Agenda Introduction and highlights Mike Watters (CEO) Financial - PowerPoint PPT Presentation

Investing in opportunity rdireit.com Full year results presentation October 2018

1 Agenda • Introduction and highlights Mike Watters (CEO) • Financial results Donald Grant (CFO) • Capital allocation Stephen Oakenfull (Deputy CEO) • Portfolio update Adrian Horsburgh (Property Director) • Outlook and conclusion Mike Watters (CEO) • Q&A 2018 full year results presentation

2 FY18 highlights Strong results with 3.8% growth in the dividend to 2.70p, fully covered +7.4% +3.3% +3.4% +9.8% Underlying earnings Underlying EPS EPRA NAV per share Total accounting return growth to £53.5m growth to 2.84p growth to 42.8p 46.2% £255.7m £284.9m Proforma LTV to 47.3% (1) Disposal proceeds Acquisitions yielding achieving 8.9% premium >9% on equity (1) Refmecting post year end transactions. 2018 full year results presentation

3 Delivering superior, sustainable and growing income Underpinned by a stronger balance sheet and signifjcantly improved portfolio Superior income 6.3% 15.6% Liquid and transparent Sustainable income Top quartile yield EPRA cost ratio; Superior income investment in on NAV (UK-REIT effjciently commercial average 4.2%) converting rent real estate to dividends Sustainable income 95.1% 7.0 years 6.7 years WAULT to pay-out ratio debt maturity fjrst break with with 99.6% 97.1% occupancy fjnance costs fjxed/capped Growing income G r o w 27.0% 31.1% 41.9% i n g i n c Serviced income Open rent Indexed rent o m with strong reviews weighted e CPI correlation to sectors with positive outlook 2018 full year results presentation

Financial results Strategic priority: Financial discipline • Transparency on earnings and alignment to operational cash fmow • Targeting one of the lowest industry EPRA cost ratios • Dividend fully covered by earnings and operational cash fmow • Medium term targets linked to senior management incentives to drive accountability Hampton by Hilton, London Gatwick Airport

5 Underlying earnings (including share of joint ventures) FY18 FY17 Change Change Summary income statement £m £m £m % Net rental income 100.7 93.5 7.2 Other income 1.8 2.7 (0.9) Administrative costs (14.4) (15.6) 1.2 Net fjnance expense (29.0) (29.0) — Other items (2.8) 2.3 (5.1) Non-controlling interests (4.4) (3.0) (1.4) EPRA earnings 51.9 50.9 1.0 Company adjustments: – Reverse debt accretion charges (non-cash) 0.8 0.9 (0.1) – FX loss/(gain) 0.8 (2.0) 2.8 Underlying earnings 53.5 49.8 3.7 +7.4 Underlying earnings per share 2.84p 2.75p +3.3 Dividend per share (declared H2: 1.35p) 2.70p 2.60p +3.8 Diluted weighted average shares in issue 1,892.3m (31 August 2017: 1,811.9m). EPRA cost ratio improved to 15.6% (17.2% in FY17) 2018 full year results presentation

6 Net rental income (£m) Like-for-like +2.1% 0.1 0.5 1.1 Nil 100.7 0.6 15.1 93.5 (10.2) Disposals Acquisitions Development UK Commercial UK Retail UK Hotels Europe Net rental income Net rental income (FY18) (FY17) 2018 full year results presentation

7 Valuations (including share of joint ventures) Market Market EPRA value value Gain/ Gain/ topped up FY18 FY17 (loss) (1) (loss) NIY (2) £m £m £m % % UK Commercial 332.0 307.4 23.1 7.5 5.2 UK Retail 481.0 501.8 (26.1) (5.2) 6.8 UK Hotels 245.9 239.6 5.1 2.1 5.9 UK total 1,058.9 1,048.8 2.1 0.2 6.0 Europe 226.1 226.5 (0.9) (0.4) 4.9 €+2.2% Total like‑for‑like 1,285.0 1,275.3 1.2 0.1 CCY+0.6% Acquisitions 303.3 — Development 32.1 23.4 Disposals — 240.0 Total property portfolio 1,620.4 1,538.7 5.8 (1) Gain/(loss) includes the efgect of capital expenditure, tenant incentives, head lease amortisation and FX. (2) Reported EPRA topped up NIY for total segment. Disposals during the year were completed at a 8.9% premium to the last reported market value 2018 full year results presentation

8 Debt and gearing Key statistics Medium term target FY18 HY18 FY17 LTV (%) 45% – 50% 46.2 (1) 48.0 50.0 (2) Weighted average debt maturity (years) 6.7 7.0 7.3 Weighted average cost of debt (%) 3.2% – 3.4% 3.4 3.3 3.1 Debt with interest rate protection (%) >75% 99.6 99.2 93.0 Interest cover (3) (times) >3x 3.5 3.5 3.2 (1) Increasing to 47.3% post period end. (2) Proforma adjusted from 51.3% to refmect transactions between 31 August 2017 and FY17 results announcement. (3) Group interest cover calculated as net rental income divided by net fjnance cost. LTV continues to move towards the lower end of our target range 2018 full year results presentation

