Regional REIT weighs elevating money at a ‘materials low cost’ to pay debt

Regional REIT shares nosedived by greater than a 3rd on Tuesday after the London-listed property investor flagged a possible fairness fundraise in efforts to finance its money owed.

The FTSE All-Share business property investor, which primarily owns places of work exterior of London, advised shareholders on Tuesday it may choose to boost round £75million from buyers at a ‘materials low cost’ to its present share worth.

Regional REIT shares have been down 31.8 per cent to 13.7p in early buying and selling, bringing losses over the past yr to nearly 75 per cent.

It additionally sits on a 73.5 per cent low cost to internet asset worth, in keeping with Association of Investment Companies information, in comparison with a median low cost to NAV of 24.6 per cent within the UK Commercial Property funding belief sector.  

Regional REIT invests in a business property portfolio comprising primarily places of work exterior of the M25 

The funding belief has beforehand stated it was exploring refinancing choices, together with each debt and fairness, given its publicity to £50million in retail bonds set to mature in August.

Regional REIT offloaded £26.1million value of belongings in 2023 partly to drive down its money owed.

But analysts at Peel Hunt estimate the belief might want to line up greater than £175million value of disposals – roughly 1 / 4 of its whole portfolio – to scale back its loan-to-value (LTV) ratio under its 40 per cent goal from its present LTV of 55 per cent.

Peel Hunt stated: ‘While progress is being made, such a quantum of gross sales appears unlikely within the close to time period, in our view.

‘New debt is more likely to be costly however, extra importantly, it doesn’t scale back the LTV.

‘We imagine the optimum long-term answer is a big disposal programme mixed with new fairness.’

It follows a torrid 2023, which chief govt of its asset supervisor London and Scottish Property Investment Management, Stephen Inglis, described as ‘one of the vital difficult years for REITs in current reminiscence’.

London-listed actual property investments trusts are struggling underneath the load of low belongings, weak share costs and excessive reductions, resulting in an uptick in merger and acquisition exercise since 2019.

Regional REIT was compelled to slash its dividend final yr as its portfolio valuation fell from £790million to £701million, and its gross annualised lease roll fell from just below £72million to roughly £68miillion.

Inglis stated final month: ‘The LTV continues to be a key focus of the Board and the administration have a plan to scale back LTV to the long-term goal of 40 per cent by means of selective gross sales and reimbursement of debt.

‘The senior debt is 100 per cent mounted, swapped or capped and won’t exceed 3.5 per cent. 

‘The firm is actively exploring a variety of refinancing choices for the retail bond given its near-term maturity date.’