22 Oct 2020 07:00
BMO Real Estate Investments Ltd - Trading Update and Net Asset ValueBMO Real Estate Investments Ltd - Trading Update and Net Asset Value
PR Newswire
London, October 21
To: Company Announcements
Date: 22 October 2020
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 September 2020.
Net Asset Value (‘NAV’)
The unaudited NAV per share of BREI as at 30 September 2020 was 94.8 pence. This represents a decrease of 1.9 per cent from the NAV per share as at 30 June 2020 of 96.6 pence and a NAV total return for the quarter of -1.3 per cent.
The NAV is based on the external valuation of the Company's property portfolio prepared by Cushman & Wakefield. The valuation certificate no longer includes a ‘material uncertainty’ clause that had been in place for the previous two quarters.
The NAV is calculated under International Financial Reporting Standards ("IFRS").
The NAV includes all income to 30 September 2020 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 30 June 2020 to 30 September 2020.
| Pence per share | % of opening NAV | |
| Net asset value per share as at 30 June 2020 | 96.6 | |
| Unrealised movement in valuation of property portfolio (including the effect of gearing) | (2.0) | (2.1)* |
| Movement in revenue reserves | 0.2 | 0.2 |
| Net asset value per share as at 30 September 2020 | 94.8 | (1.9) |
* The un-geared decrease in the valuation of the property portfolio over the quarter to 30 September 2020 was 1.5%.
Share Price
The share price was 51.6 pence per share as at 30 September 2020, which represented a discount of 45.6 per cent to the NAV per share announced above. The share price total return for the quarter was -6.9 per cent.
Performance
The property market had started to show some tentative signs of improvement as government restrictions eased. Investment activity saw a partial recovery, helped by overseas buying, with rent collection rates generally improving. Any improvement was however from a very low base with underlying performance polarised. A widespread or lengthy return to restrictions could compound existing structural challenges for parts of the economy.
There was further downward pressure on valuations in our retail portfolio with the sector remaining troubled. The retail warehouse portfolio was less affected with these properties almost entirely let to functional, convenience, non-fashion tenants. There has been much debate around the future shape of the office market combined with a recent increase in available space and this sector has delivered a muted performance over the period. Industrial, logistics and distribution, which accounts for 44.1 per cent of the Company’s portfolio, continue to offer relative resilience, reflected in increased investment demand and strong take-up.
The portfolio remains substantially let, to a diversified tenant base, with a vacancy rate of 3.3 per cent. The high allocation to Industrial, logistics and distribution assets in the south east and the absence of any exposure to the leisure and hospitality sectors has been particularly helpful to the Company’s rent collection statistics. Against the backdrop of continued uncertainty in the occupier markets, the focus remains on working with our tenants to deliver mutually beneficial outcomes at this difficult time and ensuring the recovery of income due under contractual leases.
Rent Collection
The Company has a highly diverse tenant base, the vast majority of whom continued to trade through the lockdown. The Managers have continued to engage with tenants given the challenges faced by many to meet quarterly rental commitments at this time. The portfolio has no exposure to the hotels, student and leisure subsectors and only two restaurant tenants, although it does have occupiers linked to these sectors through the supply chain. We summarise below our current rent collection outcome for Quarter 2 and 3 as well as providing an update on collection to date for Quarter 4.
Quarter 2 and 3 collection (billed between 26 March 2020 and 1 September 2020)
The Company has collected 93.9 per cent of its quarter 2 rents due and 91.6 per cent of its quarter 3 rents, giving a combined collection rate of 92.8 per cent.
