19 May 2021

REGIONAL REIT Limited

("Regional REIT", the "Group" or the "Company")

Q1 2021 Trading Update, Improved Rent Collection

&

Increased Dividend

Regional REIT Limited (LSE: RGL), the regional real estate investment specialist focused on building a geographically diverse portfolio of income producing regional UK core and core plus office assets, is today pleased to announce a trading update for the year to date. This reflects higher rent collection, an increase in the dividend for the first quarter 2021 and a statement on the Group's outlook for the full year 2021, which continues to improve.

Q1 2021 Trading Update

The Group completed a number of lease renewals during the quarter, achieving rental uplifts of 6.4% versus the prior rent level. Retention rates remain high at 71.4% by area and 79.3% of units with lease renewals remain occupied¹.

The Group has exchanged on 12 new leases, totalling 71,598 sq. ft.. When fully occupied these new leases will provide £0.9m per annum ("pa") of rental income.

[1] For leases that came up for renewal from 1 Jan 2021 to 31 Mar 2021, including tenants that are currently holding over, lease renewals, and replacement tenants.

Rent Collection Update

As at 14 May 2021, the rent collection for Q1 rent due has increased to 96.1% from 90.4%, as previously announced on the 21 April 2021. The 96.1% comprises 93.8% rents received, monthly rents of 1.2% and agreed collection plans of 1.1%, which compares favourably with the rent received of 89.6% for the equivalent period in 2020.

Q1 2021 Increased Dividend

As an indication of the improving market conditions and ever stronger rent collection, the Company is pleased to declare that it will pay a dividend of 1.60 pence per share ("pps") for the period 1 January 2021 to 31 March 2021, an increase of circa 7% from the previous quarter's dividend of 1.50pps, (1 January 2020 to 31 March 2020: 1.90pps). The dividend payment will be made on 16 July 2021 to shareholders on the register as at 28 May 2021. The ex-dividend date will be 27 May 2021. The entire dividend will be paid as a REIT property income distribution ("PID").

Outlook

The Company's asset management team continues to actively engage with its highly diversified roster of tenants to ensure the maintenance of strong quarterly rent collections. The rent collections underpin the uninterrupted payment of the quarterly dividend, which has been increased. Alongside the rent collections, the asset management initiatives across the portfolio continue to be executed to ensure long-term capital value growth for shareholders.

Stephen Inglis, CEO of London & Scottish Property Investment Management, the Asset Manager of Regional REIT commented:

"As lockdown restrictions are relaxed across the UK we are beginning to experience an increasing engagement with potential occupiers. Our vibrant workspaces, such as our newly refurbished Coach Works in Leeds, which is occupied by FTSE 100 constituent St James's Place Wealth Management Group, are positioned to ensure Regional REIT remains the regional office space provider and brand of choice.

"As previously announced, the Board is convinced that the supply and demand balance of the office sector, together with the Asset Manager's specialist operating platform and experience, will continue to maximise total shareholder returns over the long term. As such, we continue to investigate the disposal of all other commercial property sectors, particularly the industrial sector, whilst tracking exciting acquisition opportunities which will continue to deliver on our strategy."

Portfolio as at 31 March 2021:

·   153 properties, 1,245 units and 874 tenants, totalling c. £734.7m² of gross property assets; with a gross rent roll of c. £62.8m pa

·    Offices (by value) constituted 83.5% of the portfolio (31 December 2020: 83.5%), Industrial sites 11.2% (31 December 2020: 11.1%), Retail 4.0% (31 December 2020: 4.1%), and Other 1.3% (31 December 2020: 1.3%)

·   England & Wales represented 82.7% (31 December 2020: 82.7%) of the portfolio with the remainder in Scotland

·   EPRA occupancy (by ERV) of 87.8% (31 December 2020: 89.4%); 31 March 2021 like-for-like (versus 31 March 2020) 87.0% (88.5%)

·    Average lot size c. £4.8m (31 December 2020: c. £4.8m)

·    Capital expenditure £2.0m (31 December 2020: £8.8m)

·   Net loan-to-value ratio c. 41.3%² (31 December 2020: 40.8%). Gross borrowings £365.9m (31 December 2020: £366.2m); cash and cash equivalent balances £62.7m (31 December 2020: £67.4m). Cost of debt (including hedging) of 3.3% pa (31 December 2020: 3.3% pa)

2 Gross property assets value based upon C&W valuations as at 31 December 2020, adjusted for subsequent acquisitions, disposals and capital expenditure in the period.

Summary of Activity in the Quarter to 31 March 2021:

The Group undertook several asset management projects, generating new lettings and maintaining and improving income through lease renewals and re-gears:

·   The Coach Works, Leeds - St James's Place Wealth Management Group Plc has renewed three leases totalling 18,253 sq. ft. for a further three years with the option to break in 2022. When combined these leases provide a rent of £456,325 pa (£25.00/ sq. ft.). This represents an increase of 35.9% against the previous rental income.

·    Ashby Business Park, Ashby De La Zouch - A lease agreement has been signed with Ceva Logistics Ltd. to renew an existing lease for 30,756 sq.ft. for a further five years to 2026 at a rent of £405,132 pa (£13.17/ sq. ft.) representing a rental uplift of 13.5% from the previously agreed five-year lease, which ended July 2019.

