Secure Income expects more secure income

Interim numbers for Secure Income Reit (SIR) lead with positive news: in the six months to July, the travel, leisure, and private hospital landlord saw its gross property valuation tick up 2 per cent.

Somewhat confusingly, this was driven by a 1.9 per cent rental uplift recorded up until the end of July. But because rents drive valuations, it makes sense for the FTSE 250 group to disclose progress since the accounting period end.

After all, annualised passing rents of £115m – adjusted for Covid-19 concessions – are a decent proxy for market price.

Secure thinks this should kick on in the second half. Rent collections climbed to 92 per cent in the period and are now expected to return originally contracted levels by January 2022.

The key sticking point here has been the Company Voluntary Agreement (CVA) struck with Travelodge, which resulted in £8.8m of rent due this year being waived. The terms of the CVA also mean a further £0.6m in rent uplifts from the hotel group have been deferred until January, resulting in a small cash drag.

Unless events take another nosedive, that should be it for tenant support. No rent reductions have been granted 2020, though one rent deferral – for May and June – was extended to The Brewery, billed triumphantly as the “largest catered events venue in the City of London” when it was acquired in 2017.

Since then, the changed outlook for leisure-focused property assets continues to cast a pall over Secure shares, which even after a recent rally trade at a slight discount to a consensus forecast book value of 448p per share for December 2022. A refinancing later this year should help earnings, while yield profile should be helped by further improvements in Travelodge’s trading. Buy.

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