REG - Alpha Real Tst Ltd - Trading Update and Dividend Announcement
25/02/2022 09:30
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RNS Number : 8459C Alpha Real Trust Limited 25 February 2022
LEI: 213800BMY95CP6CYXK69
25 February 2022
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY" OR THE "GROUP")
TRADING UPDATE and dividend announcement
ART today publishes its trading update for the nine month period ended 31
December 2021 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 31 December 2021, excluding sundry assets/liabilities,
was as follows:
31 December 2021 30 September 2021
High return debt 26.1% 27.6%
High return equity in property investments 18.3% 20.3%
Other investments 11.6% 8.9%
Cash 44.0% 43.2%
ART continues to grow its diversified loan portfolio while seeking to retain
scope to deliver attractive risk adjusted returns including potential for
capital gains through its wider investment strategy.
The Company's Investment Manager is Alpha Real Capital LLP ("ARC").
Highlights
· NAV per ordinary share 212.2p as at 31 December 2021 (30
September 2021: 208.5p).
· Adjusted earnings for the period ended 31 December 2021 of 3.0p
per ordinary share (six months to 30 September 2021: 3.0p per ordinary share).
· For the period ended 31 December 2021 basic earnings of 8.6p per
ordinary share (six months to 30 September 2021: earnings of 2.5p per ordinary
share).
· Declaration of a quarterly dividend of 1.0p per ordinary share
expected to be paid on 6 April 2022.
· Robust financial position: ART adopted a cautious approach to new
investment and conserved cash as a result of the uncertainty that
characterised the past financial year. As economies re-open post Covid-19, the
Company's robust financial footing makes it well positioned to take advantage
of new investment opportunities.
· Diversified portfolio of secured senior and secured mezzanine
loan investments: as at 31 December 2021, the size of ART's drawn secured loan
portfolio was £33.1 million, representing 26.1% of the investment portfolio.
· New loan investments: Growth of the loan portfolio has been and
remains a key focus for ART and is expected to attract a larger allocation of
capital for new investments.
· The senior portfolio has an average LTV of 37.5% based on loan
commitments (with mezzanine loans having an LTV range of between 54.8% and
78.6% whilst the highest approved senior loan LTV is 72.9%).
· 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 £15.0 million.
· Sale of Cambourne Business Park: the sale of the business park,
in which ART held a 10% interest in the owning joint venture, completed in
December 2021 at a price in excess of the Company's latest book value; the
investment returned an IRR of in excess of 14.4% p.a. during ART's ownership.
· Galaxia, India: post period end the Supreme Court of India issued
an order concluding the Logix Galaxia litigation and permitting the release of
funds to ART.
Investment summary
Portfolio overview as at 31 December 2021
Investment name
Investment type Carrying value Income Investment location Property type / Investment notes % of portfolio(1)
return p.a. underlying security
High return debt (26.1%)
Secured senior finance
Senior secured loans (excluding committed but undrawn facilities of £0.6m) £15.2m (2) 11.0% (3) UK Diversified loan portfolio focussed on real estate investments and Senior secured debt 11.9%
developments
(during the period the average senior facilities commitments were
£17.4m)
Secured mezzanine finance
Second charge mezzanine loans £17.9m (2) 17.3% (3) UK Diversified loan portfolio focussed on real estate investments and Secured mezzanine debt and subordinated debt 14.2%
developments
(during the period the average mezzanine facilities commitments
were £17.7m)
High return equity in property investments (18.3%)
H2O shopping centre
Indirect property £16.4m 4.8% (4) Spain Dominant Madrid shopping centre and separate development site 30% shareholding; moderately geared bank finance facility 12.9%
(€19.5m)
Long leased industrial facility, Hamburg
Direct property £6.9m (5) 6.6% (4) Germany Long leased industrial complex in major European industrial and logistics hub Long term moderately geared bank finance facility 5.4%
(€8.2m)
Other investments (11.6%)
Listed and authorised fund investments
£11.0m 5.9%(4) UK & Channel Islands Commercial real estate, infrastructure and debt funds Short to medium term investment in listed and authorised funds 8.6%
Affordable housing Residential Investment
£0.6m n/a UK High-yield residential UK portfolio 100% shareholding; no external gearing 0.5%
Galaxia
Joint venture in arbitration £3.2m n/a India Development site located in NOIDA, Delhi, NCR Legal process to recover investment by enforcing arbitration award concluded 2.5%
(INR325m)
Cash and short-term investments (44.0%)
Cash (6) £56.0m 0.1% (7) UK 'On call' and current accounts 44.0%
(1 )Percentage share shown based on NAV excluding the company's sundry
assets/liabilities
(2 )Including accrued interest/coupon at 31 December 2021
(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 31 December 2021
(5) Property value including sundry assets/liabilities and cash, net of
associated debt
(6 )Group cash of £56.6m excluding cash held with the Hamburg holding company
of £0.6m
(7 )Weighted average annual interest earned
Further to the half year results announcement on 26 November 2021, the
following are key investment updates.
