Investor Presentation Annual Results 2018 Record Total Returns - PowerPoint PPT Presentation

Investor Presentation Annual Results 2018 Record Total Returns Achieved regionalreit.com

Introduction Stephen Inglis Chief Executive Officer Introduction Market Overview and Outlook Derek McDonald Managing Director Portfolio Financial Information Simon Marriott Investment Director regionalreit.com Offices held at London and Scottish Investments, Asset Manager to Regional REIT

Financial Highlights – 2018 another good year for Regional REIT Exceeding target of 10% pa Total EPRA accounting return • 2018 16.6% • Since IPO 37.5% • Annualised 10.6% Asset management initiatives EPRA NAV +9% to £430.5m continuing to deliver • Revaluation increases of £23.9m Newstead Court, Nottingham • Disposal gain of £23.1m EPRA NAV - diluted +9.6pps to 115.5pps LTV 38.3% reduced from 45.0% Proactive and disciplined Weighted average cost of debt approach to debt management • 3.5% as at 9 January 2019 Tay House, Glasgow Weighted average debt duration • 7.1 years as at 9 January 2019 +3% Dividend declared 2018 Progressive dividend policy One of the highest dividends • 2018 : 8.05pps in the sector • 2017: 7.85pps Aztec West, Bristol Expected to return to fully Dividend cover 93%* covered during 2019 regionalreit.com 1 *Based on Adj. EPRA Eps

Portfolio Highlights – Proactive property asset management achieving outperformance Sold 30 properties (plus 9 part sales) for £149.3m (after costs) at a weighted average net initial yield of c.5.7% Bought 16 properties for £73.3m (before costs) with a weighted average net yield of c.8.7% Gains £47m gains - Disposal gain £23.1m; Revaluation gain £23.9m • Property portfolio £718.4m Occupancy • EPRA occupancy increased to 89.4% from 88.2% as at 31 Dec 17 • By value increased to 87.3% from 85.0% as at 31 Dec 17 Capital rate per sq. ft. of £96.64 • Office: £126.35 per sq. ft. Industrial: £45.18 per sq. ft. Average rent per sq. ft. • £9.40 in 2018; £8.18 in 2017 • Office £12.66; Industrial £3.63 Scotland exposure reduced to 18.0% from 22.4% as at 31 Dec 17 • Long-term target of 15% Post 31 December 2018 Acquisition - £20.0m office in Birmingham, with a net initial yield of 7.9%, 98.8% occupied with a net income of c.£1.69m. Anchor tenant HMRC Debt - £39.9m ZDP fully repaid 9 Jan 2019 regionalreit.com 2

Delivering on our Strategy – exceeding our objectives Dec 2017 Dec 2018 Change Portfolio Continuous Management Investment Property £737.3m £718.4m (£18.9m) Targeted and opportunistic Acquisitions before costs £228.1m £73.3m (£154.8m) acquisitions; disposals when asset management initiatives achieved Acquisition Net Initial Yield 7.9% 8.7% +80bps Disposals net £16.9m £149.3m +£132.4m Disposal Net Initial Yield 6.3% 5.7% (60bps) Portfolio Diversification Office and Industrial 90.6% 91.6% +100bps Exposure to Scotland reduced by value Scotland* 22.4% 18.0% (440bps) Weighted Average Cost of Debt 3.8% 3.8% 0bps Debt (incl. ZDP) Proactive and disciplined approach Weighted Average Cost of Debt 3.5% 3.5% 0bps (Excl. ZDP) Weighted Average Duration 6.0yr 7.1yr** +1.1yr Total Accounting Return since IPO*** 19.9% 37.5% +1760bps Return Continued strong returns with a high Total Annual Accounting Return 8.8% 10.6% +180bps yielding progressive dividend policy Dividends declared 7.85pps 8.05pps +0.20pps regionalreit.com 3 * Exposure to Scotland continues to be reduced to long term target of 15% **Figure as at 9th January 2019 ***IPO 06.11.2015 – NAV plus dividend

