RDI Reit, whose shares lost 13.8% on Wednesday after the landlord rejected a takeover offer, has cut its interim dividend because of lower earnings and a chunk of cash being tied up in a credit facility.
Underlying earnings in the six months to end-February fell 3.7% to £26.4m (R493m), the property owner said.
At the same time, £11.6m in cash was retained in a credit facility provided by Aviva Commercial Finance linked to four of its malls in the UK.
“This cash is restricted and is unavailable to the group to fund its operations or to allocate to shareholders in the form of dividend,” said RDI, which is headed by Mike Watters.
The landlord cut its interim dividend to four pence a share from 6.75p previously. But Watters said the company would raise its second-half dividend in order to meet the UK’s real estate investment trust (Reit) rules in respect of distributions.
Meanwhile, RDI said it planned to slash its exposure to the retail sector amid declining mall valuations in the UK.
The UK retail market has been contending with a surge in online shopping, slowing retail sales and weak consumer confidence in the face of Brexit. As a result, retailers have been cutting space and seeking lower rentals, to the detriment of landlords.
RDI said a disposal of its retail-focused German portfolio “is being actively progressed” while the group is also looking to sell the four Aviva-financed shopping centres in the UK.
It said earlier in April that after the four malls were revalued by financier Aviva, the lender’s loan-to-value ratio on this facility had breached its covenants.
Along with possible disposals of “certain mature assets”, these mooted disposals would reduce RDI’s retail exposure to about 22% of its total portfolio, from 43% currently.
“The remaining retail assets are largely well-located retail parks with a proven track record of strong occupational demand and are currently operating at an occupancy rate of 96.5%,” the group said.
Following the disposals, the market value of RDI’s portfolio would shrink to £1.1bn from £1.6bn.
RDI’s shares sank to a close of R25 on Wednesday after the group said it had rejected a takeover offer from Cromwell Property Group.
“The board considered the proposal, which undervalued the company and its prospects, and, as a result, the board took the unanimous decision not to support a further period of due diligence,” RDI said after the market’s close on Tuesday.
Watters added on Thursday that given “unprecedented weak sentiment” towards the property sector in the UK, it was “the wrong time” to be selling.
“Uncertainty is becoming the new normal,” he said.
RDI’s shares were 4% lower at R24 at 11am on Thursday, the worst level since August 2012.
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