8 April 2020
Real Estate Investors Plc
(“REI” or the “Company” or the “Group”)
Trading & COVID-19 Update & Dividend Confirmation
Real Estate Investors Plc (AIM: RLE), the UK’s only Midlands-focused Real Estate Investment Trust (REIT) with a diversified portfolio of 1.59 million sq ft of investment property across all sectors, announces the following trading update.
The unprecedented and fast changing circumstances surrounding COVID-19 have created an uncertain environment. However, REI’s conservative gearing, diversified portfolio, controlled overheads and excellent banking relationships, combined with our experience of operating in periods of crisis, means we are well positioned to weather this storm whilst also supporting our occupiers and stakeholders.
We have taken all the necessary steps in line with government guidance to ensure the wellbeing of our staff. Our team is working from home and the business is operating efficiently. Furthermore, we have received assurances from all third-party providers that they have contingency measures in place to support REI.
Our strategy to maintain a portfolio that is diversified means that we have no material reliance on any one sector, asset or occupier.
As of 31 December 2019, our portfolio consisted of 53 assets and 280 occupiers, with offices being our largest sector at 37.7% of the Company’s rental income (of which government bodies represent 6.4%).
Additionally, 23.8% of our portfolio represents key worker/essential services, with many of these continuing to trade during lockdown with government permission.
Nationally, some neighbourhood and convenience stores (the subsector that underpins the retail element of our portfolio) have experienced a rise in trade during lockdown as they serve their communities, in the four weeks to 22 March 2020, sales have seen an increase of 45% on the same period in 2019 (according to the Sunday Times).
REI is a responsible and experienced landlord, who remains in close contact with all occupiers, and considering the circumstances the Company confirms a strong rent collection across the portfolio for the March 2020 quarter and those monthly rents falling due at the beginning of April 2020.
Rent collection falls into one of the following categories:
· We have secured a high percentage of rents due at the March quarter (including those adjusted to monthly payments) and monthly rents as due and agreed for the start of April
· Where necessary, we are working with our tenants on a case-by-case basis to find payment solutions, including rental payments absorbed from any rental deposits held, or switching rent to be payable on a monthly basis rather than quarterly in advance. Rent deposits can be topped up at a future date.
· Where occupiers have requested a suspension of rent, terms for them to pay any unpaid rents on receipt of government support or on a deferred or instalment basis, alongside future due rents, are being fully discussed and documented.
Generally, occupiers have reacted to the present crisis in a responsible and cooperative manner. A small proportion have asked for a rent-free period, despite having strong balance sheets and being eligible for substantial government funding, to include, 12-month business rates waiver, VAT deferral and salary support. We will be responding to provide some flexibility in their rental payments, but we will not be looking to accommodate a full waiver of rents or a rent-free period.
Gearing & Covenants
Management believe that preserving cash at this time is a prudent approach and continues to monitor rent collection, control overheads and keep in close contact with its lenders.
REI is multi banked with 6 lenders providing facilities. At 31 March 2020, the Company had in excess of £8.4 million cash at the bank and significant headroom in our covenants – at 31 December 2019 our LTV was 46.7% and 42.2% net of cash (bank covenants are between 60% and 65%) and our interest cover was 330% (bank covenants are at 175% to 225%).
We have a facility with Santander of £7 million due to mature in May 2020 and we are in discussions to extend this for a further 12 months, as well as a new facility of £3.5 million with Barclays which we anticipate drawing down in full this month. In addition, on 6 April 2020 we fixed our £8.5 million loan with Barclays at an all-in-rate of 2.217% to 29 December 2023. Our average cost of debt is 3.4% (as at 31 December 2019) with 80% of the Company’s debt now fixed.
New lettings and occupancy
As at 31 December 2019, occupancy was 96.3% and since then we have concluded £779,000 of lease renewals and new lettings, even during the “lockdown” imposed by the UK Government as a result of COVID-19. We have completed deals and provided additional incentives to allow for the existing crisis. Presently occupancy is at 96.1%.
We accept that there will be significant economic impact as a result of COVID-19, on a national and global basis, however, we remain confident that the significant momentum behind the rebirth of the Midlands region, to include the confirmation of HS2, Commonwealth Games in 2022, Coventry City of Culture 2021 and significant business and population relocations to the region, will result in a positive economic bounce within our investment geography.
Dividend Payment and Outlook
The Board confirms that the final fully covered dividend for 2019 of 1p per share, as announced on 17 March 2020, will be paid on 30 April 2020 as a Property Income Distribution.
This uplifted dividend payment provides a total dividend per share for 2019 of 3.8125p (FY 2018: 3.5625p) representing a 7% increase on 2018, the 7th consecutive year of dividend growth. Since the commencement of the dividend policy in 2012, £29 million has been paid to our shareholders, with quarterly dividend payments adopted in 2016.
In accordance with our responsibilities as a REIT, the Board continue to be committed to a dividend policy, however, in view of the ongoing circumstances we reserve the right to review future dividend payments.
Furthermore, given the high level of uncertainty, the Board is unable to comment further on the outlook for the Company until there is greater certainty on the full impact of the economic disruption from the pandemic.
Paul Bassi, CEO of Real Estate Investors Plc, commented:
“During the COVID-19 crisis, our occupancy and rent collection has been resilient and its foundation is the diversity of our portfolio, operating in a vibrant economic region. Our occupiers are committed to returning to their premises, where they have a significant capital investment, and continue to build their businesses.”
“Our in depth understanding of the region in which we operate and our close proximity to the assets, plus our unique network allows us to stay in touch with our occupiers and continue to run our business prudently.”
“I would like thank everyone connected to REI for their hard work and professionalism, we are living through an extraordinary period, but I have every faith that if we continue to work collaboratively, we will come out of this and continue to trade as a strong and stable business.”
Real Estate Investors Plc
Paul Bassi/Marcus Daly
+44 (0)121 212 3446
Katy Birkin/Ben Jeynes
+44 (0)20 7397 8900
Jamie Richards/William Hall
+44 (0)20 3100 2000
Nick Naylor/Asha Chotai
+44 (0)20 3328 5656
Tim Robertson/Fergus Young
+44 (0)20 3151 7008
About Real Estate Investors Plc
Real Estate Investors Plc is a publicly quoted, internally managed property investment company and REIT with a portfolio of 1.59 million sq ft of mixed-use commercial property, managed by a highly-experienced property team with over 100 years of combined experience of operating in the Midlands property market across all sectors. The Company‘s strategy is to invest in well located, real estate assets in the established and proven markets across the Midlands, with income and capital growth potential, realisable through active portfolio management, refurbishment, change of use and lettings. The portfolio has no material reliance on a single asset or occupier.
On 1st January 2015, the Company converted to a REIT. Real Estate Investment Trusts are listed property investment companies or groups not liable to corporation tax on their rental income or capital gains from their qualifying activities. The Company aims to deliver capital growth and income enhancement from its assets, supporting its progressive dividend policy, which has enjoyed 7 years of consecutive growth. Further information on the Company can be found at www.reiplc.com.
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.