Circle Property reports solid rent collection performance

Regional office space investor Circle Property was upbeat on its rent performance on Tuesday, reporting a collection rate of 91% for the quarter through March.

The AIM-traded firm said current rent collection for the June quarter stood at 77% and, with agreed monthly payments, that figure increased to 91% of rent due.

It said it remained in “constant and constructive” dialogue with all tenants, and expected those rent collection numbers to increase further.

Looking at its financing, Circle noted it has a facility in place with RBS and HSBC for £100m, with the senior revolving facility for £65m, of which it has drawn £62.3m, with an accordion option for a further £35m.

As of Tuesday, the firm said it had £4.3m of cash on balance, reflecting a gross loan-to-value ratio of 44.68%, adding that in total, it had £7m of immediate liquidity at its disposal.

The board said a flexible development and refurbishment pipeline meant the company had been able to defer expenditure in response to recent uncertainty.

“However, the company will continue to focus on ensuring that it creates value through active asset management and development in the future and as and when the business environment becomes clearer,” the board said in its statement.

Circle said it had remained active across its portfolio during the period, noting that a new letting was completed at 300 Pavilion Drive in Northampton to a consulting company, on a 10-year lease with a five-year break, at £34,000 per annum.

Existing tenants at 135 Aztec West in Bristol had also decided to remain in occupation, committing to the end of 2020.

Tenant interest at the firm’s newest asset, Concorde Park in Maidenhead, continued to build “pleasingly”, the board said, adding that the asset - purchased with 63% vacancy in August 2019 - had proved a “resounding success”, with 33% of space left to lease.

“More generally, whilst letting activity continues in our regions, albeit at a slower pace, we expect this to pick up as workforces gradually return to places of work,” the board added.

It said that, while it expected working practices to adapt as a result of the Covid-19 pandemic, it was still confident that its multi-tenanted buildings, designed for regional small to medium enterprises, and with “flexibility and affordability” as a focus, would remain attractive environments.

Heading into the crisis, Circle said it had been benefiting from both structural demand growth and supply constraints in its chosen regional centres.

While disruptive in the short-term, the board said it saw no evidence that the pandemic would fundamentally alter those underlying dynamics, and in that respect it said it remained positive that small, regional offices would continue to be attractive venues for work.

“Our ability to deliver a solid performance in current market conditions demonstrates not only the strong and constructive relationships we have with our tenants, but also the benefits of the size and flexibility of our space,” said chief executive officer John Arnold.

“The majority of our regional commercial lettings are 1,000 to 5,000 square feet - a sweet spot for regional lettings given that 70% of leases fall within this range.”

Arnold said the company still believed in the long-term market opportunity in regional offices, despite a change in short-term working patterns, with its team “working tirelessly” through the crisis to protect the value of its commercial properties and attached income.

“As lockdown eases, we expect workers to return to offices and we remain confident in the long-term demand for regional office space and the group's prospects over the months and years ahead.”

Circle reiterated that the publication of its final results for the year ended 31 March was delayed until late September due to the coronavirus crisis, adding that it was not yet in a position to provide guidance on expectations for the 2021 financial year.

Its board said it currently expected that a final dividend for the 2020 financial year would be paid, although no final decision was yet made.

“Given the wider impact of Covid-19, the board believes it prudent to maintain a higher cash position ahead of greater visibility of market conditions and business progress in response to Covid-19,” the directors said.

At 0901 BST, shares in Circle Property were up 5.16% at 163p.