REG - Alternative Inc REIT - Results for the half year ended 31 December 2021
07/03/2022 07:00
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RNS Number : 7738D Alternative Income REIT PLC 07 March 2022
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7 March 2022
Alternative Income REIT plc
(the "Company" or the "Group")
Interim Report and Financial Statements for the half year ended 31 December
2021
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, is pleased to announce its interim report
and financial statements for the half year ended 31 December 2021.
Financial Highlights
At 31 December
2021 2020 Change
Net Asset Value (unaudited) £72.75 million £68.17 million +6.7%
Net Asset Value per share (unaudited) 90.38 p 84.68 p +6.7%
Share price 72.2 p 60.0 p +20.3%
Loan to GAV (3 A) 35.22% 36.62%
( )
For the half year ended 31 December
2021 2020 Change
EPRA EPS (A) 3.28 p 2.90 p(1) +13.1%
Adjusted EPS (A) 2.79 p 2.66 p(1) +4.9%
Dividend cover (A) 107.31% 118.22% -10.9%
Total dividends 2.60 p 2.25 p +15.6%
Operating profit £3.45 million (including gain on sale of investment property but excluding £3.48 million -0.9%
fair value changes)
Profit before tax £6.23 million £3.03 million +105.3%
Earnings per share 7.74 p 3.77 p +105.3%
Share price total return (A) 5.84% 17.15%
NAV total return (A) 9.65% 5.02%
Ongoing charges (A) 1.44% 1.45% -1 bps
(A) Considered to be an Alternative Performance Measure. Further details can
be found at the end of this section and full calculations are set out
following the financial statements.
(1) Originally reported 31 December 2020 EPRA EPS was 3.43p and Adjusted EPS
was 3.19p. This included gain on investment disposal of £425,000 equivalent
to 0.53p which should have been excluded from the EPRA EPS calculation. See
Note 7.
(2) This is a target only and not a profit forecast. There can be no
assurance that the target will be met and it should not be taken as an
indicator of the Company's expected or actual results.
(3) The loan facility at 31 December 2021 of £41.0 million (31 December
2020: same) is with Canada Life Investments, matures on 20 October 2025 and
has a weighted average interest cost of 3.19%.
· The Net Asset Value increased by 6.7% or £4.58 million to £72.75
million, equivalent to 90.38 pence per share ('pps') as at 31 December 2021
(31 December 2020: £68.17 million and 84.68 pps). The majority of this
increase is due to the £3.9 million valuation uplift in investment properties
primarily due to improved market conditions, with previous year valuations
impacted by poorer market conditions due to Covid-19.
· Total dividends of 2.60p have been declared for the half year (half
year ended 31 December 2020: 2.25 p). This is an increase of 15.6% and
reflects the Board's view that the Company remains on track to deliver its
target annual dividend(2) of 5.5 pps, with full dividend cover expected, all
else being equal, by September 2022.
· Profit before tax increased 105.3% to £6.23 million and
earnings per share to 7.74p for the half year (half
year ended 31 December 2020: profit of £3.03 million and earnings per
share of 3.77p). The majority of this increase is due to the £3.9 million
valuation uplift in investment properties.
·
At 31 December 2021, the Group had a £41.00 million loan facility with Canada Life Investments,
which represented a loan to Gross Asset Value ('GAV') (A )of 35.22% (31
December 2020: 36.62%), with the weighted average interest cost of 3.19% (31
December 2020: same).
Property Highlights
· At 31 December 2021, the Group's property portfolio had a fair value
of £107.73 million across 18 properties (31 December 2020: £108.53 million
across 19 properties). During the year, the Group disposed of the investment
property known as Trident Business Park, Huddersfield (refer to Financial
Results section within the Chairman's Statement below). On a like-for-like
basis the remaining 18 properties were valued at £107.73 million at 31
December 2021 (31 December 2020: £103.03 million), a valuation increase of
£4.70 million or 4.6%.
· EPRA Net Initial Yield (A) ('NIY') improved to 5.72% at 31 December
2021 (31 December 2020: 5.49%).
· Rent recognised during the half year was £3.73 million (half year to
31 December 2020: £3.49 million), of which, £0.25 million was accrued
debtors for the combination of minimum uplifts and rent-free period (31
December 2020: accrued debtors of £0.24 million). The number of tenants at 31
December 2021 was 20 (31 December 2020: 22).
· At 31 December 2021, the portfolio had Annualised Gross Passing
Rental Income (A) of £6.62 million across 18 properties (31 December 2020:
£6.94 million across 19 properties).
· 92.6% of the Group's income is inflation linked to Retail Price Index
('RPI') or Consumer Price Index ('CPI').
· The assets were 99.4% let at 31 December 2021 (31 December 2020:
fully let).
· The weighted average unexpired lease term ('WAULT') at 31 December
2021 was 18.1 years to the earlier of break and expiry (31 December 2020: 18.3
years) and 20.2 years to expiry (31 December 2020: 20.3 years).
· On 1 December 2021, the Group completed the disposal of the freehold
interest in the Audi car showroom in Huddersfield to the occupier for £5.5
million, representing a 3.8% premium on the book value at June 2021 and a net
initial yield of 6.75%.
Post balance sheet highlights
· On 3 February 2022, the Board declared an interim dividend of 1.3 p
in respect of the period from 1 October 2021 to 31 December 2021. This was
paid on 28 February 2022 to shareholders on the register as at 11 February
2022. The ex-dividend date was 10 February 2022.
· By 2 March 2022, in respect of the March, June, September and
December 2021 rent quarters, the Group has collected 100% of rent. All current
tenants have repaid outstanding arrears/deferrals, including Pure Gym who
accelerated repayment of all arrears from July 2022 to December 2021.
· The portfolio is fully let following a further letting to Bgen Ltd at
St Helens.
· As announced on 31 January 2022, the Company completed the
acquisition of the Volvo car showroom in a prime location on the A4 Bath Road,
Slough for £5.0 million (net of acquisition costs to the Company) with a
materially longer WAULT of 15 years. This acquisition redeployed the net
proceeds from the Group's disposal, announced on 30 November 2021, of its Audi
car showroom in Huddersfield for £5.5 million.
Alan Sippetts, Non-Executive Chairman of Alternative Income REIT plc,
comments:
Our results clearly underline the strength of our resilient portfolio which is
delivering strong increases in our like-for-like property valuation and
unaudited NAV, with continuing income growth and very strong rent collection.
We expect to provide our shareholders with further enhanced income and capital
growth from our robust portfolio, which benefits from long leases, 92.6% of
which have inflation linked uplifts, as well as from asset management
activities, opportunistic transactions and further improvements in the market.
When combined with our strong balance sheet and modest overhead, the Group has
a strong foundation from which to deliver attractive total returns, including
a potentially progressive dividend, and we are continuing to focus on
identifying opportunities which can deliver further potential income,
valuation enhancement and scale to the Company.
The Board remains confident that the Company is on track to deliver on its
target annual dividend of 5.5 pence per share (2), with full dividend cover
expected, all else being equal, by September 2022."
ENQUIRIES
Alternative Income REIT plc
Alan Sippetts - Chairman via Maitland/AMO below
M7 Real Estate Ltd +44 (0)20 3657 5500
Richard Croft
Panmure Gordon (UK) Limited +44 (0)20 7886 2500
Alex Collins
Tom Scrivens
Chloe Ponsonby
Maitland/AMO (Communications Adviser) +44(0) 7747 113 930
James Benjamin james.benjamin@maitland.co.uk
The Company's LEI is 213800MPBIJS12Q88F71.
Further information on Alternative Income REIT plc is available at
www.alternativeincomereit.com (http://www.alternativeincomereit.com/) (4)
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 inflation linked rent review provisions.
The Company's investment adviser is M7 Real Estate Limited ("M7"). M7 is a
leading specialist in the pan-European, regional, multi-tenanted real estate
market. Majority owned by its senior managers, 220 employees in 15 countries
across Europe. The team manages over 570 properties with a value of circa
€4.3 billion.
(4) 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.
Alternative Performance Measures ("APM")
In assessing the performance of the Group, the Board and the Investment
Adviser use APMs including the European Public Real Estate ("EPRA") Best
Practice Recommendations to supplement IFRS. EPRA measures are widely
recognised and used by public real estate companies and investors and seek to
improve transparency, comparability and relevance of published results in the
sector.
Reconciliations between EPRA measures, other APMs and IFRS disclosures can be
found in Note 7 and immediately after the Notes the Consolidated Condensed
Financial Statements in this report.
Definitions of APMs are given in the Key Performance Indicators, EPRA
Performance Measures Calculations and APM Calculations sections or otherwise
included in the Glossary section of this report.
Chairman's Statement
Overview
I am pleased to present the unaudited interim report and financial statements
of Alternative Income REIT plc (the "Company") together with its subsidiaries
(the "Group") for the half year ended 31 December 2021.
During the period and up to the date of this report, the portfolio has
continued to prove its resilience. In spite of the resurgence of Covid-19
through the new Omicron variant and additional Government measures
implemented, our rent collection from the Group's portfolio has remained very
strong. Yields in our portfolio have remained robust, even in those sectors
most impacted by the pandemic, and there is further potential for yield
compression as trading and the market generally improves supported by the
removal by the Government of Plan B restrictions. Together with our robust
balance sheet, modest overhead, 92.6% of our portfolio's leases with inflation
linked upwards only rent reviews and the potential for further enhancement
through asset management initiatives and transactions initiated on an
opportunistic basis only, the Board believes the Company is positioned well to
deliver very attractive income and capital growth.
On 1 December 2021, we completed the disposal of the freehold interest in the
Audi car showroom in Huddersfield to the occupier for £5.5 million,
representing a 3.8% premium on the book value as at June 2021 and a net exit
yield of 6.75%. As announced on 31 January 2022, we were delighted to have
subsequently swiftly redeployed these proceeds through the acquisition of a
state-of-the-art car showroom let to Volvo for £5.0 million (net of
acquisition costs to the Company) with a materially longer WAULT of 15 years.
