BMO Real Estate value falls as it focuses on rent collection
CT Property Trust Limited
82.90p
16:45 04/08/23
BMO Real Estate Investments reported an unaudited net asset value per share of 96.6p as at 30 June on Thursday, representing a decrease of 3.1% from 31 March, and a net asset value total return for the quarter of negative 2.5%.
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The London-listed firm said the external valuation that the net asset value was based on included a “material uncertainty” clause in-line with RICS guidance, reflecting the fact that there was less certainty in the valuations, given the unknown future impact that the Covid-19 pandemic could have on the real estate market.
It noted that the clause did not apply to the industrial, logistics and distribution assets, which account for 43.4% of the portfolio.
BMO said it had a “highly diverse” tenant base, the vast majority of which continued to trade through the lockdown.
It said its managers had been engaging with tenants given the challenges faced by many to meet quarterly rental commitments, adding that the trading restrictions put in place by the government resulted in the closure of many of its retail units.
The “vast majority” had now commenced trading, although with social distancing measures in place.
BMO said its portfolio had no exposure to the hotels, student and leisure sub sectors, and only two restaurant tenants, although it did have occupiers linked to those sectors through the supply chain.
The group said it had collected 91% of its second quarter rents due.
Of the outstanding 9%, around 3% had been agreed as outright rent-free concessions - a selection of which could be withdrawn, unless part payments were satisfied imminently.
A further 3% of quarterly rents for the period was recoverable by way of deferral or extension to lease term, with the remainder due, but unpaid at the current time.
For the third quarter, the group said it had billed about £3m of rent due from 24 June to date, and collected 66% of that total amount.
This would increase as tenants, with which BMO had agreed monthly payment arrangements but had been billed quarterly, paid further instalments.
The total quarterly rent amounted to around £4.1m, with further contractual billing dates during the course of July and August.
A similar pattern of collection was seen as for the March quarter, with a number of the company’s retail occupiers paying monthly.
Such terms had also been granted to selected occupiers within other sectors, where it was felt appropriate to offer cash flow assistance, the board explained.
The group said it had about £13.7m of available cash, and an undrawn revolving credit facility of £20m.
Its £90m long-term debt with Canada Life and the undrawn loan facility with Barclays did not need to be refinanced until November 2026 and March 2025 respectively, the directors said.
As at 30 June, its loan-to-value ratio was 25.6%, and there was “significant” headroom under debt covenants.
On 3 June, BMO announced its quarterly dividend payment of 0.625p per share for the financial year ended 30 June, which was paid to shareholders on 30 June.
That was a 50% reduction on previous quarterly dividends, reflecting the fact that rent collection was likely to be challenging in the coming months, and that the firm had been paying a dividend which had not been fully covered over the course of the financial year.
The board said it 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.
It said on Thursday that it would continue to monitor the impact of Covid-19 on rental receipts and earnings closely, and keep the future level of dividends under review.
“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,” BMO Real Estate said in its statement.
“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.”
The board said securing income due under existing lease contracts remained its 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% 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.”
At 1018 BST, shares in BMO Real Estate Investments were down 0.33% at 60.8p.