The rental guarantee and cash back payments
On March 27, the Group announced that the rental guarantee payments will be withheld and that cash back payments will be reduced to 3% in an effort to manage the cash flow of the Group to protect the company and our investors through the current crisis. The first reduced cash back payment was issued on end of march 2020, but withheld the payments on mid of April.
The rental guarantees issued to investors by the Group are based on the operational revenue from our operations. The diversification of the Group into new destinations, countries, and regions was done with the intention to withstand local disruptions. A total lockdown of all operations at all destinations, however, was something no international company could be prepared for. The rental guarantee payments, therefore, had to stop as there has been no revenue to distribute to our investors.
The cash back payments are based on the capital gain of new land bank purchases and new investments. This means that the investment will go through a treasury function where a percentage is reinvested into project that return the investment with interest, equal to the capital gain on that asset. In the face of the current crisis, however, the market value of assets have decreased and the future capital gain on such assets remain uncertain. The decision to withhold the cash back was made on the basis that bank fees and work going into issuing the payments, eat up the profitability of the activities. The New Nordic Group is a solid company, but making rushed decisions and rushed sales of assets will bring harm to the company and every investor.
Stopping the investor returns have not been an easy decision for us. The close relationship between the company, our agencies, and our customers have been the backbone of our operations for 10 years. We understand that has also had effects to the private lives and families of our investors. This is not a situation that we take lightly.
The Group has been forced to take strong measures in the face of the current crisis. The last few months have been the most difficult time we have had to face since our establishment in 2009. We do, however, want to highlight that every decision taken is to protect the company, our staff and our investors, as it will be in all shared interest that the long-term success of the company is ensured.
Our focus over the last few months have been to stress test all assets, finalize a restructuring plan to complete all ongoing construction sites in the years to come and to be able to have a better product when we resume normal operations.
We will reach out to all our agencies within the month of July, starting with our elite agencies, to propose a meeting with each and every one of you. Here we want to present our plan going forward to protect the company, our agencies and our investors.
We want to extend a heartfelt thank you for your patience and understanding. We look forward to better times ahead.
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