Regional REIT : Trading Update, Dividend and Outlook Statement

17 May 2018

Regional REIT Limited

Trading Update, Dividend Announcement and Outlook Statement

Continued steady progress of the business

Q1 2018 dividend 1.85pps

Regional REIT Limited (LSE: RGL) ('Regional REIT', 'the Group' or 'the Company'), the UK regional office and industrial property focused REIT, in advance of its Annual General Meeting today, announces its trading update for the year to date, its dividend declaration for the first quarter of 2018, and provides a statement on the Group's Outlook for the full year 2018.

Stephen Inglis, Chief Executive Officer of London & Scottish Investments Limited, the Asset Manager commented: 'The Group has maintained a good pace of lettings in the first quarter of 2018, coupled with steady interest in both its office and industrial sites. This, together with our granular approach to asset management, further enforces our confidence in our ability to grow income and increase occupancy.

'As always, whilst we remain focused onorganic development within our portfolio, the Company remains opportunistic and will continue to explore opportunities to further exploit the strong presence we have in the regions.'

Trading Update

The Group has continued to pursue its strategy of providing investors with an attractive return on a sustained and consistent basis from investing in and managing, predominantly, offices and light industrial property in the main regional centres of the UK outside of the M25 motorway.

Since 1 January 2018 to date, the Group has exchanged on 16 new leases, totalling 46,171 sq. ft.; when fully occupied these will provide approximately £0.6m pa of rental income. Over the period 38 leases came up for renewal, totalling 156,309 sq. ft.. Lease renewals, and the acquisition of new replacement tenants, c.69% (by value).

Capital expenditure year-to-date was £2.9m net.

Portfolio as at 31 March 2018:

· 160 properties, 1,339 units and 996 tenants, amounting to c. £727m of gross property assets; a contracted rent roll run-rate of c. £61.7m pa.

· Offices (by value) were 66.9% of the portfolio (31 December 2017: 67.3%) and industrial sites 23.4% (31 December 2017: 23.3%); England & Wales represented 77.2% (31 December 2017: 77.6%) of the portfolio.

· Occupancy (by value) increased to 85.7%, versus 85.0% at 31 December 2017; 31 March 2018 like-for-like (versus 31 December 2017) occupancy was in-line at 85.7% (85.7%).

· Average lot size remained at c. £4.5m (31 December 2017: £4.5m).

· Net loan-to-value ratio c. 44% (31 December 2017: 45.0%). Gross borrowings £378.8m; cash and cash equivalent balances £59.8m. Cost of debt (including hedging) of 3.8% pa (31 December 2017: 3.8% pa).

Active asset management activity highlights:

· Building 2, Aylesbury- following the completion of refurbishment works, the first floor was let to Agria Pet Insurance Ltd. (13,832 sq. ft.) for 10 years with no break option. The annual rent is £235,000. The letting was completed in advance of the completion of the Group's £3.36m refurbishment scheme completing in April 2018.

· Ashby Park, Ashby De La Zouch- the property was purchased as part of the Conygar portfolio in 2017 and is now fully let following the completion of two lettings at the beginning of March 2018 at Ceva House: a 5-year lease for 3,117 sq. ft. let to Jigsaw Solutions Ltd. at £95,315pa, and a 3-year lease for 7,232 sq. ft. let to Dunwoody Airline Services Ltd. at £46,743pa.

· The Point, Glasgow- regear of existing lease to The University Court of the University of Glasgow completed for 16,016 sq. ft. for a further 10-year term, subject to a break option at the fifth anniversary, achieving a 31.5% uplift in headline rent to £112,122pa.

· Tolvaddon Business Park, Camborne- regear of two existing leases for units 1 and 2 North Crofty to Lumiradx Care Solutions UK Ltd. totalling 5,110 sq. ft for a 5-year term. The leases provide a combined rental income of £48,545pa, indicating a 7.9% uplift in headline rent. In addition to the aforementioned regears, Lumiradx Care Solutions UK Ltd. signed a lease for an additional 4,587 sq. ft. of space on a 5-year lease at an annual rent of £43,577. The letting of this previously vacant unit has resulted in an increase in occupancy (by value) from c.75% (31 December 2017) to c.92% (31 March 2018). This property was acquired in December 2017.

