One of the key attractions of Regional Reit (RGL) is that because it offers very affordable rents – £13 per sq ft for office and £3.74 for industrial space – there is considerable reversionary income yet to be crystallised. So while the net initial yield on the portfolio is 6.7 per cent, if rents were marked to market this would jump to 9.2 per cent.
Gross rental income in the six months to June grew by 17 per cent and would have been higher without revenue lost from refurbishments and a number of tenants moving out. As a result of these, occupancy rates fell from 86.2 per cent at the start of the year to 84.1 per cent. However, expiring leases provides the opportunity for refurbishment and re-letting at significantly higher levels. A good example of this can be seen at 9 Portland Street in Manchester, where rental value has risen by 44 per cent since refurbishment.
A jump in the portfolio valuation from £501m a year earlier to £640m reflected the £129m acquisition of assets from Conygar (CIC) comprising 31 office, retail, leisure and industrial properties. The net loan-to-value ratio fell from 49 per cent to 47 per cent but was nearer 41 per cent when excluding the zero dividend preference shares which came with the Conygar deal.
Analysts at Peel Hunt are forecasting adjusted net asset value at the December 2017 year end of 109.7p per share, up from 106.9p a year earlier.
REGIONAL REIT (RGL) | ||||
ORD PRICE: | 100.25p | MARKET VALUE: | £301m | |
TOUCH: | 100.25-101p | 12-MONTH HIGH: | 111p | LOW: 100p |
DIVIDEND YIELD: | 7.7% | DEVELOPMENT PROPERTIES: | nil | |
DISCOUNT TO NAV: | 6% | NET DEBT: | 82% | |
INVESTMENT PROPERTIES: | £640m |
Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p*) |
2016 | 107 | 5.9 | 2.2 | 3.5 |
2017 | 107 | 16.2 | 5.6 | 3.6 |
% change | - | +172 | +155 | +3 |
Ex-div: | 07 Sep | |||
Payment: | 13 Oct | |||
*Dividends paid quarterly. XD and payment dates refer to second-quarter dividend of 1.8p a share |