Industrial holdings leave Provincia in strong position

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Thursday 14 May 2020

Olly Newland

Commercial

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Industrial holdings leave Provincia in strong position

Elephant in the room at level two

Tales of strife and problems abound in the commercial property world these days, but the impact of the Covid-19 pandemic has not been as devastating for all commercial players.

By The Landlord

Provincia Property Fund has just released a statement which forecasts no change on its previously forecasted pre-tax cash yield target of 6% per annum for the year to 31 March 2021.

The fund’s managing director, Carl Burling, says this is thanks to the clearly stated strategy they have long operated under.

That strategy means that the fund does not invest in retail or office properties.

“Instead we concentrate on the best-located industrial investments, which is the safest and most defensive of all commercial property categories.

“As a result of this strategy, 82% of the fund’s full rent roll is still being received during lockdown, with the remaining 18% being abated or deferred.”

“A large majority of our tenants were classified as essential from the outset, and with the move from level four to level three most of tenants were back to work.”

However, the fund did provide mandatory financial relief for the small number of their tenants who were affected by the lockdown.

Burling says that, in return for this, they have negotiated a number of early lease renewals.

Additionally, they have secured much longer terms for three of their major tenants who make up over 45% of the fund’s total income, he says.

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 three to six years.

This means that the fund’s weighted average lease term (WALT) has improved which makes for improved continuity of rent and gives shareholders better security than ever.

Burling says that whatever the post-lockdown environment throws up, their best estimates and predictions are that they should remain at their 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.”

“We are already invested in these areas and we are poised to take advantage of increased demand for this sector.”

Provincia Property Fund was established in 2017 to provide an alternative to the direct ownership of low-risk industrial property for aspiring commercial investors.

It is an unlisted limited liability company which invests in medium-sized industrial properties in growth areas. Shareholders own shares in the property fund company, which in turn directly owns the properties.

According to the fund’s chairman, veteran investor Olly Newland, its aim is “to make an expensive asset class accessible to investors while avoiding the multiple layers that often come between investors and the underlying assets”.

It also allows for investors to maintain most of the benefits of direct ownership, he said.

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