Alternative Income REIT (AIRE) has committed to paying a quarterly dividend for its financial year ending 30 June 2020.
The group (previously named AEW UK Long Lease REIT – AEWL), which owns a diversified portfolio of 19 UK commercial property assets let on long leases, said it expected to continue paying a quarterly dividend but warned a prolonged economic downturn due to covid-19 may impair its previously announced aggregate dividend target of 5.5 pence/share for the year ending 30 June 2020.
In the announcement the company said: “Given the current uncertainty over the economic impact and duration of the covid-19 pandemic, the board draws comfort from the company’s high quality portfolio, strong financial position, the recent rent collection levels and diverse tenant base, and it expects the company to continue paying an attractive quarterly dividend even if a prolonged economic downturn results in some potential impairment from the company’s previously announced aggregate dividend target of 5.5 pence/share for the year ending 30 June 2020.”
Rent collection
As at 23 April 2020, the group had received 82% of the rents that were due on the March 2020 rent quarter day in respect of forthcoming quarter, which represents 64% of the group total rent roll. The remainder of the rents remain due as the collection dates fall outside of the usual English quarter days. T
AIRE said it was providing proportional assistance to those tenants whose operations are being materially impacted by near term cash flows woes.
The company is in discussion with tenants (which represent 39% of the rent roll) that include conversions to monthly or payments in arrears or deferral and stage repayments over defined periods.
Valuation and net asset value movement
The group made the announcement alongside a net asset value (NAV) update for the quarter to the end of March 2020. The company’s unaudited NAV was £70.86m, or 88.024 pence per share as at 31 March 2020, a 7% fall in the quarter.
The value of its portfolio fell by 3.73% in the quarter to £108.78m, while unaudited EPRA earnings per share for the quarter decreased by 16.7% to 1.268 pence per share, which represents dividend cover for the quarter of 92.2%.
Covenant headroom and liquidity
As at 31 March 2020, the group’s gearing measured by its loan to gross asset value ratio (LTV) was 37.7%. It has a £41m fixed interest loan facility with Canada Life Investments that has been fully drawn since January 2019.
The group has headroom both on its LTV and interest cover tests; the rental income and asset valuations of the 17 properties secured to Canada Life would need to fall by 32% and 31% respectively before testing the loan covenants.
The weighted average interest cost of the group’s facility is 3.19% and the facility is repayable on 20 October 2025. The company has a medium term target for its LTV of 30%.
As at 31 March 2020, the group had £4.35m of cash on its balance sheet.
Cost savings
As announced on 25 February 2020, the company made changes to its service providers in order to reduce the its recurring annual overhead to around half of its historic level, the effect of which will start to be realised in the current quarter, it said.
AIRE said there had been good progress in reorganising the group’s advisors and service providers. It added that it was considering strategic options to expand the company, including the potential appointment of a manager who would introduce new assets to the group’s portfolio, and to deliver further shareholder value.
AIRE : Alternative Income REIT commits to quarterly dividend