The Board believes that the asset has the potential to deliver excellent long
term returns to shareholders, particularly with the strength of the tenant
covenant on a long lease with index-linked rent reviews. This transaction was
the second investment introduced by M7 Real Estate Limited ("M7"), the
Company's Investment Adviser. M7 continues to consider asset management
initiatives and transactions initiated on an opportunistic basis to further
enhance income and capital growth; further information can be found in the
Investment Adviser's Report below.
By 2 March 2022, in respect of the March, June, September and December 2021
rent quarters, the Group has collected 100% of rent. All current tenants have
repaid outstanding arrears/deferrals, including Pure Gym who accelerated
repayment of all arrears from July 2022 to December 2021. The portfolio is
fully let following a further letting to Bgen Ltd at St Helens. A total of
four rent reviews took place during the period with a combined uplift of
£70,361 representing a 3.54% increase in contracted rent on those properties.
A further five are expected to take place in the year ending 30 June 2022,
with an expected increase of c.3.7% in contracted rent across the portfolio.
Financial Results Half year ended Half year Year
31 December 2021 (unaudited) ended ended
31 December 2020 (unaudited) 30 June
2021 (audited)
IFRS performance measures:
Operating profit before fair value changes £'000 3,445 3,475 6,311
Operating profit £'000 6,939 3,745 6,993
Profit before tax £'000 6,228 3,033 5,572
Profit per share - basic and diluted 7.74 p 3.77 p 6.92 p
Dividend per share 2.60 p 2.25 p 5.14 p
Net Asset Value per share 90.38 p 84.68 p 85.58 p
Alternative performance measures:
EPRA EPS - basic and diluted 3.28 p 2.90 p 5.55 p
Adjusted EPS - basic and diluted 2.79 p 2.66 p 5.07 p
Financing
As at 31 December 2021, the Group had fully utilised its £41.0 million loan
facility with Canada Life Investments (31 December 2020: fully utilised). The
weighted average interest cost of the Group's facility is 3.19% and the loan
is repayable on 20 October 2025. If repayment is made prior to this date,
and the corresponding Gilt rate is lower than the contracted rate of interest,
then the loan terms provide for a significant early redemption fee, which as
at 31 December 2021 would have been £2,551,803.
Dividends & Earnings
The Company declared interim dividends of 2.6 p in respect of the half year
ended 31 December 2021, an increase of 15.6% on the dividends declared for the
half year ended 31 December 2020 of 2.25 p.
As set out in Note 7 to the Consolidated Condensed Financial Statements, these
dividends were covered by both EPRA Earnings (A) of 3.28 p (31 December 2020:
2.90 p), and the Group's Adjusted EPS (representing cash) were 2.79 p (31
December 2020: 2.66 p).
Future Growth and Outlook
Our results clearly underline the strength of our resilient portfolio which is
delivering strong increases in our like-for-like property valuation and
unaudited NAV, with continuing income growth and very strong rent collection.
We expect to provide our shareholders with further enhanced income and capital
growth from our robust portfolio, which benefits from long leases, 92.6% of
which have inflation linked uplifts, as well as from asset management
activities, opportunistic transactions and further improvements in the market.
When combined with our strong balance sheet and modest overhead, the Group has
a strong foundation from which to deliver attractive total returns, including
a potentially progressive dividend, and we are continuing to focus on
identifying opportunities which can deliver further potential income,
valuation enhancement and scale to the Company.
The Board remains confident that the Company is on track to deliver on its
target annual dividend of 5.5 pence, with full dividend cover expected, all
else being equal, by September 2022(5).
I would like to thank my fellow shareholders, Directors, the Investment
Adviser and our other advisers and service providers who have provided
professional support and services to the Group during the period.
Alan Sippetts
Chairman
4 March 2022
(A) Considered to be an Alternative Performance Measure. Further details can
be found at the end of this section and full calculations are set out
following the financial statements.
(5) This is a target only and not a profit forecast. There can be no
assurance that the target will be met and it should not be taken as an
indicator of the Company's expected or actual results.
Key Performance Indicators ('KPIs')
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE
1. Net Initial Yield ('NIY') 5.71%
Annualised rental income based on the cash rents passing at the balance sheet The NIY is an indicator of the ability of the Company to meet its target at 31 December 2021
date, less non-recoverable property operating expenses, divided by the market dividend after adjusting for the impacts of leverage and deducting operating
value of the property, increased with purchasers' costs estimated by the costs. (30 June 2021: 5.93%; 31 December 2020: 5.53%)
Group's External Valuers.
2. Weighted Average Unexpired Lease Term ('WAULT') to break and expiry 18.1 years to break and 20.2 years to expiry
The average lease term remaining to expiry across the portfolio, weighted by
contracted rent.
at 31 December 2021
The WAULT is a key measure of the quality of the portfolio. Long leases (30 June 2021: 17.8 years to break and 19.8 years to expiry; 31 December 2020:
underpin the security of our future income. 18.3 years to break and 20.3 years to expiry)
3. Net Asset Value ('NAV') per share £72.75 million/90.38 p
NAV is the value of an entity's assets minus the value of its liabilities. Provides stakeholders with the most relevant information on the fair value of at 31 December 2021
the assets and liabilities of the Group.
(30 June 2021: £68.89 million, 85.58 p and 31 December 2020: £68.17 million,
84.68 p)
4. Dividend per share 2.60 p
Dividends declared in relation to the period are in line with the stated The Company seeks to deliver a sustainable income stream from its portfolio, for the half year ended 31 December 2021
dividend target as set out in the Prospectus at IPO. The Company targets a which it distributes as dividends.
dividend of 5.50 pence per Ordinary Share per annum once fully invested and (year ended 30 June 2021: 5.14 p; half year ended 31 December 2020: 2.25 p)
leveraged(2).
5. Adjusted EPS 2.79 p
Adjusted EPS from core operational activities, as adjusted for non-cash items. This reflects the Company's ability to generate earnings from the portfolio for the half year ended 31 December 2021
A key measure of a company's underlying operating results from its property which underpins dividends.
rental business and an indication of the extent to which current dividend (year ended 30 June 2021: 5.07 p; half year to 31 December 2020: 2.66 p)
payments are supported by earnings. See Note 7 to the Consolidated Condensed
Financial Statements.
6. Leverage (Loan-to-GAV) 35.22%
The proportion of the Group's assets that is funded by borrowings. The Group utilises borrowings to enhance returns over the medium term. at 31 December 2021
Borrowings will not exceed 40% of GAV (measured at drawdown).
(30 June 2021: 36.30% and 31 December 2020: 36.62%)
EPRA Performance Measures
( )
The table below shows EPRA performance measures (which are all alternative
performance measures) of the Group.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
EPRA NIY (6) 5.72%
Annualised rental income based on the cash rents passing at the balance sheet A comparable measure for portfolio valuations. This measure should make it at 31 December 2021
date, less non-recoverable property operating expenses, divided by the market easier for investors to judge themselves, how the valuation of two portfolios
value of the property, increased with (estimated) purchasers' costs. compare. (30 June 2021: 5.94% and 31 December 2020: 5.49%)
EPRA 'Topped-Up' NIY (6) 6.68%
This measure incorporates an adjustment to the EPRA NIY in respect of the A comparable measure for portfolio valuations. This measure should make it at 31 December 2021
expiration of rent-free periods (or other unexpired lease incentives such as easier for investors to judge themselves, how the valuation of two portfolios
discounted rent periods and step rents). compare. (30 June 2021: 6.95% and 31 December 2020: 7.04 %)
EPRA NAV (7) £72.75 million/90.38 p
Net asset value adjusted to include properties and other investment interests Makes adjustments to IFRS NAV to provide stakeholders with the most relevant at 31 December 2021
at fair value and to exclude certain items not expected to crystallise in a information on the fair value of the assets and liabilities within a real
long-term investment property business. estate investment company with a long-term investment strategy. (30 June 2021: £68.89 million, 85.58 p and 31 December 2020: 68.17 million,
84.68 p)
EPRA Earnings/EPS (7) £2.64 million/3.28 p
Earnings from operational activities. A key measure of a company's underlying operating results and an indication of EPRA earnings for the half year ended 31 December 2021
the extent to which current dividend payments are supported by earnings.
(30 June 2021: £4.47 million/5.55 p and 31 December 2020: £2.34 million/2.9
p)
EPRA Vacancy (6) 0.6 %
Estimated Rental Value ('ERV') of vacant space divided by ERV of the whole A 'pure' percentage measure of investment property space that is vacant, based EPRA vacancy as at 31 December 2021
portfolio. on ERV.
(30 June 2021: 0% and 31 December 2020: 0%)
EPRA Cost Ratio (6) 10.3%
Administrative and operating costs (including and excluding costs of direct A key measure to enable meaningful measurement of the changes in a company's EPRA Cost Ratio as at 31 December 2021. The ratio is the same both including
vacancy) divided by gross rental income. operating costs. and excluding the vacancy costs.
(30 June 2021: 18.4% and 31 December 2020: 12.6%)
EPRA Net Reinstatement Value (7) £77.20 million/95.91 p
The EPRA NRV adds back the purchasers' costs deducted from the EPRA NAV and A measure that highlights the value of net assets on a long-term basis. EPRA NRV for the half year ended 31 December 2021
deducts the break cost of bank borrowings.
(30 June 2021: £72.53 million/90.09p and 31 December 2020: £71.04
million/88.25p)
EPRA Net Tangible Assets (7) £70.20 million/87.21 p
The EPRA NTA deducts the break cost of bank borrowings from the EPRA NAV. A measure that assumes entities buy and sell assets, thereby crystallising EPRA NTA for the half year ended 31 December 2021
certain levels of deferred tax liability. The Group has UK REIT status and as
such no deferred tax is required to be recognised in the accounts. (30 June 2021: £65.43 million/81.27 p and 31 December 2020: £62.90
million/78.14 p)
EPRA Net Disposal Value (7) £70.20 million/87.21 p
The EPRA NDV deducts the break cost of bank borrowings from the EPRA NAV. A measure that shows the shareholder value if assets and liabilities are not EPRA NDV for the half year ended 31 December 2021
held until maturity.