9 EPRA NAV per share (p) Up 3.4% to 42.8p 0.6 1.2 2.84 (2.65) (0.3) (0.29) 42.8 41.4 EPRA NAV Underlying Profits on Valuation Dividends FX loss Other EPRA NAV (FY17) earnings disposal and gains gains (FY18) on acquisition Total shares on issue 1,900.4m (31 August 2017: 1,828.1m). Total accounting return of 9.8% 2018 full year results presentation

10 Cash fmow and available facilities (£m) (including share of joint ventures) 188.0 (106.4) 134.8 58.8 (82.6) 75.0 63.4 (41.1) 10.0 (10.3) 53.4 59.8 Cash and Operating Disposals Acquisitions Net debt Dividends Other Cash and available cash flow and capital repaid available facilities (FY17) expenditure facilities (FY18) Undrawn, committed facilities Capital commitments of £9.5m, increasing to £27.5m post period end 2018 full year results presentation

11 Medium term guidance maintained Linked to management incentives to drive accountability Key statistics Medium term target FY18 HY18 FY17 HY17 Rental income growth like-for-like (%) 2% – 5% 2.1 2.1 3.7 3.3 Rent collection (%) >95% within 7 days 98.0 89.3 94.3 94.0 EPRA cost ratio (%) <15% 15.6 15.7 19.8 (1) 20.7 (1) Cost of debt (%) 3.2% – 3.4% 3.4 3.3 3.1 3.3 LTV (%) 45% – 50% 46.2 (2) 48.0 50.0 (3) 49.9 Interest cover (times) >3x 3.5 3.5 3.2 3.1 Pay-out ratio (%) 90% – 95% 95.1 92.5 94.5 96.3 Underlying earnings per share growth (%) 3% – 5% 3.3 8.2 n/a n/a (1) 17.2% and 18.0% respectively, when adjusted for non-recurring items. (2) Increasing to 47.3% post period end. (3) Proforma adjusted from 51.3% to refmect transactions between 31 August 2017 and FY17 results announcement. Full year dividend of 2.70p representing growth of 3.8% on FY17 2018 full year results presentation

Capital allocation Strategic priority: Effjcient capital structure • Stronger balance sheet with LTV at the lower end of medium term guidance • Continued success in allocating capital to sectors supported by occupier demand 20 St Dunstans Hill, London

13 Meaningful improvement in leverage Focus on both balance sheet and income statement leverage Continued reduction in LTV to 46.2% (1) Improvement in leverage KPIs • Refjnanced or extended facilities at lower leverage LTV (%) Interest and reduced margins cover (x) 55 4.0 • Reinvestment at lower marginal leverage 53.4% Lower income statement leverage • Signifjcant improvement in interest cover to 3.5x 3.5 • Cost of debt increased marginally to 3.4% 3.5x • Increase in interest rates likely, however… 50 • 99.6% interest costs fjxed/capped 3.0 2.7x 46.2% (1) 45 2.5 FY16 HY17 FY17 HY18 FY18 (1) 47.3% when adjusted for transactions between 31 August 2018 and FY18 results announcement. 2018 full year results presentation

14 Well structured debt profjle Debt maturity profjle (£m) Group debt £808.2m (FY17: £842.2m) GBP Europe bank debt Advanced negotiations UK bank debt 336.4 to extend to FY24 • Gross LTV: 61.1% Euro • Gross LTV: 47.5% 16% • LTV cov ave: 66.5% • LTV cov ave: 68.2% 193.3 19% 65% 154.9 55.1 47.6 UK non-bank debt 20.9 • Gross LTV: 74.6% • LTV cov ave: 85.0% FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28+ • Limited refjnancing risk with no material maturities • Net Group LTV 46.2% (1) until FY21 • Cash and undrawn facilities of £134.8m • Refjnancing early to secure attractive rates • £69.6m ungeared properties • £303m AUK facility provides fmexible capital structure • German assets funded with Euro debt providing and cost of debt effjciencies natural FX hedge • Weighted average debt maturity of 6.7 years (1) 47.3% when adjusted for transactions between 31 August 2018 and FY18 results announcement. 2018 full year results presentation

15 Continuously improving portfolio quality Income-led diversifjed business model provides ability to actively invest for growth High growth Post year end distribution and industrial £52.3m; implied NIY >6% London serviced offjces Travelodge portfolio (IHL) £161.7m; implied NIY >6% £29.0m; 5.3% NIY RBH managed hotels (IHL) Kingston, Canbury Business Park £75.4m; implied NIY 7.5% £18.8m; 5.8% NIY EPRA topped Low yield High yield up yield 5.8% German supermarket portfolio €205m; 10.8% premium; 5.8% NIY Six regional offjces £59.8m; 8.9% premium; 6.4% NIY Hull, House of Fraser £11.0m; 12.8% discount; 9.7% NIY Acquisitions (acquisition value) Disposals (gross proceeds) Low growth Effjcient reinvestment demonstrates relentless focus on income and ability to efgectively recycle capital 2018 full year results presentation