Yew Grove properties ‘insulated’ from Covid-19 rent defaults

Yew Grove Reit, the Irish property trust invested in offices and industrial holdings outside Dublin's central business district, said it expected more than 95 per cent of rent due to it in the second quarter to be paid as the Government, overseas groups and large corporates make up almost all of its tenant base.

Still, the company has pressed the pause button on planned acquisitions until there is greater clarity on the effect of the Covid-19 pandemic on the economy and the property market.

"Our portfolio is over 89 per cent let, with the vast majority of our tenants either in businesses that are insulated from, or well able to get through, the effects of government actions to control the spread of contagion," chief executive Jonathan Lardedo said in a company trading update on Wednesday.

“Because of that, our focus has been on working with tenants and occupiers to keep their buildings safe, to understand the business stresses they currently face and to try to ameliorate them where we are able.

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“We continue to monitor opportunities and will look to re-enter the markets when it is sensible to do so.”

Still, the company said that it was too early to say how the economic fallout from Covid-19 will play out in the Irish commercial real-estate market.

“At present, the industrial sector, especially that part involved in the medtech sector and the pharmaceutical supply chain looks robust,” it said.

“In offices, given Ireland’s structural shortage of properties suitable for FDIs [foreign-direct investment companies] and large corporates, especially in the markets served by Yew Grove, the longer-term outlook remains much as it was and is expected to be resilient provided the virus does not cause a deep and more prolonged global downturn.”

Yew Grove said the value of its properties would have to fall by 37 per cent for loan-to-value debt-servicing covenants to be breached with its lenders. Income on its assets would need to slump by 56 per cent for its interest-coverage covenant to come under threat.

The company plans to pay out a dividend of 1.2 cent per share for the first quarter.

Commenting on the results, Investec analyst Ronan Dunphy said: "The group's progress on rent collection should provide reassurance to investors, while its tenant mix looks enviable in the current circumstances. Yew Grove's five largest tenants as at year end were all in the life sciences sector or Irish State entities."