(30 June 2021: £65.43 million/81.27 p and 31 December 2020: £62.90
million/78.14 p)
EPRA NNNAV is equal to EPRA NAV as there are no adjusting items. As such, this
measure has not been presented.
(6) The reconciliation of this APM is set out in the EPRA Performance Measures
Calculations section following the Notes to the Consolidated Condensed
Financial Statements.
(7) The reconciliation of this APM is set out in Note 7 of the Notes to the
Consolidated Condensed Financial Statements.
Investment Adviser's Report
Market Outlook
UK Economic Outlook
Headline GDP growth in 2022 could be between 4.5% and 5.1% but this is largely
driven by base effects. The annual growth figures in the first half of 2022
are expected to be skewed as the economy comes off its low base due to the
national lockdown in early 2021. Core underlying growth will continue to be
relatively modest, continuing the low-growth trend we have seen this year
driven by the normalisation of economic activity.
PricewaterhouseCoopers (PwC) anticipate GDP growth to slow down in 2022 as the
economy returns to its pre-pandemic trend with the UK economy anticipated by
the end of 2022 to be roughly 1% to 2% above the pre-COVID levels. From 2023
onwards, the pace of growth is projected to slow down further as base effects
fall out of the annual figures. Under PwC's two scenarios, growth is expected
to range between 1.3% and 1.8% in 2023.
Research produced by PwC in December 2021(8) suggested that the end of the
furlough scheme has not set back the labour market recovery. Various
indicators and surveys suggest that a significant majority of the 1.1 million
workers still on furlough at the end of September remain in employment.
However, it will take some months to understand the full impact of the end of
furlough. This is because furloughed employees that have been made redundant
will still be included in the payroll data while they serve out their notice
periods. This means the short-term outlook for the labour market is cautiously
optimistic.
Inflation is likely to reach its highest level for three decades in Q2 2022,
before returning gradually back to target. Ofgem's price cap review, combined
with the scheduled reversal of the VAT cuts for hospitality and tourism, is
expected to create a perfect storm that creates upward pressure on inflation
rates in the first half of 2022. This increase in inflation is expected to
positively impact the income profile of the Alternative Income REIT plc with
several tenants having index linked rent reviews. Inflation is expected to
gradually fall back to target over the next 1-2 years, as the impact of these
two factors fade, supply bottlenecks ease, and base effects dissipate.
(8 )UK Economic Outlook, December 2021, PricewaterhouseCoopers
UK Real Estate Outlook
Although the UK isn't in the clear with regards to the Covid-19 pandemic,
progress has been made and people are moving forward with a renewed sense of
optimism. An improving economy and the labour market holding stable following
the removal of the furlough scheme provide a generally positive backdrop for
real estate in 2022.
Whilst there is a general positivity around real estate in 2022, following the
easing of Covid-19 related lockdown measures, sectors such as industrial are
assumed to continue to thrive, which will benefit the Group's industrial
exposure. It is expected that the rental growth experienced in recent years
will continue into 2022, with speculative development at an all-time high, but
insufficient to meet the current demand, causing vacancy rates to remain low
and created upward pressure on rents. Additionally, retail is expected to
recover during 2022, driven by a pick-up in spend in 2022 leading to increased
occupier demand. Retail warehousing and parks are expected to continue to be
the strongest performers during 2022.
The Group's hotel assets struggled throughout the pandemic, however, hotel
revenues are expected to recover during 2022, driven by increases in
international travel and the removal of national lockdown restrictions.
Increased investor appetite will support recovery in asset values and
liquidity. Healthcare was another sector that struggled during 2022, however,
CBRE expect the market to recover to pre pandemic levels, boosting investor
confidence and leading to prime yields of 4.5%. Furthermore, they are
anticipating record M&A activity in the leisure industry during 2022,
because of investors looking to capitalise on operational risk with the
market.
Student housing is another sector in which the Group has a large exposure. At
the end of 2021, it was reported that 2021 saw significant confidence return
to the UK's purpose build student accommodation sector with over £2.5 billion
invested and companies, such as Unite, reporting occupancy figures of 94%.
2021 saw an emphasis placed on the importance of ESG related credentials.
Normally associated with sustainability, and gaining in prominence, ESG is a
growing and has quickly become an ethical priority for businesses, both large
and small. It is becoming a central aspect of how businesses define
themselves. This is having significant impacts on the occupational market with
perspective tenants taking ESG values into account when considering their next
office, making ESG related credentials a key selling point.
Portfolio Activity During the Period
The following asset management initiatives were undertaken during the half
year:
· Rent Reviews: A total of four rent reviews took place
during the period with a combined uplift of £70,361 representing an average
of 3.54% growth in contracted rent across those properties affected and 1.07%
across the portfolio.
· Covid-19 rent arrangements: All Covid-19 related arrears
have now been repaid.
o Premier Inn - the tenant did not utilise the option to defer the payment
of 50% of rent due at the end of September & December 2021, having paid
all rents in accordance with their obligations.
o Pets at Home - continue to pay monthly although contracted to pay
quarterly.
o Pure Gym - 10 month's rent, deferred by agreement due to Covid closures,
was repaid in full 7 months early in December 2021.
o Snap Fitness - rent deposit is being repaid by instalments through to
March 2022.
· Grazebrook Industrial Estate, Dudley: major new machinery
and steel installation works by Meridian Steel in their Dudley operation is
due to complete in Spring 2022.
· Pocket Nook Estate, St Helens: A 5 year lease extension of
Unit 2 by Bgen Limited, on expiry of their lease in April 2022, completed on
21 February 2022 at a 5.6% increased rent.
· Travelodge, Swindon: Travelodge Hotels Limited, who
entered CVA in June 2020 have performed in accordance with their agreement.
Following a rent review in June 2021, 100% of the reviewed rent (£403,147 per
annum) became due from 1 January 2022. As previously reported, work was
completed in December 2020 to replace the combustible elements uncovered on
the external walls of the top floors and rear lift core of the Travelodge
Hotel, with non-combustible replacements and to remediate the fire/smoke
stopping, at a cost (including professional fees) of c.£1.2 million. The
property was extended in 2007 and both the architect and cladding
sub-contractor involved are being pursued for reimbursement of the costs.
Particulars of Claim were lodged with the Court on 12 November 2021, Defences
were lodged on 7 February 2022.
· Huddersfield, Audi car showroom was sold for £5.5 million
on 1 December 2021 to the occupier. The lease has a WAULT of 3.86 years and
rent reflecting £13.49 per sq ft, significantly in excess of industrial rents
in the vicinity.
The following asset management initiatives were undertaken between the half
year and the date of this report:
· Acquisition of a state-of-the-art car showroom let to
Volvo for £5.0 million (net of acquisition costs to the Company) with a
materially longer WAULT (15 years compared with Huddersfield of 3.86 years) on
28 January 2022. The rent reflects £18.05 per sq ft, a level underpinned by
alternative use (industrial and retail warehouse) rental values in the
vicinity.
· Bgen Limited has taken a 3 year lease of an adjacent yard
so that the only unlet property at the period end is now let, returning the
Group's portfolio to 100% occupancy.
Financial Results
Net rental income earned from the portfolio for the half year ended 31
December 2021 was £3.73 million excluding service and direct recharges (half
year to 31 December 2020: £3.49 million; year to 30 June 2021: £7.21
million), contributing to an operating profit before fair value changes of
£3.35 million (half year to 2020: £3.05 million; year to 30 June 2021:
£5.89 million).
The portfolio has seen a gain of £3.49 (9) million in fair value of
investment property over the half year (half year to 31 December 2020: gain of
£0.27 million; year to 30 June 2021: gain of £0.68 million). This is
primarily due to improved market conditions, with previous year valuations
impacted by poorer market conditions due to Covid-19.
Administrative and property operating expenses, which include the Investment
Manager's fee and other costs attributable to the running of the Group, were
£0.38 million for the half year excluding service and direct recharges (half
year to 31 December 2020: £0.44 million; year to 30 June 2021: £1.32
million). Ongoing charges for the half year were 1.44% (half year to 31
December 2020: 1.45%; year to 30 June 2021: 1.27%). The increase compared with
the year to 30 June 2021 is caused by the Investment Adviser's fee holiday
which the Company benefited from during 2020.
The Group incurred finance costs of £0.71 million during the half year (half
year to 31 December 2020: £0.71 million; year to 30 June 2021: £1.42
million).
The profit before tax for the half year of £6.23 million (half year to 31
December 2020: profit before tax of £3.03 million; year to 30 June 2021:
profit before tax of £5.57 million) equates to a basic earnings per share of
7.74 p (half year to 31 December 2020: basic earnings per share of 3.77 p;
year to 30 June 2021: basic earnings per share of 6.92 p).
EPRA EPS for the half year was 3.28 p which, based on dividends declared of
2.6 p, reflects a dividend cover of 126.15% (half year to 31 December 2020:
EPRA EPS of 2.90 p, dividends declared of 2.25 p and dividend cover of
128.89%; year to 30 June 2021: EPRA EPS of 5.55 p, dividends declared of 5.14
p and dividend cover of 107.98%).
Adjusted EPS for the period which equates to cash generated from operations
(and therefore excludes movements in accrued minimum contracted uplifts, the
amortisation of loan arrangement fees and movements in the provision for
impairment of trade receivables) were 2.79 p which, based on dividends
declared of 2.6p, reflect a dividend cover of 107.31% (half year to 31
December 2020: Adjusted EPS of 2.66 p, dividends declared of 2.25 p and
dividend cover of 118.22%; year to 30 June 2021: Adjusted EPS of 5.07 p,
dividends declared of 5.14 p and dividend cover of 98.64%).
