Rent collections in Aviva property funds as low as 60% amid Covid-19

Rent collection in Aviva’s Irish commercial property funds, which are heavily invested in retail buildings, has been running at as low as 60 per cent as Covid-19 leads to a spike in delinquencies by tenants.

The funds have a combined value of €840 million and include assets such as the Blackrock Shopping Centre in south Co Dublin, the Royal Hibernian Way shopping arcade, and a host of buildings in the city centre, as well as the Globe Retail Park in Naas, Co Kildare.

Rent collection at Aviva's Irish Property Fund for the second quarter stands at 60 per cent, while the figure for its Friends First Irish Commercial Property Fund is 67 per cent, according to a company spokeswoman. Rents are generally collected in advance at the start of a quarter.

“We continue to engage with those tenants who have been directly impacted by the Covid-19 outbreak and agree a payment plan,” she said. “As landlords it is important that we work with those impacted to support them in the short term in order to retain them as valuable tenants over the longer term.

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“Any sort-term rent relief provided to tenants at this time will be agreed on a deferred basis as Aviva have an obligation to return this income to policyholders.”

Aviva moved to stop investors in the funds withdrawing money for up to six months at the end of January after dealing with a sharp increase in people looking to take their money out of the portfolios, which comprise about 40 per cent retail property.

Spokesmen for Irish Life and Zurich, who moved in mid-March to restrict investors from taking money out of their flagship property funds as the coronavirus crisis escalated, did not respond to questions on their rent collection rates.

The Aviva rent collection rates are the lowest reported to date by Irish commercial property vehicles. Office-focused Hibernia Reit said on April 9th that it had collected 87 of rent due at the start of the second quarter. US real estate giant Kennedy Wilson said rent collection in its extensive Irish portfolio, where Bank of Ireland is the top tenant, was running at 99 per cent.

Restrictions

Suzie Nolan, head of property fund management with Aviva in Ireland, said in an investor update posted within the past week that she expects rent collection rates to pick up in near future as Covid-19 restrictions continue to ease and the economy opens up.

The values of holdings in the two Aviva funds dipped slightly in the past two months as independent valuers Lisney took a more cautious view on retail property.

“The expectation is that there will be a few more months of valuation adjustments until businesses establish their new normal way of working and consumer sentiment improves,” she said.

However, she warned that “value adjustments” may creep beyond the retail sector to office space if working remotely or from home becomes a more established pattern after coronavirus.

Social media giant Twitter informed staff this month they can continue to log in from home indefinitely, while Google and Facebook have told employees to work remotely until the end of this year amid broader Covid-19 shutdowns. All three have large operations in Ireland.