ART's investment portfolio benefits from diversification across geographies,
sectors and asset types. Prior to the emergence of Covid-19, the Company had
focused on recycling capital into asset backed lending while reducing exposure
to development risk. As a result of the uncertainty that characterised the
past financial year, ART adopted a cautious approach to new investment and
conserved cash. This has served the Company well and ART benefits from a
robust financial footing that makes it well placed to capitalise on new
investment opportunities.
Whilst the economic and social impact of Covid-19 continues to dominate the
economic backdrop in which the Company operates, economies are taking positive
steps towards stabilisation. ART remains committed to growing its diversified
investment portfolio with a dominant weighting towards cashflow driven
investments. The Company is currently focussed on continuing to grow its loan
portfolio whilst retaining scope to deliver attractive risk adjusted returns
including potential capital gains through its wider investment strategy.
In an environment of inflation and increasing interest rates, the Company's
predominately floating rate loan portfolio, which typically sets borrowing
rates at a margin over Bank of England Base Rates, will benefit from rising
interest rates as outstanding loans deliver increasing returns as loan rates
track increases in the Bank Base Rate.
Diversified secured lending investment
The Company has 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 31 December 2021, ART had committed £35.2 million across
twenty loans, of which £34.6 million was drawn.
During the quarter to 31 December 2021, three loans totalling £4.1 million
(including accrued interest and exit fees) were fully repaid and a further
£1.8 million (including accrued interest) was received as part repayments.
Post period end, four loans were fully repaid for £4.0 million (including
accrued interest and applicable fees) and a further £0.2 million (including
accrued interest) was received as part repayments.
As at 31 December 2021, 48.0% of the Company's loan investments were senior
loans and 52.0% were mezzanine loans. The portfolio has an average LTV of
52.7% based on loan commitments (with mezzanine loans having an LTV range of
between 54.8% and 78.6% whilst the highest approved senior loan LTV is 72.9%).
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 31 December 2021 is a
senior loan of £3.9 million which represents 11.1% of committed loan capital
and 3.1% of the Company's NAV. Three loans have entered receivership including
the borrower of this loan. 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 over the assets and personal
guarantees) and have provided for an Expected Credit Loss ('ECL') of
approximately £1.5 million in the Company's consolidated accounts.
Aside from the cases 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 31 December 2021 had
geographic diversification with a London and Southeast focus. The South of
England (including London) accounted for 71%, of which London accounted for
44%, of the committed capital within the loan investment portfolio.
Sale of Cambourne Business Park
As previously announced, the sale of Cambourne Business Park, Cambridge,
completed in December 2021. ART received net proceeds of £2.1 million in
relation to the sale of its 10% equity interest in the owning joint venture.
The sale has realised a return above the Company's latest book value for the
investment.