Collection by sector:
| Rent Billed | Collected | |
| (£m) | (%) | |
| Industrial, logistics and distribution | 2.9 | 99.2 |
| Offices | 2.4 | 98.3 |
| Retail Warehouse | 1.8 | 92.2 |
| Retail | 1.1 | 65.6 |
| Total | 8.2 | 92.8 |
Breakdown of uncollected rent:
| Total Outstanding | Rent Billed | |
| (£m) | (%) | |
| Agreed deferments | 0.1 | 0.8 |
| Rent waived | 0.1 | 0.5 |
| Unresolved / in discussion | 0.4 | 5.9 |
| Uncollected Rent | 0.6 | 7.2 |
Quarter 4 Collection (billed between 29 September 2020 and 1 December 2020)
The Company has billed c.£3.2m of its quarter 4 rent due from 29 September to date and has collected 76.8 per cent of this total amount (compared to 89.7 per cent for the same period last year and 65.1 per cent after the same number of days last quarter). 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.£4.1 million with further contractual billing dates during the course of October and November. Collection rates are expected to be similar to those for the previous quarter with many of the retail occupiers paying monthly. Such terms have also been granted to selected occupiers within other sectors where it continues to be appropriate to offer cashflow assistance at this time.
Collection by sector:
| Rent Billed | Collected | |
| (£m) | (%) | |
| Industrial, logistics and distribution | 1.2 | 87.5 |
| Offices | 0.7 | 88.9 |
| Retail Warehouse | 0.7 | 65.7 |
| Retail | 0.6 | 54.6 |
| Total | 3.2 | 76.8 |
Breakdown of uncollected rent:
| Total Outstanding | Rent Billed | |
| (£m) | (%) | |
| Monthly payments* | 0.4 | 13.5 |
| Unresolved / in discussion | 0.3 | 9.7 |
| Uncollected Rent | 0.7 | 23.2 |
* tenants who have been billed for the quarter but are paying in monthly instalments.
Cash and Borrowings
The Company has approximately £14.6 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 September 2020, the LTV was 25.2 per cent and there was significant headroom under debt covenants.
Dividend
On 26 August 2020, the Company announced its quarterly dividend payment of 0.625 pence per ordinary share in respect of the financial year ended 30 June 2020, which was paid to shareholders on 30 September 2020. The Board will continue to monitor closely the impact of Covid-19 on rental receipts and earnings and keep the future level of dividends under review.
| Portfolio Analysis | £m | % of portfolio as at 30 Sept 2020 | % capital value movement in quarter |
| Offices | 92.5 | 30.0 | (1.9) |
| West End | 28.3 | 9.2 | (2.0) |
| South East | 36.7 | 11.9 | (2.9) |
| Rest of UK | 27.5 | 8.9 | (0.4) |
| Industrial, logistics and distribution | 136.0 | 44.1 | 0.4 |
| South East | 136.0 | 44.1 | 0.4 |
| Standard Retail | 30.7 | 9.9 | (6.0) |
| West End | 7.8 | 2.5 | (6.0) |
| Rest of London | 1.8 | 0.6 | (5.3) |
| South East | 15.3 | 5.0 | (5.7) |
| Rest of UK | 5.8 | 1.8 | (6.9) |
| Retail Warehouse | 49.4 | 16.0 | (2.9) |
| Total Property | 308.6 | 100.0 | (1.5) |
Summary Balance Sheet
| £m | Pence per share | % of Net Assets | |
| Property Portfolio per Valuation Report | 308.6 | 128.2 | 135.2 |
| Adjustment for lease incentives | (3.6) | (1.5) | (1.6) |
| Fair Value of Property Portfolio | 305.0 | 126.7 | 133.6 |
| Cash | 14.6 | 6.1 | 6.4 |
| Trade and other receivables | 7.0 | 2.9 | 3.1 |
| Trade and other payables | (8.8) | (3.7) | (3.9) |
| Interest-bearing loans | (89.6) | (37.2) | (39.2) |
| Net Assets at 30 September 2020 | 228.2 | 94.8 | 100.0 |
The property portfolio will next be valued by an external valuer during December 2020 and the net asset value per share as at 31 December 2020 will be announced in January 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 SecretaryNorthern Trust International Fund Administration Services (Guernsey) LimitedTrafalgar CourtLes BanquesSt Peter PortGuernseyGY1 3QLTel: 01481 745001Peter LoweScott MacraeBMO Investment Business LtdTel: 0207 628 8000