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

Alternative Income REITAnnouncement

02/11/2023 07:16

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RNS Number : 1743S  Alternative Income REIT PLC  02 November 2023

2 November 2023

Alternative Income REIT PLC

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

NET ASSET VALUE, DIVIDEND DECLARATION AND PORTFOLIO VALUATION UPDATE

TO 30 SEPTEMBER 2023

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

New target annual dividend of at least 5.9 pence per share, a 3.5% increase on
the prior year target of 5.7 pence per share

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 index-linked rent reviews, provides a
trading and business update and declares an interim dividend for the quarter
ended 30 September 2023.

 

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

 

"AIRE completed the disposal of its hotel in Glasgow for £7.5 million in
August 2023 at a 7.9% premium to its book value. The Board has considered a
number of attractive potential investment opportunities and now expects to
reinvest the net proceeds into two alternative investments, with one of the
acquisitions at an advanced stage with completion expected prior to 31
December 2023.

 

The Company achieved its target dividend of 5.7 pence per share ("pps") last
year, and subject to the reinvestment of the Glasgow sale proceeds as
anticipated and the continued collection of rent from the Group's property
portfolio as it falls due, the Board has set a new dividend target of at least
5.9pps for the year ending 30 June 2024. This represents an increase of at
least 3.5% over the previous year and reflects the Board's intention to pay a
progressive dividend.

 

The Group's portfolio has delivered income growth for the quarter ended
September 2023 of 2.5% (after discounting for the conclusion of the rent-free
period on Pets at Home) as a result of its 96% index-linked rent review
profile, with 40% of this rental income reviewed annually. Contracted
annualised rent increased by 4.2% this quarter. The portfolio continues to be
actively managed and during the quarter, three rent reviews were successfully
completed and regearing discussions have started with three tenants, combining
lease extensions with ESG initiatives and EPC improvements.

 

During the quarter, the Group's portfolio valuation, portfolio net initial
yield and unaudited NAV remained broadly stable. The Company delivered an
unaudited NAV total return for the quarter of 1.6%.

 

The Group's portfolio is relatively insulated from market fluctuations,
benefiting from being 100% let, with 100% collection of rent due and 96%
index-linked rent review profile, and low borrowing costs fixed at a weighted
average interest rate of 3.19% until October 2025, which together continue to
provide a secure and growing rental income stream.

 

The Board remains confident that the Company is well-positioned to continue to
deliver value to shareholders through a progressive dividend policy and with a
portfolio that has the potential for capital growth."

 

Overview of Key Financials

 

                                            At 30 September  At 30 June           Change

                                            2023             2023

                                            (unaudited)      (audited)
 Net Asset Value ("NAV")                    £67.3million     £67.8 million        -0.7%
 NAV per share                              83.6p            84.2p                -0.7%
 Share price per share                      59.6p            64.7p                -7.9%
 Share price discount to NAV                28.7%            23.1%                +5.6%
 Investment property fair value             £99.6 million    £107.0 million (C)   -6.9%

 (based on external valuation)
 Loan to gross asset value ("GAV") (A) (B)  37.1%            36.8%

 

                                   Quarter ended 30 September 2023    Quarter ended    Change

                                   (unaudited)                        30 June 2023

                                                                      (audited)
 EPRA earnings per share (A)       1.3p                               1.7p             -23.5%
 Adjusted earnings per share (A)   1.5p                               1.6p             -6.3%
 Dividend cover (A)                104.9%                             81.8%            23.1%
 Total dividends per share         1.425p                             1.92p            -25.8%
 Dividend yield (A)                9.9%                               9.3%             0.6%
 Earnings per share                1.3p                               2.0p             -35.0%
 Share price total return (A)      -4.9%                              -1.7%
 NAV total return (A)              1.6%                               +2.4%
 Annualised passing rent           £7.1 million                       £7.6 million     -6.6%
 Ongoing charges (A) (annualised)  1.5%                               1.4%             10bps

(A) Considered to be an Alternative Performance Measure.

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

(C) On a like-for-like basis the remaining 18 properties were valued at
£100.1 million at 30 June 2023, a valuation decrease of £0.5 million or
0.5%.

 

Property Portfolio

 

AIRE completed the disposal of the Group's hotel in Glasgow for £7.5 million
in August 2023 at a 7.9% premium to its book value. Since then, the Board has
looked at a number of attractive investment opportunities to reinvest the
proceeds, and expects to reinvest the net proceeds into two alternative
investments, with one of the acquisitions at an advanced stage with completion
expected prior to 31 December 2023.

 

The value of the Group's remaining portfolio of 18 assets has been relatively
stable over the quarter to September 2023, decreasing by £0.5 million or 0.5%
to £99.6 million (30 June 2023: £107.0 million across 19 assets; on a
like-for-like basis £100.1 million across 18 assets) and the portfolio's net
initial yield remains almost unchanged at 6.7% (30 June 2023: 6.6%). This
quarter's marginal valuation decrease arose from the Healthcare sector where
capitalisation rates have weakened slightly.

