6 Apr 2020 07:00
RDI REIT P.L.C.
("RDI" or the "Company")
(Registered number 010534V)
LSE share code: RDI
JSE share code: RPL
ISIN: IM00BH3JLY32
LEI: 2138006NHZUMMRYQ1745
COVID-19 Update
RDI, the income focused UK Real Estate Investment Trust ("UK-REIT"), provides the following business and trading update for the period from 29 February 2020 which coincides with the evolving uncertainty and disruption due to the COVID-19 outbreak.
RDI's immediate focus has been on the welfare, safety and security of our staff, our occupiers and the communities which interact with our business and portfolio.
Below is a summary of trading conditions and RDI's financial position. A more detailed update will be provided at our half year results presentation, or as required.
Cash and liquidity
The Group's current cash balance is approximately £85.0 million, following the recent completion of the previously announced German DIY portfolio and Reigate disposals, the drawdown of £25.0 million from the Group's revolving credit facility and the disposal of a mixed-use asset in Leipzig.
A number of steps have been taken to ensure that capital is preserved, and costs are minimised in the short term. Further details are provided in the operational update below.
Disposal of Leipzig, Germany
The sale of a food-anchored mixed-use asset in Leipzig has completed for a purchase price of €7.9 million (£6.8 million) reflecting an 8.0% discount to the 31 August 2019 market value. The disposal forms part of the Group's strategic disposal plan supporting a reduction in leverage and retail exposure.
Financing
At 29 February 2020 the Group's proportionate share of debt was £671.9 million. The pro-forma LTV for the Group, including disposals exchanged or completed after period end, was 41.8 per cent against a weighted average LTV covenant across the Group's facilities of 66.7 per cent. The Company has £46.4 million of ungeared assets.
Pro-active refinancing activity over the last two years has resulted in limited near term debt maturities. Over the next six months, £16.1 million (Group share: £12.8 million) matures across two facilities. It is anticipated that £3.0 million will be repaid. Terms to extend the remaining £13.1 million (Group share: £9.8 million) facility are agreed with the existing lender but remain subject to credit approval.
All of the Group's financing facilities are secured against portfolios or individual assets with no recourse to the Group.
Capital expenditure
All non-essential capital expenditure has been postponed until there is more clarity on the operating environment and visibility on future cashflows. Previously committed or essential capital expenditure over the next 12 months is limited to approximately £1.8 million. Ongoing essential maintenance, and in particular expenditure related to security, health and safety requirements, will continue as usual.
Rent collection
The rental collection statistics provided in the table below reflect the percentage of rents collected against rents or income due and demanded. Across the Group's portfolio, approximately 54.0 per cent of gross rental income was collected for either the March quarter or the month of March where rents are billed monthly.
· Rent collected across the UK portfolio (excluding UK Hotels and London Serviced Offices) totalled 74.0 per cent of rents demanded and adjusted for tenants paying monthly
· Rents collected across the European portfolio were 97.0 per cent of rents due. Rents are typically due monthly in advance
· Rents associated with the RBH managed hotels are paid quarterly in arears. The full rental payment was received for the second quarter to 29 February 2020, however no rental payments are anticipated for the third quarter ending 31 May 2020.
· Approximately 87.6 per cent of net revenues were collected across the London Serviced Office portfolio for the month of March
An operational update giving further details in respect of the UK Retail, UK Hotels and London Serviced Office portfolio is provided below.
Rent collection summary | Annualised gross rental income £m(1) | % of rent collected - adjusted(2) |
Offices | 7.1 | 73.1 |
Distribution and Industrial | 13.8 | 81.6 |
Retail | 20.2 | 67.6 |
UK total (excl. UK Hotels and LSO) | 41.1 | 74.0 |
Europe(3) | 8.8 | 97.0 |
Total (excl. UK Hotels and LSO) | 50.0 | 76.5 |
UK Hotels | 24.7 | 0.3 |
London Serviced Offices | 10.5 | 87.6 |
Total | 85.1 | 54.0 |
(1) Annualised gross rental income as at 29 February 2020
(2) Rent collections adjusted for certain tenants which have indicated they are paying monthly and have paid one third of quarterly rent demanded
(3) Rent collections for Europe typically reflect payment monthly in advance for March and are expected to be lower in April
Operational update
Following government directives in both the UK and Germany, a number of assets or specific units within assets were closed in March - in particular, non-essential retail stores and hotels. The London Serviced Office portfolio has also been closed to observe guidelines on working from home. At this stage it is too early to quantify the impact on income for the remainder of the financial year.
We are actively engaging with tenants and clients across the portfolio. Financial assistance in the form of rent free periods or rent deferrals are being prioritised for those occupiers most in need and in order to help support their businesses during this challenging period.
