TIDMARTL
RNS Number : 5179M
Alpha Real Trust Limited
15 September 2023
LEI: 213800BMY95CP6CYXK69
15 September 2023
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY" OR THE
"GROUP")
TRADING UPDATE and dividend announcement
ART today publishes its trading update for the three month
period ended 30 June 2023 and the period up until the date of this
announcement. The information contained herein has not been
audited.
About the Company
ART targets investment, development, financing and other
opportunities in real estate, real estate operating companies and
securities, real estate services, infrastructure, infrastructure
services, other asset-backed businesses and related operations and
services businesses that offer attractive risk-adjusted total
returns.
ART currently selectively focusses on asset-backed lending, debt
investments and high return property investments in Western Europe
that are capable of delivering strong risk adjusted returns.
The portfolio mix at 30 June 2023, excluding sundry
assets/liabilities, was as follows:
30 June 2023 31 March 2023
High return debt: 45.5% 44.5%
High return equity in property investments: 26.1% 26.5%
Other investments: 19.9% 15.2%
Cash: 8.5% 13.8%
The Company is currently focussed on selectively increasing its
loan portfolio and opportunistically extending its wider investment
strategy to target high return property investments offering
inflation protection via index linked income adjustments and
investments that have potential for capital gains.
The Company's Investment Manager is Alpha Real Capital LLP
("ARC").
Highlights
-- NAV per ordinary share 216.2p as at 30 June 2023 (31 March 2023: 216.8p).
-- Basic earnings for the quarter ended 30 June 2023 of 2.1p per
ordinary share (Twelve months to 31 March 2023: earnings of 1.1p
per ordinary share).
-- Adjusted earnings for the quarter ended 30 June 2023 of 2.0p
per ordinary share (Twelve months to 31 March 2023: earnings of
7.7p per ordinary share).
-- Declaration of a quarterly dividend of 1.0p per ordinary
share expected to be paid on 27 October 2023.
-- Robust financial position: ART remains on a robust financial
footing and is well positioned to take advantage of new investment
opportunities.
-- Investment targets: the Company is currently focussed on
selectively increasing its loan portfolio and opportunistically
extending its wider investment strategy to target investments
offering inflation protection via index linked income adjustments
and investments that have potential for capital gains.
-- Diversified portfolio of secured senior and secured mezzanine
loan investments: as at 30 June 2023, the size of ART's drawn
secured loan portfolio was GBP56.7 million, representing 45.5% of
the investment portfolio.
-- The senior portfolio has an average Loan to Value ('LTV') of
65.8% based on loan commitments (with mezzanine loans having an LTV
range of between 55.0% and 78.6% whilst the highest approved senior
loan LTV is 73.3%).
-- Loan commitments: including existing loans at the balance
sheet date and loans committed post period end, ART's current total
committed but undrawn loan commitments amount to GBP6.0
million.
-- H2O Madrid: post period end, three Inditex group brands
entered into updated lease contracts to extend the footprint of
existing stores and extend the lease terms.
-- Cash management: during the quarter the Company invested a
further GBP6 million in short term UK Treasury Bonds (Gilts) to
enhance returns on its liquid holdings.
