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Regional REIT NAV falls on dilutive share issuance and debt refinancing costs

Regional REIT NAV falls on dilutive share issuance and debt refinancing costs – Regional REIT has published its results for the year ended 31 December 2017. Its EPRA NAV fell to 105.9 from 106.9p, predominately due to the issuance of two tranches of new equity and debt refinancing costs. EPRA EPS rose to 8.1p from 7.7p. They declared dividends totalling 7.85p (2016: 7.65p).

Highlights:

  • Gross investment property portfolio of GBP737.3m (31 Dec 2016: GBP502.4m); Like-for-like value increased by 2.6%, adjusting for capital expenditure.
  • Acquisitions of GBP228.1m (before costs) with average net initial yield of c.7.9%. This includes major portfolio acquisitions in both H1 and H2:
    • GBP129m multi-asset portfolio in March as part of ‘NAV-for-NAV’ Conygar transaction
    • Acquisition of two portfolios in December for c. GBP88.3m following the GBP73m capital raise
  • Disposals of GBP16.9m net, mature and non-core assets to take advantage of current market demand for industrials, at net initial yields of c.6.3%.
  • Capital expenditure of GBP13.4m net relating to refurbishment programmes on properties in Bristol, Aylesbury, Leeds, and Birmingham.
  • Gross bank borrowings of GBP376.5m (31 Dec 2016: GBP220.1m) increased to fund acquisitions. Cost of debt remains favourable at 3.8% (including hedging costs).
  • New 10-year borrowing facility agreed in December extends the weighted average maturity to 6 years.
  • Net LTV of the Group reduced to 45%, from peak of c.49% following Conygar portfolio acquisition in H1, and will continue to be managed down towards the Group’s long-term target of 40%.
  • Operating profit before gains and losses of property assets and other investments GBP36.4m (31 Dec 2016: GBP29.9m) and Profit before tax of GBP28.7m (31 Dec 2016: GBP13.4m), with rental income of GBP52.3m (31 Dec 2016: GBP43.0) and an EPRA costs ratio of 29.7% (31 Dec 2016: 29.6%).

Operational Highlights:

  • Diversified portfolio now sits at 164 properties (31 Dec 2016: 123), 1,368 units (2016: 941) and 1,026 tenants (2016: 717).
  • Occupancy (by value) of 85.0% (31 Dec 2016: 82.7%) and Occupancy (by area) 84.3% (31 Dec 2016: 83.8%).
  • Portfolio continues to focus on core sectors of office (67.3% by value) and industrial sites (23.3%) across the UK, with England & Wales now accounting for an increased proportionate amount of the portfolio (77.6%).
  • Regional REIT senior team strengthened by appointment of Simon Marriott at London & Scottish Investments Limited, with Regional REIT as his primary responsibility.
  • London & Scottish Investments Limited offices for Regional REIT now present in Glasgow, Manchester, and Leeds with continued support from nationwide asset manager network.

Total Shareholder Return of 19.9% since IPO (November 2015) and annualised 8.8% in FY 2017

Stephen Inglis, Chief Executive Officer of London & Scottish Investments Limited, the Asset Manager, commented: “It has been a very active period for the Group. During our second full year as a listed entity, we acquired three major portfolios, successfully raised funds in a difficult market, improved our debt terms, and strengthened our management team and regional network. All this while continuing to offer shareholders one of the best yields in the sector. This momentum demonstrates our commitment and belief in the strategy laid out at IPO. Whilst we remain alert to increasing economic uncertainty we remain confident in the strength of our business model.”

RGL : Regional REIT NAV falls on dilutive share issuance and debt refinancing costs

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