Slide 1: Investor Presentation - Year to 31 December 2016
Investor Presentation - Year to 31 December 2016 March 2017 High dividend distribution UK REIT, offering an unrivalled exposure to the regional commercial property market with active management by an experienced Asset Manager
Slide 2: Highlights – Full Year 2016
Highlights – Full Year 2016 • Business performing well – delivering good income growth with H2 momentum • Occupier activity remained robust – investment market now showing signs of increasing activity • Repositioning the portfolio - completed £133.6 million of acquisitions; disposals of £44.9 millio
Slide 3: Delivering on our IPO Commitments
Delivering on our IPO Commitments At the IPO (November 2015) we made a number of commitments for the year ahead: Property assets increased c. 30%* Targeted acquisitions in 2016 amounted to £133.6m; Targeted acquisitions net initial yield c. 8.6% H2’16 management focus on Conygar deal (Feb’17) Proper
Slide 4: Active and Intensive Management of the Portfolio in 2016
Active and Intensive Management of the Portfolio in 2016 116 new lettings this year (69 since 30 June) New lettings of c. 728,382 sq. ft. When fully income producing provide rents of c. £5m pa Quality enhancement programme for assets Growing the revenue Capital expenditure of £9.1m net; to increase
Slide 5: Risk Limited by Scale and Diversification
Risk Limited by Scale and Diversification Diversified business base 123 properties, 941 units and 717 tenants Lease renewal managed by active asset management and large and diverse portfolio Office/Industrial mix; balancing the regions Increased Office/Industrial exposure to 92.7% (by value) (IPO, 8
Slide 6: Momentum of Rental Income
Momentum of Rental Income Year ending 31 December 2016 For period ending 31 December 2015* Gross rental income £43.0m £5.4m (56 days) Costs ratio 30.4% (H2'16: 29.3%) 39.3% (Adj. c. 26%**) Adjusted costs ratio (exc Performance Fee) 29.9% (H2'16: 28.2%) n/a Operating profit before gains/losses on pro
Slide 7: Financial Position Remains Strong
Financial Position Remains Strong As at 31 December 2016 As at 31 December 2015* Gross property asset value £502.4m £403.7m NAV (fully diluted) 106.3pps 107.7pps EPRA NAV (fully diluted) 106.9pps 107.8pps Bank borrowings** £220.1m £128.6m Cost of debt (inc hedging) 3.7% 4.5% Net Loan-to-value 40.6%
Slide 8: Delivering Returns to Shareholders
Delivering Returns to Shareholders Net Asset Value Bridge 2016 125.0 3.4 120.0 13.9 (2.9) 6% 45% (5.9) 0.2 40.6% 5% 4.8% 115.0 4.5% 40% (3.1) Change in fair value of 4% 3.7% investment properties 35% Pence per share 110.0 107.8 (6.3) 106.9 3% 105.0 (0.2) 30% 2% 26.4% 25.4% 100.0 25% 1% 100.0 95.0 0%
Slide 9: Diversified Property Portfolio
Diversified Property Portfolio Property - £502.4m gross investment properties Gross property assets WAULT to first break & Voids Valuation yields 100% 5 90% 12% 90% 4.6 29.4% 4.4 9.8% 80% 25.3% 24.7% 3.8 years exc Blythswood House (April 2016) 10% 9.5% 4 9.0% 70% 84.1% 3.6 85% 8.3% 83.9%* 83.8% 8% 7
Slide 10: £502.4m Property Portfolio as at 31 December 2016
£502.4m Property Portfolio as at 31 December 2016 Diversified office-led portfolio – unrivalled exposure to the UK regional property market (by value) - and broad base of business activity 0.1% 7.2% SECTOR SPLIT (by value) TENANTS BY SIC CODES (% of gross rent) Wholesale and retail 12.4% 13.7% Offic
Slide 11: Targeted Acquisitions Growth in 2016
Targeted Acquisitions Growth in 2016 • 2 major portfolio acquisitions of 17 properties (£117.5m) completed in March 2016 – Wing and Rainbow office/industrial portfolios • Total acquisitions of 20 properties for £133.6m. Recycling of capital from disposals of £44.9m net • Extensive asset management o
Slide 12: Organic Growth for RGL from UK Regional Property Portfolio
Organic Growth for RGL from UK Regional Property Portfolio Significant • Further opportunities remain to scale the business portfolio to • Group remains opportunistic and pro-active in its approach in the current environment embed; further • Will seek EpS accretion and NAV growth with acquisitions a
Slide 13: Prospective Acquisition of c. £129m of Commercial Properties
Prospective Acquisition of c. £129m of Commercial Properties Conditional ‘NAV-for-NAV’ acquisition for shares, complementary to the existing assets and which aligns well with the expertise and experience of the Asset Manager • 31 mixed-use property assets (1,280,980 sq. ft.); 153 units and 115 tenan
Slide 14: Outlook