Investment summary
Portfolio overview as at 30 June 2023
Investment name
Investment Carrying Income Investment Property type Investment % of
type value return location / underlying notes portfolio(1)
p.a. security
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
High return debt (45.5%)
--------------------------------------------------------------------------------------------------------------- -------------
Secured senior
finance
Senior secured
loans
(excluding Diversified
committed loan portfolio
but undrawn focussed on
facilities real estate
of GBP8.8 GBP39.7m 8.3% investments Senior secured
million) (2) (3) UK and developments debt 31.8%
Secured mezzanine finance
Diversified
loan portfolio
focussed on Secured mezzanine
Second charge real estate debt and
mezzanine GBP17.0m 16.5% investments subordinated
loans (2) (3) UK and developments debt 13.7%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
High return equity in property investments (26.1%)
--------------------------------------------------------------------------------------------------------------- -------------
H2O shopping centre
Dominant Madrid
shopping centre 30% shareholding;
and separate moderately
Indirect GBP17.5m 5.3% development geared bank
property (EUR 20.4m) (4) Spain site finance facility 14.1%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
Long leased industrial facility, Hamburg
Long leased
industrial complex
in major European
industrial and
logistics hub Long term moderately
GBP8.3m 6.3% with RPI linked geared bank
Direct property (5) (4) Germany rent finance facility 6.7%
(EUR9.7m)
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
Long leased hotel, Wadebridge
Long leased
hotel to
Travelodge,
a large UK hotel
5.3% group with CPI No external
Direct property GBP3.8m (6) UK linked rent gearing 3.1%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
Long leased hotel,
Lowestoft
Long leased
hotel to
Travelodge,
a large UK hotel
5.2% group with RPI No external
Direct property GBP2.8m (6) UK linked rent gearing 2.2%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
Other investments (19.9%)
--------------------------------------------------------------------------------------------------------------- -------------
Short to medium
Listed and Commercial real term investment
authorised UK & estate, in listed and
fund 6.2% Channel infrastructure authorised
investments GBP4.1m (4) Islands and debt funds funds 3.3%
Affordable
housing
High-yield 100% shareholding;
Residential GBP0.6 residential no external
Investment m n/a UK UK portfolio gearing 0.5%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
4.0 -
4.8%(7)
(2.25
UK Treasury - UK government
Bonds GBP13.1m 2.75)(8) UK bonds - 10.5%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
UK Treasury 4.2% UK government
Bills GBP7.0m (7) UK bonds - 5.6%
---------------- ----------------------------- -------- ---------- ------------------ -------------------- -------------
Cash and short-term investments (8.5%)
--------------------------------------------------------------------------------------------------------------- -------------
GBP10.6 1.3% 'On call' and
Cash (9) m (10) UK current accounts - 8.5%
------------------------ --------------------- -------- ---------- ------------------ -------------------- -------------
(1) Percentage share shown based on NAV excluding the company's
sundry assets/liabilities
(2) Including accrued interest/coupon at the balance sheet
date
(3) The income returns for high return debt are the annualised
actual finance income return over the period shown as a percentage
of the average committed
capital over the period
(4) Yield on equity over 12 months to 30 June 2023
(5) Property value including sundry assets/liabilities, net of
associated debt
(6) Annualised monthly return
(7) Annualised yield to maturity
(8) Fixed annual coupon
(9) Group cash of GBP11.6m excluding cash held with the Hamburg
holding company of GBP1.0m
(10) Weighted average interest earned on call accounts
Further to the annual results announcement on 23 June 2023, the
following are key investment updates.
ART's investment portfolio benefits from diversification across
geographies, sectors and asset types. As inflationary pressures
increasingly dominate the economic backdrop in which the Company
operates, ART remains on a robust financial footing and is well
placed to capitalise on new investment opportunities.
Inflationary pressures and rising central bank interest rates
continue to dominate the economic agenda. The impact of these
events on real asset prices is yet to be fully determined. The
uncertain market will offer opportunities in the medium term for
ART to grow its diversified investment portfolio. In recent years
the Company focused on recycling capital into cashflow driven
investments. The Company is currently focussed on selectively
increasing its loan portfolio and opportunistically extending its
wider investment strategy to target investments offering inflation
protection via index linked income adjustments and investments that
have potential for capital gains.
ART continues to adhere to its disciplined strategy and
investment underwriting principles which seek to manage risk
through a combination of operational controls, diversification and
an analysis of the underlying asset security.
Long leased assets
The Company's portfolio of long leased properties, comprising
two hotels leased to Travelodge in the UK and an industrial
facility in Hamburg, Germany, leased to a leading industrial group
are well positioned in the current inflationary environment. The
leased assets have inflation linked rent adjustments which offer
the potential to benefit from a long term, predictable, inflation
linked income stream and the potential for associated capital
growth.
Post period end ART acquired a hotel and public house in
Yardley, Birmingham, United Kingdom for GBP5.1 million including
acquisition costs, leased to Travelodge Hotels Limited reflecting
an initial yield of 8.3% p.a. ART has acquired the asset for
cash.
The property is let until November 2060 with a tenant only break
option in 2035, providing 12 years term certain to the break clause
and the rent has inflation linked adjustments.
The 64-bedroom hotel and public house is held freehold and is
situated to the east of Birmingham City Centre off the A45. The
hotel is in a well-connected location equidistant between
Birmingham City Centre to the west and Birmingham Airport to the
east.