The Group's NAV as at 31 December 2021 was £72.75 million or 90.38 p (31
December 2020: £68.17 million or 84.68 p; 30 June 2021: £68.89 million or
85.58 p). This is an increase of 4.8 pps or 5.61% over the half year ended 31
December 2021, and an increase of 5.7 p or +6.73% over the year to 31 December
2021, with the underlying movement in NAV set out in the table below:
Half year ended Half year ended Year ended
31 December 2021 31 December 2020 30 June 2021
Pence per £ million Pence per £ million Pence per £ million
share share share
NAV as at beginning of period/ year 85.58 68.89 83.58 67.27 83.58 67.29
Change in fair value of investment property 4.34 3.49 0.34 0.27 0.85 0.68
Income earned for the year 4.75 3.83 4.38 3.53 9.20 7.41
Gain on sale of property 0.12 0.10 0.53 0.43 0.53 0.42
Finance costs for the year (0.88) (0.71) (0.88) (0.71) (1.77) (1.42)
Other expenses for the year (0.59) (0.48) (0.59) (0.47) (1.89) (1.52)
Dividends paid during the year (2.94) (2.37) (2.68) (2.15) (4.92) (3.97)
NAV as at the end of the year 90.38 72.75 84.68 68.17 85.58 68.89
(9) the fair value increase includes accounting adjustments relating to rent
smoothing of (£0.30m) and movement in finance lease obligation of (£0.05m).
( )
Valuation
At the period end (31 December 2021) the Group owned 18 assets, following the
sale of Trident Business Park, Huddersfield. The fair value of these 18 assets
had increased from £103.03 million at 31 December 2020 to £107.73 million at
the period end, an increase of £4.70 million or 4.6%.
The Group has experienced valuation increases across its retail warehousing,
industrial and student housing assets. Additionally, following the easing of
Covid-19 related lockdown restrictions, the Group has experienced valuation
increases during 2021 across is leisure and hotel assets, two asset classes
that were hit hardest by the pandemic.
Financing
As at 31 December 2021, the Group had fully utilised its £41 million loan
facility with Canada Life Investments (31 December 2020 and 30 June 2021: £41
million facility utilised). This term facility, which is repayable on 20
October 2025, allows up to 40% loan to property value at drawdown, is provided
on a portfolio basis and has a loan to value covenant of 60%.
As at 31 December 2021, the weighted average interest cost of the Group's £41
million facility is 3.19% (31 December 2021 and 30 June 2021: same).
Summary by Sector at 31 December 2021
Gross
Passing
Market Occupancy WAULT to Rental
Number of Valuation Value by ERV break Income ERV ERV
Sector Properties (£m) (%) (%) (years) (£m) (£m) (%)
Industrial 4 24.0 22.3 97.3 23.7 1.49 1.51 22.8
Hotel 3 21.4 19.9 100.0 14.0 1.40 1.43 21.6
Healthcare 3 18.4 17.1 100.0 27.0 1.13 1.10 16.6
Automotive & Petroleum 2 11.8 11.0 100.0 14.2 0.73 0.72 10.8
Student Accommodation 1 13.2 12.3 100.0 19.6 0.67 0.67 10.2
Leisure 2 5.7 5.2 100.0 7.8 0.37 0.38 5.9
Power Station 1 5.2 4.8 100.0 10.2 0.30 0.30 4.5
Retail 1 5.9 5.5 100.0 5.5 0.40 0.37 5.6
Education 1 2.1 1.9 100.0 22.1 0.13 0.13 2.0
Total/Average 18 107.7 100.0 99.4 18.1 6.62 6.61 100.0
Summary by Geographical Area at 31 December 2021
Gross
Passing
Market Occupancy WAULT to Rental
Geographical Number of Valuation Value by ERV break Income ERV ERV
Area Properties (£m) (%) (%) (years) (£m) (£m) (%)
West Midlands 4 28.0 26.0 100.0 12.8 1.87 1.80 27.3
The North West & Merseyside 2 23.4 21.7 96.8 35.5 1.22 1.23 18.7
Rest of South East 4 19.2 17.8 100.0 11.1 1.07 1.07 16.2
South West 2 13.0 12.1 100.0 23.8 0.69 0.81 12.3
Yorkshire and the Humber 2 6.4 6.0 100.0 20.3 0.42 0.42 6.2
Scotland 1 7.0 6.5 100.0 14.7 0.68 0.59 8.9
London 2 5.6 5.2 100.0 7.8 0.37 0.39 5.9
Eastern 1 5.1 4.8 100.0 10.2 0.30 0.30 4.5
Total/Average 18 107.7 100.0 99.4 18.1 6.62 6.61 100.0
The weighting of the Group's contracted rental income, based on the type of
rent review associated with each lease is as follows: RPI inflation linked:
69.2%; CPI inflation linked: 23.4% and Open Market Value Reviews: 7.4%.
Top Ten Tenants Annual Passing Rental Income (£'000) % of Portfolio Total Passing
Rental Income
Tenant Property
Prime Life Ltd Lyndon Croft Care Centre, Solihull and Westerlands Care Village, Brough 704 10.6
Meridian Steel Ltd Grazebrook Industrial Estate, Dudley and Provincial Park, Sheffield 688 10.4
Jupiter Hotels Ltd Mercure City Hotel, Glasgow 680 10.3
Mears Group Plc Bramall Court, Salford 671 10.1
Motorpoint Ltd Motorpoint, Birmingham 500 7.6
Premier Inn Hotels Ltd Premier Inn, Camberley 449 6.8
Handsale Ltd Silver Trees, Bristol 421 6.4
Hoddesdon Energy Ltd Hoddesdon Energy, Hoddesdon 300 4.5
B&M Bargains Droitwich Spa Retail Park, Droitwich 272 4.1
Biffa Waste Services Ltd Pocket Nook Industrial Estate, St Helens 267 4.0
The Group's top ten tenants, listed above, represent 7.8% of the total
passing rental income of the portfolio.
Lease Expiry Portfolio - To the earlier of break of expiry
Year Expiring passing rent pa (£'000) Cumulative (£'000)
2022 123 123
2023 286 409
2024 - 409
2025 - 409
2026 - 409
2027 924 1,333
2028 262 1,594
2029 272 1,867
2030 - 1,867
2031 - 1,867
2032 771 2,637
2033 364 3,002
2034 - 3,002
2035 - 3,002
2036 680 3,682
2037 500 4,182
2038 - 4,182
2039+ 2,438 6,620
M7 Real Estate Limited
4 March 2022
Interim Management Report and Directors' Responsibility Statement
Interim Management Report
The important events that have occurred during the period under review, the
key factors influencing the financial statements and the principal risks and
uncertainties for the remaining half year of the financial year are set out in
the Chairman's Statement and the Investment Adviser's Report above.
The principal risks facing the Company are unchanged since the date of the
Annual Report and Financial Statements ('Annual Report') for the year ended 30
June 2021 as set out in that report on pages 20 to 24 and in Note 19 to the
Financial Statements on pages 79 to 81.
Risks faced by the Company include, but are not limited to, tenant default,
portfolio concentration, property defects, rate of inflation, property market,
property valuation, illiquid investments, breach of borrowing covenants,
failure of service providers, dependence on the Investment Adviser, ability to
meet objectives, Group REIT status, political/economic risks and introduction
of, or amendment to, laws and regulations (especially in relation to climate
change).
The Board is of the opinion that these principal risks are equally applicable
to the remaining six months of the Group's financial year, as they were to the
six months being reported on.
Related Party Transactions
Detail of the Investment Adviser arrangements were provided in the Annual
Report. There have been no changes to the related party transactions described
in that report that could have a material effect on the financial position or
performance of the Company or Group. Amounts payable to the Investment Adviser
in the six months being reported are shown in the unaudited Consolidated
Condensed Statement of Comprehensive Income.
Going Concern
This report has been prepared on a going concern basis. Note 2.4 sets out the
Board's considerations in coming to this conclusion.
