An extraordinary dividend was paid on 15th February 2024 relating to the final quarter of 2023 in addition to the normal quarterly dividend. The dividend paid was 3.31 pence per unit for the quarter, totalling 7.71 pence per unit for the 2023 calendar year, showing a 47% increase on 2022.
This payment has been made possible following a lease surrender from Tesco at a property in Gateshead, where Tesco have paid CPF £16.9 million in return for being released from their lease obligations. We have an unusual situation here where Tesco are paying rent, but they have never occupied the property and it has been fully underlet to The Range and Sports Direct since acquisition. Tesco in turn receive rent from these sub-tenants, although it is less than the rent they are contracted to pay to CPF. Therefore, whilst we are collapsing Tesco’s lease, we will inherit the two sub-tenants and the asset will remain 100% let and income producing.
There has been a reduction in the capital value of this asset (and this was reflected in the December 2023 unit price) because the level of income it generates will decrease, however this is less than the surrender premium received. It also transforms the property from an overrented position to a reversionary position and we are confident we will be able to grow the rent from its current level over time through asset management. Because the premium received from Tesco is considered a payment in lieu of rent, the premium is classified as income and therefore distributed. This has effectively added 1.87 pence per unit to the normal quarterly distribution of 1.44 pence per unit.
If this surrender premium is excluded the underlying dividend for 2023 is 5.85 pence per unit, which shows a significant +11.4% increase on the 5.25 pence per unit paid in 2022. This reflects new lettings that have reduced the vacancy rate and rental growth achieved through open market and index-linked rent reviews.