Acquisitions

On 29 March 2018, Regional REIT completed the acquisition of an office building at Port Solent as part of the Northwood Investors transaction. The acquired space within the One Port Way development totals 62,379 sq. ft. across three floors. It is let to Ageas Insurance Ltd. until 2026 at a rent of £0.4m, which represents a yield on purchase price (assuming standard costs) of 8.05%. The site underwent comprehensive refurbishment prior to its acquisition.

Since 31 March 2018, Regional REIT has also announced the acquisition of a £35.2m portfolio from Kildare Partners, which is expected to provide a net income of c.£3.1m pa and equates to a net initial yield of 8.4%, further utilising the proceeds of the fundraise the Group undertook in December 2017. The portfolio consists of five regional offices and one office/distribution property located in Telford, Rotherham, Macclesfield, Dundee, Chelmsford and Bedford. The assets total circa 320,000 sq. ft. let to 12 tenants including NHS Property Services Ltd., Swiss Precision Diagnostics, Capgemini, Elior UK Services Ltd., Royal Bank of Scotland plc. and The Scottish Ministers. Completion will take place towards the end of June 2018.

Sales

There were a number of disposals by the Group in the first quarter of 2018 with disposal amount (net of costs) totalling £18.2m. All sales were agreed in H2 2017 averaging 19.3% above 30 June 2017 valuation.

· CGU House, Leeds- sold in February 2018 at a sale price of £9.58m.

· Lonsdale House, Birmingham- sold in January 2018 at a sale price of £2.85m, reflecting a net initial yield of 4.8%.

· St Georges House, Cheltenham- having successfully completed its business plan, Regional REIT completed the sale of the property in February 2018 at a sale price of £2.3m, reflecting a net initial yield of 8.2%

· Unit 6 Centrepoint, Manchester- sold in January 2018 at a sale price of £1.98m, reflecting a net initial yield of 5.9%. This property was purchased as part of the Rainbow portfolio in March 2016.

· St Nicholas Chambers, Newcastle Upon Tyne- having successfully increased occupancy to 100% following the completion of the letting of the last remaining unit to The Liquor Co. Ltd., the Group completed the sale of the property in January 2018 at a sale price of £1.5m, reflecting net initial yield of 8.7%.

· Antler Complex, Morley- The Group completed a part sale during the quarter at a sale price of £0.2m.

In addition, there has been a number of smaller lettings and there remain many potential deals to be completed.

Outlook

The Group continues to benefit from a good performance in the industrial and office occupancy markets of the UK's regions. Management expects trading to be in-line with its expectations for 2018 and remains confident as to the Group's ability to grow income, decrease void rate, and increase occupancy in 2018. This is underpinned by Group's active asset management which is delivering results with both recent acquisitions and the established portfolio.

First Quarter 2018 Dividend Declaration

The Company will pay a dividend of 1.85 pence per share ('pps') for the period 1 January 2018 to 31 March 2018 (1 January 2017 to 31 March 2017: 1.80 pps). The dividend payment will be made on 13 July 2018 to shareholders on the register as at 25 May 2018. The ex-dividend date will be 24 May 2018. The dividend will be paid as 1.85 pps as a REIT property income distribution ('PID').

It is the Company's intention to pay three quarterly dividends at approximately this level in relation to the financial year 2018, of which this is the first, and then a fourth quarter dividend to at least manage compliance with the REIT distribution requirement.

The level of future payment of dividends will be determined by the Board having regard to, among other things, the financial position and performance of the Group at the relevant time, UK REIT requirements and the interests of Shareholders.

Enquiries:

About Regional REIT

About Regional REIT Regional REIT Limited (LSE: RGL) is a London Stock Exchange Main Market traded specialist real estate investment trust focused on office and industrial property interests in the principal regional locations of the United Kingdom outside of the M25 motorway.

Regional REIT is managed by London & Scottish Investments, the Asset Manager, and Toscafund Asset Management, the Investment Manager, and was formed by the combination of two existing funds previously created by the Managers as a differentiated play on the expected recovery in UK regional property, to deliver an attractive total return to Shareholders and with a strong focus on income.

The Group's investment portfolio, as at 31 December 2017, was spread across 164 regional properties, 1,368 units and 1,026 tenants. As at 31 December 2017, the investment portfolio had a value of £737.3m and a net initial yield of 6.5%. The weighted average unexpired lease term to first break was 3.5 years.

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.

LEI: 549300D8G4NKLRIKBX73

www.regionalreit.com