Diversified secured lending investment
The Company invests in a diversified portfolio of secured senior
and mezzanine loan investments. The loans are typically secured on
predominately residential real estate investment and development
assets with attractive risk adjusted income returns. As at 30 June
2023, ART had committed GBP69.5 million across nineteen loans, of
which GBP56.7 million (excluding a GBP4.0 million provision for
Expected Credit Loss discussed below) was drawn.
The Company's debt portfolio comprises predominately floating
rate loans. Borrowing rates are typically set at a margin over Bank
of England ('BoE') Base Rate and benefit from rising interest rates
as outstanding loans deliver increasing returns as loan rates track
increases in the BoE Base Rate.
During the quarter, one loan totalling GBP1.5 million (including
accrued interest and exit fees) was fully repaid and a further
GBP2.4 million (including accrued interest) was received as part
repayments.
Post period end, one new loan was drawn for GBP0.7 million and
additional drawdowns of GBP3.7 million were made on existing loans,
one loan was fully repaid for GBP0.5 million (including accrued
interest and exit fees) and part payments for other loans were
received amounting to GBP1.0 million (including accrued
interest).
As at 30 June 2023, 70.0% of the Company's loan investments were
senior loans and 30.0% were mezzanine loans. The portfolio has an
average LTV of 65.8% based on loan commitments (with mezzanine
loans having an LTV range of between 55.0% and 78.6% whilst the
highest approved senior loan LTV is 73.3%). Portfolio loans are
underwritten against value for investment loans or gross
development value for development loans as relevant and
collectively referred to as LTV in this report.
The largest individual loan in the portfolio as at 30 June 2023
is a senior loan of GBP9.9 million which represents 14.2% of
committed loan capital and 7.9% of the Company's NAV.
Three loans in the portfolio have entered receivership: ART is
closely working with stakeholders to maximise capital recovery. The
Company has considered the security on these loans (which are a
combination of a first charge and a second charge over the
respective assets and personal guarantees) and have calculated an
Expected Credit Loss ('ECL') on these three loans of approximately
GBP3.2 million; the Group have also provided for an ECL on the
remainder of the loans' portfolio for an additional GBP0.8 million:
in total, the Group have provided for an ECL of GBP4.0 million in
its consolidated accounts.
Aside from the isolated cases of receivership, illustrated
above, the Company's loan portfolio has proved to be resilient
despite the recent extended period of heightened uncertainty and
risk. In terms of debt servicing, allowing for some temporary
agreed extensions, interest and debt repayments have been received
in accordance with the loan agreements. Where it is considered
appropriate, on a case-by-case basis, underlying loan terms may be
extended or varied with a view to maximising ART's risk adjusted
returns and collateral security position. The Company's loan
portfolio and new loan targets continue to be closely reviewed to
consider the potential impact on construction timelines, building
cost inflation and sales periods.
The underlying assets in the loan portfolio as at 30 June 2023
had geographic diversification with a London and Southeast focus.
The South East of England (including London) accounted for 61%, of
which London accounted for 44%, of the committed capital within the
loan investment portfolio.
H2O, Madrid
ART has a 30% stake in a joint venture with CBRE Investment
Management in the H2O shopping centre in Madrid.
H2O occupancy, by area, as at 30 June 2023 was 91.5%. The
centre's visitor numbers remain below pre-Covid highs; however, a
recovery is evident. In the calendar year to 30 June 2023, visitor
numbers were approximately 7.1% below those in 2019 (pre-Covid) and
8.5% above 2022.
Post period end, a notable asset management action was secured
when three Inditex group brands entered into updated lease
contracts to extend the footprint of existing stores and extend the
lease terms. The works to deliver the new 3,000 square metre store
for anchor retailer Primark was signed for a new continue to
advance on schedule. The store is expected to be delivered during
2024.
Other investments
Investment in listed and authorised funds
The Company invested a total of GBP6.0 million (value as at 30
June 2023: GBP4.1 million) across three investments that offered
potential to generate attractive risk adjusted returns. Current
market volatility and rises in interest rates have impacted the
capital value of these investments. The investment yield offers a
potentially accretive return to holding cash while the Company
deploys capital in opportunities in line with its investment
strategy. These funds invest in ungeared long-dated leased real
estate, debt and infrastructure.
Investment in UK Treasury Bonds and Treasury Bills
In June 2023, the Company invested a further GBP6.0 million in
short dated UK Treasury Bonds earning a 2.75% annual coupon with
maturity 7 September 2024 and an annualised yield to maturity of
4.8% .
