Overseas Realty says no premature lease terminations due to COVID-19

• But expects delays in ongoing projects 

Overseas Realty Ceylon PLC said the company hasn’t so far seen any premature lease terminations at its World Trade Centre (WTC) or cancellation of sale agreements of its Havelock City residential properties despite the pandemic depressed business and incomes of many companies and individuals. 

The pandemic upended how people work and shop as remote working arrangements gained popularity in certain sectors amid people ordering food and other groceries online impacting the office and commercial real estate sector globally.

But the pandemic still had limited impact on Sri Lanka’s real estate sector and the future impact largely depends on how quickly the economy rebounds from the depths it hit in the June quarter. 

Overseas Realty reported rental income of Rs.639.8 million from leasing of its two office towers at Echelon Square in the April-June 2020 quarter, up from Rs.609.3 million in the year earlier period indicating that leases have held up despite the pandemic’s effects on the occupying firms. 

“Even though no premature lease terminations have taken place so far, any future premature lease terminations or non-renewal of leases may affect future rental and service charge revenue. In the wake of COVID-19, so far no sale and purchase agreements of residential properties have been cancelled or postponed,” 
the company stated.

However, the firm’s consolidated revenues from rental income, apartment sales and other property services fell significantly to Rs.832.2 million in the quarter compared to Rs.1.39 billion in the year earlier period mainly due to low revenues from 
apartment sales. 

Last year’s higher apartment sales came from the sale of Phase 3 apartments consisting of 304 units. 

The company was well into the construction and pre-sales of its final or Phase 4 of its residential project consisting of 340 units with over 76 percent completion and 22 percent being pre-sold before the pandemic brought both activities to an abrupt halt. 

The management estimates the pandemic and resulting lockdowns, which halted the construction, could delay the projects, including its 50-storey office tower and a shopping mall by at least three to four months. The company expected the residential apartments to be ready by October this year and the commercial development to be completed by April next year.  Pre-leasing of retail space of the latter has already begun and over 40 percent already contracted and reserved, the company said. 

The company reported earnings of 18 cents a share or Rs.228.1 million for the three months under review compared to 68 cents or Rs.839.2 million in the comparable 
period in 2019. 

In May, the company’s shareholders collectively owning 82.48 percent stake said, they would not support the dividend of Rs.1.25 per share, which amounted to a total payout of Rs.1.55 billion recommended by the board of directors on February 18 for the financial year ended December 31, 2019. And the resolution was not approved at the Annual General Meeting held on June 25. 

As at June 30, 2020, Singapore-based Shing Kwan Investment Company Limited held 38.43 percent stake in the company, followed by 18.66 percent stake by Unity Builder Limited, 12.77 percent stake by Shing Kwan (Pvt) Ltd and 12.62 percent by Peeli Limited bringing the total stake to 82.48 percent.