Regional Reit Ltd. · LSE:RGL
Regional Reit — FY2018 Earnings Presentation
36 slides from Regional Reit's earnings presentation, 2019
Slide 1: Investor Presentation Annual Results 2018
Investor Presentation Annual Results 2018 regionalreit.com Record Total Returns Achieved
Slide 2: Introduction
Introduction Stephen Inglis Chief Executive Officer Introduction Market Overview and Outlook Derek McDonald Managing Director Portfolio Financial Information Simon Marriott Investment Director regionalreit.com Offices held at London and Scottish Investments, Asset Manager to Regional REIT
Slide 3: Financial Highlights – 2018 another good year for Regional REIT
Financial Highlights – 2018 another good year for Regional REIT Total EPRA accounting return Exceeding target of 10% pa • 2018 16.6% • Since IPO 37.5% • Annualised 10.6% EPRA NAV +9% to £430.5m Asset management initiatives continuing to deliver • Revaluation increases of £23.9m Newstead Court, Notti
Slide 4: Portfolio Highlights – Proactive property asset management achieving outperformance
Portfolio Highlights – Proactive property asset management achieving outperformance Sold 30 properties (plus 9 part sales) for £149.3m (after costs) at a weighted average net initial yield of c.5.7% Bought 16 properties for £73.3m (before costs) with a weighted average net yield of c.8.7% Gains £47m
Slide 5: Delivering on our Strategy – exceeding our objectives
Delivering on our Strategy – exceeding our objectives Dec 2017 Dec 2018 Change Portfolio Continuous Management Investment Property £737.3m £718.4m (£18.9m) Targeted and opportunistic acquisitions; disposals when asset Acquisitions before costs £228.1m £73.3m (£154.8m) management initiatives achieved
Slide 6: Regional Offices
Regional Offices Rental Value Growth (vs previous 12 months) Outperformance of regional offices 12% 10% • Comprises 76.1% by value of portfolio 8% 6% • CBRE research – highlights 2018 regional 4% offices outperformed: 2.2% - Regional office returns of 11.5% 2% - Central London office returns of 5.3%
Slide 7: Regional Industrial
Regional Industrial Occupier Demand Strengthens in the UK Industrial Market UK industrial & logistics take-up (million sq. ft.) 40.0 • Comprises 15.5% by value of portfolio 35.0 • Cushman & Wakefield - take-up in 2018 totalled 30.0 35.9 35.9 million sq. ft., a 30% increase from 2017 levels and the h
Slide 8: Outlook
Outlook Regional commercial • Our core markets continue to experience beneficial supply-demand dynamics (Source: Savills (February 2019) property – remains an • Investment demand for regional assets continues to remain robust, with regional attractive opportunity office outperforming Central London
Slide 9: Portfolio
Portfolio regionalreit.com
Slide 10: £718.4m Property Portfolio
£718.4m Property Portfolio Sector Split (% by value) IPO – November 2015 31 December 2017 31 December 2018 8.1% 7.1% 1.4% 11.3% 5.0% 1.3% 23.3% 15.5% 25.3 Office £386.1m £737.7m £718.4m Industrial Retail Other 58.4% 67.3% 76.1% Regional Split (% by value) 9.7% 2.7% 8.2% 3.9% 7.8% 3.6% 29.7% 12.7% 27
Slide 11: Highly Diversified Portfolio
Highly Diversified Portfolio Diversified Tenant Base Tenants by SIC code, as a % of gross rent Professional, scientific and technical activities 12.1% 11.5% • Diversified income - large tenant mix (14.2%) (10.6%) Administrative and support service activities 3.2% • No tenant > 3.0% of rent roll as a
Slide 12: Financial Information
Financial Information regionalreit.com
Slide 13: Generating Income in 2018
Generating Income in 2018 Year ending 31 December 2017 Year ending 31 December 2018 Change* EPS (fully diluted) 9.1pps 18.1pps +9.0pps Net rental income £45.9m £54.4m +£8.5m EPRA cost ratio (incl. direct vacancy costs) 29.7% 40.1% +1040bps Adj. EPRA costs ratio (incl. direct vacancy costs & excl. pe
Slide 14: Financial Position Remains Strong, Flexible and Defensive
Financial Position Remains Strong, Flexible and Defensive Year ending 31 December 2017 Year ending 31 December 2018 Change*** NAV (fully diluted) 105.1pps 115.2pps +10.1pps EPRA NAV (fully diluted) 105.9pps 115.5pps +9.6pps Bank borrowings (incl. zero dividend preference shares)* £376.5m £380.3m +£3
Slide 15: Debt – Profile and LTVs, 31 December 2018
Debt – Profile and LTVs, 31 December 2018 Lender Original Outstanding Maturity Gross Loan Annual Interest Rate Amortisation Swaps\Caps: Rates - Blend Facility Debt* Date to Value** Notional £'000 £'000 Amounts Royal Bank of Scotland over 3mth £ Mandatory £26,458 £26,458 Dec-21 45.9% 2.00% LIBOR Prep
Slide 16: Appendix
Appendix Financials Property Portfolio • Acquisitions • Disposals • Capital Expenditure regionalreit.com Appendix
Slide 17: Financial – Statement of Comprehensive Income
Financial – Statement of Comprehensive Income Year-end 2017 Year-end 2018 Change* (£’000) (£’000) Rental Income 61,610 74,019 12,409 Property costs (15,763) (19,644) (3,881) Net rental income 45,847 54,375 8,528 Administrative & other expenses (9,429) (17,586) (8,157) Operating profit (loss) before
Slide 18: Financial – Statement of Financial Position