Responsibility Statement
The Directors confirm that to the best of our knowledge:
· the consolidated condensed set of financial statements has
been prepared in accordance with the UK-adopted IAS 34 Interim Financial
Reporting;
·
the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the six months of
the financial year and their impact on the consolidated condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining half of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the six months of the
current financial year and that have materially affected the financial
position or performance of the Company during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
A list of the Directors is maintained on the Company's website at
www.alternativeincomereit.com (http://www.alternativeincomereit.com)
Alan Sippetts
Chairman
4 March 2022
Consolidated Condensed Statement of Comprehensive Income
For the half year ended 31 December 2021
Half year ended Half year ended Year
31 December 2021 (unaudited) 31 December 2020 (unaudited) ended
30 June
2021
(audited)
Notes £'000 £'000 £'000
Income
Rental and other income 3 3,826 3,526 7,409
Property operating income / (expense) 4 48 (85) (647)
Net rental and other income 3,874 3,441 6,762
Other operating expenses 4 (526) (391) (876)
3,348 3,050 5,886
Operating profit before fair value change
Change in fair value of investment properties 9 3,494 270 682
Gain on disposal of investment property 9 97 425 425
Operating profit 6,939 3,745 6,993
Finance expense 5 (711) (712) (1,421)
Profit before tax 6,228 3,033 5,572
Taxation 6 - - -
Profit and total comprehensive income attributable to shareholders 6,228 3,033 5,572
Earnings per share (pence) 7 7.74 3.77 6.92
(basic and diluted)
EPRA EPS (pence) 7 3.28 2.90 5.55
(basic and diluted)
Adjusted EPS (pence) 7 2.79 2.66 5.07
(basic and diluted)
All items in the above statement are derived from continuing operations. The
accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
Consolidated Condensed Statement of Financial Position
As at 31 December 2021
As at As at As at
31 December 2021 (unaudited) 31 December 2020 (unaudited) 30 June
2021
(audited)
Notes £'000 £'000 £'000
Assets
Non-current Assets
Investment properties 9 105,220 106,551 107,026
105,220 106,551 107,026
Current Assets
Receivables and prepayments 10 8,962 3,740 3,682
Cash and cash equivalents 2,243 1,670 2,115
11,205 5,410 5,797
Total Assets 116,425 111,961 112,823
Non-current Liabilities:
Interest bearing loans and borrowings 12 (40,568) (40,464) (40,516)
Lease obligations 13 (317) (353) (335)
(40,885) (40,817) (40,851)
Current Liabilities
Payables and accrued expenses 11 (2,749) (2,939) (3,041)
Lease obligations 13 (37) (39) (38)
(2,786) (2,978) (3,079)
Total Liabilities (43,671) (43,795) (43,930)
Net Assets 72,754 68,166 68,893
Equity
Share capital 16 805 805 805
Capital reserve and retained earnings 71,949 67,361 68,088
Total capital and reserves attributable to equity holders of the Group 72,754 68,166 68,893
Net Asset Value per share (pence) 7 90.38 84.68 85.58
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
The financial statements were approved by the Board of Directors on 4 March
2022 and were signed on its behalf by:
Alan Sippetts
Chairman
Company number: 10727886
Consolidated Condensed Statement of Changes in Equity
For the half year ended 31 December 2021
Total capital
Capital and reserves
reserve attributable
and to equity
Share retained holders of
capital earnings the Group
Notes £'000 £'000 £'000
For the half year ended 31 December 2021 (unaudited)
Balance as at 1 July 2021 16 805 68,088 68,893
Total comprehensive income - 6,228 6,228
Dividends paid 8 - (2,367) (2,367)
Balance as at 31 December 2021 805 71,949 72,754
For the half year ended 31 December 2020 (unaudited)
Balance as at 1 July 2020 16 805 66,481 67,286
Total comprehensive income - 3,033 3,033
Dividends paid 8 - (2,153) (2,153)
Balance as at 31 December 2020 805 67,361 68,166
For the year ended 30 June 2021 (audited)
Balance as at 1 July 2020 16 805 66,481 67,286
Total comprehensive income - 5,572 5,572
Dividends paid 8 - (3,965) (3,965)
Balance as at 30 June 2021 805 68,088 68,893
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
Consolidated Condensed Statement of Cash Flows
For the half year ended 31 December 2021
Half year ended Half year Year
31 December 2021 (unaudited) ended ended
31 December 30 June
2020 2021
(unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
Profit before tax 6,228 3,033 5,572
Adjustment for:
Finance expenses 711 712 1,421
Gain on sale of investment property (97) (425) (425)
Change in fair value of investment properties (3,494) (270) (682)
Operating results before working capital changes 3,348 3,050 5,886
Change in working capital
(Increase)/ decrease in other receivables and prepayments (5,280) 1,677 1,735
(Decrease)/ increase in other payables and accrued expenses (297) 342 429
Net cash (used in)/ generated from operating activities (2,229) 5,069 8,050
Cash flows from investing activities
Purchase of investment property - (4,907) (6,070)
Additions to investment property - (1,101) -
Disposal of investment property 5,397 3,159 3,159
Net cash generated from/ (used in) investing activities 5,397 (2,849) (2,911)
Cash flows from financing activities
Finance costs paid (659) (709) (1,322)
Dividends paid (2,362) (2,129) (3,949)
Payment of lease obligation (19) - (41)
Net cash used in financing activities (3,040) (2,838) (5,312)
Net increase/ (decrease) in cash and cash equivalents 128 (618) (173)
Cash and cash equivalents at start of period/year 2,115 2,288 2,288
Cash and cash equivalents at end of period/ year 2,243 1,670 2,115
The accompanying notes 1 to 18 form an integral part of these Consolidated
Condensed Financial Statements.
Notes to the Consolidated Condensed Financial Statements
for the half year ended 31 December 2021
1. Corporate Information
The Company is a public limited company and a closed ended Real Estate
Investment Trust ('REIT') incorporated on 18 April 2017 and domiciled in the
UK and is registered in England and Wales. The registered office of the
Company is located at 1 King William Street, London, United Kingdom, EC4N 7AF.
The consolidated condensed financial statements for the period ended 31
December 2021 do not constitute statutory accounts as defined in section 434
of the Companies Act 2006 and have not been audited nor reviewed by the
Company's auditor. A copy of the statutory accounts for the year ended 30 June
2021 has been delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
2. Accounting policies
2.1 Basis of preparation
These consolidated condensed financial statements have been prepared in
accordance with International Accounting Standard ('IAS') 34 Interim Financial
Reporting and should be read in conjunction with the Group's last annual
consolidated financial statements for the year ended 30 June 2021 ('Audited
Financial Statements'). These unaudited consolidated condensed financial
statements do not include all information required for a complete set of
financial statements prepared in accordance with international accounting
standard in conformity with the requirements of the Companies Act 2006 and in
accordance with international financial reporting standards ('IFRS') adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union
('EU') and Article 4 of the IAS Regulations. However, selected explanatory
notes have been included to explain events and transactions that are
significant in understanding changes in the Group's financial position and
performance since the last financial statements.
Although not required by IAS 34, the comparative figures as at 31 December
2020 for the Consolidated Condensed Statement of Financial Position and for
the year ended 30 June 2021 for the Consolidated Condensed Statement of
Comprehensive Income, Consolidated Condensed Statement of Changes in Equity
and Consolidated Condensed Statement of Cash Flows and related notes have been
included on a voluntary basis.
These consolidated condensed financial statements have been prepared under the
historical cost convention, except for investment properties that have been
measured at fair value. These consolidated condensed financial statements are
presented in Sterling, which is the Group's presentational and functional
currency, and all values are rounded to the nearest thousand pounds, except
where otherwise shown.
Basis of consolidation
These consolidated condensed financial statements for the half-year ended 31
December 2021 incorporate the financial statements of the Company and its
subsidiaries (the 'Group'). Subsidiaries are entities controlled by the
Company, being Alternative Income Limited and Alternative Income REIT Holdco
Limited. IFRS 10 outlines the requirements for the preparation of consolidated
financial statements, requiring an entity to consolidate the results of all
investees it is considered to control. Control exists where an entity is
exposed to variable returns and has the ability to affect those returns
through its power over the investee.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation. Accounting policies of the subsidiaries are consistent with the
policies adopted by the Company.
New standards, amendments and interpretations
The following new accounting amendments have been applied in preparing these
consolidated condensed financial statements:
• Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16). The amendments provide relief to the
Group in respect of certain loans whose contractual terms are affected by
interest benchmark reform (effective from 1 January 2021). Applying the
practical expedient introduced by the amendments, when the benchmarks are
replaced the adjustments to the contractual cash flows will be reflected as an
adjustment to the effective interest rate. Therefore, the replacement of the
benchmark interest rate does not result in an immediate gain or loss recorded
in profit or loss.
The following are new standards, interpretations and amendments, which are not
yet effective, and have not been early adopted in this financial information,
that will or may have an effect on the Group's future financial statements:
• Amendments to IAS 1 which clarifies the criteria used to determine
whether liabilities are classified as current or non-current (effective 1
January 2023). These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the
reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendment is not expected to have an
impact on the presentation or classification of the liabilities in the Group
based on rights that are in existence at the end of the reporting period.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IFRS requires the
Directors to make judgements, estimates and assumptions that affect the
reported amounts recognised in the financial statements. However, uncertainty
about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability in the
future.
There are not considered to be any judgements which have a significant effect
on the amounts recognised in the consolidated financial information.
Estimates
The estimates and associated assumptions that have a significant effect on the
amounts recognised in the consolidated financial information outlined below.
Valuation of investment property
The fair value of investment property is determined, by external property
valuation experts, to be the estimated amount for which a property should
exchange on the date of the valuation in an arm's length transaction.
Properties have been valued on an individual basis. The valuation experts use
recognised valuation techniques, applying the principles of both IAS 40 and
IFRS13.
The valuations have been prepared in accordance with the Royal Institution of
Chartered Surveyors ('RICS') Valuation. Factors include current market
conditions, annual rentals, the contractual terms of the leases and their
lengths and location. The significant methods and assumptions used by valuers
in estimating the fair value of investment properties are set out in note 9.
Provision for expected credit losses ('ECL') of trade receivables
Rent collection rates pre-Covid is in the region of 100%. As a result, the
Group does not have the data to establish historical loss rates for the
expected credit loss analysis.
In determining the provision on a tenant-by-tenant basis, the Group considers
both recent payment history and future expectations of the tenant's ability to
pay or possible default in order to recognise an expected credit loss
allowance. The Group also considers the risk factors associated by sector in
which the tenant operates and the nature of the debt. Based on sector and
rent receivable type a provision is provided in addition to full provision for
maximum risk tenants or known issues.
Judgment
Principal versus agent considerations - services to tenants
The Group arranges for certain services to be provided to tenants. These
arrangements are included in the contract the Group enters into as a lessor.
The Group has determined that it controls the services before they are
transferred to tenants, because it has the ability to direct the use of these
services and obtain the benefits from them. The Group has determined that it
is primarily responsible for fulfilling these services as it directly deals
with tenants' complaints and is primarily responsible for the quality or
sustainability of the services. In addition, the Group has discretion in
establishing the price that it charges to the tenants for the specified
services.
Therefore, the Group has concluded that it is the principal in these
contracts. In addition, the Group has concluded that it transfers control of
these services over time, as services are rendered by the third-party service
providers, because this is when tenants receive and, at the same time, consume
the benefits from these services.
REIT status
The Group is a Real Estate Investment Trust (REIT) and does not pay tax on its
property income or gains on property sales, provided that at least 90% of the
Group's property income is distributed as a dividend to shareholders, which
becomes taxable in their hands. In addition, the Group has to meet certain
conditions such as ensuring the property rental business represents more than
75% of total profits and assets. Any potential or proposed changes to the REIT
legislation are monitored and discussed with HMRC. It is management's
intention that the Group will continue as a REIT for the foreseeable future.
Classification of lease arrangements - the Group as lessor
The Group has acquired investment properties that are leased to tenants. In
considering the classification of lease arrangements, at inception of each
lease the Group considers the economic life of the asset compared with the
lease term and the present value of the minimum lease payments and any
residual value compared with the fair value and associated costs of acquiring
the asset as well as qualitative factors as indicators that may assert to the
risks and rewards of ownership having been substantially retained or
transferred. The Group has determined that it retains all the significant
risks and rewards of ownership of its investment property and accounts for the
lease arrangements as operating leases.
2.3 Segmental information
Each property held by the Group is reported to the chief operating decision
maker. In the case of the Group, the chief operating decision maker is
considered to be the Board of Directors. The review process for segmental
information includes the monitoring of key performance indicators applicable
across all properties. These key performance indicators include Net Asset
Value, Earnings per Share and valuation of properties. All asset cost and
rental allocations are reported by property too. The internal financial
reports received by the Directors cover the Group and all its properties and
do not differ from amounts reported in the financial statements. The Directors
have considered that each property has similar economic characteristics and
have therefore aggregated the portfolio into one reportable segment under the
provisions of IFRS 8.