UK Retail
The UK Retail portfolio comprises nine assets representing less than 20 per cent of the overall portfolio by market value and which are weighted toward well located, largely discount and convenience retail parks. The majority of stores across the retail portfolio have been closed, however all assets remain open to varying degrees to support those essential retailers which continue to trade. At our two UK shopping centres, operating costs will be reduced wherever practical to limit costs for both RDI and occupiers.
UK Hotels portfolio
The UK Hotel portfolio comprises 18 assets, including 13 assets managed by the Company's associate, RBH Hotel Group ("RBH"). The remaining five assets are let to Travelodge UK Holdings Limited.
Of the 13 assets managed by RBH, eight have been closed following UK Government guidelines. Five hotels have been let to local authorities at discounted rates to be utilised for key workers and the homeless. A significant amount of work has been done to reduce operating and overhead costs while the hotels remain closed. A high proportion of the managed hotels operating costs are variable which, together with the various UK Government support packages, including the 12 month business rates holiday and the Coronavirus Job Retention Scheme, will provide a significantly reduced cost base.
RDI is actively engaging with RBH as the tenant and manager to provide support and, where appropriate, financial assistance to bridge any short term cashflow requirements.
The five assets let to Travelodge have a current passing rent of £2.5 million p.a. (Group share: £2.1 million p.a.). Travelodge has indicated it will not pay rent for the March 2020 quarter. Discussions with Travelodge are yet to take place, however all terms under the leases remain in force.
London Serviced Office portfolio
The London Serviced Office portfolio comprises four assets managed by Office Space in Town ("OSIT"). All four assets are closed following UK Government guidelines.
Approximately 97% of licence fees and IT service fees have been collected for the month of March. Licence and IT service fees typically comprise approximately 90 per cent of net revenues. Net revenues derived from ancillary services such as meeting rooms and catering, which typically represent the remaining 10%, are assumed to be nominal for March resulting in an overall 87.6 per cent estimated collection rate for expected net revenues.
The London serviced office portfolio typically has an EBITDA margin to total revenue of approximately 60 per cent. The anticipated net EBITDA (before head rents) for the current financial year was approximately £10.5 million (Group share: £8.4 million) prior to the onset of the COVID-19 pandemic. The most significant underlying operating costs relate to inter alia, business rates, staff costs, utilities, sales and marketing and management fees. As with the hotel portfolio, a high proportion of these costs are variable which, when combined with the UK Government support packages including the Coronavirus Job Retention Scheme, will materially reduce the underlying operating costs while the offices remain closed.
Clients have been offered a 50% reduction in licence fees for April 2020, subject to certain conditions. These measures, which are temporary, are to ensure that we support our clients during this time when many businesses are experiencing cashflow disruption.
Longer term, we remain confident in the quality of our operational assets which have a strong track record of income resilience despite the short term disruptions as a result of the unprecedented impact of the COVID-19 pandemic.
The Board believes the strategic actions over the last 12 months, including our disposal programme, decreased retail exposure and leverage reduction, has put the Company in a stronger position to withstand these extraordinary conditions.
Half year results announcement
The Company has not yet confirmed a date for its half year results announcement and presentation but intends to do so as soon as possible having regard for some of the challenges around current working practices for both the Company and its advisers.
Dividend
At this stage the Board is closely monitoring the impact of COVID-19 on the business, its cashflows and the wider economic and capital markets environment. A decision on the dividend, if any, will be provided together with our results for the six month period to 29 February 2020.
The Board is fully cognisant of ensuring that the Group has sufficient liquidity, not only in the short term but also in the event that the current market conditions persist for an extended period.
For further information:
RDI REIT P.L.C. | |
Mike Watters, Stephen Oakenfull | Tel: +44 (0) 20 7811 0100 |
FTI Consulting | |
UK Public Relations Adviser | |
Dido Laurimore, Claire Turvey, Ellie Sweeney rdireit@fticonsulting.com | Tel: +44 (0) 20 3727 1000 |
Instinctif Partners | |
SA Public Relations Adviser | |
Frederic Cornet RDI@instinctif.com | Tel: +27 (0) 11 447 3030 |
JSE Sponsor | |
Java Capital | Tel: + 27 (0) 11 722 3050 |
Note to editors:
About RDI
RDI is an income focused UK-REIT with a diversified portfolio invested principally in the UK. The investment approach is driven by an in depth understanding of occupational demand including the impact of technology, transport and infrastructure investment. The portfolio has been repositioned in recent years to increase its weighting to London and the South East and to provide greater exposure to our leading hotel and serviced office operating platforms.
RDI is committed to delivering attractive income led total returns across the real estate cycle. The current strategic objectives of a lower leverage capital structure and more focused allocation of capital are targeted at delivering an industry leading and sustainable income return.
RDI is a UK Real Estate Investment Trust (UK-REIT) and holds a primary listing on the London Stock Exchange and a secondary listing on the JSE. The Company is included within the EPRA, GPR, JSE All Property and JSE Tradeable Property indices.
For more information on RDI, please refer to the Company's website www.rdireit.com