Financial – Statement of Financial Position Year-end 2017 Year-end 2018 Year-end 2017 Year-end 2018 Change* Change* (£’000) (£’000) (£’000) (£’000) Assets Non-current Assets Liabilities Current liabilities Investment properties 737,330 718,375 (18,955) Goodwill 1,672 1,115 (557) Bank and loan borrow
Slide 19: Delivering Good Returns to Shareholders
Delivering Good Returns to Shareholders • EPRA : £430.5m (115.5pps fully diluted) (31 Dec’17: £395.7m, 105.9pps fully diluted) EPRA Net Asset Value - diluted Bridge 2018 • IFRS: £429.5m (115.2pps fully diluted) 135 (31 Dec’17: £392.9m, 105.1pps fully diluted) 6.2 130 8.3 125 (4.2) (0.5) 14.6 (1.9) 1
Slide 20: Successful Debt – LTV Management
Successful Debt – LTV Management 800 46% 737.3 718.4 45.0% 44% 600 502.4 42% 40.6% £Millions 400 40% 38.3% 38% 200 380.3 376.5 220.1 36% 104.8 44.6 16.2 0 34% Dec-16 Dec-17 Dec-18 Cash Borrowings Investment Properties Net LTV (rhs) regionalreit.com 18
Slide 21: Property Portfolio
Property Portfolio regionalreit.com
Slide 22: Diversified Income Stream
Diversified Income Stream Portfolio details at 31 December 2018 Gross Occupancy Occupancy Occupancy WAULT to Average Yield Valuation % by Sq. ft. rental ERV Capital rate Sector Properties (by value) (by area) (EPRA) first break rent (£m) valuation (mil) income (£m) (£psf) (%) (%) (%) (yrs) (£psf) Ne
Slide 23: Top 15 Tenants (share of rental income)
Top 15 Tenants (share of rental income) WAULT to Lettable Annualised % of Gross Tenant Property Sector first break area gross rent rental income (years) (Sq Ft) (£m) Barclays Bank Plc Tay House, Glasgow Financial and insurance activities 2.9 78,044 1.6 2.7% Bank of Scotland Plc Buildings 3 HBOS Camp
Slide 24: Top 15 Investments (market value)
Top 15 Investments (market value) Market Lettable Let by Let by Annualised % of gross WAULT to % of Property Sector Anchor tenants value area area rental value gross rent rental first break portfolio (£m) (Sq Ft) (%) (%) (£m) income (years) Tay House, Glasgow Office Barclays Bank Plc, University of
Slide 25: Diversified Office – led portfolio focused on the UK regions
Diversified Office – led portfolio focused on the UK regions Gross property assets by value (%)* Occupancy by value (%) Average Rent & Capital rate (£psf) 100% 89% £10.00 120 £9.40 90% 2.7% increase in 2018 £9.00 87% £8.18 15.5% 100 80% 23.3% £8.00 29.4% £7.36 £96.64 87.3% 85% 70% £7.00 80 £82.14 60
Slide 26: Investment Property Activity – proactive strategy
Investment Property Activity – proactive strategy Investment Properties Bridge 31 December 2018 760 740 737.3 23.9 718.4 720 700 23.1 680 7.0 £ millions 76.3 660 640 620 600 580 (149.3) 560 Valuations Disposals (Net of Acquisitions (Incl. CAPEX Gain/(loss) on the Valuation uplift Valuations 31Dec17
Slide 27: Acquisitions
Acquisitions regionalreit.com
Slide 28: Summary - Acquisitions during 2018
Summary - Acquisitions during 2018 Sector Split Regional Split 10.8% 5.5% 7.2% Regional REIT continues to identify off-market acquisition targets offering 8.6% 37.8% value and have been able to re-invest in quality assets with additional asset £73.3m £73.3m management opportunities. 13.0% • Acquisit
Slide 29: Acquisition of £31.4 million regional portfolio
Acquisition of £31.4 million regional portfolio The portfolio was acquired in August 2018 for a consideration of £31.4m, reflecting a net initial yield of 8.66% The portfolio consists of eight offices located in Hull, High Wycombe, Stockton-on-Tees, Ipswich, Clevedon, Wakefield, Deeside and Lincoln.
Slide 30: Acquisition of £35.2 million regional portfolio
Acquisition of £35.2 million regional portfolio Purchase of six regional assets from Kildare Partners for £35.2m in an off market transaction, reflecting a net initial yield of 8.4% Portfolio consists of five regional offices and one office/distribution property located in Telford, Rotherham, Maccle
Slide 31: Disposals
Disposals regionalreit.com
Slide 32: Summary: Disposals during 2018
Summary: Disposals during 2018 Our strategic decision to sell c.47% of our industrial portfolio into what we identified as an overheated market, together with some non-core assets has generated substantial profits over December 2017 Valuation. • Disposals in 2018 totalled £149.3m (net of costs) at a
Slide 33: Capital Expenditure
Capital Expenditure regionalreit.com
Slide 34: Aztec West, Bristol
800 Aztec West, Bristol Acquired March 2016 Before After A 71,651 sq. ft. three storey office located in the Aztec West Business Park near the M4 / M5 interchange in Bristol. The building was previously occupied by EE whose lease expired December 2016. Recently undertaken a major “back to shell” ref
Slide 35: 2800 The Crescent, Birmingham Business Park
2800 The Crescent, Birmingham Business Park Before After Acquired as part of Empire Portfolio in August 2014. 28,896 sq ft HQ building over two floors with 140 car spaces located on premier business park in proximity to Birmingham Airport. Let to Severn Trent Water on lease expiring March 2016. The
Slide 36: 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