Property group maintains dividend and focuses on quality regional offices

Property group Regional REIT maintained its dividend policy in what it described was a “robust year” despite making a pre-tax loss.

The regional real estate investment specialist, which has offices in Manchester overseeing properties throughout the North West, reported annual results for the year to December 31, 2020, today.

Revenues were static at £75.941m, compared with £75.645m the previous year.

However, the 2019 pre-tax profit of £26.254m became a pre-tax loss of £31,201m in 2020.

The accounts showed a negative change in fair value of investment properties of £54.793m, compared with a negative value of £3.513m in 2019.

However, a total dividend of 6.4p per share was announced, down from 8.25p per share the previous year.

The company said it recognises that the dividend is the major component of total shareholder returns. It added that, looking ahead, there is a clear aspiration by the board to maintain its record of uninterrupted quarterly dividend payments, especially through this period of continuing uncertainty.

This is predicated on the strength of the company’s balance sheet and the strong rent collections received throughout the year.

Since inception, the company has declared dividends amounting to 39.20p per share.

During the year, total rent collection, or within terms for 2020, was 98.2% of rent due, similar to the 99.4% of rent collected for the equivalent period in 2019. The rent roll remained stable at £64.2m (2019: £64.3m).

The group holds a diversified portfolio of 153 properties (2019: 160), 1,245 units (2019: 1,251) and 898 occupiers (2019: 904).

It made disposals amounting to £53.4m, net of costs, during 2020, and the proceeds were recycled into acquiring properties with an aggregate value of £42.4m, before costs, further diversifying the occupier base by standard industrial classification.

At the period end, 83.5% (2019: 79.9%) of the portfolio by market value was offices and 11.1% (2019: 13.7%) was industrial.

Post reporting period, the group reported continued momentum through active asset management, securing £1m of lettings across eight new lease agreements.

The Royal Bank of Scotland also agreed to extend its £55m facility for one year from June 2024 to June 2025. This will extend the group’s weighted average debt duration to 6.5 years from 6.4 years as at December 31, 2020, with the group cost of debt remaining unchanged at 3.3%.

Stephen Inglis, chief executive of London and Scottish Property Investment Management, the asset manager, said: “I am very pleased to report that the company achieved a robust performance in 2020 despite the effects of COVID-19 on working habits.

“With this in mind, we are pleased to have continued to deliver a strong dividend income for our shareholders, from a portfolio that is well positioned for the anticipated UK economic recovery.”

He said the quality and diversity of the group’s office properties, alongside the strength of the occupier register, were instrumental to this performance. This was evidenced by the strong rent collection with 98.2% of rent due for the year collected.

“One of our clearest differentiators continues to be our maintained dividend distributions, which are a significant component of total shareholder returns. During the difficult 12 months of 2020, where many REITs cancelled or suspended dividends for a time, we achieved uninterrupted distributions, paying out a total of 6.4pps for 2020, which was fully covered by earnings.”

He said the group has taken significant steps to capitalise on the changing landscape in its market by tilting its focus to take full advantage of the mispricing that it is seeing in quality regional offices.

And he added: “We look forward to updating shareholders on further progress as we continue to reposition the portfolio to take full advantage of our active pipeline of compelling regional office opportunities.”