Slide 1: Investor Presentation – Half year to 30 June 2018
Investor Presentation – Half year to 30 June 2018 September 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: Introduction
Introduction Stephen Inglis Chief Executive Officer London and Scottish Investments, Asset • Introduction Manager to Regional REIT • Financials and Portfolio Derek McDonald Managing Director • Market Overview and Outlook London and Scottish Investments, Asset Manager to Regional REIT Simon Marriott
Slide 3: Highlights – Financial
Highlights – Financial • EPRA NAV – diluted £426.5m(+8%), asset management initiatives delivering, revaluation increases of £27.9m and disposal gains of £7.2m • EPRA NAV – diluted 113.6pps (+7.7pps) • LTV 41.2% (reduced by 380bps), proactive and disciplined approach to capital management • Total Acc
Slide 4: Highlights – Property
Highlights – Property • Sold 20 properties for £60.4m* (after costs) at a weighted average net initial yield of c.4.9% Arena Point, Leeds • Bought 7 properties for £40.1m (before costs) with a weighted average net yield of c.8.4% • Property portfolio £758.7m increase of £21.4m from 31 Dec 17 • Occup
Slide 5: Financials and Portfolio
RRO Financials and Portfolio
Slide 6: Delivering on our Strategy
Delivering on our Strategy Dec 2017 June 2018 Change* Portfolio change - Investment Property £737.3m £758.7m +£21.4m targeted and opportunistic Acquisitions before costs £228.1m £40.1m +£188.0m acquisitions; disposals when asset management initiatives achieved Acquisition Net Initial Yield 7.9% 8.4%
Slide 7: Diversified office-led portfolio focussed on the UK regions
Diversified office-led portfolio focussed on the UK regions Property - £758.7m gross investment properties Gross property assets by value (%)* WAULT to first break (years) & Voids (%) Valuation yields (%)* 100% 10% 4 86% 9.2% 9.2% 9.0% 90% 3.5 3.5 3.5 9% 4 86% 80% 23.3% 21.0% 85.5% 8% 26.0% 70% 3 85
Slide 8: £758.7m Property Portfolio as at 30 June 2018
£758.7m Property Portfolio as at 30 June 2018 SECTOR SPLIT (% by value) IPO – November 2015 31 December 2017 30 June 2018 5.0% 1.3% 7.4% 1.3% 11.3% 8.1% £386.1m £737.7m £758.7m 23.3% 21.0% 25.3% 58.4% 67.3% 70.3% Office Industrial Retail Other Office Industrial Retail Other Office Industrial Retail
Slide 9: Highly Diversified Actively Managed Portfolio
Highly Diversified Actively Managed Portfolio Tenant Profile Wholesale and retail trade TENANTS BY SIC CODES, as a % of gross rent • Large mix of tenants across a variety of Professional, scientific and sectors offers income diversification 12.4% (14.2%) 12.7% technical activities and security of le
Slide 10: Stable Rental Income
Stable Rental Income Half year ending 30 June 2017 Half year ending 30 June 2018 Change* Rental income £23.0m £30.6m +£7.6m EPRA cost ratio 37.7% 41.8% +410bps Adj. EPRA costs ratio (excl. Performance Fee) 33.7% 28.1% (560bps) Operating profit before gains/losses on property assets/other £14.3m £17.
