AEW UK REIT has said it will pursue any of its large, well capitalised tenants that are refusing to pay rents when legally allowed to do so.
The investment manager said it was having constructive discussions with most of its tenants and was sympathetic to difficult trading circumstances that some if its tenants were experiencing.
However, it said: “Unfortunately, there are a few larger tenants who have significant financial resources and the ability to pay who are refusing to do so or even to enter into dialogue. The company shall be pursuing these tenants when legally able to do so and charging the full default interest rate allowed within their lease agreements.”
Government has stopped landlords pursuing any tenant that refuses to pay rent by placing a ban on winding up petitions or statutory demands until at least the end of next month.
AEW said it had collected 75% of rent so far but expected this figure to increase to 87% once payments have been received from tenants making monthly payments and those on longer-term payment plans which have not yet fallen due.
The group is also progressing a number of asset management initiatives to help it mitigate the impact of Covid-19 on its business. These include the sale of a 35-acre site in Corby, let to supply chain business Gefco UK for £18.8m. It bought the asset in February 2018 for £12.4m and has not invested any capital in the site since the acquisition. Gefco has just one year remaining on its lease.
AEW UK REIT portfolio manager Alex Short said: “The completion of this sale will deliver to the company an IRR in excess of 30% which, particularly at the current time, highlights the defensive nature of the company’s strategy. Seeking mispriced assets and those that have higher alternative use values as well as high levels of income has been a feature of the strategy since IPO. As the portfolio matures, these assets create opportunities for significant value to be added and, as evidenced by the Corby disposal, we are now seeing a number of these positions reach fruition.”
Following completion of the Corby sale, AEW UK REIT has cash on hand of £27m and an LTV of 25.6%.
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