This is a followup post from 7 REITs Reported Results For The COVID-19 Period And A Few Have Withheld Dividends as more REITs have released their Jan-Mar 2020 results.
Retail REITs reported the most depressing news to unitholders – big dividend cuts.
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We did a poll previously to ask if unitholders are willing to take dividend cuts to help the tenants. Most were willing to accept 0-29% cut over a period of 3-6 months.
But the reality is that the dividend cuts among the retail REITs were deeper than unitholders’ expectations, with 4 of them cutting Distribution Per Unit (DPU) by 49% to 78% thus far. That made our estimation of 48% cut look conservative.
Starhill Global REIT is not in the list because there’s no DPU given for the period of Jan-Mar 2020 as they have switched to semi-annual reporting and distribution cycles. SPH REIT has been excluded too as it is in a different reporting cycle with their quarter ending in Feb 2020.
Mapletree North Asia Commercial Trust (MNACT) had a double whammy, suffering from both the protests in Hong Kong (affecting Festival Walk, a mall in Kowloon Tong) and subsequently the COVID-19 outbreak. But luckily the manager decided to top up the dividends as the insurance was expected to cover for the loss of business due to the protests and this has helped to cushion the dividend cuts in the last quarter.
Rental Reliefs for Tenants
All of the retail REITs have provided rental reliefs for the tenants.
Lippo Malls Indonesia Retail Trust (LMIRT) has decided to retain 75.9% of the distributable income or about S$11.1m to help with the cash flow as they are offering rental relief to the tenants. The management said, “during the temporary closure period, the Trust will not be collecting rent from those tenants unable to operate their businesses in the mall. Despite reducing operating costs by 30 to 40% with a 70% reduction in utilities and 50% in outsourced security and cleaning services.” The temporary closure of the malls might be further extended, depending on the measures imposed by the Indonesia government.
Capitaland Mall Trust (CMT) has announced the retention of S$69.6 million or about 70% of the distributable income. CMT has committed to a rental relief package of about S$114 million. This translates into 100% rental and property tax rebates in April and May 2020 for almost all the retail tenants.
Mapletree Commercial Trust (MCT) has offered S$29 million worth of rental relief to the retail tenants and would waive the April fixed rent for eligible retail tenants.
Frasers Centrepoint Trust (FCT) is retaining about 50% of the income available for distribution or about S$18.0 million. FCT, together with Frasers Property Retail, have passed on the full property tax rebate to all qualifying businesses.
MNACT has granted rental relief of S$17.8 million for tenants at Festival Walk. The support would end in 1Q FY20/21 but the management said, “[we] are prepared to continue to support our tenants should the situation persist or worsen”. The Manager has also waived the acquisition fee of S$3.5 million which was entitled for the acquisitions of mBAY POINT Makuhari and Omori Prime Building in Japan.
Rental Relief Expected To Be Extended
Retail REITs were the hardest hit by COVID-19. Industrial and logistics REITs have not seen businesses being affected (maybe not yet). Office REITs still look resilient.
The dividend cuts are going to get worse because we only have a month, Mar 2020, in the previous quarter that was impacted by COVID-19. In contrast, the Apr-Jun quarter would see two months in circuit-breaker mode. So unitholders of retail REITs should expect further decline in dividend distribution in the next quarter.
Even if the circuit-breaker mode is lifted, I would expect some measures such as social distancing to be in place, and the consumers may not return to the malls immediately. Retail REITs should see some recovery by then but unitholders should not be too sanguine about going back to the dividend rates prior to the COVID-19 outbreak anytime soon.
Hi Alvin,
Thank you for your good article.
Wouldn’t whatever amount that has been heldback in the current reportings have taken into account whatever reliefs that would be given out in the coming months, and at the very least cover for April and May ?
I shall use, for example, for SPH REIT, the first REIT to report in the current pandemic calamity. Following are the footnotes Q2 FY2020 Financial Performance :
Following the emergence of COVID-19, SPH REIT announced a Tenants’ Assistance scheme on 27 February 2020 to assist tenants impacted by the outbreak. Subsequent to 2Q2020, S$4.6 million of rental rebates for February and March were set aside and the February tranche of the rebate will be credited to tenants commencing from April 2020.
SPH REIT held back approximately S$32.6mil (working backwards compared against Q2 FY2019 Results) but only S$4.6mil was used for Feb and March.
The remaining S$28mil should be more than enough for cater for any rental relief assistance for April and May, and perhaps even for June if the situation warrants.
Hence, coming from the above. wouldn’t whatever ‘not used’ or ‘extra’ withheld be returned to unitholders in the form of dividend payouts within these 12 months in order to qualify for the tax transparency status ?
Would apprecaite yoru comments in the above,… thank you,…
CK
Yes. They need to comply with the distribution eventually. MAS extended it by a year. So they can withhold the dividends for a longer period now.
Thank you. Some REITs withheld too much, perhaps for good reasons too, eg low cashflow positions. Some has not withheld at all,.. say Lendlease GCR which reported results yesterday. Then many in-between which withheld lower amounts compared to the likes of SPH REIT and CMT.
CK