 

At 30 September 2023, the Net Initial Yield on the Group's portfolio remained
stable at 6.7% (30 June 2023: 6.6%).

 

The property investment market has been subdued for much of 2023 with ongoing
economic uncertainty leaving investors cautious. Despite concerns over rising
interest rates and high levels of inflation, there are some positive signs for
the market with pockets of strong occupational demand, particularly in the
industrial and logistics sector and growing demand for sustainable properties.
The Group's portfolio is relatively insulated from market fluctuations,
benefiting from being 100% let, with 100% collection of rent due and 96%
index-linked rent review profile, which continue to provide a secure and
growing rental income stream.

 

Over the past year, the value of the Group's portfolio has fallen by a total
of £12 million or 10.75%. AIRE continues to outperform relative to most other
commercial real estate companies, as demonstrated by CBRE which reported a
fall in their Monthly (All-Property) Index of 14.2% over the same period.

 

The Group's portfolio has delivered income growth for the quarter ended
September 2023 of 2.5% (after discounting for the conclusion of the rent-free
period on Pets at Home) as a result of its 96% index-linked rent review
profile, with 40% of this rental income reviewed annually. Contracted
annualised rent increased by 4.2% this quarter. The portfolio continues to be
actively managed and during the quarter, three rent reviews were successfully
completed and regearing discussions have started with three tenants combining
lease extensions with ESG initiatives and EPC improvements. During the quarter
to 31 December 2023, 10% of the Group's income will be reviewed with two
annual index-linked rent reviews.

 

Dividend Declaration, Earnings Per Share and Dividend Cover

 

The Company achieved its target dividend of 5.7pps last year, and subject to
the reinvestment of the Glasgow sale net proceeds as anticipated and the
continued collection of rent from the Group's property portfolio as it falls
due, the Board has set a new dividend target of 5.9pps for the year ending 30
June 2024. This represents an increase of 3.5% over the previous year and
reflects the Board's intention to pay a progressive dividend.

 

The Board is pleased to declare an interim quarterly dividend of 1.425pps for
the quarter ended 30 September 2023. This dividend will be distributed as
Property Income Distribution ("PID") and will be paid on 24 November 2023 to
shareholders on the register on 10 November 2023. The ex-dividend date will be
9 November 2023.

 

The Adjusted EPS of 1.49pps marginally decreased over the quarter (30 June
2023: 1.57pps). The dividend cover for the quarter was 104.9% (30 June 2023:
81.8%).

 

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

 

At 30 September 2023, the Group's unaudited NAV was £67.3 million, 83.6pps
(30 June 2023: £67.8 million, 84.2pps), representing a marginal 0.7% decrease
over the previous quarter.

 

When combined with the 1.92pps dividend paid in the quarter, this produces an
unaudited NAV total return for the quarter of 1.6% (30 June 2023: 2.4%).

 

The share price decreased by 7.9% to 59.6pps and reflects the increase in the
discount from 23.1% to 28.7%. In general, discounts in the sector have widened
considerably in the quarter, although AIRE's discount remains at less than the
sector average.

 

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

 

                                                              Pence per share  £ million
 NAV at 30 June 2023                                          84.2             67.8
 Valuation movement in property portfolio                     (0.7)            (0.6)
 Income earned for the period                                 2.2              1.8
 Expenses for the period                                      (0.5)            (0.4)
 Net finance costs for the period                             (0.4)            (0.4)
 Gain on sale of property                                     0.7              0.6
 Interim dividend paid during the quarter ended 30 June 2023  (1.9)            (1.5)
 NAV at 30 September 2023                                     83.6             67.3

 

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 September 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 September 2023, the Group's assets were 100% let (30 June 2023: 100%).
The weighted average unexpired lease term at 30 September 2023 was 17.1 years
to the earlier of break and expiry (30 June 2023: 17.0 years) and 19.2 years
to expiry (30 June 2023: 18.9 years).

 

In aggregate 96% (30 June 2023: 97.0%) of the portfolio's income stream is
reviewed periodically on an upward-only basis and in line with inflation,
subject to floors and caps, 40.0% being annual reviews. The majority of the
portfolio's income stream, being 67.0%, is linked to RPI and 29.0% to CPI,
with the remaining 4.0% being subject to fixed uplifts or expiries.

 

Contracted annualised rent increased by 4.2% this quarter, due to annual RPI
rent reviews at Salford (+8.0%), income following the rent free period on the
Pets at Home lease of £112,500 per annum and 5 yearly rent reviews in
Birmingham (+13.6%) and Sittingbourne (+17.3%)

 

Over the quarter to 31 December 2023, 10% of the Group's income will be
reviewed (two annual index-linked rent reviews).

 

Rent Collection

 

Rent collection remains resilient with 100% expected for the September 2023
quarter. The rents for the September 2023 quarter are split 90.4% payable
quarterly in advance and 9.6% 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 14 countries and territories. The team manages
over 610 assets with a value of circa €6.9 billion (at 30 September 2023).

 

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