Last close As at 05/08/2026
GBP0.98
▲ 2.00 (2.08%)
Market capitalisation
GBP159m
Research: Real Estate
In a challenging market, Regional REIT’s (RGL’s) FY23 operational and financial performance was robust, in line with expectations and previous guidance. Investor focus remains on the company’s loan to value (LTV) reduction and bond refinancing plans, explored in detail in our previous note and RGL will provide an update on this in due course.
Regional REIT |
Performing as expected ahead of refinancing |
FY23 results |
Real estate |
9 April 2024 |
Share price performance
Business description
Analyst
Regional REIT is a research client of Edison Investment Research Limited |
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In a challenging market, Regional REIT’s (RGL’s) FY23 operational and financial performance was robust, in line with expectations and previous guidance. Investor focus remains on the company’s loan to value (LTV) reduction and bond refinancing plans, explored in detail in our previous note and RGL will provide an update on this in due course.
Year end |
Net rental income (£m) |
EPRA earnings* (£m) |
EPRA EPS* |
NAV**/ share (p) |
DPS |
P/NAV |
Yield |
12/22 |
62.6 |
34.1 |
6.6 |
73.5 |
6.60 |
0.29 |
31.4 |
12/23 |
53.7 |
27.0 |
5.2 |
56.4 |
5.25 |
0.37 |
25.0 |
12/24e |
53.5 |
25.0 |
4.8 |
56.4 |
4.80 |
0.37 |
22.9 |
Note: *EPRA earnings exclude revaluation movements, gains/losses on disposal and other non-recurring items. EPRA EPS is fully diluted. **NAV is EPRA net tangible assets per share.
FY23 DPS of 5.25p was covered by EPRA earnings. H223 DPS was 2.4p, following the Q223 rebasing, and FY24 DPS will partly depend on RGL’s chosen re-financing route. The Q124 DPS will be declared in May. Despite occupiers continuing to take a ‘wait and see’ approach to lease commitments, new lettings added £3.8m pa to rent roll, at a 7.1% premium to estimated rental value (ERV). However, with lease expiries of c £14m coming into FY23, contracted rent roll reduced by almost £3m, net of disposals, to £67.8m. There is very significant reversionary income potential in the portfolio, reflected in an occupancy rate of 80.0% and net equivalent yield of 9.9% compared with a net initial yield (NIY) of 6.2%. Rents have continued to modestly increase. RGL’s comprehensive in-house survey, conducted with its c 1,000 tenants, indicates a continuing return to the office and a level of utilisation of occupied space that is slightly above pre-pandemic levels. The portfolio sustainability metrics showed a strong improvement in the year and the proportion of the portfolio rated EPC C or better (a 2027 minimum regulatory requirement) is now 73%, up from 57% a year earlier. RGL is confident of meeting EPC targets through a combination of its rolling capex programmes, aligned with leasing events, and the disposal of remaining EPC D and E rated properties.
The like-for-like portfolio valuation decline of 9.3% was a stronger performance than that reflected in the 17.4% decline in the MSCI Rest of UK Office Index, benefiting from asset management initiatives. However, including the impact of gearing, and a c 2.5p/share reduction from an accounting change in respect of lease incentives, NAV per share was 23% lower at 56.4p (FY22: 73.5p) and LTV increased to 55.1% (49.5%), despite asset sales and debt reduction. As part of the company’s asset disposal programme aimed at reducing the LTV towards the target 40%, and enhancing portfolio quality, £25.0m (net of costs) of assets were sold in FY23 with the low NIY reflecting a high share of vacant properties. Since then, aggregate sales of £13.4m (before costs) have completed, in line with end-FY23 valuation. A further £130m of assets are identified for possible sale, including more than £20m at an advanced stage, but in current market conditions we expect only around half to complete this year. Explored in detail in our previous note, that would be insufficient to repay the £50m 4.5% unsecured bond that matures in August while maintaining collateral cover on secured borrowings. RGL is exploring the options for both the debt and equity refinancing of the bond, and ahead of this, there is no change to our EPRA earnings or DPS forecasts although we have reflected the accounting change in NAV.
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Research: Investment Companies
The energy developers segment of Premier Miton Global Renewables Trust’s (PMGR’s) holdings accounts for 30.2% of its portfolio (at 29 February 2024). These developers can generate significantly higher returns than other sections of the portfolio (eg yield plays and investment trusts) due to higher initial capital investment and development risk. PMGR’s portfolio remains a diversified approach to renewable energy asset investing, with a mix across technologies, geographies and corporate structures. Asset values in renewables have been under some pressure of late due to rising bond yields and, in some sectors, falling forward power price curves, though these are two trends that have arguably run their course.