British Land (dividend culled)

[monabri]

https://www.londonstockexchange.com/exc ... 78219.html

[Wizard]

I'm not an expert on REITs, how does the whole 85% of income rule stack up with a suspended dividend? Is it an annual rule and so not paying a quarterly dividend is OK?

[Arborbridge]

As regards thoughts of topping-up, or those who have topped up: one can only say that presumably this crisis will end one day, and hopefully before long, and that BLND will still have a solid business when life resumes.

Better pain now than dragging it out.

Arb.

[Dod101]

I'm not an expert on REITs, how does the whole 85% of income rule stack up with a suspended dividend? Is it an annual rule and so not paying a quarterly dividend is OK?

Unless the Government suspends the rules for REITs presumably British Land will simply lose the tax benefits it gets as a REIT. Interesting that they made no mention of that.

Dod

[monabri]

I'm not an expert on REITs, how does the whole 85% of income rule stack up with a suspended dividend? Is it an annual rule and so not paying a quarterly dividend is OK?

Unless the Government suspends the rules for REITs presumably British Land will simply lose the tax benefits it gets as a REIT. Interesting that they made no mention of that.

Dod

I think that that is currently well down on the .Gov's list of things to do. I did notice an article on Primark regarding them withholding rent payments...will many others follow?

"Primark has refused to pay £33m in rent to its landlords after the closure of its UK stores due to the coronavirus outbreak.

The payment, which was due on Wednesday, was meant to cover rent and service charges for two thirds of its 189 UK stores over the next three months.

But Associated British Foods, which owns the fast fashion retailer, is withholding the cash as it tries to negotiate a deal that might offset the financial hit caused by the UK lockdown. Primark’s sales will be entirely wiped out by store closures, as it does not sell online.

Burger King, which has 500 restaurants, has also refused to pay its latest rent bill."


https://www.theguardian.com/world/2020/ ... -uk-stores (free to read - no locks).

[Dod101]

The Primark situation is also reported in The Times this morning. I do not think it is very clever of them and would have expected better from ABF (which I have not held for some years)

As for B Land I assume therefore that they will simply lose their REIT status. Rather shows the weakness of it compared to say IT status because ITs are unlikely ever to come under the same imperative to save cash going out of the business.

Dod

[Arborbridge]

I'm not an expert on REITs, how does the whole 85% of income rule stack up with a suspended dividend? Is it an annual rule and so not paying a quarterly dividend is OK?

Unless the Government suspends the rules for REITs presumably British Land will simply lose the tax benefits it gets as a REIT. Interesting that they made no mention of that.

Dod

Maybe there is some softness in the timing of these things which they can use to mitigate their position.

Arb

[Dod101]

I'm not an expert on REITs, how does the whole 85% of income rule stack up with a suspended dividend? Is it an annual rule and so not paying a quarterly dividend is OK?

Unless the Government suspends the rules for REITs presumably British Land will simply lose the tax benefits it gets as a REIT. Interesting that they made no mention of that.

Dod

Maybe there is some softness in the timing of these things which they can use to mitigate their position.

Arb

Do you mean that with a 31 March year end, and it is the third quarter dividend that they are culling, they have the opportunity to make up their PID payments at the Final? That sounds a possible reason that they have not mentioned it.

Dod

[tjh290633]

Do you mean that with a 31 March year end, and it is the third quarter dividend that they are culling, they have the opportunity to make up their PID payments at the Final? That sounds a possible reason that they have not mentioned it.

Do the REIT rules call for quarterly payments? I hold Segro, who pay semi-annually, so I think not. Bear in mind the current witholding of rent and a rent holiday.

From https://www.investegate.co.uk/british-l ... 00026371H/

Our immediate priority is to support those customers who are being hardest hit. At sites we control, we are therefore releasing our smaller retail, food & beverage and leisure customers from their rental obligations for three months (April to June). The financial impact in terms of lost rent and service charge is c.£3m.