Slide 11: Stable Income Profile - Lease Expiries as at June 2018
Stable Income Profile - Lease Expiries as at 30 June 2018 A large number of tenants offers income diversification, combined with intensive asset management, and security of lease renewals Lease Expiry Income Profile • Number of units: 1,294 10.3% 13.5% • Number of tenants: 950 0-1 years • Contracted
Slide 12: Financial Position Remains Strong, Flexible and Defensive
Financial Position Remains Strong, Flexible and Defensive As at 31 December 2017 As at 30 June 2018 Change** Investment Property Asset Value £737.3m £758.7m +£21.4m NAV (fully diluted) 105.1pps 112.9pps +7.8pps EPRA NAV (fully diluted) 105.9pps 113.6pps +7.7pps Bank borrowings (incl. zero dividend p
Slide 13: Investment Property Activity
Investment Property Activity Investment Properties Bridge 30 June 2018 770 27.9 758.7 750 737.3 7.2 730 4.4 £ millions 42.1 710 690 (60.4) 670 Valuations Disposals (Net of costs) Acquisitions (Incl. costs) CAPEX Gain/(loss) on the Valuation uplift Valuations 31 Dec 17 disposal of properties 30 Jun 1
Slide 14: Delivering Returns to Shareholders
Delivering Returns to Shareholders • EPRA : £426.5 (113.6pps fully diluted) • (31 Dec’17: £395.7m, 105.9pps fully diluted) EPRA Net Asset Value - diluted Bridge 30 June 2018 125.0 • IFRS: £423.9m (112.9pps fully diluted) (31 Dec’17: £392.9m, 105.1pps fully diluted) 1.9 8.6 120.0 (1.2) (2.0) 115.0 Pe
Slide 15: Debt - LTV Management
Debt - LTV Management 800 48% 758.7 47.3% 737.3 640.4 46% 600 45.0% 44% £Millions 400 42% 41.2% 335.0 376.5 391.9 200 40% 32.2 44.6 79.5 0 38% Jun-17 Dec-17 Jun-18 Cash Borrowings Investment Properties Net LTV (rhs) Chart may not sum due to roundings 15
Slide 16: Debt - Profile and LTVs as at 30 June 2018
Debt - Profile and LTVs as at 30 June 2018 Borrowing strategy remains prudent and defensive with long maturity Lender Original Outstanding Maturity Gross Loan to Annual Interest Rate Amortisation Swaps\Caps: Rates Facility Debt* Date Value** Notional Amounts £'000 £'000 ICG Longbow Ltd £65,000 £65,0
Slide 17: Asset Management Highlights
Asset Management Highlights Disposals Bluebell Portfolio (Phase 1) o Portfolio comprised of 15 industrial property assets, 54 units, and 42 tenants amounting to 610,620 sq ft. o The sale price represents an uplift of 24.1% against the December 2017 valuation. o Three properties still to complete: Gr
Slide 18: Asset Management Highlights (continued)
Asset Management Highlights (continued) Acquisitions Purchase of six regional assets from Kildare Partners for £35.2 million in an off-market transaction • Portfolio consists of five regional offices and one office/distribution property located in Telford, Rotherham, Macclesfield, Dundee, Chelmsford
Slide 19: Market Overview and Outlook
Market Overview and Outlook 19
Slide 20: Opportunity for Regional Offices
Opportunity for Regional Offices Rolling 12 month rental value growth rates Outperformance of regional offices 12% 10% • Research from CBRE indicates that regional offices have 8% outperformed in comparison to central London offices, 6% 4% 1.48% delivering superior returns of 11.7% in the 12 months
Slide 21: Opportunity for Regional Industrial
Opportunity for Regional Industrial UK industrial & logistics take-up (million sq. ft.) Growing demand and limited supply for multi-sized, 18.0 16.7 15.7 multi-let industrial sites 16.0 14.0 • Cushman and Wakefield estimate that take-up in million sq. ft. 12.0 H1 2018 totalled 16.7 million sq. ft.,
Slide 22: Outlook
Outlook • Investment demand for regional assets continues to be strong, with regional offices outperforming Central London on both capital and income metric (Source: CBRE) Regional commercial • Regional economic and business fundamentals remain positive – continued limited supply of property – remai
Slide 23: Appendix
Appendix • Financial and Debt Review • Property Portfolio • Overview of Regional REIT and External Management 23
Slide 24: Financial and Debt Review
RRO Financial and Debt Review 24
Slide 25: Financial - Statement of Comprehensive Income
Financial - Statement of Comprehensive Income Half year-end June 2017 Half year-end June 2018 Change* (£’000) (£’000) Rental Income 22,964 30,626 7,662 Non-recoverable property costs (3,480) (3,716) (236) Net rental income 19,484 26,910 7,426 Administrative & other expenses (5,166) (9,288) (4,122) O
Slide 26: Financial - Statement of Financial Position
Financial - Statement of Financial Position Year-end 2017 Half year-end Year-end 2017 Half year-end Change* Change* (£’000) June 2018 (£’000) (£’000) June 2018 (£’000) Assets Non-current Assets Liabilities Current liabilities Investment properties 737,330 758,653 21,323 Bank and loan borrowings – cu
Slide 27: Property Portfolio
RRO Property Portfolio
Slide 28: High Yielding & Highly Diversified Actively Managed Portfolio
