Tuesday, October 27, 2020
Real EstateUK

Real estate revival continues

Real estate revival

Rent collection rises as tenants recover from the coronavirus shutdown

The revival of the real estate investment trust (Reit) sector continues, with Supermarket Income (SUPR) snapping up Tesco stores and others seeing rising rent collection as tenants recover from the Covid-19 lockdown.

The £519m SUPR Reit has been a favourite of the property trust world during the Covid-19 pandemic as lockdown restrictions forced the closure of restaurants and other leisure facilities, forcing people to cook and therefore grocery shop more. It currently trades at a premium of 18% and yields 5.3%.

It raised £140m earlier this year in an oversubscribed share issue and has ploughed £61m of the cash into a Tesco supermarket in Newmarket, Suffolk, purchasing the property from the Standard Life Pooled Pension Property fund.

The acquisition, which represents a 4.6% yield for the portfolio, comprises a supermarket, a 12-pump petrol station, 654 car parking spaces and distribution docks to fulfil online deliveries, a key part of SUPR’s investment strategy.

Ben Green, director of fund manager Atrato Capital, said the purchase was a ‘great addition to our growing portfolio of omnichannel stores’. The property has attractive lease terms, strong fundamentals, and is a key online grocery fulfilment hub for Tesco supporting both home delivery and click and collect.

SUPR has also arranged a revolving credit facility of £60m with US bank Wells Fargo at a cost of 2.1%, which Green said was ‘competitively priced’ and its seven-year term provided ‘room to grow’.

Regional Reit (RGL), an investor in offices and industrial estates outside the M25 London orbital road, has continued its slow and steady progress through the Covid-19 crisis, with 91.4% of second quarter rents collected.

The £293m trust managed to resist cutting its dividend but has still seen its share price plummet 37% this year. It currently trades at a discount of 33.4% and yields 12%, a high level that indicates investors expect a cut in the payout.

In its latest rent update, it said second quarter rent collection has increased to 91.4% from 78.5%, and the trust expected to collect ‘the vast majority of the balance of outstanding second quarter rent in due course as usual’.

Stephen Inglis, chief executive of fund manager London & Scottish Property, said ‘the strong rental collection to date is a testament to the collaborative relationship we have with the majority of our tenants and the quality of our management platform’ and the second quarter dividend will be paid at the end of August.

Inglis said the fund had worked with tenants to ensure a ‘safe return to work’.

Important:
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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