Regional REIT Cuts Debt to £243.8m Amid Portfolio Sales

Regional REIT Limited reported first-half 2026 results that show a decisive push to deleverage its balance sheet, reducing gross borrowings to £243.8 million and lowering the loan-to-value ratio to 38.5%. The company achieved this through £21.5 million in property disposals, a strategy CEO Stephen Inglis described as necessary to prepare for upcoming refinancing windows in 2027 and 2028. While the portfolio value stood at £526.7 million at the end of June, the company’s EPRA earnings for the period were £6.8 million, supporting a fully covered half-year dividend of 4 pence per share.

According to data provided in the earnings materials via GN markets/earnings (en-US), the company’s core occupancy rate fell to 82% from 86% at the start of the year, driven by asset sales and lease expiries. Despite this, management noted that actual occupancy improved by over 2% due to 26 new lettings, which generated £1.9 million in new annualized rental income and reduced void costs by £700,000. The firm remains on track for its full-year dividend target of at least 8 pence per share, citing income growth and cost reductions as key drivers.

Disposals target year-end LTV of 35%

The disposal program is central to Regional REIT’s financial strategy, with the aim of reducing debt ahead of significant refinancing dates. In addition to the £21.5 million sold in the first half, the company completed £4.3 million in sales immediately after the period ended. Eleven further assets, representing approximately £32 million in potential proceeds, are currently under contract or in late-stage negotiations.

If these transactions close before the year ends, total 2026 disposals could reach £58 million, fitting within the guided range of £50 million to £60 million. Management projects this activity will lower the year-end LTV to approximately 35%, a level the board deems appropriate for the current portfolio. Approximately £100 million of debt is expected to remain across Scottish Widows facilities after these sales are completed.

Refinancing costs expected to rise to 6%

Regional REIT is in discussions with Scottish Widows and other lenders regarding the refinancing of its existing debt facilities. The company anticipates that the new all-in borrowing costs will land in the low 6% range, representing an increase of about 3 percentage points over current rates. Documentation for this refinancing is expected to be finalized by the end of the first quarter of next year.

To offset the higher interest expense, management relies on the £700,000 reduction in void costs and additional rental income from new lettings. The strategy prioritizes removing non-income-producing buildings to lower holding costs, even if it temporarily pressures core occupancy metrics. This approach is designed to create a more resilient balance sheet ahead of the 2027 and 2028 debt maturities.

Leasing activity stabilizes rental income stream

Leasing activity provided a counterbalance to the occupancy decline, with 26 new lettings signed during the six-month period. These leases contributed £1.9 million to annualized rental income, including a notable 20-year lease with Glenair in Nottingham. While core occupancy dropped to 82%, management targets a recovery to 84% by year-end, supported by ongoing leasing efforts and the removal of underperforming assets.

The company attributes the difference between EPRA and actual occupancy figures to completed capital expenditure projects re-entering the calculation. By focusing on high-quality income sources and reducing voids, Regional REIT aims to maintain its dividend coverage while executing its debt reduction plan. The combination of asset sales and leasing income forms the basis of its forward-looking financial guidance.