High Yielding & Highly Diversified Actively Managed Portfolio Portfolio details at 30 June 2018 Occupancy Occupancy WAULT to Valuation % by Sq. ft. Gross rental Average rent ERV Capital Net Initial Equivalent Reversionary Sector Properties (by value) (by area) first break (£m) valuation (mil) income
Slide 29: Top 15 Investments (market value) as at 30 June 2018
Top 15 Investments (market value) as at 30 June 2018 Annualised WAULT to Market % of Lettable area Let by area Let by rental Property Sector Anchor tenants gross rent first break value (£m) portfolio (Sq. Ft) (%) value (%) (£m) (years) Tay House, Glasgow Office Barclays Bank Plc, University of Glasg
Slide 30: Top 15 Tenants (share of rental income) as at 30 June 2018
Top 15 Tenants (share of rental income) as at 30 June 2018 Tenant Property Sector WAULT to first Lettable area % of Gross rental break (years) (Sq Ft) income 3.4 2.7% Barclays Bank Plc Tay House, Glasgow Financial and insurance activities 78,044 Electricity, gas, steam and air conditioning 2.1 2.4%
Slide 31: Disposals
RRO Disposals 31
Slide 32: Disposal of Bluebell Portfolio
Disposal of Bluebell Portfolio Sale of 15 Industrial Portfolio for £39.1m Overview • Portfolio comprised of 15 industrial property assets, 54 units, and 42 tenants amounting to 610,620 sq ft. • The sale price represents an uplift of 24.1% against the December 2017 valuation. Asset Management Initiat
Slide 33: Sale of Podium Site at Arena Point, Leeds
Sale of Podium Site at Arena Point, Leeds Completion of Podium sale to Unite Investment Overview • Acquired in March 2016 as part of the “Wing” portfolio. • Phased refurbishment of vacant office floors being advanced. 50% of refurbished space already let. Sale of Podium • Following the acquisition,
Slide 34: The Point, Glasgow
The Point, Glasgow Sale price 5.6% above December 2017 valuation Investment Overview • Multi let trade counter investment located to north of Glasgow City Centre extending to 158,546 sq. ft. comprises of 11 individual units let on 10 separate leases • Tenants include SeeWoo Foods (Glasgow) Ltd, Univ
Slide 35: Other Key Disposals
Other Key Disposals Regional REIT remains active and opportunistic – disposing of assets on Disposals in H1 2018 completion of their business plan or when it has made strategic sense to do so (net of costs) amount Disposals in H1 2018 to • It has been a busy period in terms of disposals, the Group h
Slide 36: Acquisitions
RRO Acquisitions 36
Slide 37: Acquisition of £35.2 million regional portfolio
Acquisition of £35.2 million regional portfolio This acquisition highlights our disciplined approach to capital management, with disposal proceeds being promptly redeployed ensuring minimal cash drag. Overview • Purchase of six regional assets from Kildare Partners for £35.2 million in an off-market
Slide 38: Portfolio Updates
RRO Portfolio Updates
Slide 39: Rainbow Portfolio
Rainbow Portfolio 800 Aztec West, Bristol • Major £6.9m “back to shell” refurbishment completed in August 2018 into active Bristol market with limited city centre supply. • Lease completed with Edvance SAS for the entire first floor (31,549 sq. ft.) for £21.50psf (£678k pa) Buildings 2 HBOS Campus,
Slide 40: Wing Portfolio
Wing Portfolio Northern Cross, Basingstoke • Occupancy (by value) now 88.5% following letting of Suite B1 to BNP Paribas from July 2016 to 2029 with tenant break option in 2024. Lease to tie-in with the tenant’s other leases in the building at a rent of £7,150 pa. • Necessary fabric repair works com
Slide 41: Capital Expenditure
RRO Capital Expenditure
Slide 42: Aztec West, Bristol
800 Aztec West, Bristol Before After • Acquired March 2016 • 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 sh
Slide 43: Aztec West, Bristol
800 Aztec West, Bristol • The design and refurbishment has made a variety of significant improvements to the building including: • Increased the EPC rating (originally ‘E 120 points’ to B 36). • Increased lettable space (converted oversized old plantrooms on all three floors into 3,337 sq. ft. of ad
Slide 44: Buildings 2 & 3, HBOS Campus, Aylesbury
Buildings 2 & 3, HBOS Campus, Aylesbury Before After • The ownership comprises two imposing HQ style office buildings situated on extensive self-contained campus style grounds. • The site is located adjacent to Aylesbury mainline railway station with regular services to London Marleybone. • Building
Slide 45: Buildings 2 & 3, HBOS Campus, Aylesbury
Buildings 2 & 3, HBOS Campus, Aylesbury • Prior to acquisition LBG had served Notice to Quit on Building 2 as at the break option in their favour in November 2016. Our original strategy was to retain ELAS across the two floors they occupied and subsequently undertake a large scale refurbishment of t
Slide 46: Buildings 2 & 3, HBOS Campus, Aylesbury
Buildings 2 & 3, HBOS Campus, Aylesbury 46
Slide 47: 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
Slide 48: 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