For other retail, food & beverage and leisure customers experiencing financial challenges because of COVID-19, we are prepared to defer the March quarter day rents and spread repayment over the six quarters from September 2020. On the sites we hold in joint venture or via fund structures, we are working with our partners to agree an appropriate approach. We estimate the aggregate amount of March deferrals across the Group will be c£40m (British Land share) assuming this is extended to joint venture and fund properties.

TJH

[Dod101]

Do you mean that with a 31 March year end, and it is the third quarter dividend that they are culling, they have the opportunity to make up their PID payments at the Final? That sounds a possible reason that they have not mentioned it.

Do the REIT rules call for quarterly payments? I hold Segro, who pay semi-annually, so I think not. Bear in mind the current witholding of rent and a rent holiday.

From https://www.investegate.co.uk/british-l ... 00026371H/

Our immediate priority is to support those customers who are being hardest hit. At sites we control, we are therefore releasing our smaller retail, food & beverage and leisure customers from their rental obligations for three months (April to June). The financial impact in terms of lost rent and service charge is c.£3m.

For other retail, food & beverage and leisure customers experiencing financial challenges because of COVID-19, we are prepared to defer the March quarter day rents and spread repayment over the six quarters from September 2020. On the sites we hold in joint venture or via fund structures, we are working with our partners to agree an appropriate approach. We estimate the aggregate amount of March deferrals across the Group will be c£40m (British Land share) assuming this is extended to joint venture and fund properties.

TJH

I do not know what the REIT rules are re payments but it sounds as if BLand are facing a shortfall in income anyway so maybe they will still comply with the REIT rules. I had forgotten about Segro which I hold. They do not have the same exposure to retail tenants though, and your new acquisition PHP should be fine (I hope!)

Dod

[dealtn]

I would imagine its on an annual basis so plenty of time to see what income profit they make in the period and adjust as necessary to meet their REIT obligations.

[idpickering]

Well that's disappointing. I hold BLND, and I intend to continue doing so. That's two shares of mine that've made the dividend culling list. I hold TW. too.

Onwards and upwards.

Ian.

[idpickering]

As regards thoughts of topping-up, or those who have topped up: one can only say that presumably this crisis will end one day, and hopefully before long, and that BLND will still have a solid business when life resumes.

Better pain now than dragging it out.

Arb.

I topped up my holdings three times last year, and I’m not going to allow this matter to cloud my thoughts about continuing to hold. I’m unlikely to buy more until the situation improves and they recommence the dividend. I can understand the company doing this, and respect the managers right to do their jobs.

Ian.

[monabri]

It was dire for Intu before this but it goes to show that their tenants are withholding rental payments!

https://www.telegraph.co.uk/business/20 ... -pay-rent/

"Intu's troubles have worsened with a steep drop in rental income as tenants struggle to pay due to the coronavirus crisis.

The owner of Manchester's Trafford centre and Lakesside in Essex said it had received just 29pc of the quarterly rent due on Wednesday - down from 77pc at the same point last year. "

[chris]

I'm not an expert on REITs, how does the whole 85% of income rule stack up with a suspended dividend? Is it an annual rule and so not paying a quarterly dividend is OK?

Unless the Government suspends the rules for REITs presumably British Land will simply lose the tax benefits it gets as a REIT. Interesting that they made no mention of that.

Dod

Maybe there is some softness in the timing of these things which they can use to mitigate their position.

Arb

If you look at the announcement, there is some truth in that they could make it up at the year end if the rents hold up. However, with the valuers who would assess the value of the properties and recoverability of rents, the uncertainty that is mentioned may well give rise to a provision which could wipe out the rental profit for the year. Therefore they would retain REIT status but continue not to pay a dividend.

[PinkDalek]

I would imagine its on an annual basis so plenty of time to see what income profit they make in the period and adjust as necessary to meet their REIT obligations.

Late to the thread (I've been dealing with commercial tenants in some financial difficulty variously requesting rent deferral, rent free periods or rent discounts!) but British Land have always has a useful summary FAQ on the subject:

https://www.britishland.com/investors/dividends/frequently-asked-questions

The REIT section includes (my bold underlining):

90% of the tax-exempt profit from British Land's property rental business has to be distributed to shareholders.