BCPT reinstates half its dividend

Dividends were suspended in April as its tenants suffered due to coronavirus-driven lockdown measures

Heavily discounted BMO Commercial Property (BCPT) has reinstated its suspended dividend but at just half the level it was before the coronavirus crisis.

The £468 UK real estate investment trust suspended its dividend in April as its tenants suffered under the weight of the Covid-19-induced government lockdown, and were unable to pay rent.

Although rent collection is still looking uncertain as companies are still feeling the impact of the pandemic, BMO is now confident enough in its outlook to reinstate the dividend at 50% of its previous rate, equal to a monthly payment of 0.25p per share for the year ended 31 December 2019. The dividend change brings it in line with stablemate BMO Real Estate Investments (BREI) which cut its payout in half in June as rent collections became increasingly difficult.

In a second quarter update, the board of BCPT said it had made ‘good progress’ with rent collection ‘at a higher level than was originally feared’ as well as restructuring leases and deferring payments in the short-term for ‘stressed tenants’.

The trust, which is managed by Richard Kirby of BMO Global Asset Management, is still waiting for£1.5m of rent to be paid for the second quarter - billed between 26 March and 1 June. Of this, £900,000 is due from St Christopher’s Place, a 150-unit property in London’s Oxford Street let to shops, restaurants and bars. 

The stock exchanged listed fund said ‘advanced discussions’ were underway and many of the tenants had reopened for business, meaning they will be able to pay their rent.

Rent for the third quarter, which is billed between 24 June and 1 September, has been billed at £13.5m and so far, 68% of monies owed have been collected compared to 98.5% the previous year and 70% in the second quarter.

With commercial property trusts battling for rent payments, the sector has seen a widespread decline in the value of assets, and BCPT is no different. Net asset value (NAV) declined 2.9% in the three months to end of June to 120.7p per share.

BCPT blamed part of the fall on valuers ‘exercising a higher degree of caution’ amid the Covid-19 crisis, with valuers placing a ‘material uncertainty’ clause on property values.

The ‘material uncertainty’ clause was removed from industrial, logistics, and distribution assets, which make up 17.8% of the BCPT portfolio.

This uncertainty has hammered the shares this year, slumping almost half despite the NAV reducing just 3.6%. This leaves them marooned on a discount of 47% below asset value. However, the shares rallied 3.5%, or 2p, to 62p on yesterday’s dividend reinstatement.

Investec analyst Ben Newell said the experience for BCPT investors over the ‘last couple of years has been very poor’.

A tilt towards the retail sector has materially impacted the performance record, and the shares have experienced a brutal de-rating which has taken the discount to levels not seen since the global financial crisis, he said.

He said the lack of visibility on the length of the recession and subsequent recovery is concerning but the deep discount ‘represents a significant margin of safety’.