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Newbie Regional Reit looks to pay sector-leading dividend

Investor interest in the regional property market is growing fast, as is this real-estate investment trust
April 20, 2016

Regional Reit (RGL) operates in the regional commercial market, and while it was incorporated in June last year, the shares were not admitted to trading until last November, when the first acquisition was made. As such, there are no comparative numbers. The company's properties are managed by London & Scottish Investments, while Toscafund Asset Management acts as its investment manager. It has already paid an early dividend and, based on the 100p issue price, Regional Reit is targeting a dividend yield of 7-8 per cent per year.

IC TIP: Buy at 106p

Amalgamating two existing funds created by the managers has given the combined entity an investment portfolio of 120 regional properties comprising more than 710 units and 530 tenants, mostly offices and industrial properties. At the end of the period, the investment portfolio was worth £404m, up from £386m last June. Management cites evidence that market weakness in London is driving fresh investment into the regions.

Of the £250m deal pipeline outlined at the time of the IPO, purchases of £121m have been made at an average yield of 9 per cent. But there has been considerable activity after the reporting period, and property assets at the end of March had grown to around £500m. Fresh finance was also secured, so that net lending of £105m at the December year-end had risen to around £202m.

Analysts at Peel Hunt are forecasting adjusted net asset value of 120p for the current year (from 108p in 2015).

 

REGIONAL REIT (RGL)
ORD PRICE:105.75pMARKET VALUE:£290m
TOUCH:105.5-106p12-MONTH HIGH:110pLOW: 99p
DIVIDEND YIELD:0.9%DEVELOPMENT PROP:nil
DISCOUNT TO NAV:2%
INVESTMENT PROP:£404mNET DEBT:35%

Full-year to31 DecNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015*10821.17.71**
% change----

*Covers the period from 22 June 2015 to 31 December 2015

**Paid on 15 April