2.4 Going concern
In assessing the Group's going concern assumptions, the Directors have
considered the ongoing impact of the COVID-19 pandemic on the performance of
the business.
The Directors have therefore projected the Group's cash flows, for the period
up to 31 December 2023, challenging and sensitising inputs and assumptions to
ensure that the cash forecast reflects a realistic outcome given the
uncertainties associated with the current economic environment.
The Directors note that the Group's main financing of £41.0 million does not
mature until 2025 and the Group has reported full compliance with its loan
covenants to date. Based on the current cash flow projections, the directors
expect to continue to remain compliant with the covenants.
The Directors also note that the headroom of the loan to value covenant is
significant and any fall in property values that caused a breach would be
significantly more than any currently envisaged.
A 'severe, but plausible, downside' scenario has also been projected. While
rent collections have been strong, this scenario anticipates further rent
deferrals and write-offs where tenants would have difficulty paying rents.
· The Directors have assumed a rent collection of 80% for Q1 2022
and Q2 2022, decreasing to 70% in Q3 2022 and recovering back to 80% in Q4
2022.
· In such a scenario, the assumption is that 50% of these rent
deferrals would be written off, with the remainder repaid over the course of
12 months from Q1 2023. This is in addition to any existing agreements already
made with tenants.
In this scenario the Group still has adequate headroom against the interest
cover covenant and positive cash balances.
Having assessed the heightened risks as well as mitigating factors and
management strategies available to reduce such risks, the Directors have
determined that the Group has adequate resources to continue in operational
existence for the foreseeable future (being 12 months following the signing of
the Statement of Financial Position).
Accordingly, the Directors continue to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
2.5 Summary of significant accounting policies
The accounting policies and methods of computation and presentation adopted in
the preparation of the interim financial statements are consistent with those
applied in the Audited Financial Statements.
The Audited Financial Statements are available at
www.alternativeincomereit.com.
3. Rental and other income
Half year ended Half year ended Year
31 December 2021 (unaudited) 31 December 2020 ended
(unaudited) 30 June
2021
(audited)
£'000 £'000 £'000
Gross rental income 3,484 3,245 6,724
Spreading of minimum contracted future - rent indexation 291 284 571
Spreading of tenant incentives - rent free periods (44) (41) (85)
Total 3,731 3,488 7,210
Service charges and direct recharges (see note 4) 95 38 199
Total rental and other income 3,826 3,526 7,409
All rental, service charges and direct recharges and other income are derived
from the United Kingdom.
4. Expenses
Half year ended Half year ended Year
31 December 2021 (unaudited)
31 December 2020 (unaudited) ended
30 June
2021
(audited)
£'000 £'000 £'000
Property operating expenses 54 53 448
Service charges and direct recharges (see note 3) 95 35 199
Reversal of provision for impairment of trade receivables (197) (3) -
Property operating (income) / expenses (48) 85 647
Investment management fee 180 89 269
Auditor remuneration 33 58 77
Operating costs 274 221 442
Directors' remuneration 39 38 88
Reversal of write off of unreconciled difference - (15) -
Other operating expenses 526 391 876
Total operating expenses 478 476 1,523
Total operating expenses (excluding service charges and direct recharges) 383 441 1,324
5. Finance expenses
Half year ended Half year ended Year
31 December 2021 (unaudited)
31 December 2020 (unaudited) ended
30 June
2021
(audited)
£'000 £'000 £'000
Interest payable on loan 653 656 1,307
Amortisation of loan arrangement fee (note 12) 52 47 99
Other finance costs 6 9 15
Total 711 712 1,421
6. Taxation
Half year ended Half year ended Year
31 December 2021 (unaudited)
31 December 2020 (unaudited) ended
30 June
2021
(audited)
£'000 £'000 £'000
Tax charge comprises:
Analysis of tax charge in the period
Profit before tax 6,228 3,033 5,572
Theoretical tax at UK corporation tax standard rate of 19.00 (2020: 19.00%) 1,183
576 1,059
Effects of tax-exempt items under REIT regime (1,183) (576) (1,059)
Total - - -
The Group maintained its REIT status and as such, no deferred tax asset or
liability has been recognised in the current period.
Factors that may affect future tax charges
Due to the Group's status as a REIT and the intention to continue meeting the
conditions required to retain approval as a REIT in the foreseeable future,
the Group has not provided deferred tax on any capital gains or losses arising
on the revaluation or disposal of investments.
7. Earnings per share and NAV per share
Half year Half year ended Year
ended 31 December 2020 (unaudited) ended
31 December
30 June
2021
2021
(audited)
(unaudited)
Earnings per share:
Total comprehensive income (£'000) 6,228 3,033 5,572
Weighted average number of shares (number) 80,500,000 80,500,000 80,500,000
Earnings per share (basic and diluted) (pence) 7.74 3.77 6.92
EPRA EPS:
Total comprehensive income (£'000) 6,228 3,033 5,572
Adjustment to total comprehensive income:
Change in fair value of investment properties (£'000) (3,494) (270) (682)
Gain on disposal of investment property (£'000) (97) (425) (425)
EPRA earnings (basic and diluted) (£'000) 2,637 2,338 4,465
EPRA EPS (basic and diluted) (pence) 3.28 2.90* 5.55
Adjusted EPS:
EPRA earnings (basic and diluted) (£'000) - as above 2,637 2,338 4,465
Adjustments:
Rental income recognised in respect of guaranteed fixed rental uplifts (291) (284) (571)
(£'000)
Rental income recognised in respect of rent free periods (£'000) 44 41 85
Amortisation of loan arrangement fee (£'000) 52 47 99
Reversal of provision for impairment of trade receivables (197) (3) -
Adjusted earnings (basic and diluted) (£'000) 2,245 2,139 4,078
Adjusted EPS (basic and diluted) (pence)** 2.79 2.66* 5.07
* Following the review of the EPRA guidelines, it was noted that the gain on
disposal of investment property should be excluded from the calculation of the
EPRA EPS. Accordingly, the figure for the half year to 31 December 2020 has
been amended for basic EPS from 3.43p to 2.90p and for adjusted EPS from 3.19p
to 2.66p.
** Adjusted EPS is a measure used by the Board to assess the level of the
Group's dividend payments. This metric adjusts EPRA earnings for non-cash
items in arriving at an adjusted EPS as supported by cash flows.
Earnings per share are calculated by dividing profit/(loss) for the year
attributable to ordinary equity holders of the Company by the weighted average
number of Ordinary Shares in issue during the year.
Half year Half year Year
ended ended ended
31 December
31 December 2020 30 June
2021
2021
(unaudited)
(audited)
(unaudited)
£'000 £'000 £'000
NAV per share:
Net assets (£'000) 72,754 68,166 68,893
Ordinary Shares (Number) 80,500,000 80,500,000 80,500,000
NAV per share (pence) 90.38 84.68 85.58
EPRA NAV and EPRA NNNAV (refer to Glossary) are equal to the NAV presented in
the Consolidated Condensed Statement of Financial Position under IFRS and
there are no adjusting items. Accordingly, a reconciliation between these
measures does not need to be provided.
EPRA Net Reinvestment Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net
Disposal Value (NDV)
EPRA NRV EPRA NTA and EPRA NDV
At 31 December 2021
Net assets value (£'000) 72,754 72,754
Purchasers' cost (£'000) 7,002 -
Break cost on bank borrowings (£'000) (2,552) (2,552)
77,204 70,202
Ordinary Shares (Number) 80,500,000 80,500,000
Per share measure 95.91 87.21
EPRA NRV EPRA NTA and EPRA NDV
At 31 December 2020
Net assets value (£'000) 68,166 68,166
Purchasers' cost (£'000) 8,140 -
Break cost on bank borrowings (£'000) (5,262) (5,262)
71,044 62,904
80,500,000 80,500,000
Ordinary Shares (Number)
Per share measure 88.25 78.14
EPRA NRV EPRA NTA and EPRA NDV
At 30 June 2021
Net assets value (£'000) 68,893 68,893
Purchasers' cost (£'000) 7,100 -
Break cost on bank borrowings (£'000) (3,467) (3,467)
72,526 65,426
Ordinary Shares (Number) 80,500,000 80,500,000
Per share measure 90.09 81.27
8. Dividends paid
All dividends are interim dividends
Half year ended Half year ended Year
31 December 2021
31 December 2020 ended
(unaudited)
30 June
(unaudited)
2021
(audited)
Dividend £'000 £'000 £'000
Rate
Dividends in respect of year ended 30 June 2020
4th dividend for quarter ended 30 Jun 2020 1.425p - 1,147 1,147
Dividends in respect of year ended 30 June 2021
1st dividend for quarter ended 30 Sep 2020 1.250p - 1,006 1,006
2nd dividend for quarter ended 31 Dec 2020 1.000p - - 805
3rd dividend for quarter ended 31 Mar 2021 1.250p - - 1,007
4th dividend for quarter ended 30 Jun 2021 1.640p 1,320 - -
Dividends in respect of year ending 30 June 2022
1st dividend for quarter ended 30 Sep 2021 1.300p 1,047 - -
Total dividends paid 2,367 2,153 3,965
4th dividend for quarter ended 30 Jun 2020 1.425p - ( 1,147) ( 1,147)
2nd dividend for quarter ended 31 Dec 2020 1.000p - 805 -
4th dividend for quarter ended 30 Jun 2021 1.640p ( 1,320) - 1,320
2nd dividend for quarter ended 31 Dec 2021 1.300p 1,047 - -
Total dividends payable in respect of the period/year 2,094 1,811 4,138
Total dividends payable in respect of the period/year 2.60p 2.25p 5.14p
Dividends declared after the period/year end are not included in the
Consolidated Condensed Financial Statements as a liability.
Dividends paid per cash flow statement amount to £2,362,000 (31 December
2020: £2,129,000) include the amount of withholding tax paid.
