Property trusts and funds remain under the cosh

Property trusts and funds remain under the cosh

by Hannah Smith from interactive investor | 14th August 2020 11:39

Property trusts took a big hit from Covid-19 during the second quarter as non-paying commercial tenants caused dividend cuts and falling net asset values (NAVs).

Investment trust analyst Winterflood said in a note that rent collection has affected the dividend policies of most UK commercial property companies. The Standard Life Investments Property Income Trust (LSE:SLI), for example, cut its dividend payment by 40%, in line with the percentage of rent it had managed to collect for the third quarter. However, the BMO Commercial Property Trust (LSE:BCPT) and the Schroder Real Estate Investment Trust (LSE:SREI) both reinstated their dividends, at around half their previous level. AEW UK REIT (LSE:AEWU) is the only generalist UK commercial property investment company to have maintained its dividend policy throughout the pandemic, says Winterflood…

Lockdown hits leisure businesses

The effect of coronavirus measures including lockdowns on retailers, hotels and restaurants has been dramatic. With many simply not making any money at all for months, it is no surprise they are defaulting on rent payments, explains Richard Williams, property analyst at QuotedData.

Commercial landlords are negotiating with their tenants over rent deferrals, but right now they are losing money and there will be write-offs. “Some of these landlords are not collecting the amount of rents they are billing, which affects their earnings and means they can’t pay out the dividends they normally would,” he says…

A short-term setback?

Despite all the gloom, Williams suggests that over the long run this situation will prove a temporary setback for the property sector. Rents that have been deferred should eventually start to come through when the economy recovers from the effects of coronavirus. Meanwhile, players in the property space learnt their lessons from the 2008 financial crisis and are not over-leveraged as they once were.

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