Regional REIT posts strong 2018 results driven by offices portfolio – Regional REIT (RGL) is benefitting from the relatively strong performance of the regional UK office market outside London. The company has announced results for the year to 31December 2018. Its EPRA NAV per share increased by 9% to 115.5p, while its total dividend was up 3% to 8.05p.
Office segment is a good place to be
Core and core plus regional office and industrial property assets, an asset class the company says is increasingly sought after in the UK, now represents 91.6% of portfolio by value (with 76.1% in offices and 15.5% in industrial sites). The office stock of the overall portfolio has grown from 58.4% in 2015, the year of RGL’s IPO, to 76.1% in 2018. It is expected to grow further. Industrials is the other main focus area, though it is performing less well than offices.
Further highlights from 2018 include:
- Record net profit of £67.4m significantly increased by 149% (2017: £27.1m) and net rental income up 19% to £54.4m (2017: £45.8m)
- Strong performance in transactional activity with £73.3m (before costs) invested in new acquisitions and £149.3m (net of costs) received from strategic disposals. RGL posted a particularly strong spread of 300bps between the acquisition net initial yield (NIY) and disposal NIY. NIY on acquisitions was 8.7%
- Net loan-to-value reduced below target of circa 40% to 38.3% (2017: 45.0%). The ratio was helped by revaluations of the property portfolio and gains from disposals
- Following a strong start to the year, investment in the regional markets continued at pace in the second half of 2018. In the final quarter of 2018, investment volumes in the regions outside of London reached £5.6 billion, up 8% on the previous quarter and 13% above the quarterly average. This brought total investment in the regional markets in 2018 to £21.3 billion, the highest figure recorded since 2006
Commenting on the results, Stephen Inglis, CEO of London & Scottish Investments (RGL’s asset manager), said: “I am delighted to announce that 2018 was a good year for Regional REIT as the company exceeded all of its objectives and achieved significant strategic progress.
We continued with our proactive property management strategy which included the sale of 30 properties and the acquisition of 16 others, with EPRA occupancy levels increasing to 89.4% across a highly diversified tenant base. Additionally, we continued to reduce the portfolio exposure to Scotland, which now comprises less than a fifth of the portfolio. The net loan to value fell below our c. 40% target to 38.3%, and from 9 January 2019 the cost of debt was reduced by 30 bps.”
RGL: Regional REIT posts strong 2018 results driven by offices portfolio