Regionally-focused office and industrial group Regional REIT has reported strong growth in earnings in full-year results but NAV per share dipped a fraction due mainly to the impact of new equity issuance and debt refinancing costs.
The group reported EPRA earnings per share of 8.1p, up from 7.7p last year, while EPRA NAV per share dipped from 106.9p to 105.9p. The drop in NAV came despite 2.6% like-for-like growth in the value of the portfolio.
Regional REIT blamed the drop on the impact of two tranches of equity issuance and refinancing costs. Acquisition costs also affected the NAV performance.
In 2017, the group made acquisitions of £228.1m with an average net initial yield of 7.9%. This included three major portfolio acquisitions – the £129m purchase of a multi-asset portfolio from Conygar in March and a further two portfolio buys in December for £88.3m following a £73m capital raise.
The overall size of the portfolio has now grown to £737.3m, from £502.4m last year.
For 2018, the group said it would continue to pursue asset management initiatives to grow its income stream and enhance values.
Stephen Inglis, chief executive officer of Regional REIT’s asset manager London & Scottish Investments (LSI), said: “It has been a very active period for the group. During our second full year as a listed entity, we acquired three major portfolios, successfully raised funds in a difficult market, improved our debt terms, and strengthened our management team and regional network.
“All this while continuing to offer shareholders one of the best yields in the sector. This momentum demonstrates our commitment and belief in the strategy laid out at IPO. Whilst we remain alert to increasing economic uncertainty we remain confident in the strength of our business model.”
The group strengthened its senior team by the appointment of Simon Marriott at LSI, with Regional REIT as his primary responsibility, and subsequent hire of Frances Daley in February as a non-executive director.
Analysts Peel Hunt responded positively to the results, as it retained a BUY rating and commented that “the company offers one of the highest dividend yields, at a meaningful discount to NAV and an income stream that is truly diversified by location, asset type and tenants”.