Picture: 123RF/alicephoto
Picture: 123RF/alicephoto

Texton Property Fund, the diversified real estate investment trust (Reit) that owns a R5.1bn portfolio in SA and the UK, has announced the sale of its DHL Bawtry Distribution Warehouse in Doncaster, for £22,650,000 (R471.2m).

The company, which owns R5.1bn worth of assets in SA and the UK, said it had to sell the property to decrease its relative debt levels.

The distribution centre represented 33.5% and 34.1% of the UK wholly owned portfolio’s value and gross income, respectively.

The company said that the size of the asset resulted in a disproportionate concentration of the UK wholly owned portfolio being invested in one location.

The concentration risk was offset by the property having a strong lease covenant with a blue-chip tenant and a weighted average lease expiry of just under ten years.

Distribution and warehousing properties are very popular in the UK currently as landlords look to own properties that can store goods while certain stores are unable to operate during the current economic lockdown.

“The UK property market has seen a marked compression in yields for logistic assets as a significant amount of capital is being deployed into the asset class. The asset has attracted a strong price through being aggregated into a wider industrial portfolio where exposure to the strong covenant and brand is difficult to obtain,” it said.

The asset's book value sat at £18,200,000 when the deal was announced, and Texton said the disposal provided it with the opportunity to sell the property at a premium to its current book value and secure a profitable exit.

The proceeds of the disposal would be used to repay debt and strengthen Texton’s balance sheet.

In November 2020, Texton became  the first real estate investment trust (Reit) in the R300bn SA listed property sector to declare it could not pay a dividend at all for 2020, after failing to meet liquidity tests.

Reits are mandated to pay at least 75% of distributable income earned as a dividend each year. This creates tax benefits for them as their profits are taxed at a shareholder level and not at a company level. Reits are seen as reliable income payers that often attract pensioners as investors.

Since the Reit dispensation was introduced in SA in late 2013, SA Reits have tended to pay all of their annual income as dividends.

The Covid-19 lockdown saw Reits give rental relief to tenants in the form of discounts and deferments. As a result, some Reits have chosen to hold on to cash and deferred their dividend payment decisions until 2021. These are decisions around how large a dividend they would pay.

On Friday, Redefine Properties became the second Reit to announce it would not pay a dividend at all for its 2020 financial year, citing ongoing Covid-19 uncertainty.

andersona@businesslive.co.za

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