Regional REIT – executive interview

Regional REIT (RGL) is focused on investment in offices in regional centres across the UK, outside the M25. It is actively managed with a strong focus on income returns. The strong post-pandemic recovery in leasing seen in FY22 paused in H123, as occupiers adopted a cautious ‘wait and see’ approach. Positively, those leases that were completed in H123 were at higher rents, and the strong ‘return to the office’ provides support to the asset manager’s expectations that leasing will accelerate. Reflecting the impact on occupancy and property costs, quarterly DPS was rebased to 1.2p (or an annualised 4.8p), a level which RGL expects will be sustainably covered by earnings. Meanwhile, an increased focus on asset sales, especially empty properties with high carrying costs, aims to balance net income retention with a reduction in gearing. The market has reacted very negatively to the results, and despite the dividend rebasing, RGL continues to offer a sector leading yield.

In this interview, Stephen Inglis, CEO of the asset manager to RGL, London & Scottish Property Investment Management, discusses in detail the results for the six months to 30 June 2023 (H123), the background to the dividend rebasing, and the company’s plans to reduce gearing. He also provides an update on the regional office market and his optimism for the occupational market and rental growth.