9. Investment properties
Half year ended Half year ended Year
31 December 2021 (unaudited)
31 December 2020 (unaudited) ended
30 June
2021
(audited)
Investment Investment Total Total Total
properties
properties
freehold
leasehold
£'000 £'000 £'000 £'000 £'000
UK Investment properties
At the beginning of the period/year 75,772 33,458 109,230 101,910 101,910
Acquisition during the period - - - 4,907 6,070
Additions to investment property - - - 1,101 -
Disposal during the period (5,300) - (5,300) - -
Change in value of investment properties 2,400 1,400 3,800 612 1,250
Valuation provided by Knight Frank LLP 72,872 34,858 107,730 108,530 109,230
Adjustment to fair value for minimum rent indexation of lease income (note 10) (2,956) (2,466) (2,709)
Adjustment for lease obligation 446 487 505
Total investment properties 105,220 106,551 107,026
Change in fair value of investment properties
Change in fair value before adjustments for lease incentives and lease 3,800 612 1,250
obligations
Movement in lease obligations (59) 16 34
Adjustment to spreading of contracted future rent indexation and tenant (247) (358) (602)
incentives
3,494 270 682
Disposal of investment property
During the year, the Group disposed of the investment property known as
Trident Business Park, Huddersfield. In July 2020, the Group disposed of the
investment property known as Wet n Wild, Royal Quays, North Shields.
The table below shows a reconciliation of the gain recognised on disposal
through the Consolidated Condensed Statement of Comprehensive Income and the
realised gain on disposal in the year which includes changes in fair value of
the investment property and minimum rent indexation spreading recognised in
previous periods.
Half year ended Half year ended Year
31 December 2021 (unaudited)
31 December 2020 ended
(unaudited) 30 June
2021
(audited)
£'000 £'000 £'000
Gross proceeds on disposal 5,500 3,204 3,204
Selling costs (103) (45) (45)
Net proceeds on disposal 5,397 3,159 3,159
Carrying value (5,300) (2,734) (2,734)
Gain on disposal of investment property 97 425 425
Valuation of investment properties
Valuation of investment property is performed by Knight Frank LLP, an
accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued. The valuation of the Group's investment
property at fair value is determined by the external valuer on the basis of
market value in accordance with the internationally accepted RICS Valuation -
Professional Standards (incorporating the International Valuation Standards).
The determination of the fair value of investment property requires the use of
estimates such as future cash flows from assets (such as lettings, tenants'
profiles, future revenue streams, capital values of fixtures and fittings,
plant and machinery, any environmental matters and the overall repair and
condition of the property) and yield applicable to those cash flows.
Fair value measurement hierarchy
IFRS13 'Fair Value Measurement' specifies the fair value hierarchy and, as
explained in Note 10. of the Company's 2021 Audited Financial Statements, the
Directors have classified the Company's property portfolio as Level 3. This
reflects the fact that inputs to the valuation are not based on observable
market data.
10. Receivables and prepayments
31 December 2021 (unaudited) 31 December 2020 (unaudited) 30 June
2021
(audited)
£'000 £'000 £'000
Receivables
Rent debtor 279 1,342 602
Less: Provision for impairment of trade receivables (16) (210) (213)
Other debtors* 5,591* - 307
Sub total 5,854 1,132 696
Spreading of minimum contracted future rent indexation 2,414 1,881 2,167
Spreading of tenant incentives - rent free periods 542 585 542
Tenant deposit asset (note 11) 79 123 -
Other prepayments 73 19 277
Total 8,962 3,740 3,682
* Other debtors represent net proceeds from the sale of Trident Business Park,
Huddersfield being held by the external lender, Canada Life Investments.
The aged debtor analysis of receivables which are past due but not impaired is
as follows:
31 December 2021 (unaudited) 31 December 2020 (unaudited) 30 June
2021
(audited)
£'000 £'000 £'000
Less than three months due 5,816 618 667
Between three and six months due 38 514 29
Between six and twelve months due - - -
Total 5,854 1,132 696
11. Payables and accrued expenses
31 December 2021 (unaudited) 31 December 30 June
2020 2021
(unaudited) (audited)
£'000 £'000 £'000
Deferred income 1,406 1,443 1,445
Trade creditors 30 62 59
Accruals 523 618 603
Tenant deposit liability (note 10) 79 123 -
Other creditors 711 693 934
2,749 2,939 3,041
12. Interest bearing loans and borrowings
31 December 2021 (unaudited) 31 December 30 June
2020 2021 (audited)
(unaudited)
£'000 £'000 £'000
Facility drawn at the beginning of the period/ year 41,000 41,000 41,000
Less: unamortised loan issue costs incurred (484) (583) (583)
Plus: amortised loan issue costs 52 47 99
At end of period/ year 40,568 40,464 40,516
Repayable between 1 and 2 years - - -
Repayable between 2 and 5 years 41,000 - 41,000
Repayable in over 5 years - 41,000 -
Total 41,000 41,000 41,000
As at 31 December 2021, the Group had utilised all of its £41 million fixed
interest loan facility with Canada Life Investments and was geared at a loan
to Gross Asset Value ('GAV') of 35.22%. The weighted average interest cost of
the Group's facility is 3.19% and the facility is repayable on 20 October
2025.
31 December 2021 (unaudited) 31 December 30 June
2020 2021 (audited)
(unaudited)
£'000 £'000 £'000
Reconciliation to cash flows from financing activities
At the beginning of the period/ year 40,516 40,417 40,417
Interest paid (659) (709) (1,322)
Total changes from financing cash flows 39,857 39,708 39,095
Other changes
Movement in interest payable presented under other creditors (52) (3) (99)
Interest expense 711 712 1,421
Adjustment on loan issue costs - - -
Amortisation of loan issue costs 52 47 99
Total other changes 711 756 1,421
At the end of the period/ year 40,568 40,464 40,516
13. Lease obligations
At the commencement date, the lease liability is measured at the present value
of the lease payments that are not paid on that date.
The following table analyses the minimum lease payments under non-cancellable
leases:
31 December 2021 31 December 30 June
(unaudited) 2020 2021
(unaudited) (audited)
£'000 £'000 £'000
Within one year 50 50 50
After one year but less than five years 150 200 150
More than five years 538 538 563
Total undiscounted lease liabilities: 738 788 763
Less: Future finance charge on lease obligations (384) (396) (390)
Present value of lease liabilities: 354 392 373
Lease liabilities included in the statement of financial position:
Current 37 39 38
Non-current 317 353 335
Total: 354 392 373
14. Commitments
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its investment
property portfolio. These non-cancellable leases have a remaining term of
between 6 months and 90 years.
Future minimum rentals receivable under non-cancellable operating leases as at
31 December 2021 are as follows:
31 December 2021 (unaudited) 31 30
December June
2020 (unaudited) 2021 (audited)
£'000 £'000 £'000
Less than one year 7,039 6,880 6,957
One to two years 7,723 6,947 7,135
Two to three years 7,341 7,101 7,094
Three to four years 7,279 7,187 7,191
Four to five years 7,307 6,966 7,002
Five to ten years 32,323 30,470 29,898
Ten to fifteen years 26,872 27,615 27,201
Over fifteen years 56,370 61,807 58,889
Total 152,254 154,973 151,367
During the half year ended 31 December 2021 (2020: £nil) there were no
material contingent rents recognised as income.
15. Investments in subsidiaries
The Company has two wholly owned subsidiaries as disclosed below:
Name and company number Country of registration and incorporation Date of incorporation Principal activity Ordinary Shares held
Alternative Income REIT England and 7 November 2017 Real Estate Company 73,158,502*
Holdco Limited (Company
Wales
number 11052186)
Alternative Income Limited (Company number 10754641) England and 4 May 2017 Real Estate Company 73,158,501*
Wales
* Ordinary shares of £1.00 each.
Alternative Income REIT plc at 31 December 2021 owns 100% controlling stake of
Alternative Income REIT Holdco Limited.
Alternative Income REIT Holdco Limited holds 100% of Alternative Income
Limited.
16. Issued share capital
Ordinary Shares issued and fully paid of 80,500,000 shares at a nominal value
of 1 penny per share. This remains unchanged for all period presented.
17. Transactions with related parties
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party in
making financial or operational decisions.
Subsidiaries
Alternative Income REIT plc at 31 December 2021 owns 100% controlling stake of
Alternative Income REIT Holdco Limited and Alternative Income REIT Holdco
Limited holds 100% of Alternative Income Limited.
Directors
Directors of the Group are considered to be related parties. Directors'
remuneration is disclosed in note 4.
Investment Adviser
M7 Real Estate Ltd
M7 Real Estate Ltd was appointed as Investment Adviser on 14 May 2020. The
Interim Investment Advisory agreement (amended 26 February 2021) specifies
that there were no fees payable up to 30 September 2020. From 1 October 2020,
an annual management fee of 0.50% per annum of NAV (subject to a minimum fee
of £90,000 per quarter) is due and payable quarterly in advance. During the
period 1 July 2021 to 31 December 2021, the Group incurred £180,000 in
respect of investment management fees and expenses of which £90,000 was
outstanding at period end.
18. Events after reporting date
Dividend
On 3 February 2022, the Board declared an interim dividend of 1.30p in respect
of the period from 1 October 2021 to 31 December 2021. This will be paid on 28
February 2022 to shareholders on the register at 11 February 2022. The
ex-dividend date was 10 February 2022.
Asset acquisition
On 31 January 2022, the Group acquired a car showroom in Slough for £5.0m
(net of acquisition costs to the Company), in an off-market transaction.
Further details are available from the RNS published on 31 January 2022 and
the Chairman's Statement and Investment Advisor's Report above.
