% 2% 0% Professional, Information and Administrative Financial and Wholesale and Public sector Electricity, gas, M
Slide 48: Rent Collections – Trending back to Normality
Rent Collections – Trending back to Normality Rent Collected vs invoiced (%) 2020 2021 2022 Total (%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1† Q2† Rent Paid 99.5 98.3 98.3 98.5 98.5 98.7 98.2 98.3 98.8 98.6 98.6 † Q1 2022 – 98.8% Actual rent collected; monthly rents 0.0%, deals agreed 0.0% as at 08.09.2022 † Q2
Slide 49: Investment Property Activity – Proactive Strategy
Investment Property Activity – Proactive Strategy Table may not sum due to rounding. 49 49
Slide 50: Performance
Regional (< REIT THE OFFICE SPECIALISTS Performance regionalreit.com 50
Slide 51: Dividends and Performance
Dividends and Performance Source: Thomson Reuters 18 March 2022 51 51
Slide 52: Consensus Dividend Yield
Consensus Dividend Yield Consensus Consensus dividend yield dividend yield (share price) (NAV) Regional REIT Ltd 7.56% 6.68% Real Estate Investors PLC 8.43% 5.66% Newriver Reit PLC 7.13% 4.35% AEW UK REIT PLC 6.78% 7.00% UK Commercial Property REIT Ltd 6.64% 5.10% Ediston Property Investment Company
Slide 53: Cost Focused
Cost Focused EPRA cost ratio incl. direct costs EPRA cost ratio excl. direct costs Newriver REIT plc 41% Newriver REIT plc 39% McKay Securities plc 38% McKay Securities plc 30% AEW UK REIT plc 34% Warehouse REIT 24% Regional REIT Ltd 31% Picton Property Income Ltd 20% Warehouse REIT 27% Custodian RE
Slide 54: Glossary – EPRA
Glossary – EPRA EPRA has developed and defined the following performance measures to give transparency, comparability and relevance of financial reporting across entities which may use different accounting standards. EPRA Performance Measure Definition 31 Dec 2021 30 Jun 2022 £501,400,000 £500,523,0
Slide 55: Disclaimer
Disclaimer This document (“Document”) (references to which shall be deemed to include any information which has been This Document may include statements which involve known and unknown risks, uncertainties and other made or may be supplied orally in connection with this Document or in connection wi