Property group eyeing share buybacks and shift to office market

Stephen Inglis

Property company Regional REIT said it could consider a share buyback, reflecting the undervaluing of its stock by the market.

It also announced a shift to office properties in main regional centres.

In a trading update for the third quarter to September 30, the regional real estate investment specialist, which has offices in Manchester overseeing properties throughout the North West, also announced dividend payments.

It said it will pay a dividend of 1.50p per share for the period July 1, to September 30, 2020, as well as a dividend of 6.4p for the full year 2020.

Following an internal strategic review, it said, over the long term, the board is convinced that the supply and demand imbalance of the office sector, coupled with the asset manager’s specialist operating platform and experience, will maximise total shareholders returns.

For the foreseeable future, the board has decided that the company will focus its investment solely on properties in the office sector in the main regional centres of the UK outside of the M25 motorway.

The company will seek to exit all other commercial property sector investments, including its industrial and remaining retail sites, while promptly recycling the capital into regional offices.

It said this will ensure the group is able to maximise its investment objectives of delivering shareholders an attractive and sustainable income focused total return over the long term.

The board also said it constantly monitors the company’s share price, and as part of the strategic review, the board also considered the company’s recent share price discount rating against the latest net asset value.

The company’s financial position remains strong, with a cash balance of £71m, as at September 30.

Where the board considers it to be accretive to do so, the company may undertake a buyback of its own shares using proceeds from asset sales.
However, the company said it will take a balanced approach, continuing to seek to identify attractive new acquisitions which present long-term shareholder value.

Looking ahead, it said the business model continues to remain resilient, despite the current uncertain economic outlook.

The company’s asset management platform continues to actively engage with its diversified occupiers to ensure strong rent collections, while maintaining the momentum of ongoing asset management initiatives to increase capital values.

These attributes continue to underpin the company’s uninterrupted quarterly dividend distributions and will ensure the growth of capital returns to shareholders over the long-term.

Stephen Inglis, chief executive of London & Scottish Property Investment Management, the asset manager of Regional REIT, said: “The conclusion of the board’s internal strategic review to dispose, in due course, of the remaining non-office assets in order to focus investment in the regional office market, will allow the company to take full advantage of the current sector inefficiencies being observed and that I outlined in detail at the company’s recent capital markets day.

“It is envisaged that the company’s decision to focus solely on quality office assets for the foreseeable future will drive considerable value creation for shareholders by leveraging the manager’s key expertise whilst also serving as a major factor of differentiation for the company from existing London listed REITs.”

He added: “In light of the company’s performance throughout COVID-19, the board is of the opinion that the market is undervaluing the company.

“Should a persistent and significant share discount rating be observed, the board will take a balanced approach to the buyback of the company’s own shares where it is considered accretive to do so, using proceeds from asset sales, versus the opportunities in the regional office market which offer income and growth for our shareholders over the long term.”

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