BMO Real Estate Investments Ltd Trading Update and Net Asset Value
26 Julio 2021 - 01:00AM
UK Regulatory
TIDMBREI
To: Company Announcements
Date: 26 July 2021
Company: BMO Real Estate Investments Limited
LEI: 231801XRCB89W6XTR23
Subject: Trading Update and Net Asset Value
Background
BMO Real Estate Investments Limited ("BREI" or the "Company") provides an
update on trading and the net asset value as at 30 June 2021.
Net Asset Value ('NAV')
The unaudited NAV per share of BREI as at 30 June 2021 was 102.1 pence. This
represents an increase of 3.0 per cent from the NAV per share as at 31 March
2021 of 99.1 pence and a NAV total return for the quarter of 3.9 per cent.
The NAV is based on the external valuation of the Company's property portfolio
prepared by Cushman & Wakefield.
The NAV is calculated under International Financial Reporting Standards
("IFRS").
The NAV includes all income to 30 June 2021 and is calculated after the
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 2021 to 30 June 2021.
Pence % of
per opening
share NAV
Net asset value per share as at 31 March 2021 99.1
Unrealised movement in valuation of property 3.0 3.0*
portfolio (including the effect of gearing)
Realised loss on sale of property (including the (0.1) (0.1)
effect of gearing)
Movement in revenue reserves 0.1 0.1
Net asset value per share as at 30 June 2021 102.1 3.0
* The un-geared capital return of the property portfolio over the quarter to 30
June 2021 was 2.1%.
Share Price
The share price was 71.0 pence per share as at 30 June 2021, which represented
a discount of 24.3 per cent to the NAV per share announced above. The share
price total return for the quarter was -3.7 per cent.
Performance
The property market continued to deliver positive total returns over Quarter 2
with the continuing success of the vaccine roll-out and further relaxation of
restrictions contributing to improving consumer, business, and investor
sentiment. A note of caution remains around the rising Covid-19 cases, which is
continuing to weigh on the manufacturing, retailing and hospitality sectors,
with isolation protocols leading to staffing shortages.
The Company portfolio has enjoyed a strong quarterly performance, generating a
total return of 3.5% with capital growth of 2.2%. The capital return is after
deducting major expenditure on the redevelopment of Luton and refurbishment of
14 Berkeley Street, London, as well as the impact of the disposal of a further
asset from the High Street portfolio at The Parade, Sutton Coldfield for £
1.5million.
As in previous quarters, performance was driven primarily by the Industrial and
Distribution sectors where the weight of investor demand is continuing to
generate yield compression with occupational markets offering further support
to pricing through leasing activity and rental growth. Yields across all
Industrial sub-sectors are trending down in the context of strong occupational
fundamentals driving record low vacancy rates and correspondingly attractive
rental growth. The Company's portfolio now comprises 47.0% Industrial and
Logistics properties. These assets experienced a 4.6% capital return over the
quarter.
The retail sector is showing signs of some stabilisation, with opportunistic
investors beginning to call the bottom of the market. There is caution however
and sentiment is fragile given the likelihood of further rental decline and
occupier fallout as Covid support measures unwind. While the yields are no
longer falling at the same rate, valuations remain under downward pressure. The
traditional High Street assets, making up 7.2% of the portfolio saw capital
performance of -1.8% over the quarter. However, Retail Warehousing performance
remains robust with the 'Essential', DIY, bulky and convenience sub-sectors in
particular experiencing yield compression. The Company's Retail Warehousing
assets make up 16.6% of the portfolio and largely comprise 'essential'
non-fashion occupiers with rent collection at 98% for the quarter and capital
growth at 1.2% offering relative resilience. The Foodstore sub-sector continues
to strengthen with a weight of capital chasing a limited number of quality
opportunities. As a result, the supermarket-anchored redevelopment of Luton
remains a key driver of performance within this part of the portfolio.
While the nature of the UK's return to work and adoption of flexible working
practices remains uncertain vacant space in the Office markets is increasingly
being taken up and large corporate occupiers are beginning to move to acquire
new space. However, this recovery will not be spread evenly across geographic
regions and asset types, which is continuing to weigh on the Offices sector as
a whole. The Company's Office assets make up 29.2% of the portfolio and saw no
capital growth over the quarter.
As at period end the portfolio had a vacancy rate of 4.1% (by ERV) and an
average weighted unexpired lease term of 5.9 years (assuming tenant breaks
operated).
Rent Collection
We summarise below our current rent collection outcome since the impact of
Covid-19 came to bear, for Q2 2020 to Q2 2021, as well as providing an update
on collection for Q3 of 2021.