In addition to the above, as at 30 June 2023, the Company held
GBP7.0 million in UK Treasury Bonds earning a 2.25% annual coupon
and an annualised yield to maturity of 4.0% (value as at 30 June
2023: GBP7.0 million): this investment matured on 7 September 2023
generating sales proceeds of GBP7.1 million: these proceeds have
been reinvested in further UK Treasury Bills maturing on 4 March
2024 with an annualised yield to maturity of 5.5%.
These government backed short term investments offer the Company
enhanced returns over cash balances.
Post period end, on 7 August 2023, the initial investment in UK
Treasury Bills (value as at 30 June 2023: GBP7.1 million) came to
maturity generating sales proceeds of GBP7.1 million (annualised
yield to maturity of 4.2%).
Post period end, on 23 August 2023 the company also invested
GBP6.0 million in the Morgan Stanley GBP Liquidity Fund to enhance
returns on the Company's cash balances.
Net asset value ('NAV')
As at 30 June 2023, the unaudited NAV per ordinary share of the
Company was 216.2p (31 March 2023: NAV of 216.8p).
The decrease in NAV in the quarter is mainly due to adverse
foreign currency movements.
Dividends
T he current intention of the Company is to pay a dividend each
quarter.
The Board announces a dividend of 1.0 pence per ordinary share
which is expected to be paid on 27 October 2023 (ex-dividend date
28 September 2023 and record date 29 September 2023).
The dividends paid and declared for the 12 months to 30 June
2023 total 4.0 pence per share, representing a dividend yield of
3.0% on the average share price over the period.
Scrip dividend alternative
Shareholders of the Company have the option to receive shares in
the Company in lieu of a cash dividend, at the absolute discretion
of the Directors, from time to time.
The number of ordinary shares that an Ordinary Shareholder will
receive under the Scrip Dividend Alternative will be calculated
using the average of the closing middle market quotations of an
ordinary share for five consecutive dealing days after the day on
which the ordinary shares are first quoted "ex" the relevant
dividend.
The Board has elected to offer the scrip dividend alternative to
Shareholders for the dividend for the quarter ended 30 June 2023.
Shareholders who returned the Scrip Mandate Form and elected to
receive the scrip dividend alternative will receive shares in lieu
of the next dividend. Shareholders who have not previously elected
to receive scrip may complete a Scrip Mandate Form (this can be
obtained from the registrar: contact Computershare (details
below)), which must be returned by 12 October 2023 to benefit from
the scrip dividend alternative for the next dividend.
Share buybacks
Following the Annual General Meeting held on 7 September 2023
the Company has the authority to buy back 14.99% of its share
capital (assessed on 29 June 2023) for a total of 8,709,579 shares.
No shares have been yet bought back under this authority.
During the quarter and post quarter end, the Company did not
purchase any shares in the market.
As at the date of this announcement, the ordinary share capital
of the Company is 66,210,179 (including 7,717,581 ordinary shares
held in treasury) and the total voting rights in the Company is
58,492,598.
Foreign currency
The Company monitors foreign exchange exposures and considers
hedging where appropriate. Foreign currency balances have been
translated at the period end rates of GBP1:EUR1.164 as
appropriate.
Strategy and outlook
ART's investment portfolio benefits from diversification across
geographies, sectors, and asset types. As inflationary pressures
and interest rate policy continue to shape the economic backdrop in
which the Company operates, ART remains on a robust financial
footing and is well placed to capitalise on new investment
opportunities.
ART remains committed to growing its diversified investment
portfolio. In recent years the Company focused on reducing exposure
to direct development risk and recycling capital into cashflow
driven investments. The Company is currently focussed on its loan
portfolio and also on its wider investment strategy which targets
investments offering inflation protection via index linked income
adjustments and investments that have potential for capital
gains.
Contact :
Alpha Real Trust Limited
William Simpson, Chairman, ART +44 (0)1481 742 742
Brad Bauman, Joint Fund Manager, ART +44 (0)20 7391 4700
Gordon Smith, Joint Fund Manager, ART +44 (0)20 7391 4700
Panmure Gordon, Broker to the Company
Atholl Tweedie +44 (0)20 7886 2500
Computershare, Registrar to the Company
Telephone number +44 (0)370 707 4040
Email: info@computershare.co.je
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END
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