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
Introduction Stephen Inglis Chief Executive Officer London and Scottish Investments, Asset • Introduction Manager to Regional REIT Derek McDonald • Financials and Portfolio Managing Director • Market Overview and Outlook London and Scottish Investments, Asset Manager to Regional REIT Simon Marriott Investment Director London and Scottish Investments, Asset Manager to Regional REIT 2
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 Accounting Return since IPO 32%, annualised 11%, in line with target to deliver 10%+ • Dividend declared for H1 2018 3.70pps (H1 2017: 3.60pps) (+3%), dividend continues to grow • Board committed to a FY 2018 dividend of 8.05pps o Post 30 June 2018 £50m Retail Eligible Bond admitted 6 August to trading on London Stock Exchange Tay House, Glasgow 3
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 • Occupancy by value increased to 85.5% from 85.0% as at 31 Dec 17 • Capital rate per sq. ft. Office: £129.86 per sq. ft. • Industrial: £42.75 per sq. ft. Scotland exposure reduced to 21.9% from 22.4% as at 31 Dec 17 • Post 30 June 2018 Sale - Arena Point, Leeds £12.2m development site (30 June 18 valuation £3.9m) Sale - Wardpark, Cumbernauld £26.4m multi-let industrial (+21.1% over 31 Dec 17 valuation, +7.6% over 30 June 18 valuation) Sale – Turnford Place, Cheshunt , £17.25m office (+20.6% over 31 Dec 17 valuation, +6.2% over 30 June 18 valuation) Acquisition £31.4m office regional portfolio, reflecting a net initial yield of 8.7% Sales reduce Scotland exposure further to c.18% of portfolio *Figure includes 4 part property sales 4
Financials and Portfolio 5
Delivering on our Strategy Dec 2017 De 2017 June 2018 2018 Chang ange* e* 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 NetInitial Yield 7.9% 8.4% +50bps Disposals net £16.9m £60.4m +£43.5m Disposal NetInitial Yield 6.3% 4.9% (140 bps) Portfolio exposure - continued reduced exposure to Office and Industrial 90.6% 91.3% +70bps Scotland by value Scotland** 22.4% 21.9% (50bps) WeightedAverage Cost of 3.8% 3.8% 0bps Debt - Debt proactive and disciplined approach Weighted Average Duration 6.0yr 5.4yr (0.6yrs) Total Accounting Return 19.9% 32.0% +1210bps since IPO*** Return - Total Annual Accounting 8.8% 11.0% +220bps continued strong returns with a Return progressive dividend policy Dividends declared 3.6pps 3.7pps +0.1pps (2017: 7.85pps) (30 June 17) *Rounded to whole numbers ** Exposure to Scotland continues to be reduced with a long-term target of 15% 6 ***IPO 6 November 2015 -NAV plus dividend
Diversified office-led portfolio focussed on the UK regions Property - £758.7m gross investment properties Gross p Gr property ty assets ts b by va value (%)* (%)* WAUL ULT to to f first t break (y (years) ) & V Voids (%) (%) Val aluat ation y yiel elds ( (%)* 100% 10% 4 86% 9.2% 9.2% 9.0% 90% 3.5 3.5 3.5 9% 4 86% 21.0% 80% 23.3% 8% 85.5% 26.0% 3 85% 70% 6.7% 7% 6.5% 6.4% 85.0% 60% 3 85% 6% 50% 5% 2 84% 40% 4% 70.3% 2 84% 67.3% 62.8% 30% 3% 83.3% 1 83% 20% 2% 10% 1 83% 1% 0% 0 82% 0% 30-Jun-17 31-Dec-17 30-Jun-18 30-Jun-17 31-Dec-17 30-Jun-18 30-Jun-17 31-Dec-17 30-Jun-18 Office Industrial Years to first break (lhs) Occupancy by value (rhs) Net Initial Reversionary 7.4% - Re Reta tail 5.3 yea ears WA WAUL ULT to to lea ease exp expiry Equiv ivalent nt: 8.3% • • • (30 Jun’17,9.7%; 31Dec’17, 8.1%) (30 Jun’17,5.3;31 Dec’17, 5.4) (30 Jun’17, 8.3%;31 Dec’17, 8.3%) 1.3% - Other er • (30 Jun’17,1.5%; 31Dec’17, 1.3%) Con ontr tracte ted ren ent rol oll – c. £61 61.3m • (30 Jun’17,£54.6m;31 Dec’17, £61.9m) *Figures based on Cushman & Wakefield and JLL valuations as at 30 June 2018 7
