To
Company Announcements
Date
16 July 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
30 June 2020.
Net Asset Value (‘NAV’)
The unaudited NAV per share of BREI as at 30 June 2020 was 96.6
pence. This represents a decrease of 3.1 per cent from the
NAV per share as at 31 March 2020 of
99.7 pence and a NAV total return for
the quarter of -2.5 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. This
clause does not apply to the Industrial, logistics and distribution
assets which account for 43.4 per cent of the portfolio.
The NAV is calculated under International Financial Reporting
Standards ("IFRS").
The NAV includes all income to 30 June
2020 and is calculated after deduction of all dividends paid
prior to that date.
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 March 2020 to 30 June 2020.
|
Pence per share |
% of opening NAV |
Net asset value per share as at 31
March 2020 |
99.7 |
|
Unrealised movement in valuation of
property portfolio (including the effect of gearing) |
(3.5) |
(3.5)* |
Movement in revenue reserves |
0.4 |
0.4 |
Net asset value per share as at
30 June 2020 |
96.6 |
(3.1) |
* The un-geared decrease in the valuation of the property
portfolio over the quarter to 30 June
2020 was 2.5%.
Share Price
The share price was 56.0 pence per
share as at 30 June 2020, which
represented a discount of 42.0 per cent to the NAV per share
announced above. The share price total return for the quarter was
-18.2 per cent.
Rent Collection
The Company has a highly diverse tenant base, the vast majority
of whom continued to trade through the lockdown. The Managers have
been engaging with tenants given the challenges faced by many to
meet quarterly rental commitments at this time. The trading
restrictions put in place by the Government resulted in the closure
of many of our retail units, although the vast majority have now
commenced trading, albeit with social distancing measures in place.
The portfolio has no exposure to the hotels, student and leisure
subsectors and only two restaurant tenants, although it does have
occupiers linked to these sectors through the supply chain.
Quarter 2 collection (billed between 26
March 2020 and 1 June
2020)
The Group has collected 91 per cent of its quarter 2 rents due.
Of the outstanding 9 per cent, c.3 per cent have been agreed as
outright rent-free concessions, a selection of which may be
withdrawn unless part payments are satisfied imminently. A further
3 per cent of quarterly rents for the period is recoverable by way
of deferral or extension to lease term. The remainder is due, but
unpaid at this time.
Collection by sector:
|
Rent Billed |
Collected |
|
(£m) |
(%) |
Industrial, logistics and
distribution |
1.5 |
97.9 |
Offices |
1.2 |
99.4 |
Retail Warehouse |
0.9 |
91.2 |
Retail |
0.6 |
53.2 |
Total |
4.2 |
90.9 |
Quarter 3 Collection (billed between 24 June
2020 and 1 September 2020)
The Group has billed c.£3.0m of its quarter 3 rent due from 24
June to date and has collected 66 per cent of this total amount
(compared to 87 per cent for the same period last year and 65 per
cent after the same number of days last quarter). This percentage
will increase as tenants with whom we have agreed monthly payment
arrangements, but have been billed quarterly, pay further
instalments. The total quarterly rent amounts to c.£4.1 million
with further contractual billing dates during the course of July
and August. A similar pattern of collection is evident as was seen
for the March quarter date with many of the retail occupiers paying
monthly. Such terms have also been granted to selected occupiers
within other sectors where it is felt appropriate to offer cashflow
assistance at this time.
Cash and Borrowings
The Group has approximately £13.7 million of available cash and
an undrawn revolving credit facility of £20 million. The Group's
£90 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 30 June 2020, the Group’s LTV was 25.6 per cent
and there was significant headroom under debt covenants.
Dividend
On 3 June 2020, the Company
announced its quarterly dividend payment of 0.625 pence per ordinary share in respect of the
financial year ended 30 June 2020,
which was paid to shareholders on 30 June
2020. This was a 50 per cent reduction on previous quarterly
dividends, reflecting the fact that rent collection was likely to
be challenging in the coming months and that the Group had been
paying a dividend which had not been fully covered over the course
of the financial year. The Board therefore considered it prudent to
reduce the level of its future quarterly dividend payments in order
to protect cash reserves and the long-term value of the Group. The
Board will continue to monitor closely the impact of Covid-19 on
rental receipts and earnings and keep the future level of dividends
under review.
Portfolio Analysis |
£m |
% of portfolio as at 30
June 2020 |
% capital value
movement in quarter |
Offices |
93.2 |
29.8 |
(1.1) |
· West
End |
28.8 |
9.2 |
(1.9) |
·
South East |
36.9 |
11.8 |
(1.7) |
· Rest
of UK |
27.5 |
8.8 |
0.6 |
Industrial, logistics and
distribution |
135.5 |
43.4 |
(0.6) |
·
South East |
135.5 |
43.4 |
(0.6) |
Standard Retail |
32.7 |
10.5 |
(8.1) |
· West End |
8.3 |
2.7 |
(0.9) |
· Rest
of London |
1.9 |
0.6 |
(20.8) |
·
South East |
16.3 |
5.2 |
(9.0) |
· Rest
of UK |
6.2 |
2.0 |
(10.1) |
Retail
Warehouse |
50.9 |
16.3 |
(6.2) |
Total Property |
312.3 |
100.0 |
(2.5) |
Summary Balance Sheet
|
£m |
Pence per
share |
% of Net
Assets |
Property Portfolio per Valuation
Report |
312.3 |
129.7 |
134.2 |
Adjustment for lease incentives |
(3.6) |
(1.5) |
(1.5) |
Fair Value of Property
Portfolio |
308.7 |
128.2 |
132.7 |
Cash |
13.7 |
5.7 |
5.9 |
Trade and other receivables |
7.2 |
3.0 |
3.1 |
Trade and other payables |
(7.5) |
(3.1) |
(3.2) |
Interest-bearing loans |
(89.5) |
(37.2) |
(38.5) |
Net Assets at 30
June 2020 |
232.6 |
96.6 |
100.0 |
The property portfolio will next be valued by an external valuer
during September 2020 and the net
asset value per share as at 30 September
2020 will be announced in October
2020.
Outlook
Although the lockdown measures began to be eased towards the end
of the quarter, the economic outlook remains highly uncertain and
the trading position of many occupiers is extremely challenged. It
will take time for output to return to pre Covid-19 levels and for
many businesses, in the near term at least, but perhaps more
permanently, the new economic reality will look very different to
that prior to the outbreak.
Securing income due under existing lease contracts remains the
primary focus. The Company’s diverse occupier base offers some
defence in this regard as does the weighting towards Industrials
and Offices. The 3.3 per cent portfolio void rate demonstrates
continued occupier demand for the Company’s property, limiting the
costs associated with holding vacant buildings and mitigating
leasing risk at a time when there is an understandable degree of
demand weakness and inertia in decision making.
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