Stepping back from the numbers, we have always had faith in Regional’s management team and their knowledge of the markets in which they operate. A decision to concentrate on assets widely perceived as unpopular brings the chance of bargain prices as other investors steer clear; the trust’s managers have the skill to spot potential that others miss and to realise it via their policy of active improvement of the properties they buy and their ability to find tenants.
This is what they plan for the newly acquired portfolio, among which they have identified “extensive active asset management opportunities” to “unlock the potential” for higher rents in time. The current annual rent from the portfolio of £21.9m makes the headline initial yield 9.3pc, or 7.8pc after running costs.
Regional offices constitute 93.3pc by value of the newly acquired properties; the small number of industrial, retail and residential assets will be put up for sale.
The fund described the portfolio as “highly complementary to the existing asset base” and said it “aligns well with the expertise and experience of the asset manager”. It “increases diversification of the group’s portfolio by geography, tenant and income streams”, it added.
As part of its aim to sell all assets other than offices, it announced late last month the sale of a portfolio of industrial assets for £45m. “The sale was completed at 7.5pc above the company’s Dec 31 2020 valuation and at an uplift of 18pc from the acquisition price after capital expenditure costs,” it said.
In Questor’s view, Regional offers the appealing combination of a coherent and clearly articulated strategy, the management skill to implement it and evidence that it is already bearing fruit.
Questor says: hold
Ticker: RGL
Share price at close: 87.8p
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