£758.7m Property Portfolio as at 30 June 2018 SECTOR OR SPL PLIT ( (% b % by val value) IPO IP O – November 2015 2015 31 D 31 December 2017 2017 30 J 30 June 2018 2018 1.3% 5.0% 1.3% 7.4% 8.1% 11.3% £758.7m £737.7m £386.1m 21.0% 23.3% 25.3% 58.4% 67.3% 70.3% Office Industrial Retail Other Office Industrial Retail Other Office Industrial Retail Other REGIONAL S RE NAL SPLI LIT ( (% by v y value) 3.9% 2.8% 3.6% 8.4% 8.2% 7.8% 28.7% 27.0% 12.7% 9.5% 11.2% 11.1% £386.1m £737.7m £758.7m 13.3% 11.6% 13.0% 21.9% 35.4% 22.4% 15.5% 15.2% 17.0% South East Scotland Midlands South East Scotland Midlands South East Scotland Midlands North East North West South West North East North West South West North East North West South West Wales Wales Wales Charts may not sum due to rounding 8
Highly Diversified Actively Managed Portfolio Tenant Profile Wholesale and retail trade TEN ENAN ANTS B BY SIC CODES ES, a as a s a % % o of g gross ss rent Large mix of tenants across a variety of • Professional, scientific and sectors offers income diversification 12.4% technical activities 12.7% (14.2%) and security of lease renewals. Manufacturing (13.8%) 2.9% No tenant represents more than 2.7% of (2.9%) Information and • communication the Group’s contracted rent roll as at 30 9.8% 3.5% (10.6%) (3.5%) Administrative and support June 2018 service activities 3.9% (3.5%) Public Sector Top 15 tenants represent only 23.9% of • Contracted the Group’s contracted rent roll. rental income Financial and insurance 4.5% activities (Other) £61. £61.3m 3m (4.6%) Banking 9.3% Construction 6.3% 30 June 2018 IPO- November 2015 (9.2%) (4.4%) Transportation and storage 9.1% 950 Tenants 517 Tenants 8.4% (8.0%) Education (7.6%) 8.7% 8.5% 1,294 Units 713 Units Electricity, gas, steam and (8.7%) (8.9%) air conditioning supply Other Charts may not sum due to rounding Data in brackets relates to 31 Dec 17 figures 9
Stable Rental Income Half year ending 30 June 2017 Halfyear 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 £17.6m +£3.3m investments EPS (fully diluted) 5.6pps 12.0pps +6.4pps EPRA EPS (fully diluted) 2.9pps 2.6pps (0.3pps) EPRA EPS (excl. Performance Fee) 3.2pps 3.8pps +0.6pps Dividend declared for the period 3.6pps 3.7pps +0.1pps Rental income stable for the six months to 30 Jun 2018. Rent roll at the 30 Jun 2018 on full occupation £73.4m pa. (30 Jun 2017:£65.1m pa; 31 Dec 2017: • £73.8).Second half 2018 rental income is likely to be impacted by property sales and the timing of capital deployment. EPRA cost ratio 30 Jun 2018 impacted predominately by the property disposals and gain on revaluations in the period, resulting in an increased performance • fee. Excl. performance fee operating efficiencies are being achieved. Profit before tax 30 Jun 2018 £45.3m (30 Jun 2017: £16.2m; 31 Dec 2017: £28.7m) including gain on the disposal of investment properties £7.3m (30 June • 2017: negligible; 31 Dec 2017: £ 1.2m); and change in fair value of investment properties £27.9m (30 Jun 2017: £7.5m; 31 Dec 2017: £5.9m). EPS (fully diluted) – 30 Jun 2018 12.0pps paying a H1 2018 dividend 3.70pps up 2.8% on the six months to 30 Jun 2017 3.60pps. • *Rounded to whole numbers 10
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 Leas ease Ex e Expiry Inc ncome e Profile Number of units: 1,294 • 10.3% 13.5% Number of tenants: 950 • 0-1 years Contracted rent roll: £61.3m • 15.5% 1-3 years WAULT of 5.3 years • 3-5 years WAULT to first break of 3.5 years • 5-10 years 72% renewal rates, 74% continuity of income • 10+ years 36.3% 24.4% Leas ase E Expiry Incom ome Pr Prof ofile to to First B t Break ak CONTRACTED RENTAL INCOME 12.0 11.1 10.0 11.0 9.8 8.0 (£M) 6.0 6.9 6.8 4.0 3.6 3.3 3.3 2.0 1.6 1.7 0.4 0.0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028+ 11
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