·   30-40 Hounds Gate, Nottingham - Following completion of refurbishment, ENSEK Ltd. has leased 15,278 sq. ft. at a rent of £270,865 pa (£17.72/sq. ft.). The new 10-year lease commenced in February 2021, with an option to break in 2026.

·    Oakland House, Manchester - A.M. London Ltd. has taken two new leases (16,390 sq.ft.) for 10 years with a five year break option. In aggregate, the rent amounts to £188,658 pa (£11.51/sq. ft.).

·   Oakland House, Manchester - HSS Hire Service Finance Ltd. has leased 21,852 sq. ft. of space for one year at a rent of £187,053 pa (£8.56/sq. ft.). Former leases to HSS Hire Group Services Ltd. terminated by agreement given threat of CVA with outstanding arrears almost collected in full.

·   Dovecote Business Park, Manchester - A new lease has been signed with Genpact (UK) Ltd. for 9,701 sq. ft. of space. The lease is for five years with a break option in 2024 at a rent of £160,133 pa (£16.51/sq. ft.) plus car parking of £12,000 pa.

·   Genesis Business Park, Woking - A rent increase has been agreed with Pattonair (Derby) Ltd.. The new rent of £77,750 pa for 4,016 sq.ft. (£19.36/sq. ft.) represents an increase of 9.5% on the previous rent.

·    Phoenix Business Park Linwood - Spark of Genius (Training) Ltd. has renewed its lease for a further five years at a rental income of £46,900 pa (£10.00/sq. ft.) on 4,690 sq. ft. of space. This represents an increase of 11.1% against the previous rental income.

·    Wakefield 41 Business Park, Wakefield - The Central Alliance Pre-Construction Services Ltd. renewed its lease for 3,461 sq. ft. for a further four years to 2025 with break options after one and three years at a rental income of £35,750 pa (£10.33/sq. ft.), which is an increase of 66.3% against previous rental income.

·    Elmbridge Court, Gloucester - A new lease has been signed with Nexstor Ltd. for 1,619 sq. ft.. The lease is for five years with a break option in 2024 at a rent of £29,952 pa (£18.50/sq. ft.).

·    Mandale Business Park, Durham - Sine Consulting Ltd. has renewed its lease for a further five years, with the option to break in 2024, at a rental income of £28,500 pa (£11.25 sq. ft.) on 2,534 sq. ft. of space. This represents an increase of 2.3% against the previous rental income.

·    The Genesis Business Centre, Birchwood, Warrington - Naue Geosynthetics Ltd. renewed two leases for a further three years with break options in 2021 and 2022 at a combined rental income of £26,250 pa (£14.80/ sq. ft.) on 1,774 sq. ft. of space.

Sales

Total disposals in the three months to 31 March 2021 amounted to £0.2m.

Subsequent Events post 31 March 2021:

Since the quarter end, the Group has successfully completed the following lettings and sales:

Lettings

·    Betchworth House, Redhill - Pentasia Ltd. has renewed its lease for 2,545 sq. ft. of space for a further five years with a break option in 2024 at a rental income of £57,263 pa (£22.50/sq. ft.).

·    Portland Street, Manchester - C & D Foods (Driffield) Ltd. renewed its lease for 2,607 sq. ft. for a further five years to 2026 with a break option in 2024 at a rental income of £55,384 (£21.24/ sq. ft.), which is an increase of 21.5% against previous rental income.

·   The Courtyard, Falkirk - 4,516 sq. ft. of previously vacant space has been let to Lion Safety Ltd.. The lease is for five years with a break option in 2024 at a rent of £38,386 pa (£8.49/sq. ft.).

·  Mochdre Commerce Park, Colwyn Bay - 7,714 sq. ft. of space has been let to City Plumbing Supplies Holdings Ltd. at a rent of £34,000 pa (£4.41/ sq. ft.) for a period of 10 years with the option to break in 2026.

Sales

·   Network House, Wolverhampton was sold on 7 April 2021 for £1.3m, reflecting a 10.4% uplift from the valuation as at 31 December 2020.

Forthcoming Events

Note: All dates are provisional and subject to change

- ENDS - 

Enquiries:

About Regional REIT

Regional REIT Limited ("Regional REIT" or the "Company") and its subsidiaries (the "Group") is a United Kingdom ("UK") based real estate investment trust that launched in November 2015. It is managed by London & Scottish Property Investment Management Limited, the Asset Manager, and Toscafund Asset Management LLP, the Investment Manager.

Regional REIT's commercial property portfolio is comprised wholly of income producing UK assets and comprises, predominantly of offices located in the regional centres outside of the M25 motorway. The portfolio is geographically diversified, with 153 properties, 874 occupiers as at 31 March 2021, with a valuation of £734.7m.

Regional REIT pursues its investment objective by investing in, actively managing and disposing of regional core and core plus property assets. It aims to deliver an attractive total return to its Shareholders, targeting greater than 10% per annum, with a strong focus on income supported by additional capital growth prospects.

The Company's shares were admitted to the Official List of the UK's Financial Conduct Authority and to trading on the London Stock Exchange on 6 November 2015. For more information, please visit the Group's website at www.regionalreit.com.

Cautionary Statement

This document has been prepared solely to provide additional information to Shareholders to assess the Group's performance in relation to its operations and growth potential. The document should not be relied upon by any other party or for any other reason. Any forward looking statements made in this document are done so by the Directors in good faith based on the information available to them up to the time of their approval of this document. However, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

ESMA Legal Entity Identifier ("LEI"): 549300D8G4NKLRIKBX73