Alpha Real Capital, the Company's Investment Manager has actively managed the
asset since acquisition in 2011 including achieving lease restructuring, new
lettings and refurbishment of buildings in the business park. The investment
has achieved an equity IRR of in excess of 14.4% p.a. for ART. Proceeds from
the sale are to be deployed in line with the Company's investment strategy.
H2O, Madrid
ART has a 30% stake in joint venture with CBRE Investment Managers in the H2O
shopping centre in Madrid. Whilst legislative restrictions on retailer trading
hours and store capacities have largely been relaxed to allow for normalised
trading operations, the lingering social and economic impacts of Covid-19
continue to impact performance.
H2O occupancy by area as at 31 December 2021 was 90.5%. In the calendar year
to 31 December 2021, visitor numbers have reduced by approximately 20% versus
the same (pre-Covid) period in 2019. With the ongoing impact of the Covid-19
pandemic impacting retailing and leisure activities, a practical approach is
being taken with tenants to manage any rent arrears whilst seeking to protect
the long-term value of the centre.
The persisting impact of Covid-19 is expected to continue to significantly
affect the earnings of H2O for the current year.
Other investments
Galaxia, India
Post period end, the Supreme Court of India issued an order concluding the
litigation regarding the Company's 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.
As part of a prior court ruling, Logix were permitted to sell the Galaxia site
to raise capital for the award. The identified purchaser has lodged the
gross purchase consideration with the Court. With the conclusion of the
litigation in ART's favour, the Court has ordered the amount payable to ART to
be released to ART's investment subsidiary in return for ART's subsidiary and
Logix transferring their title interests in the site owning joint venture. ART
and Logix have deposited their shares with the Court.
Having received official confirmation of the court order, the Board now
considers that the potential recovery position has significantly improved,
however there is some level of uncertainty in the local processes, procedures
and charges which could potentially impact the amount and timing of the
eventual net receipt to the Company. Within this context the Company has
increased the carrying value of the joint venture in arbitration in its
accounts as at 31 December 2021 to £3.2 million (INR 325 million) (30
September 2021: nil value).
Net asset value ('NAV')
As at 31 December 2021, the unaudited NAV per ordinary share of the Company
was 212.2p (30 September 2021: NAV of 208.5p).
Dividends
The 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 6 April 2022 (ex-dividend date 10 March 2022 and record
date 11 March 2022).
The dividends paid and declared for the 12 months to 31 December 2021 total
4.0 pence per share, representing a dividend yield of 2.4% 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 31 December 2021. 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 22 March 2022 to benefit from the scrip
dividend alternative for the next dividend.
Share buybacks
Under the general authority, approved by Shareholders on 6 August 2021,
Shareholders approved a resolution giving the Company a general authority to
buy back Ordinary Shares.
During the period, the Company purchased 146,645 shares in the market at the
average price of £1.67 per share: these shares are held in treasury.
Post period end, the Company purchased 51,000 shares in the market at the
average price of £1.58 per share: these shares are held in treasury.
As at the date of this announcement, the ordinary share capital of the Company
is 63,937,151 (including 2,242,065 ordinary shares held in treasury) and the
total voting rights in the Company are 61,695,086.
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 £1:€1.191 or £1:INR100.599, as appropriate.
Strategy and outlook
Prior to the emergence of Covid-19, the Company had focused on recycling
capital into asset backed lending while reducing exposure to development risk.
As a result of the uncertainty that characterised the past financial year, ART
adopted a cautious approach to new investment and conserved cash. This has
served the Company well and ART benefits from a robust financial footing that
makes it well placed to capitalise on new investment opportunities.
Whilst the economic and social impact of Covid-19 continues to dominate the
economic backdrop in which the Company operates, economies are taking positive
steps towards stabilisation. ART has reactivated its investment activities and
remains committed to growing its investment portfolio with a dominant
weighting towards cashflow driven investments. The Company is currently
focussed on continuing to grow its diversified loan portfolio whilst retaining
scope to deliver attractive risk adjusted returns including potential capital
gains through its wider investment strategy.
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
Email: info@alpharealtrust.com
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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