British Land Company PLC (LON:BLND) has suspended its dividend payments and said it was offering smaller shopping centre tenants a three-month rental holiday, with larger retailers and leisure tenants offered the choice of delaying payments across future years.
Following the government’s imposition of a lockdown this week, only one of the FTSE 100 group’s retail centres is closed as the rest, including the Meadowhall shopping centre in Sheffield and Ealing Broadway in London, remain open to allow essential stores such as supermarkets and pharmacies to keep trading.
By the time of Thursday’s results, only around 200 individual units or 12% of the total portfolio was still open.
The office and retailer property developer said releasing smaller retail, food & beverage and leisure clients for rents due for the three months from April will lead to lost rent and service charges of around £3mln.
For larger chains having a tough time from coronavirus, British Land said it was prepared to defer day rents from the March quarter and “spread repayment over the six quarters from September 2020”, deleying roughly £40mln of revenue across the group’s share of properties, assuming the offer is extended to joint venture and fund properties.
Available cash and undrawn borrowing facilities stood at £1.2bn after a revolving credit facility was extended, with “significant headroom” in its debt covenants.
As of Wednesday, work was suspended at its major development schemes at 100 Liverpool Street and 1 Triton Square, with roughly one month of work and nine months' work remaining respectively and both schemes mostly pre-let.
On the dividend, management said they consider it prudent to “temporarily suspend future dividend payments” and revisit the dividend policy in future, which it said would ensure the company can “support our retail and leisure customers who are hardest hit, protect the long-term value of the business, and further strengthen our financial position”.
A third-quarter dividend had been due for payment in May.
Shares in the company fell 4% to 345.64p by mid-morning on Thursday, where they are more than 44% lower so far this year.
Nicholas Hyett, an analyst at Hargreaves Lansdown, said: “British Land’s high street tenants are among the companies hardest hit by the coronavirus lockdown. Shops have shuttered and revenues have fallen to zero.
“In theory British Land is still entitled to collect rent, but management have clearly decided that helping crisis hit tenants through the tough times is more important. We think that’s a sensible decision, ensuring there are still shops to open at the end of this comes above a few months’ rent.
“Having said that it’s going to be a painful ride for investors. The dividend has been suspended, and we could see the estimated value of British Land’s assets permanently impacted."
Hyett said an economic downturn and a potential long-term the rise in homeworking were both bad news for central London property values, while a further increase in online shopping doesn’t bode well for bricks-and-mortar retail.
“They were both trends you could see coming well before the current crisis, but if this accelerates those existing secular shifts there’s a risk British Land’s assets get left behind.”
Analysts at UBS said that the measures “appear prudent to us, and with no [interest coverage ratio] covenant to worry about, and over 50% value decline headroom, British Land should weather this period”.
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