TIDMARTL
RNS Number : 3613Z
Alpha Real Trust Limited
18 September 2020
18 September 2020
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY" OR THE
"GROUP")
TRADING UPDATE and dividend announcement
ART today publishes its trading update for the quarter ended 30
June 2020 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 focusses on asset-backed lending, debt
investments and high return property investments in Western Europe
that are capable of delivering strong risk adjusted cash flows. The
portfolio mix at 30 June 2020, excluding sundry assets/liabilities,
was as follows:
30 June 2020 31 March 2020
High return debt 29.8% 31.9%
High return equity in property
investments 25.2% 26.1%
Other investments 2.7% 6.2%
Cash 42.3% 35.8%
The Company currently plans to invest the majority of its cash
into secured senior or secured mezzanine debt in due course and
subject to how the Covid-19 situation unfolds.
The Company's Investment Manager is Alpha Real Capital LLP
("ARC").
Highlights
-- NAV per ordinary share 211.2p as at 30 June 2020 (31 March 2020: 213.7p).
-- Adjusted earnings for the quarter ended 30 June 2020 of 1.0p
per ordinary share (31 March 2020: 6.4p per ordinary share).
-- For the quarter ended 30 June 2020 a basic earnings loss of
2.6p per ordinary share (31 March 2020: earnings of 5.8p per
ordinary share).
-- Declaration of a quarterly dividend of 1.0p per ordinary
share expected to be paid on 23 October 2020.
-- Robust financial position: a cautious approach to new
investment is being taken and cash conserved as the Covid-19
situation unfolds.
-- Diversified portfolio of secured senior and secured mezzanine
loan investments; as at 30 June 2020, the size of ART's secured
loan portfolio was GBP37.2 million, representing 29.8% of the
investment portfolio. The portfolio has an average LTV of 55.7%
based on loan commitments (with mezzanine loans having a LTV range
of between 47.4% and 76% whilst the highest approved senior loan
LTV is 73.1%).
-- Capital recycling: the sale of the Unity and Armouries
development site in Birmingham completed at the GBP4.5 million book
value.
-- Capital recycling: post period end, the sale of the final
asset in the UK industrial portfolio completed for GBP3.8 million,
a price marginally ahead of book value.
-- Galaxia update: in line with the Supreme Court of India
ruling in favour of ART, Logix have deposited INR 292 m (GBP3.1m )
with the court, of which INR 260m (GBP2.6m ) has been recovered by
ART post period end; the balance of the court award is to be funded
following a sale of the Galaxia SPV that owns the development
land.
Investment summary
Portfolio overview as at 30 June 2020
Investment name
Investment Carrying Income Investment Property type Investment notes % of
type value return location / underlying portfolio(1)
p.a. security
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
High return debt (29.8%)
----------------------------------------------------------------------------------------------- -------------
Secured senior
finance
Senior secured
Senior secured debt
loans (excluding Diversified (during the
committed loan portfolio period the average
but undrawn focussed on senior facilities
facilities real estate commitments
of GBP5.8 GBP18.0m 9.4% investments were GBP23.0m
million) (2) (3) UK and developments ) 14.4%
Secured mezzanine finance
Secured mezzanine
debt and
subordinated
debt
Diversified (during the
loan portfolio period the average
focussed on mezzanine facilities
Second charge real estate commitments
mezzanine GBP19.2m 14.3% investments were GBP19.4m
loans (2) (3) UK and developments ) 15.4%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
High return equity in property investments (25.2%)
----------------------------------------------------------------------------------------------- -------------
H2O shopping centre
Dominant Madrid 30% shareholding;
shopping centre medium term
and separate moderately geared
Indirect GBP17.8m 2.0% development bank finance
property (EUR19.6m) (4) Spain site facility 14.3%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
Long leased industrial facility, Hamburg
Long leased
industrial complex
in major European Long term moderately
GBP7.5m 7.3% industrial and geared bank
Direct property (5) (4) Germany logistics hub finance facility 6.0%
(EUR8.3m)
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
Industrial asset, Wolverhampton
GBP4.4m High-yield 100% shareholding;
8.9% commercial no external
Direct property (6) UK UK property gearing 3.5%
------------------ -------------------- ---------- ------------------ -------------------- -------------
Cambourne Business Park
High-yield Medium term
business moderately
Indirect 9.7% park located geared bank finance
property GBP1.8m (4) UK in Cambridge facility 1.4%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
Other investments (2.7%)
----------------------------------------------------------------------------------------------- -------------
Galaxia
Invested capital
recovered; legal
Development process ongoing
GBP2.6m site located to collect full
Joint venture (INR in NOIDA, Delhi, arbitration
in arbitration 260m) n/a India NCR award 2.1%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
Realhousingco
High-yield 100% shareholding;
Residential GBP0.6 residential no external
Investment m n/a UK UK portfolio gearing 0.5%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
Healthcare & Leisure Property Limited
Indirect GBP0.1 Leisure property No external
property m n/a UK fund gearing 0.1%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
Cash and short-term investments (42.3%)
----------------------------------------------------------------------------------------------- -------------
GBP52.7 0.1% 'On call' and
Cash (7) m (8) UK current accounts 42.3%
------------------ ------------ ------- ---------- ------------------ -------------------- -------------
(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 2020
(5) Property value including sundry assets/liabilities and cash,
net of associated debt
(6) Annualised income return, post tax
(7) Group cash of GBP54.3m excluding cash held with the Hamburg
and Wolverhampton holding companies
(8) Weighted average interest earned on call accounts
Further to the annual results announcement on 12 June 2020, the
following are key investment updates.