Outlook • Yield differential between the regions and London remains above average; Regional continuing capital inflows to the regions commercial • Regional economic and business fundamentals remain positive – continued property; an limited supply of office and industrial properties attractive • Tena
Slide 15: Appendix 1: Debt Financing and Summary Financials
Appendix 1 Debt Financing and Summary Financials 15
Slide 16: Debt Profile and LTVs as at 31 December 2016
Debt Profile and LTVs as at 31 December 2016 Additional borrowing and refinancings substantially reduced average cost of debt Lender Original Outstanding Maturity Gross Annual Interest Rate Amortisation Hedging and Swaps:Notional Amounts/Rates*** Facility £'000 Debt £'000* Date LTV** Mandatory Santa
Slide 17: Financials - Group Income Statement
Financials - Group Income Statement 1 January 2016 to 31 December 2016 22 June 2015 to 31 December 2015* £'000 Rental income 42,994 5,361 Non recoverable property costs (4,866) (753) Net rental income 38,128 4,608 Administrative & other expenses (8,217) (1,353) Operating profit (loss) before gains/l
Slide 18: Financials - Group Balance Sheet
Financials - Group Balance Sheet As at 31 December 2016 As at 31 December 2015* As at 31 December 2016 As at 31 December 2015* £'000 Change £'000 Change Assets Liabilities Non-current Assets Current liabilities Investment properties 502,425 403,702 24.5% Bank and loan borrowings - current - 200 n/a
Slide 19: Financials - Cost Efficiency
Financials - Cost Efficiency Cost efficiency despite number and spread of properties and in-house management Regional REIT EPRA ratio is based on the reported results of the Group for the year ending 31 December 2016. For peers it is the last reported Full Year or, if later, Half Year. Total Costs i
Slide 20: Appendix 2: Time to Invest in Regional Property
Appendix 2 Time to Invest in Regional Property 20
Slide 21: Expecting Regional Property Returns to Outperform
Expecting Regional Property Returns to Outperform Average property total returns forecast for the whole UK market (including London)*: Offices 1.5% for 2017 2.5% for 2018 4.8% for 2019 Industrial 6.6% for 2017 6.1% for 2018 6.5% for 2019 Total returns forecast has improved, following the immediate a
Slide 22: Secondary Set to Outperform Prime
2) Secondary Set to Outperform Prime Yield spread narrows towards long-term average • The spread between prime and secondary commercial property yields has fallen from its historic highs of 2013-14 • Spread remains well above long-term average levels • Strong potential for high quality regional seco
Slide 23: Opportunity for Regional Offices
4) Opportunity for Regional Offices Demand increasing – Supply limited Availability of office by grade (million sq. ft.) • Uncertainty surrounding the EU referendum resulted in lower levels of take-up ahead of the referendum and directly after the UK voted to leave. An increase in the level of activ
Slide 24: Opportunity for Regional Offices (continued)
4) Opportunity for Regional Offices (continued) UK office rental growth (Q4 2016) – The JLL Property Clock1 Rental growth accelerating in regional markets • Prime rental growth across the core 8 regional office markets increased by an average of 3.3% year-on-year in 2016. JLL indicates that a slowdo
Slide 25: Opportunity for Regional Industrial
5) Opportunity for Regional Industrial Demand increasing – Supply limited 2016 take-up by sector (%) • The industrial sector was robust in most UK regions throughout 2016, with particularly strong occupier demand in Midlands, London and the South East • Industrial market experienced the highest rent
Slide 26: Appendix 3: Regional REIT UK Property Portfolio
Appendix 3 Regional REIT UK Property Portfolio 26
Slide 27: High Yielding Portfolio set for UK Regional Market Recovery
High Yielding Portfolio set for UK Regional Market Recovery Portfolio details at 31 December 2016 Gross WAULT to Net rental Capital Valuation % by Sq. ft. rental Average ERV Yield (%) Properties Occupancy % first break income rate valuation income rent £psf (yrs) £m £m (mil) £m £m £psf Net initial E
Slide 28: Top 15 Investments (market value) as at 31 December 2016
Top 15 Investments (market value) as at 31 December 2016 Market WAULT % of Lettable Let by Annualised value to first portfolio area area gross Property Sector Anchor tenants (£m) break (Sq Ft) (%) rent (£m) (years) Tay House, Glasgow Office Barclays Bank Plc, Glasgow University 32.3 6.4% 156,933 87.
