REG - Alternative Inc REIT - NAV, Dividend Declaration & Portfolio Valuation

Alternative Income REITAnnouncement

02/08/2023 07:00

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RNS Number : 9747H  Alternative Income REIT PLC  02 August 2023

2 August 2023

Alternative Income REIT PLC

(the "Company" or "Group" or "AIRE")

NET ASSET VALUE, DIVIDEND DECLARATION AND PORTFOLIO VALUATION UPDATE

TO 30 JUNE 2023

Total annual dividend of 6.045pps for the year ended 30 June 2023,

an increase of 9.9% on the prior year

Resilient portfolio well-placed to continue to provide secure,
inflation-linked income with the potential for capital growth

The Board of Directors of Alternative Income REIT PLC (ticker: AIRE), the
owner of a diversified portfolio of UK commercial property assets,
predominantly let on long leases with inflation-linked rent reviews, provides
a trading and business update and declares an interim dividend for the quarter
ended 30 June 2023.

 

Simon Bennett, Non-Executive Chair of Alternative Income REIT plc, comments:

"The Board is pleased to declare a fourth interim dividend of 1.92 pence per
share ("pps") for the quarter ended 30 June 2023. As a result, the dividend
target of 5.70pps for the year ended 30 June 2023 has been met. In addition,
the Board has agreed to distribute to shareholders an extra 0.345pps in
respect of non-rental income that has been received in the year following the
successful settlement of a historical legal case. This brings the total annual
dividend to 6.045pps, an increase of 9.9% on the 5.50pps annual dividend
declared in the prior year. The total annual dividend is 106.3% covered by
cash earnings.

 

The Group's portfolio composition delivers income growth each quarter (1.86%
Q2 2023) due to the 97% inflation linked rent review profile, with 45% of this
rental income reviewed annually. Our portfolio is 100% let with an enviable
track record of 100% rent collection at the due dates. Whilst many commercial
real estate portfolios, and businesses in general, are struggling with the
impact of rising debt costs on their profitability, the Group benefits from
the security of a fixed low rate of 3.19% until October 2025.

 

The second quarter of 2023 has been relatively secure with the value of the
Group's portfolio increasing by £0.3 million or 0.3% to £107 million (31
March 2023: £106.7 million) over the period, and our portfolio's net initial
yield remaining unchanged at 6.6%. This quarter's valuation growth has come
from the industrial and retail warehouse sectors driven by growth in their
rent and underlying ERVs. At 30 June 2023, the Group's unaudited NAV increased
0.7% over the quarter to £67.8 million or 84.2pps, due to the increase in the
portfolio valuation. When combined with the dividend paid for the quarter,
this produces an unaudited NAV total return for the quarter of 2.4%.

 

We continue to actively manage the portfolio, and this quarter we successfully
completed a lease renewal with Pets at Home at the Droitwich Retail Park,
three rent reviews and two fixed rental uplifts. Working closely with our
occupiers, we have an active programme of analysing EPC recommendations to
drive ESG initiatives and EPC improvements across the portfolio.

 

Looking to the future, for the period to 30 September 2023, 20% of the Group's
income will be reviewed, one annual index-linked rent review and two periodic
index-linked rent reviews, with five years since the previous reviews. The
Board remains confident that the Company is well-positioned for the future,
with a resilient portfolio well-placed to continue to provide secure,
inflation-linked income with the potential for capital growth."

 

Overview of Key Financials

                                            At 30 June       At 31 March      Change

                                            2023             2023

                                            (unaudited)      (unaudited)
 Net Asset Value ("NAV")                    £67.8 million    £67.3 million    +0.7%
 NAV per share                              84.2p            83.5p            +0.7%
 Share price per share                      64.7p            67.2p            -3.7%
 Share price discount to NAV                23.1%            19.6%            +3.5%
 Investment property fair value             £107.0 million   £106.7 million   +0.3%

 (based on external valuation)
 Loan to gross asset value ("GAV") (A) (B)  36.8%            37.0%

 

