Regional REIT — Encouraging progress

Regional REIT (LSE: RGL)

Last close As at 05/08/2026

GBP0.99

1.00 (1.02%)

Market capitalisation

GBP159m

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Research: Real Estate

Regional REIT — Encouraging progress

Regional REIT (RGL) has published an update on Q126 trading to accompany its AGM. While market conditions remain challenging, it has continued to make good progress on its portfolio repositioning strategy. We expect the sale of predominantly vacant, non-core assets will reduce property costs by more than rental income, while the proceeds are funding debt reduction and interest cost savings. It is particularly encouraging that new leases continue to be agreed at a strong premium to estimated rental value (ERV) and that, adjusted for disposals, underlying rent roll was broadly stable versus end-FY25. A Q1 DPS of 2.0p has been declared, in line with the previously declared FY26 target of 8.0p.

Written by

Martyn King

Director, Financials. Property and Insurance

Real estate

Q126 update

20 May 2026

Price 89.50p
Market cap £145m

Net cash/(debt) at 31 March 2026

£(214.2)m

Shares in issue

162.1m
Free float 75.7%
Code RGL
Primary exchange LSE
Secondary exchange N/A
Price Performance

Business description

Regional REIT is focused on office assets in the regional centres of the UK, outside the M25, highly diversified by property, tenants and the underlying industry exposure of those tenants. It is actively managed with a strong focus on income.

Analyst

Martyn King
+44 (0)20 3077 5700

Regional REIT is a research client of Edison Investment Research Limited

Note: EPRA earnings exclude property revaluation movements and non-recurring items. NAV is EPRA net tangible assets per share.

Year end EPRA earnings (£m) EPRA EPS (p) NAV/share (£) DPS (p) Yield (%) P/NAV (x)
12/24 22.7 19.2 2.10 7.80 8.7 0.43
12/25 19.1 11.8 1.94 10.00 11.2 0.46
12/26e 15.6 9.7 1.95 8.00 8.9 0.46
12/27e 16.1 9.9 2.00 8.40 9.4 0.45

2025 was a transitional year for RGL, and in our recent update note we discussed in detail the significant value embedded in its portfolio and management’s strategy to unlock this. The key elements of this strategy are to reduce debt, reduce costs by selling non-core, underperforming assets, and to invest to enhance the occupier appeal and income potential of the properties retained. The properties to be retained include a core of good-quality assets, which already meet occupiers’ needs and have sustainable long-term income-generating potential (64% of the portfolio total), and others that can achieve this through capital investment (19%). In Q126, property sales generated proceeds of £12.6m, all at close to their end-FY25 valuations, reflecting a 4% net initial yield on disposal. The assets were on average 90% vacant. Gross borrowings reduced to £254m from £266m at end-FY25 and the loan-to-value ratio, based on year-end valuations, reduced to 39.4% (end-FY25: 40.4%). A further three disposals totalling £2.5m completed post quarter end. While disposals are accretive to earnings and portfolio quality, in our view, the medium-term investment case rests on RGL’s ability to lease space and grow income from its retained assets. Although the timing for an improvement in the external leasing environment remains difficult to predict, a flight to quality continues, with occupiers willing to pay higher rents for good-quality, energy-efficient space. RGL’s portfolio is increasingly well positioned for this, with 61% already rated EPC B or better. The company expects a growing supply-demand imbalance to drive rents higher, especially for Grade A space, and spilling over into good-quality secondary space. Reflecting these market trends, in Q126, 26 new lettings and renewals were completed, adding £1.1m to the rent roll at an average 9.8% above the valuers’ ERV. This follows an average 9.0% premium to ERV on Q425 lettings. EPRA occupancy of 76% was slightly down from end-FY25 but increased slightly for core assets (87%). Annualised rent roll and ERV both reduced, to £49.8m (end-FY25: £50,4m) and £77.0m (end-FY25: £77.0m) respectively, but this substantially reflects disposals (we estimate c £0.5m).

With a prospective yield of c 9% and c 50% discount to NAV, the upside from a successful execution of the strategy remains material and further signs of progress should support performance.

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