Australian Unity Office Fund have suggested that SME tenants representing up to on third of the gross income could be eligible for a waiver of 50% of any rental reduction granted by the Fund.
The fund indicated that it is not presently possible to accurately determine the potential impact of the measures outlined in the Code on AOF's Funds from Operations (FFO), but that they were working with tenants to establish their likely eligibility under the Code and the potential impact on their revenue and rental payments.
As such, the Board of AOF has determined the most prudent course of action is to withdraw its FY20 FFO guidance and has cuts its distribution for the quarter ending 30 June 2020 of approximately 3.0 cents per unit, taking the full year FY20 distribution to approximately 15.0 cents per unit.
James Freeman, Fund Manager of AOF commented, "We will continue to engage with our tenants in this challenging period to determine their eligibility under the Code and agree an appropriate solution for their business. We are focused on supporting the viability of our tenants to ensure they make it through the COVID-19 pandemic whilst achieving an outcome that is appropriate for AOF's unitholders."
AOF advised that it remained in a strong capital position. As at 31 December 2019, gearing was 29.9% and the interest coverage ratio was 4.4x, providing significant headroom to its debt covenants. Following the refinancing and extension of its debt facility announced on 19 March 2020, AOF has a weighted average debt term of 3.7 years and no debt expiring until October 2022.
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