Regional Offices Rental Value Growth (vs previous 12 months) 12% Outperformance of regional offices 10% 8% • Comprises 76.1% by value of portfolio 6% • CBRE research – highlights 2018 regional 4% offices outperformed: 2.2% 2% - Regional office returns of 11.5% - Central London office returns of 5.3% 0% 1.1% -2% • Now a three year trend Feb-14 Jun-14 Feb-15 Jun-15 Feb-16 Jun-16 Feb-17 Jun-17 Feb-18 Jun-18 Dec-13 Apr-14 Aug-14 Oct-14 Dec-14 Apr-15 Aug-15 Oct-15 Dec-15 Apr-16 Aug-16 Oct-16 Dec-16 Apr-17 Aug-17 Oct-17 Dec-17 Apr-18 Aug-18 Oct-18 Dec-18 • Outperformance reflected better capital returns (driven by rental growth) Source: CBRE, Peel Hunt (December 2018) Central London Rest of UK offices - 2.2% regional rental growth - Only 1.1% in Central London offices Central London & regional office returns (12 months to December 2018) • Savills research - occupier demand continues 25% 22.9% to reduce availability: 19.3% - Total availability falling by 14% in 2018 to 20% 18.5% 11.5 million sq. ft. across nine regional 16.3% office markets 15% - 27% below the 10-year average and marks 12.0% 11.5% the fifth consecutive year that supply of 10% 8.0% office stock has declined. Savills, Regional Office Market Q4 2018 5.3% 5% 2.7% 0.9% 0% 2014 2015 2016 2017 2018 Central London offices Rest of UK offices Source: CBRE, Peel Hunt (December 2018) regionalreit.com 4

Regional Industrial Occupier Demand Strengthens in the UK Industrial Market UK industrial & logistics take-up (million sq. ft.) 40.0 • Comprises 15.5% by value of portfolio 35.0 • Cushman & Wakefield - take-up in 2018 totalled 35.9 30.0 35.9 million sq. ft., a 30% increase from 2017 million sq. ft. levels and the highest annual take-up recorded 25.0 27.6 since 2008. 20.0 • BNP Paribas Real Estate - competition for 15.0 industrial space resulted in rental growth in 2018, 10.0 with MSCI index showing rental growth of 4.6% for the 12 months to December 2018. 5.0 0.0 • BNP Paribas Real Estate – Total returns of 2017 2018 16.4% for the 12 months to December 2018 Source: Cushman & Wakefield (Q4 2018) (MSCI UK Quarterly Property Index - Q4 2018). • The Investment Property Forum UK Consensus Rental value growth (%) Capital value growth (%) Total return (%) Forecast, February 2019, anticipates rental 2019 2020 2021 2019/23 2019 2020 2021 2019/23 2019 2020 2021 2019/23 growth of 2.9% in 2019. Industrial 2.9 2.2 2.0 2.1 2.9 1.3 1.0 1.5 7.6 6.1 5.6 6.2 • In comparison, the IPF UK Consensus Forecast predicts that the all property average annual All Property 0.0 0.2 0.9 0.8 -2.3 -1.2 0.0 -0.3 2.4 3.5 4.9 4.4 rental growth expected for 2019 is 0%. Source: IPF Consensus Forecast (February 2019) regionalreit.com 5

Outlook • Our core markets continue to experience beneficial supply-demand dynamics Regional commercial (Source: Savills (February 2019) property – remains an • Investment demand for regional assets continues to remain robust, with regional attractive opportunity office outperforming Central London on both capital and income metric (Source: CBRE) • Regional economic and business fundamentals remain positive – continued limited supply of office properties due to re-purposing, increased commercial demand and little new development • Proven, experienced and professional UK wide asset management team, with a Regional REIT income strong reputation in the sector, underpinning business growth security and capital gains • Continue to focus on occupancy and improvement from modest rents and capital underpin performance values strength • Continued opportunistic strategy of disposals and acquisitions when individual asset management initiatives have been delivered and pricing achieved at a substantial premium to valuations regionalreit.com 6

Portfolio regionalreit.com

£718.4m Property Portfolio Sector Split (% by value) IPO – November 2015 31 December 2017 31 December 2018 1.4% 8.1% 7.1% 5.0% 1.3% 11.3% 15.5% 23.3% 25.3 Office £386.1m £737.7m £718.4m Industrial Retail Other 58.4% 67.3% 76.1% Regional Split (% by value) 2.7% 9.7% 3.6% 7.8% 3.9% 8.2% 29.7% 27.0% 12.7% South East 10.6% 11.2% 9.5% Scotland Midlands £386.1m £737.7m £718.4m North East North West 13.3% 13.0% 13.8% South West Wales 35.4% 22.4% 18.0% 15.2% 15.6% 17.0% regionalreit.com Tables may not sum due to rounding. 8