SGS - comment

Ahead of their conference call next Wednesday (9th March), SGS released both a quarterly and updated business plan to lenders. We will write a fuller update later, but in summary, SGS has seen improved rent collections, both of arrears and quarterlys, which has led to an underlying cash balance improvement of c.£16m ahead of budget. Rent collections of Q4 21 and Q1 22 are now trending in the 90’s, with 93% and 96% respectively of rent and service charge collections for Q4 21.

It is this improved rent collection, coupled with higher occupancy rates (85% across the portfolio) that has increased the property valuations. The four centres combined have increased by 4.9% since June to an aggregate £744m as of December 2021. This is based on modest tightening of nominal Equivalent Yield, a 30bps tightening on average to a current yield of 8.7%. LTV is currently 197%.

In Summary, the progress of rent collections and increased occupancy is in line with our expectations. We expect FY22 to be a further year of improving collections and occupancy rates, which will lead to rent increases and, all combined, will lead to further yield compression.