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Real Estate Investors cuts quarterly dividends amid Covid crisis
15th Jun 2020 08:31
(Sharecast News) - Midlands-focussed Real Estate Investors updated the market on its trading on Monday, reporting that its "diverse and stable" property portfolio had performed well through the Covid crisis thus far, despite the "extremely challenging" market conditions and "unhelpful" government restrictions placed on commercial landlords.
The AIM-traded firm said rent collection for the March quarter so far was 81%, adding that it remained in a dialogue with occupiers whose payments remained overdue - many of which were waiting for their businesses to reopen, or were taking advantage of the 90-day government payment rule.
However, it said it expected to agree the repayment of any outstanding arrears alongside ongoing rental payments.
The last three months had been an "active period", with Covid-19 related negotiations on rent being agreed alongside lease extensions, which resulted in 18 new lease events, leading to an improvement in the firm's weighted average unexpired lease term to 4.96 years to break and 6.63 years to expiry, compared to 3.82 years to break and 5.79 years to expiry at the end of December.
Real Estate Investors said those agreements should act as a catalyst for some valuation gain, or at least assist in combating downward valuations.
As of Monday, the company said its portfolio consisted of 58 assets and 277 occupiers, with £17.3m contracted rental income and occupancy at 95.14%, down slightly from 96.3% at the end of December.
It said its diversified portfolio ensured that it had no material reliance on any single sector, asset or tenant, with its largest sector by rental income being offices at 38.12%, and its largest occupier being the government at 7.98%.
The firm noted that as a real estate investment trust (REIT), it is required to pay 90% of its rental taxable profit in dividends to shareholders, adding that it currently paid in excess of the required level of dividend.
As it stated in its trading update on 8 April, the board said it was "very mindful" of the ongoing uncertainties surrounding the Covid-19 pandemic, and the potential for the markets in which it operated to deteriorate.
The directors said they had thus decided to reduce quarterly dividend payments, and leave the option to make a larger final quarter dividend payment, to be decided once the financial year has been completed.
As such, REI said it would now pay a 0.5p per share first quarter dividend, with the expectation that would also be the level of dividend for the second and third quarters.
The board said it had not taken the decision lightly, adding that it was looking forward to the resumption of sustainable dividend growth, as soon as it was prudent to do so.
It confirmed that the first quarter dividend for 2020 of 0.5p per share would be paid on 24 July, to all shareholders on the register as at 26 June, with an ex-dividend date of 25 June, and would be paid as a property income distribution.
"The diversity of our portfolio combined with our close working relationships with our tenants and their advisers, together with management s' in-depth knowledge of the regional marketplace, continues to be the strength of our business model," said chief executive Paul Bassi,
"That said, given the current market environment, it is appropriate that we act prudently and a logical precaution is to reduce dividend payments during the course of the year leaving the option to make a larger final payment, if the company is able to continue to maintain its current resilience."
At 0818 BST, shares in Real Estate Investors were down 3.26% at 31.44p.
The AIM-traded firm said rent collection for the March quarter so far was 81%, adding that it remained in a dialogue with occupiers whose payments remained overdue - many of which were waiting for their businesses to reopen, or were taking advantage of the 90-day government payment rule.
However, it said it expected to agree the repayment of any outstanding arrears alongside ongoing rental payments.
The last three months had been an "active period", with Covid-19 related negotiations on rent being agreed alongside lease extensions, which resulted in 18 new lease events, leading to an improvement in the firm's weighted average unexpired lease term to 4.96 years to break and 6.63 years to expiry, compared to 3.82 years to break and 5.79 years to expiry at the end of December.
Real Estate Investors said those agreements should act as a catalyst for some valuation gain, or at least assist in combating downward valuations.
As of Monday, the company said its portfolio consisted of 58 assets and 277 occupiers, with £17.3m contracted rental income and occupancy at 95.14%, down slightly from 96.3% at the end of December.
It said its diversified portfolio ensured that it had no material reliance on any single sector, asset or tenant, with its largest sector by rental income being offices at 38.12%, and its largest occupier being the government at 7.98%.
The firm noted that as a real estate investment trust (REIT), it is required to pay 90% of its rental taxable profit in dividends to shareholders, adding that it currently paid in excess of the required level of dividend.
As it stated in its trading update on 8 April, the board said it was "very mindful" of the ongoing uncertainties surrounding the Covid-19 pandemic, and the potential for the markets in which it operated to deteriorate.
The directors said they had thus decided to reduce quarterly dividend payments, and leave the option to make a larger final quarter dividend payment, to be decided once the financial year has been completed.
As such, REI said it would now pay a 0.5p per share first quarter dividend, with the expectation that would also be the level of dividend for the second and third quarters.
The board said it had not taken the decision lightly, adding that it was looking forward to the resumption of sustainable dividend growth, as soon as it was prudent to do so.
It confirmed that the first quarter dividend for 2020 of 0.5p per share would be paid on 24 July, to all shareholders on the register as at 26 June, with an ex-dividend date of 25 June, and would be paid as a property income distribution.
"The diversity of our portfolio combined with our close working relationships with our tenants and their advisers, together with management s' in-depth knowledge of the regional marketplace, continues to be the strength of our business model," said chief executive Paul Bassi,
"That said, given the current market environment, it is appropriate that we act prudently and a logical precaution is to reduce dividend payments during the course of the year leaving the option to make a larger final payment, if the company is able to continue to maintain its current resilience."
At 0818 BST, shares in Real Estate Investors were down 3.26% at 31.44p.