                                   Quarter ended 30 June 2023    Quarter ended 31 March 2023    Change

                                   (unaudited)                   (unaudited)
 EPRA earnings per share (A)       1.7p                          1.6p                           +8.2%
 Adjusted earnings per share (A)   1.6p                          1.5p                           +2.6%
 Dividend cover (A)                81.8%                         110.9%                         -29.1%
 Total dividends per share         1.92p                         1.375p                         +39.6%
 Dividend yield (annual) (A) (C)   9.4%                          8.8%                           +0.6%
 Earnings per share                2.0p                          0.6p                           +245.1%
 Share price total return (A)      -1.7%                         +2.8%
 NAV total return (A)              +2.4%                         +0.7%
 Annualised passing rent           £7.6 million                  £7.5 million                   +1.3%
 Ongoing charges (A) (annualised)  1.4%                          1.5%                           -0.1bps

(A) Considered to be an Alternative Performance Measure.

(B) The loan facility at 30 June 2023 of £41.0 million (31 March 2022: £41.0
million) with Canada Life Investments, matures on 20 October 2025 and has a
weighted average interest cost of 3.19%.

(C) The ratio of Group's annual dividends per share divided by the Group's
share price for the period.

 

Dividend Declaration, Earnings Per Share and Dividend Cover

The Board is pleased to declare a fourth interim quarterly dividend of 1.92pps
for the quarter ended 30 June 2023. This dividend will be distributed as a
Property Income Distribution ("PID") and will be paid on 25 August 2023 to
shareholders on the register on 11 August 2023. The ex-dividend date will be
10 August 2023.

 

The Board is pleased to report that the dividend target of 5.70pps for the
year ended 30 June 2023 has been met. The fourth interim dividend declared
includes an additional 0.345pps in respect of non-rental income received in
the year, more details of which were provided in the half-yearly report. This
brings the total dividend for the year to 6.045pps, representing a 9.9%
increase on the previous year's total dividend of 5.50pps.

 

The Adjusted EPS increased 2.6% over the quarter to 1.57pps (31 March 2023:
1.53pps) giving a total of 6.43pps for the year (2022: 5.55pps), an increase
of 15.9%. The dividend cover for the quarter was 81.8% (31 March 2023: 110.9%)
and 106.3% for the year (2022: 101.3%).

 

Property Valuation

At 30 June 2023, the Group's property portfolio, comprising 19 assets, had a
fair value of £107.0 million, representing a 0.3% increase from the last
quarter (31 March 2023: £106.7 million). At 30 June 2023, the Net Initial
Yield on the Group's portfolio remained secure at 6.6% (31 March 2023: 6.6%).

 

The repricing of the property investment market in the latter half of 2022 has
given way to a period of relative stability in the first half of 2023,
although transactional activity remains limited. With a further increase in
interest rates anticipated over the summer, certain sectors of the property
market are bracing themselves for further falls in value. The development and
secondary market are already seeing another significant repricing, which is
tending to mirror the rising cost of debt. The Group's portfolio is relatively
insulated from this movement, as it benefits from being 100% let, with 100%
collection of rent due, 97% inflation linked rent review profile and long
dated fixed low rated debt, providing secure, growing income.

 

Over the past year, the value of the Group's portfolio has reduced by a total
of £10.9 million or 9.2%. Once again, AIRE has outperformed relative to most
other commercial real estate portfolios, as demonstrated by MSCI who have
reported a fall in their Monthly (All-Property) Index of 21% over the same
period.

 

Net Asset Value, Share price and Share price discount to NAV

At 30 June 2023, the Group's unaudited NAV was £67.8 million, 84.2pps (31
March 2023: £67.3 million, 83.5pps), representing a 0.7% increase over the
quarter, due to the increase in the portfolio valuation. When combined with
the 1.92pps dividend paid for the quarter, this produces an unaudited NAV
total return for the quarter of 2.4% (31 March 2023: 0.7%).

 

The share price decreased by 3.7% to 64.7pps and the share price total return
for the quarter was -1.7%.  The Company's share price discount to NAV was
23.1% at the period end.

 

The table below sets out the movement in NAV during the quarter.

