Regional REIT (LON:RGL) executives told investors its 2025 full-year performance was shaped by a challenging operating backdrop and a slower-than-expected leasing market, but said the company made progress on key strategic priorities including asset sales, refinancing, and portfolio repositioning.
Chief Executive Officer Stephen Inglis said the year was “difficult” amid higher interest rates, uncertainty from macroeconomic and geopolitical conditions, and headwinds facing UK businesses. He added that the environment contributed to slower leasing than management had anticipated at the start of 2025. Despite those conditions, management highlighted progress in reducing debt, executing disposals, and investing in refurbishments aimed at improving occupancy, rents, and EPC performance.
2025 results: earnings cover, occupancy pressure, and higher investment
Portfolio occupancy also declined. EPRA occupancy ended 2025 at 76%, slightly down year-over-year, with management attributing the decline largely to three large tenant breaks exercised during the year.
Management said it increased capital expenditure as part of its repositioning strategy. CapEx rose to GBP 11.8 million in 2025 from GBP 8.2 million in 2024. Despite a slower leasing market, the company completed 64 new lettings at rents 3.9% ahead of ERV, which management presented as a sign of rental growth for “the right product.”
Disposals and debt reduction: sales program accelerates
A central theme of the call was the company’s strategic sales program, which executives said was essential to reducing debt and mitigating void costs. Inglis said Regional REIT sold 18 assets in 2025 for GBP 51.6 million, exceeding the company’s GBP 40 million to GBP 50 million target range. Gross borrowings decreased to GBP 266.2 million, and GBP 50.5 million of debt was repaid during the period. Loan-to-value fell to just over 40% from just over 42%, despite a valuation decline.
Management said momentum continued after year-end, with five additional sales completed for GBP 12.3 million and a further 14 disposals “well advanced” (contracted, in solicitors’ hands, or with terms agreed) totaling GBP 29 million.
Inglis emphasized that many 2026 disposals are expected to be non-core and underperforming, with low occupancy. He said the assets sold to date averaged 22% occupancy, while those targeted for completion by mid-year averaged 27%. On completion, management said the disposal of these assets would improve net income by GBP 2.1 million, reflecting the drag from landlord void costs.
Addressing investor questions about why some income-producing assets were sold, Inglis said certain disposals—such as a Bedford asset that was “end of business plan”—were completed to help position the company to refinance its banking facility.
Refinancing, hedging, and the next debt milestone
Finance Director Alistair Hewitt said the company refinanced its syndicated facility (previously with RBS, Bank of Scotland and Barclays) with Santander replacing Barclays. The facility now expires in December 2028, extending from its prior August 2026 maturity. Hewitt also said post year-end debt repayments totaled GBP 11.5 million, including GBP 7.8 million already repaid and a further GBP 3.7 million “about to” be repaid.
On hedging, Hewitt said existing hedging ran to August 2026, but new hedging has been entered into covering August 2026 through December 2028. He said the new hedging carries a strike rate of 3.56%, compared with a blended 0.98% previously shown, reflecting higher market rates. He also said an over-hedge position at year-end (101% hedged) had been rectified, returning the facility to fully hedged.
Looking ahead, management said focus is shifting to refinancing the Scottish Widows and Aviva facility maturing in December 2027. Hewitt said the company may need to reduce LTV in advance of that refinancing and has begun initial discussions with existing lenders, with an aim to refinance by “this time next year,” while noting that refinancing early could increase costs because it is a fixed-rate facility.
Valuation movement driven by income loss, not yield shift
Asked about the valuation decrease in 2025, Inglis said yields had stabilized at both the June and December valuation points. He attributed the valuation decline to changes in income rather than market yield deterioration, pointing to the three large tenants lost during 2025. Inglis said those three tenants accounted for just over 50% of the valuation change.
In the metrics review, management cited total assets of GBP 552.2 million at year-end, with the reduction driven by sales and a “small proportion” from a 5% like-for-like valuation decrease. The company also referenced a small acquisition in Leeds, described as the “final piece of a jigsaw” on a city center development site that gives it control of the full site.
Dividend outlook, CapEx targets, and market commentary
For 2026, management said it is targeting a “prudent” dividend of 8 pence per share. Inglis said the board maintained the 10 pence dividend in 2025 despite income being impacted by the tenant breaks, effectively paying out above the level that would have been 90% of PID if income had held up. He said paying above PID limits cash retained for reinvestment, and that retained cash will be redeployed into accretive CapEx.
On the 2026 CapEx program, Inglis said spending is likely to be in line with 2025—around GBP 10 million to GBP 12 million—as the company continues to create “let ready” space. He said the company targets returns of 1.5 times capital deployed, and aims for a 10% income return from CapEx, while noting some spending can be defensive rather than value-add.
The company also described its focus on improving EPC ratings and ESG positioning. Inglis said more than 60% of the portfolio is now EPC A or B, with a further 25% rated C. He argued that moving from C to B or A can be achieved with relatively modest investment, citing measures such as LED lighting upgrades and replacing gas boilers with electric systems. He added that many properties rated D/E and below are included in the sales program.
In a market update, Inglis and the team reiterated their view that a supply-demand imbalance in regional offices is likely to strengthen due to a lack of new construction starts, and emphasized “flight to quality” dynamics. He said the company’s refurbished space has typically achieved rents of GBP 20 to GBP 30 per square foot, versus an average portfolio rent of GBP 15.60, and expressed conviction that rents for good-quality Grade A space could move above GBP 30 per square foot over the medium term.
Property Investment Director Simon Marriott said the pool of buyers for disposals is “much deeper” than a year ago, dominated by local property companies and family trusts, mostly using equity rather than debt. He also said recent sales processes have seen best-and-final offer dynamics and described buyer interest in change-of-use outcomes such as residential (including student and build-to-rent), budget hotel conversions, and in some cases redevelopment into industrial uses.
Closing the presentation, Inglis said the company is “cautiously optimistic” based on the current level of sales and leasing activity, while warning that prolonged geopolitical conflict and energy price impacts could affect tenant decision-making and operating costs—underscoring, in his view, the importance of continuing the sales and leasing strategy.
About Regional REIT (LON:RGL)
Regional REIT Limited is a UK based real estate investment trust, focused on building a large geographically diverse portfolio of income producing regional properties outside of the M25 motorway.
Regional REIT pursues its investment objective by investing in, actively managing and disposing of regional core property and core plus property assets. It aims to deliver an attractive total return to its shareholders, with a strong focus on income supported by additional capital growth prospects.
