BMO Real Estate Investments Ltd Trading Update & Net Asset Value
20 Abril 2020 - 01:00AM
UK Regulatory
TIDMBREI
To: Company Announcements
Date: 20 April 2020
Company: BMO Real Estate Investments Limited
LEI: 231801XRCB89W6XTR23
Subject: Trading Update and Net Asset Value
Background
BMO Real Estate Investments Limited ("BREI" or the "Group") provides an update
on trading and the net asset value as at 31 March 2020 against the backdrop of
the evolving COVID-19 pandemic, as well as the actions being undertaken by the
Investment Manager (the "Manager"), Our priorities at this challenging time are
the wellbeing of everyone involved with the Group, our ability to provide
support to our tenants where it is most needed and preserving the financial
strength of the Group for shareholders.
Operations
The Manager has robust business continuity plans to ensure it can maintain
operations in these challenging times. Although a work from home policy has
been introduced across all geographies the asset and property managers are in
regular contact with tenants, providing support where felt necessary. They are
also ensuring that essential services are maintained across the portfolio.
The Managers will consider assistance regarding concessions or the future
phasing of rent where appropriate. The Managers are also focused on reducing
operational costs and service charges in addition to non-essential capital
expenditure. Our hope is that our support, in addition to that already
announced by the Government, will help place our tenants in a position to
resume normal operations as swiftly as possible when conditions allow.
Net Asset Value ('NAV')
The unaudited NAV per share of BREI as at 31 March 2020 was 99.7 pence. This
represents a decrease of 2.8 per cent from the NAV per share as at 31 December
2019 of 102.6 pence and a NAV total return for the quarter of -1.6 per cent.
The NAV is based on the external valuation of the Group's property portfolio
prepared by Cushman & Wakefield. 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 real estate market. Valuers are therefore
exercising a higher degree of caution and giving less weight to previous market
evidence for comparison purposes.
The NAV is calculated under International Financial Reporting Standards
("IFRS").
The NAV includes all income to 31 March 2020 and is calculated after deduction
of all dividends paid prior to that date. Further analysis of the movement in
the NAV and portfolio details are included at the end of this statement.
Share Price
The share price was 69.2 pence per share at 31 March 2020, which represented a
discount of 30.6 per cent to the NAV per share announced above. The share price
total return for the quarter was -15.1 per cent. The volatility of the market
has further impacted the share price during April 2020 and as at 17 April 2020
the shares were trading at around 50 pence per share, a discount of 50 per cent
to the NAV as at 31 March 2020.
Portfolio Composition
The Company benefits from a defensive, balanced asset base allocated 42.6 per
cent Industrial & Logistics, 29.4 per cent Offices, 16.9 per cent Retail
Warehousing and 11.1 per cent High Street Retail. The geographical exposure to
the wider South East region is 77 per cent across all sectors. The portfolio
comprises 37 assets, and 122 tenants with the largest tenant representing 7.5
per cent of the annual income. The vacancy rate by rental value is sub 3 per
cent and the average weighted unexpired lease term is in excess of 6 years.
Rent Collection
The Company has a highly diverse tenant base, the vast majority of whom
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. We are beginning to witness the impact of the
trading restrictions put in place by the Government which has resulted in the
closure of many of our retail units. The portfolio has no exposure to the
hospitality and leisure subsectors and only two restaurant tenants, although it
does have occupiers linked to these sectors through the supply chain.
The Group has billed c.GBP3.3m 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.GBP3.9 million with further contractual billing dates
during the course of April and May.
Cash and Borrowings
The Group has approximately GBP13.5 million of available cash and an undrawn
revolving credit facility of GBP20 million. The Group's GBP90 million long-term
debt with Canada Life and the undrawn loan facility with Barclays do not need
to be refinanced until November 2026 and March 2025 respectively. As at 31
March 2020, the Group's LTV was 25.1 per cent and there was significant
headroom under its actual and projected debt covenants.
Dividend
On 11 March 2020, the Company announced its quarterly dividend payment of 1.25
pence per ordinary 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.
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 c3% 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 lockdown measures becomes
clearer.
Breakdown of NAV movement
Set out below is a breakdown of the change to the unaudited net asset value per
share calculated under IFRS over the period from 31 December 2019 to 31 March
2020.
Pence % of
per opening
share NAV
Net asset value per share as at 31 December 2019 102.6
Unrealised movement in valuation of property portfolio (2.6) (2.5)*
(including the effect of gearing)
Movement in revenue reserves (0.3) (0.3)
Net asset value per share as at 31 March 2020 99.7 (2.8)
* The un-geared decrease in the valuation of the property portfolio over the
quarter to 31 March 2020 was 1.9%.
Portfolio Analysis GBPm % of % capital
portfolio as value
at 31 March movement
2020 in quarter
Offices 94.1 29.4 0.3
- West End 29.3 9.2 (0.3)
- South East 37.4 11.7 1.8
- Rest of UK 27.4 8.5 (0.9)
Industrial 136.4 42.6 (0.2)
- South East 136.4 42.6 (0.2)
Standard Retail 35.5 11.1 (7.0)
- West End 8.4 2.6 (0.9)
- Rest of London 2.4 0.7 (12.7)
- South East 17.8 5.6 (8.0)
- Rest of UK 6.9 2.2 (9.2)
Retail Warehouse 54.3 16.9 (5.9)
Total Property 320.3 100.0 (1.9)
Summary Balance Sheet
GBPm Pence % of Net
per Assets
share
Property Portfolio per Valuation Report 320.3 133.0 133.4
Adjustment for lease incentives (3.4) (1.4) (1.4)
Fair Value of Property Portfolio 316.9 131.6 132.0
Cash 13.4 5.6 5.6
Trade and other receivables 7.0 2.9 2.9
Trade and other payables (7.8) (3.2) (3.2)
Interest-bearing loans (89.5) (37.2) (37.3)
Net Assets at 31 March 2020 240.0 99.7 100.0
The property portfolio will next be valued by an external valuer during June
2020 and the net asset value per share as at 30 June 2020 will be announced in
July 2020.
Important information
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014. Upon the publication of this announcement via Regulatory
Information Service this inside information is now considered to be in the
public domain.
Enquiries:
The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01481 745001
Fax: 01481 745051
Peter Lowe
Scott Macrae
BMO Investment Business Ltd
Tel: 0207 628 8000
Fax: 0131 225 2375
END
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