RDI.L Regulatory News (RDI)

RDI REIT P.L.C.

 ("RDI" or the "Company")

(Registered number 010534V)

LSE share code: RDI

JSE share code: RPL

ISIN: IM00BH3JLY32

LEI: 2138006NHZUMMRYQ1745

Trading update

RDI, the income focused UK Real Estate Investment Trust ("UK-REIT"), provides the following business and trading update.

Rent collection

Across the Group's portfolio, approximately 70.1 per cent of gross rents or income due and demanded was collected for either the June quarter or the month of June where rents are billed monthly. This compares to 54.0 per cent for the March quarter at approximately the same time post the relevant due date.

Negotiations with occupiers and clients are ongoing and it is expected that the current collection rates will improve or, in certain cases, result in agreements to remove break options or extend leases.

· Rent collected across the UK portfolio (excluding UK Hotels and London Serviced Offices) totalled 68.0 per cent of rents demanded, adjusted for tenants paying monthly

· Rents collected across the European portfolio, which are typically paid monthly in advance, were 91.4 per cent of rents due

· Rents associated with the RBH managed hotels are paid quarterly in arrears. As previously announced, no rental payments are anticipated for the second half of the financial year ending 31 August 2020

· Rents for the five-asset Travelodge portfolio have been received in full based on the revised rents following the recent CVA

· 96.8 per cent of licence and fixed service fees billed were collected across the London Serviced Office portfolio for the month of June. The discount on desk rates being offered to clients has been reduced to 25% from 50%. Income collected in June reflects approximately 67.1 per cent of anticipated net revenues, largely as a result of the temporary licence fee discount and nominal meeting room and ancillary income during this period.

(1) Annualised gross rental income as at 30 June 2020

(2) Rent collections adjusted for certain tenants which have indicated they are paying monthly and have paid one third of quarterly rent demanded

Financing and liquidity

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 had £46.4 million of ungeared assets.

£3.1 million of debt related to a planned disposal has been repaid in the period. Terms have been agreed to extend the only remaining facility maturing in 2020, a £13.1 million hotel facility, which will be extended for eight months to provide a co-terminus maturity with a facility maturing in April 2021. It is anticipated that the wider hotel portfolio will be refinanced on a longer-term basis in due course.

As previously announced, covenant waivers are in place on 96 per cent of debt subject to financial covenants. All of the Group's financing facilities are secured against portfolios or individual assets with no recourse to the Group.

The Group's current cash balance is approximately £80.0 million. The Group's capital commitments for the next 12 months remain limited at less than £2.0 million.

Operational update

Portfolio occupancy at the end of May 2020, excluding RBH managed hotels and London Serviced Offices, remains broadly unchanged at 96.3 per cent.

A significant amount of planning and co-ordination has been carried out to ensure the safe re-opening of assets across the portfolio and to support customers, clients and occupiers wherever possible.

UK Hotel 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 ("Travelodge").

Occupancy across the RBH managed portfolio averaged 24.1 per cent for the four months to the end of June 2020, achieved largely through contracts entered into with local authorities and agencies for occupation by rough sleepers, the NHS and other key workers.

As at 30 June, ten hotels were open and trading. The remaining hotels are anticipated to open during July 2020 following the UK Government's recent update and relaxation of lockdown restrictions.

Demand for forward bookings has shown a steady increase in recent weeks. Hampshire Cricket has confirmed a booking for a minimum of 80 rooms a night from the end June through to September at the Southampton Holiday Inn Express, located next to the Ageas Bowl, in order to accommodate various ECB staff, media and security teams.

Travelodge has confirmed that its proposed Company Voluntary Arrangement ("CVA") was passed by the required majority of creditors and approved by its shareholders on 19 June 2020. 

The five assets let to Travelodge had a pre-CVA passing rent of £2.5 million p.a. (Group share: £2.1 million p.a.). Under the terms of the CVA, assuming no rent reviews or RDI utilising any of its break rights, the Group's share of rent will be reduced by:

· £0.4 million for the financial year ending 31 August 2020;

· £0.9 million for the financial year ending 31 August 2021; and

· £0.3 million for the financial year ending 31 August 2022

From December 2021, rents will revert to the full contractual position. All outstanding payments have recently been received in full, in accordance with the CVA. 

Under the terms of the CVA, landlords have the right to terminate certain leases by giving notice prior to 19 November 2020. This is being actively considered on two hotels where opportunities exist to either operate the hotel directly under a different brand through the Company's associate RBH, or where other hotel operators have expressed an interest in taking a lease.

London Serviced Office portfolio

The London Serviced Office portfolio re-opened on 1 June 2020. Contracted occupancy at the end of May 2020 was 86.2 per cent. (29 February 2020: 89.5 per cent.).

The temporary 50 per cent licence fee discount offered in April and May has been reduced to 25 per cent in June with no material impact on collection rates. As previously announced, this is a temporary measure and will be phased out following the relaxation in lockdown restrictions.

UK Distribution and Industrial

Leasing and asset management activity across the portfolio has remained active with a number of lease extensions, rent reviews and new lettings in progress. The remaining 168,154 sq ft unit at Link 9, Bicester has been placed under offer which, if concluded, would bring the distribution and industrial portfolio to full occupancy.

UK Retail portfolio

All retail assets re-opened in full on 22 June 2020 with a limited number of stores remaining closed but expected to re-open imminently. Footfall has seen a steady increase in recent weeks. Footfall numbers across the retail parks portfolio for the week ending 22 June 2020 were, on average, 82.9 per cent of footfall compared to the same week last year.

Footfall numbers across the two remaining shopping centres for the week ending 22 June 2020 were, on average, 41.1 per cent of footfall compared to the same week last year.

Occupancy across the UK retail portfolio at the end of May 2020 was unchanged at 98.1 per cent. The impact of recently announced CVAs and administrations has been limited to five units totalling 38,000 sq ft with a passing rent of £0.8 million p.a. Terms have been agreed with a new tenant on one unit of 6,400 sq ft and there are active discussions with alternative occupiers on the remaining four units should the terms of the proposed CVAs be unacceptable.

Dividend

As previously announced, the Board will continue to closely monitor the impact of COVID-19 on the business, its cashflows and the wider economic and capital markets environment. A decision on the timing of reinstating dividend payments will be made alongside the full year results to 31 August 2020.

Mike Watters, CEO at RDI, commented:

"Our focus since the start of the COVID-19 crisis has been on the welfare, safety and security of our stakeholders, and on ensuring that asset values are protected, revenues are carefully managed and costs are minimised. Whilst near-term visibility remains low, recent trading following an easing of government restrictions has been encouraging and portfolio occupancy remains high. Furthermore, our assets are weighted towards sectors and locations with long term positive structural demand characteristics which, once the significant social and economic challenges of the pandemic have been overcome, should leave us well positioned for the future."

For further information:

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