In a trading update to 31 March 2020, BMO Real Estate (BREI) has said that its unaudited NAV per share at the period-end was 99.7 pence, representing a decrease of 2.8% 31 December 2019 of 102.6 pence and a NAV total return for the quarter of (1.6%)..BREI said the valuation certificate includes a ‘material uncertainty’ clause in-line with RICS guidance. This clause reflects the fact that there is less certainty in the valuations, given the unknown future impact that covid-19 might have on the market. Valuers are exercising a higher degree of caution and giving less weight to previous market evidence for comparison purposes.
BREI’s portfolio is allocated as follows: 42.6% industrial and logistics, 29.4% offices, 16.9% retail warehousing and 11.1% high street retail. The geographical exposure to the wider south east region is 77% across all sectors. The portfolio comprises 37 assets, and 122 tenants with the largest tenant representing 7.5% of the annual income. The vacancy rate by rental value is sub 3% and the average weighted unexpired lease term is in excess of 6 years.
Dividend – update pn the long-term sustainability of the quarterly dividend to follow
On 11 March 2020, BREI announced its quarterly dividend payment of 1.25 pence per share in respect of the financial year ended 30 June 2020 which was paid to shareholders on 31 March 2020. The impact that covid-19 will have on future rental receipts and the long-term sustainability of the quarterly dividend is under review and a further update in this regard will be made once the full picture has been established.
Rent Collection – 69% compared to 94% last year
BREI says that the majority of its tenants continue to trade through the lockdown. Nonetheless almost without exception UK businesses are experiencing unprecedented levels of disruption. The managers are engaging with tenants given the challenges faced by many to meet quarterly rental commitments at this time. The company says it is beginning to witness the impact of the trading restrictions put in place by the Government which has resulted in the closure of many of its retail units. The portfolio has no exposure to the hospitality and leisure subs-ectors and only two restaurant tenants, although it does have occupiers linked to these sectors through the supply chain.
The group has billed c.£3.3m of its quarter 2 rent due from 25 March to date and has collected 69 per cent of this amount (compared to 94 per cent for the same period last year). This percentage will increase as tenants with whom we have agreed monthly payment arrangements pay further instalments. The total quarterly rent amounts to c.£3.9m with further contractual billing dates during the course of April and May.
Outlook
“Given the uncertainty surrounding the current trading position of some of the company’s tenants, the recovery of income due under existing lease contacts remains the immediate focus. The company’s low void rate of circa 3% and relatively high and diversified weighting to the Office and Industrial sectors should provide some protection against these challenges but very few areas of the market will offer immunity to the wider downturn induced by the pandemic and associated global lockdown. We therefore continue to expect to see significant disruption to revenues over the near term, including the next quarter’s rent collection, even when the timetable for relaxation of lock-down measures becomes clearer.”
BREI: BMO Real Estate collected 69% of billed rent over quarter to 31 March