The economic and social impact of Covid-19 continues to severely
affect the economic backdrop in which the Company operates. ART's
investment portfolio benefits from diversification across
geographies, sectors and asset types. We continue to take a
cautious approach to new investment, including new lending, as we
see how Covid-19 unfolds.
In the period prior to the emergence of Covid-19, the Company
had focused on recycling capital into asset backed lending while
reducing exposure to development risk. In this time of heightened
uncertainty, the Company is benefiting from that strategy and it
has placed the Company on a robust financial footing.
Diversified secured lending investment
The Company has a diversified portfolio of secured senior and
mezzanine loan investments. The loans are typically secured on real
estate investment and development assets with attractive risk
adjusted income returns. As at 30 June 2020, ART had committed
GBP43.0 million across thirty five loans, of which GBP37.2 million
was drawn.
During the quarter to 30 June 2020, five loans totalling GBP2.6
million (including accrued interest and exit fees) were fully
repaid and a further GBP2.4 million (including accrued interest)
was received as part repayments. Post period end, a further GBP2.4
million (including accrued interest) was received as part
repayments.
The largest individual loan in the portfolio as at 30 June 2020
is a senior loan of GBP3.4 million which represents 7.9% of
committed capital and 2.7% of the Company's NAV.
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 portfolio
has an average LTV of 55.7% based on loan commitments (with
mezzanine loans having a LTV range of between 47.4% and 76% whilst
the highest approved senior loan LTV is 73.1%).
As at 30 June 2020, 48.7% of the Company's loan investments were
senior loans and 51.3% were mezzanine loans, with a weighted
average LTV ratio of 57.8% based on commitments, i.e. including
amounts available for drawing. The underlying assets in the loan
portfolio as at 30 June 2020 had geographic diversification with a
London and South East focus. The South of England (including
London) accounted for 62%, of which London accounted for 31%, of
the committed capital within the loan investment portfolio.
To date, the Company has experienced no defaults but the
underlying loan portfolio continues to be closely monitored
especially in light of the Covid-19 pandemic. Where it is
considered appropriate, on a case by case basis, underlying loan
terms may be extended.
Capital recycling
On 11 June 2020, the sale of the Unity and Armouries development
site in Birmingham completed at the GBP4.5 million book value,
successfully continuing the Company's strategy of actively
recycling capital.
Post period end, the sale of the final asset in the Alpha UK
Property Fund Asset Company (No. 2) Limited portfolio of UK
industrial assets completed for GBP3.8 million, a price marginally
ahead of book value.
H2O, Madrid
ART has a 30% stake in joint venture with CBRE Global Investors
in the H2O shopping centre in Madrid. The government of Spain
issued a "stay-at-home" directive to the whole of Spain from 14
March 2020 in response to Covid-19. In line with other shopping
centres in Madrid, H2O was able to fully reopen on 8 June 2020,
with some stores permitted to open earlier based on their size and
activity. During the entire period, the H2O supermarket and the
pharmacy were the only shops that remained operational, being
considered essential services.
A practical approach is being taken with tenants to manage any
rent arrears whilst seeking to protect the long-term value of the
centre. Since reopening, visitor numbers have reduced by
approximately 30%, although some stores have noted an increased
spend per head from the reduced number of customers.