 

                                                               Pence per share  £ million
 NAV at 31 March 2023                                          83.5             67.3
 Valuation movement in property portfolio                      0.3              0.2
 Income earned for the period                                  2.7              2.2
 Expenses for the period                                       (0.5)            (0.4)
 Net finance costs for the period                              (0.4)            (0.4)
 Interim dividend paid during the quarter ended 31 March 2023  (1.4)            (1.1)
 NAV at 30 June 2023                                           84.2             67.8

 

The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards as adopted by the United Kingdom
and incorporates both the Group's property portfolio individually valued on a
'Red Book' basis at 30 June 2023 and net income for the quarter but does not
include a provision for the interim dividend declared today (see above).

 

The income earned for the period includes an accrual for the minimum
contractual uplifts contained in the index-linked leases. In the event that
inflation is greater than these minimum contractual uplifts, the actual income
will be greater than the income currently accrued.

 

Portfolio Update

At 30 June 2023, the Group's assets are 100% let (31 March 2023: 100%). The
weighted average unexpired lease term at 30 June 2023 was 17.0 years to the
earlier of break and expiry (31 March 2023: 16.7 years) and 18.9 years to
expiry (31 March 2023: 18.6 years).

 

In aggregate, 97.0% (31 March 2023: 96%) of the portfolio's income stream is
reviewed periodically (45% annually) on an upward-only, inflation linked
basis, subject to floors and caps. 71% of these reviews are linked to RPI and
26% to CPI. The remaining 3.0% of the portfolio's income stream is subject to
fixed uplifts or expiries.

 

Contracted annualised rent increased by 1.9% this quarter, due to annual RPI
rent reviews at Dudley & Sheffield (+4.0%) and fixed uplifts to the rents
for BGEN Limited in St. Helens (+9.4%). The Group completed a lease renewal
with Pets at Home in May 2023 in the Droitwich Retail Park for a further 5
years. The contracted rent is £112,500 per annum with a 9-month rent free
period given by way of an incentive.

 

Over the period to 30 September 2023, 20% of the Group's income will be
reviewed (one annual index-linked rent review and two periodic index-linked
rent reviews (5 years since the previous reviews)).

 

Rent Collection

Rent collection remains resilient with 100% expected for the June 2023
quarter. The rents for the June 2023 quarter are split 82.8% payable quarterly
in advance and 17.2% payable monthly in advance.

 

 

ENQUIRIES

 Alternative Income REIT PLC
 Simon Bennett - Chairman                      via H/Advisors Maitland below

 M7 Real Estate Ltd                            020 3657 5500

 Richard Croft

 Jane Blore

 Panmure Gordon (UK) Limited                   020 7886 2500
 Alex Collins
 Tom Scrivens

 H/Advisors Maitland (Communications Advisor)  07747 113 930 / 020 7379 5151
 James Benjamin                                aire-maitland@h-advisors.global

 Rachel Cohen

 

The Company's LEI is 213800MPBIJS12Q88F71.

 

Further information on Alternative Income REIT PLC is available at
www.alternativeincomereit.com (http://www.alternativeincomereit.com) (1).

 

(1) Neither the content of the Company's website, nor the content on any
website accessible from hyperlinks on its website or any other website, is
incorporated into, or forms part of, this announcement nor, unless previously
published on a Regulatory Information Service, should any such content be
relied upon in reaching a decision as to whether or not to acquire, continue
to hold, or dispose of, securities in the Company.

 

NOTES

Alternative Income REIT PLC aims to generate a sustainable, secure and
attractive income return for shareholders from a diversified portfolio of UK
property investments, predominately in alternative and specialist sectors. The
majority of the assets in the Group's portfolio are let on long leases which
contain index linked rent review provisions.

 

The Company's asset manager is M7 Real Estate Limited ("M7"). M7 is a leading
specialist in the pan-European, regional, multi-tenanted real estate market.
It has over 230 employees in 15 countries and territories. The team manages
over 620 assets with a value of circa €6.9 billion (as at 30 June 2023).

 

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