Slide 29: Stable Income Profile - Lease Expiries as at 31 December 2016
Stable Income Profile - Lease Expiries as at 31 December 2016 A large number of tenants offers income diversification and security of lease renewals • Number of units: 941 Lease Expiry Income Profile • Number of tenants: 717 9.7% 15.2% • Contracted rent roll: £44.0m 0-1 years • WAULT of 5.2 years 1-
Slide 30: Top 15 Tenants (share of rental income) as at 31 December 2016
Top 15 Tenants (share of rental income) as at 31 December 2016 Stable income profile - income security core to management aims Lettable % of WAULT area Gross Tenant Property Sector to first rental break (Sq Ft) income Barclays Bank Plc Tay House, Glasgow Financial and insurance activities 4.9 78,044
Slide 31: Case Study Update - Portfolio Acquisition Q1 2016: Wing Portfolio
Case Study Update - Portfolio Acquisition Q1 2016: Wing Portfolio Oakland House, Manchester • Front of house works undertaken to improve immediate presentation to include installation of coffee facility/ improvements to washroom facilities/relining all external road areas/creation of external garden
Slide 32: Case Study - Portfolio Acquisition Q1 2016: Rainbow Portfolio
Case Study - Portfolio Acquisition Q1 2016: Rainbow Portfolio Aylesbury • Building 2 – concurrent re-letting of first and second floors to Equitable Life completed Nov 2016 for 10-years subject to tenant break options at £426,360 pa following expiry of the Lloyds Banking Group lease • Building 2 – c
Slide 33: Case Study – Offices: St James Court, Bristol
Case Study – Offices: St James Court, Bristol Lease termination with re-let and refurbishment, enhancing the capital value Investment Overview • Two out-of-town office buildings situated in the popular Almondsbury area to the north of Bristol City Centre • Building A – 30,000 sq. ft.; Building B – 1
Slide 34: Case Study – Offices: Hampshire House, Hampshire Court, Eastleigh
Case Study – Offices: Hampshire House, Hampshire Court, Eastleigh Lease termination with re-let and refurbishment, enhancing the capital value Investment Overview • 42,810 sq. ft. out-of-town modern office building • Let to Aviva until December 2016 and to Royal Bank of Scotland to December 2021 wit
Slide 35: 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 36: Case Study – Office: Festival Court, Brand Street, Glasgow
Case Study – Office: Festival Court, Brand Street, Glasgow Regear of leases and maintaining headline rent Investment Overview • Three modern pavilion offices within secure “campus” environment located to the south of Glasgow City Centre • Let to the Home Office on individual leases with phased expir
Slide 37: 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 38: Case Study – Industrial: Wardpark Industrial Estate, Cumbernauld
Case Study – Industrial: Wardpark Industrial Estate, Cumbernauld Lettings and regears. Retention of asset based on business development prospects for the site Investment Overview • Strategically located industrial estate with direct access to Central Scotland's motorway triangle • The most recognise
Slide 39: Case Study – Retail: Llansamlet Retail Park, Swansea
Case Study – Retail: Llansamlet Retail Park, Swansea Retention of asset based on business development prospects for the site Investment Overview • Acquired in August 2014 • Six unit 71,615 sq. ft. retail park with bulky goods only consent. Located on southern edge of the city adjacent to the M4 and
Slide 40: Appendix 4: Introduction to Regional REIT & External Management
Appendix 4 Introduction to Regional REIT & External Management 40
Slide 41: Introduction to Regional REIT Limited
Introduction 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 adva
Slide 42: 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 43: Asset Manager, Investment Criteria and Management Approach
Asset Manager, Investment Criteria and 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
Slide 44: 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
Slide 45: Regional REIT Limited Contact Information
Regional REIT Limited Contact Information Website: www.regionalreit.com Investor Relations: James S Johnson +44 (0) 20 7845 6107/+44 (0) 7342 994 390 jjohnson@regionalreit.com or investor@regionalreit.com 45