5 tenants, occupying 2,839 square metres and representing 6% of
the centre's total leasable area, have entered into insolvency
proceedings or have either not reopened their stores as a result of
Covid-19 or pre-existing trading difficulties. Some of these
tenants were non-performing and had already been paying reduced
rents prior to Covid-19.
The above has been partly offset by new leasing activity with a
414sqm restaurant being re-let from a nonperforming tenant to
international restaurant brand 'Tony Romas'. A 236sqm large terrace
area of a further restaurant unit, where a lease contract was
terminated, has been leased to a newly launched brand by one of
Spain's larger restaurant franchise groups.
Covid-19 will have a significant impact on the earnings of H2O
for the current year. After remaining largely unchanged at the 31
March 2020 valuation date, the 30 June 2020 valuation reduced by
-6.2%.
Other investments
Galaxia, India
As announced in February 2020, the Supreme Court of India ruled
in favour of ART's dispute regarding its Galaxia investment, a
50:50 joint venture with Logix Group ("Logix") that owns an 11.2
acre development site located in NOIDA, the National Capital
Region, India.
In upholding the arbitration award in favour of ART and
dismissing Logix's appeal, the Supreme Court ordered Logix to pay
ART a total of INR 860 million (GBP9.2 million at the period end
exchange rate). In accordance with the court order, Logix deposited
a total of INR 292 million (GBP3.1 million) with the court. Post
period end, INR 260 million (GBP2.6 million) has been recovered by
ART.
Logix is now required to pay the remainder of the liability
under the award of INR 568 million. The court permitted Logix to
sell the Galaxia site, which was previously charged in favour of
ART, in order to raise capital. The site is currently under offer
and the sale proceeds will be deposited with the Supreme Court
towards the settlement amount. Following a petition by the
identified site purchaser, the court has permitted an extension of
the original settlement period to November 2020. Failure by Logix
to make payment would result in higher interest rates applicable
under the arbitration award.
ART has historically recovered INR 215 million (GBP2.3 million)
from amounts previously deposited by Logix with the court. With the
INR 260 million (GBP2.6 million) recovered post period end, ART has
now successfully recovered the full amount of its capital
originally invested into the Galaxia joint venture.
As at 30 June 2020, the Company carried the joint venture in
arbitration in its accounts at INR 260 million (GBP2.6 million),
which is in line with ART's initial investment less amounts
recovered over time. ART continues to actively pursue its claim to
collect the full arbitration award.
Share buybacks
During the quarter ended 30 June 2020, the Company made no share
buybacks.
As at the date of this announcement, the ordinary share capital
of the Company is 62,126,086 (including 1,940,797 ordinary shares
held in treasury) and the total voting rights in the Company are
60,185,289.
Dividends
The Board announces a dividend of 1.0 pence per ordinary share
which is expected to be paid on 23 October 2020 (ex-dividend date 1
October 2020 and record date 2 October 2020).
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 2020.
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 9 October 2020 to benefit from
the scrip dividend alternative for the next dividend.
Net asset value ('NAV')
As at 30 June 2020, the unaudited NAV per ordinary share of the
Company was 211.2p (31 March 2020: audited NAV of 213.7p).
The decrease in NAV is primarily due to the fair value movement
in the H2O joint venture investment partly mitigated by the
quarterly earnings of the Company.
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:EUR1.100 or
GBP1:INR93.304, as appropriate.
Strategy and outlook
Covid-19 and the unprecedented actions of Governments to
lock-down their citizens and shut-down their economies has severely
affected the economic backdrop in which the Company operates. ART's
investment portfolio benefits from diversification across
geographies, sectors and asset types. Prior to the emergence of
Covid-19, the Company had been focussing on recycling capital into
asset backed lending while reducing exposure to development risk.
In this time of heightened uncertainty, the Company is benefiting
from that strategy and it has placed the Company on a robust
financial footing.
ART is committed to its disciplined strategy and investment
principles which focus on opportunities that can deliver high risk
adjusted returns, while seeking to manage risk through a
combination of operational controls, diversification and defensive
return structures.
We are taking a cautious approach to new investment, including
new lending, as we see how Covid-19 unfolds. This cautious
approach, while conserving cash, is likely to significantly reduce
earnings in the current year.
Contact :
Alpha Real Trust Limited
David Jeffreys, 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 / Joanna Langley +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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September 18, 2020 02:00 ET (06:00 GMT)
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