Q2 2020 to Q2 2021 collection (billed between 26 March 2020 and 1 June 2021)
Overall collection over the fifteen-month period is at 96.1 per cent and the
breakdown is detailed below:
Rent Billed Collected
(£m) (%)
Quarter 2 2020 4.2 93.7
Quarter 3 2020 4.1 95.2
Quarter 4 2020 4.2 97.5
Quarter 1 2021 4.2 96.3
Quarter 2 2021 4.2 97.5
Total 20.9 96.1
Collection by sector:
Rent Billed Collected
(£m) (%)
Industrial, logistics and 7.8 100.0
distribution
Offices 5.7 99.3
Retail Warehouse 4.6 97.4
Retail 2.8 76.5
Total 20.9 96.1
Breakdown of uncollected rent:
Total Outstanding Rent Billed
(£m) (%)
Rent waived 0.5 2.6
Unresolved / in 0.1 0.3
discussion
Bad Debts 0.2 1.0
Uncollected Rent 0.8 3.9
The absence of any exposure to the shopping centre, hospitality and leisure
sectors remains an important factor in the comparatively high level of rent
collection achieved by the Company. The Company's disposal of high street
retail assets over the past five years and the healthy collection from the
retail warehousing assets has also been helpful. The focus remains on ensuring
that rental income is recovered where it is due under contract whilst
continuing to work with our occupiers to deliver mutually beneficial outcomes,
recognising certain occupiers are challenged in the current environment.
Quarter 3 2021 Collection (to be billed between 24 June 2021 and 1 September
2021)
The Company has billed c.£3.0m of its quarter 3 rent due from 24 June to date
and has collected 84.2 per cent of this total amount. 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.£4.2 million with further contractual billing dates during the
course of July and August. Progress on collection is consistent with previous
quarters with total recovery by period end expected to be in line with trend
over the course of the pandemic.
Collection by sector:
Rent Billed Collected
(£m) (%)
Industrial, logistics and 1.2 83.6
distribution
Offices 0.7 92.7
Retail Warehouse 0.7 83.9
Retail 0.4 72.1
Total 3.0 84.2
Breakdown of uncollected rent:
Total Outstanding Rent Billed
(£m) (%)
Monthly payments* 0.1 4.1
Rent waived 0.1 4.8
Unresolved / in 0.2 6.9
discussion
Uncollected Rent 0.4 15.8
* tenants who have been billed for the quarter but are paying in monthly
instalments.
Cash and Borrowings
The Company has approximately £16.6 million of available cash and an undrawn
revolving credit facility of £20 million. The £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 2021,
the LTV was 24.4 per cent and there was significant headroom under debt
covenants.
Dividend
On 19 May 2021, the Company announced a quarterly dividend payment of 0.85
pence per ordinary share in respect of the financial year ended 30 June 2021,
which was paid to shareholders on 30 June 2021. The Board will continue to
monitor rental receipts and earnings closely and keep the future level of
dividends under review.
Portfolio Analysis £m % of % capital
portfolio value
as at 31 movement
March 2021 in quarter
Offices 95.0 29.2 0.0
· West End 27.9 8.6 0.0
· South East 40.1 12.3 0.4
· Rest of UK 27.0 8.3 (0.7)
Industrial, logistics and distribution 153.0 47.0 4.6
· South East 153.0 47.0 4.6
Standard Retail 23.5 7.2 (1.8)
· West End 6.7 2.1 (1.5)
· Rest of London 1.6 0.5 (5.9)
· South East 11.5 3.5 (1.1)
· Rest of UK 3.7 1.1 (2.9)
Retail Warehouse 54.1 16.6 1.2
Total Property 325.6 100.0 2.2
Summary Balance Sheet
£m Pence % of
per Net
share Assets
Property Portfolio per Valuation Report 325.6 135.3 132.5
Adjustment for lease incentives (3.7)
(1.5) (1.5)
Fair Value of Property Portfolio 321.9 133.8 131.0
Cash 16.6 6.9 6.8
Trade and other receivables 6.7 2.8 2.7
Trade and other payables (9.7) (4.1) (4.0)
Interest-bearing loans (89.7) (37.3) (36.5)
Net Assets at 30 June 2021 245.8 102.1 100.0
The property portfolio will next be valued by an external valuer during
September 2021 and the net asset value per share as at 30 September 2021 will
be announced in October 2021.
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
Peter Lowe
Scott Macrae
BMO Investment Business Ltd
Tel: 0207 628 8000
END
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