The impact of the Covid-19 pandemic on Provincia Property Fund has not been dramatic, leaving it as one of the few funds to forecast no change on its previously forecasted pre-tax cash yield target of 6% p.a. for the year to 31 March 2021.
“This is thanks to our clearly stated strategy from the outset – that we do not invest in retail or office, but concentrate on best-located industrial investments, which is the safest and most defensive of all commercial property categories,” says managing director Carl Burling
“As a result of this strategy, 82% of the full rent roll is still being received during lockdown, with the remaining 18% being abated or deferred.
“It is pleasing to note that a large majority of our tenants were classified as ‘essential’ from the outset, and with the move from Level 4 to Level 3 most tenants were back to work.”
“We provided mandatory financial relief for a small number of tenants who were affected by the lockdown. In return, we have negotiated a number of early lease renewals.”
Longer lease terms
“Notably we have secured much longer terms for three of our major tenants who make up over 45% of our total income. Northpower (Arwen Pl, East Tamaki), Goodman Fielder (Great South Rd, Penrose) and Filtec (Carbine Rd, Mt Wellington) have all extended their leases for terms ranging from 3-6 years.
“The result is that the fund’s WALT (weighted average lease term) has improved and we have better continuity of rent, which has given shareholders better security than ever.”
“Whatever the post-lockdown environment throws up, our best estimates and predictions are that we should remain at our current level or better in the months to come.
“With the advent of Covid 19 the future of retail is now firmly online. Bricks and mortar retail will continue to suffer but increased demand for online retail will create further demand for well-located warehousing and the third-party logistics and freight companies that operate in this space.
“Provincia is already invested in these areas and is poised to take advantage of increased demand for this sector.”