COVID-19 FAQ – Skyline Commercial REIT
Q: Is it still safe to be invested in the industrial commercial & distribution real estate sectors at this time?
A: The properties within the Commercial REIT are hard assets and remain essential to the long-term functionality of the Canadian economy. The Commercial REIT is comprised of a broad range of high-quality real estate that will continue to benefit from the ongoing evolution of market needs that favour these types of industrial assets. The Commercial REIT is well poised with a diverse tenant group including the food distribution, e-commerce, warehousing, and broader distribution logistics sectors–all industries that continue to grow amid heightened demand for these services.
Q: What do Skyline Commercial REIT’s Senior Management Team believe are the biggest risks at this time for the Commercial REIT?
A: To date, Skyline Commercial REIT has experienced minimal impact from the current COVID-19 pandemic. Being a focused industrial investment fund, the Commercial REIT is invested in a sector that should be reasonably insulated.
The Commercial REIT management team sees a degree of short-term rental deferment as the largest potential negative effect of the current COVID-19 outbreak. Management recognizes that current events may cause stress within the Commercial REIT’s tenant base as it moves through the next few quarters, but, like most, the team does not envision this as a long-term systemic failure such as the risks posed in 2008—rather as a “Black Swan” event that will pass through the economy.
The Commercial REIT has set aside substantial reserves and is very well positioned to address management’s conservative estimates of the potential impact of any required deferments or delinquencies. This will allow the Commercial REIT to maintain its priority of safeguarding income and continuing its commitment to investor distributions, while providing for measures to deal with these potential short-term challenges.
Q: Is Skyline Commercial REIT moving forward with planned acquisitions at this time?
A: Yes. The Commercial REIT is currently accepting investments to help fund a $132 million acquisition slated to close in late March. This transaction was originally underwritten with an expected financing interest rate of 3.4%. Due to the recent drop in the Canada Bond rates, the final rate will be only 2.4%. This represents an additional $850,000 per year of cashflow to the Commercial REIT than was expected.
Q: What is the Commercial REIT’s biggest strength during uncertain times like these?
A: The Commercial REIT is carefully structured; there are 492 tenants in multiple markets across Canada with leases that average close to nine years of remaining term. The portfolio is not dominated by any specific business sector; in fact, some of those sectors are benefiting strongly from the current market environment. For example, the Commercial REIT’s current largest tenant, Congebec Cold Storage, is experiencing an understandable surge in its frozen food logistics business to meet current demands. The Commercial REIT’s top 25 tenants, arguably its strongest, represent 66% of its current income.
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