EPRA Performance Measures Calculations
EPRA Yield calculations At At At
31 December 31 December 2020 30 June
2021 (unaudited) 2021
£'000
(unaudited) (audited)
£'000
£'000
Investment properties wholly owned:
- by Company 2,100 2,100 2,100
- by Alternative Income Limited 105,630 106,430 107,130
Total - note 9 107,730 108,530 109,230
Allowance for estimated purchasers' costs 7,002 8,140 7,100
Gross up completed property portfolio valuation b 114,732 116,670 116,330
Annualised cash passing rental income 6,620 6,460 6,965
Annualised property outgoings (55) (55) (55)
Annualised net rents a 6,565 6,405 6,910
Add: notional rent expiration of rent-free periods or other lease incentives 1,100 1,812 1,171
Topped-up net annualised rent c 7,665 8,217 8,081
EPRA NIY a/b 5.72% 5.49% 5.94%
EPRA "topped-up" NIY c/b 6.68% 7.04% 6.95%
EPRA Cost Ratios Half year ended Half year Year
31 December 2021 (unaudited) ended ended
£'000
31 December 30 June
2020 2021
(unaudited) (audited)
£'000
£'000
Include:
EPRA Costs (including direct vacancy costs) - note 4 a 383 441 1,324
Direct vacancy costs - - -
EPRA Costs (excluding direct vacancy costs) b 383 441 1,324
Gross rental income - note 3 c 3,731 3,526 7,210
EPRA Cost Ratio (including direct vacancy costs) a/c 10.27% 12.51% 18.36%
EPRA Cost Ratio (excluding direct vacancy costs) b/c 10.27% 12.51% 18.36%
EPRA Vacancy rate Half year Half year Year
ended ended ended
31 December 2021 31 December 30 June
(unaudited) 2020 2021
£'000
(unaudited) (audited)
£'000
£'000
Annualised potential rental value of vacant premises a 40 - -
Annualised potential rental value for the completed property portfolio b 6,609 6,925 6,927
EPRA Vacancy rate a/b 0.6% 0.0% 0.0%
Alternative Performance Measure (APM) Calculations
APMs are numerical measures of the Group's current, historical or future
performance, financial position or cash flows, other than financial measures
defined or specified in the applicable financial framework. The Group's
applicable financial framework is IFRS. The Directors assess the Group's
performance against a range of criteria which are reviewed as particularly
relevant for a closed-end REIT.
Share Price and Net Asset Value (NAV) Total Return
Share price and NAV total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. Share price and NAV total
returns are monitored against FTSE EPRA Nareit UK and FTSE Small Cap,
respectively.
Share price NAV
Opening at 1 July 2021 a 71.00p 85.58p
Closing at 31 December 2021 b 72.20p 90.38p
Return c=(b/a)-1 1.69% 5.61%
Dividend reinvestment * d 4.15% 4.04%
Total shareholder return c+d 5.84% 9.65%
Opening at 1 July 2020 a 53.50p 83.58p
Closing at 31 December 2020 b 60.00p 84.68p
Return c=(b/a)-1 12.15% 1.32%
Dividend reinvestment* d 5.00% 3.71%
Total shareholder return c+d 17.15% 5.02%
* Share price total return involves reinvesting the net dividend in the share
price of the Company on the date on which that dividend goes ex-dividend. NAV
total return involves investing the net dividend in the NAV of the Company
with debt at fair value on the date on which that dividend goes ex-dividend.
Dividend Cover.
The ratio of Group's Adjusted EPS divided by the Group's dividends payable for
the relevant period/ year
31 December 2021 31 December 2020 30 June 2021
Adjusted EPS a 2.79 2.66 5.07
Dividend per share b 2.60 2.25 5.14
Dividend cover a/b 107.31% 118.22% 98.64%
Loan to GAV
Loan to GAV measures the value of loans and borrowings utilised (excluding
amounts held as restricted cash and before adjustments for issue costs)
expressed as a percentage of the combined valuation of the property portfolio
(as provided by the valuer) and the fair value of other assets.
31 December 2021 31 December 2020 30 June 2021
Borrowings (£'000) a 41,000 41,000 41,000
Total assets (£'000) b 116,425 111,961 112,823
Loan to GAV (a/b) 35.22% 36.62% 36.34%
Ongoing Charges
The ongoing charges ratio is the total for all operating costs expected to be
regularly incurred expressed as a percentage of the average quarterly NAVs of
the Group for the financial period. Note that the ratio for 31 December is
based on actual ongoing charges to 31 December and forecast ongoing charges to
the following June (shown as annualised in the below calculation).
31 December 2021 31 December 2020 30 June 2021
Other operating expenses for the half year / year (£'000) a 526 391 876
Ongoing charges- annualised where required (£'000) b 1,012(†) 992(†) 876
Average net assets (£'000) c 70,214 68,459 68,893
Ongoing charges ratio b/c 1.44% 1.45% 1.27%*
* The Company benefited from an investment adviser fee holiday during 2020.
Adjusting for the impact of this fee holiday, the ongoing charges ratio for
the year to 30 June 2021 would have been 13 bps higher than reported.
† Non-recurring legal costs of £20,000 have been excluded in the annualised
amount for 31 December 2021 (31 December 2020: excluded non-recurring write
back of £15,000 and investment adviser fee holiday for three months of
£90,000).
Annualised Gross Passing Rental Income
The annualised gross passing rent is the rent roll at the reporting date,
taking account of any in-place rent free incentives or step rents annualised
on a straight-line basis over the following 12-month period.
Company Information
Share Register Enquiries
The register for the Ordinary Shares is maintained by Computershare Investor
Services PLC. In the event of queries regarding your holding, please contact
the Registrar on 0370 707 1874 or email: web.queries@computershare.co.uk.
Changes of name and/or address must be notified in writing to the Registrar,
at the address shown below. You can check your shareholding and find practical
help on transferring shares or updating your details at
www.investorcentre.co.uk. Shareholders eligible to receive dividend payments
gross of tax may also download declaration forms from that website.
Share Information
Ordinary £0.01 shares 80,500,000
SEDOL Number BDVK708
ISIN Number GB00BDVK7088
Ticker/TIDM AIRE
Share Prices
The Company's Ordinary Shares are traded on the Main Market of the London
Stock Exchange.
Frequency of NAV publication
The Group's NAV is released to the London Stock Exchange on a quarterly basis
and is published on the Company's website www.alternativeincomereit.com
(http://www.alternativeincomereit.com) .
Annual and Interim Reports
Copies of the Annual and Half-Yearly Reports are available from the Group's
website.
Financial Calendar 2022
30 June 2022 Year end
October 2022 Announcement of annual results
November 2022 Annual General Meeting
31 December 2022 Half year end
March 2023 Announcement of interim results
Glossary
Alternative Investment Fund Manager or AIFM or Investment Manager Langham Hall Fund Management LLP.
Company Alternative Income REIT plc.
Contracted rent The annualised rent adjusting for the inclusion of rent subject to rent-free
periods.
Earnings Per Share ('EPS') Profit for the period attributable to equity shareholders divided by the
weighted average number of Ordinary Shares in issue during the period.
EPRA European Public Real Estate Association, the industry body representing listed
companies in the real estate sector.
Equivalent Yield The internal rate of return of the cash flow from the property, assuming a
rise to Estimated Rental Value at the next review or lease expiry. No future
growth is allowed for.
Estimated Rental Value ('ERV') The external valuer's opinion as to the open market rent which, on the date of
the valuation, could reasonably be expected to be obtained on a new letting or
rent review of a property.
External Valuer An independent external valuer of a property. The Group's External Valuer is
Knight Frank LLP.
Fair value The estimated amount for which a property should exchange on the valuation
date between a willing buyer and a willing seller in an arm's length
transaction after proper marketing and where parties had each acted
knowledgeably, prudently and without compulsion.
Fair value movement An accounting adjustment to change the book value of an asset or liability to
its fair value.
FCA The Financial Conduct Authority.
Gross Asset Value ('GAV') The aggregate value of the total assets of the Group as determined in
accordance with IFRS.
IASB International Accounting Standards Board.
IFRS International financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. On 31 December 2020
EU-adopted IFRS was brought into UK law and became UK-adopted international
accounting standards, with future changes to IFRS being subject to endorsement
by the UK Endorsement Board.
Investment Adviser M7 Real Estate Limited.
IPO The admission to trading on the London Stock Exchange's Main Market of the
share capital of the Company and admission of Ordinary Shares to the premium
listing segment of the Official List on 6 June 2017.
Lease incentives Incentives offered to occupiers to enter into a lease. Typically this will be
an initial rent-free period, or a cash contribution to fit-out. Under
accounting rules the value of the lease incentive is amortised through the
Consolidated Statement of Comprehensive Income on a straight-line basis until
the lease expiry.
Net Asset Value ('NAV') Net Asset Value is the equity attributable to shareholders calculated under
IFRS.
Net Asset Value per share Equity shareholders' funds divided by the number of Ordinary Shares in issue.
Net equivalent yield Calculated by the Group's External Valuers, net equivalent yield is the
internal rate of return from an investment property, based on the gross
outlays for the purchase of a property (including purchase costs), reflecting
reversions to current market rent and items as voids and non-recoverable
expenditure but ignoring future changes in capital value. The calculation
assumes rent is received annually in arrears.
Net Initial Yield ('NIY') The initial net rental income from a property at the date of purchase,
expressed as a percentage of the gross purchase price including the costs of
purchase.
Net rental income Rental income receivable in the period after payment of ground rents and net
property outgoings.
Ordinary Shares The main type of equity capital issued by conventional Investment Companies.
Shareholders are entitled to their share of both income, in the form of
dividends paid by the Company, and any capital growth.
Passing rent The gross rent less in-place lease incentives.
pps Pence per share.
REIT A Real Estate Investment Trust. A company which complies with Part 12 of the
Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria
being met, the profits from the property business of a REIT, arising from both
income and capital gains, are exempt from corporation tax.
Reversion Increase in rent estimated by the Company's External Valuers, where the
passing rent is below the ERV.
Share price The value of a share at a point in time as quoted on a stock exchange. The
Company's Ordinary Shares are quoted on the Main Market of the London Stock
Exchange.
Weighted Average Unexpired Lease Term ('WAULT') The average lease term remaining for first break, or expiry, across the
portfolio weighted by contracted rental income (including rent-frees).
Shareholder Information
Directors
Alan Sippetts (Independent non-executive Chairman)
Stephanie Eastment (Independent non-executive Director)
Adam C Smith (Non-executive Director)
Company Website
https://www.alternativeincomereit.com/ (http://www.aewukllreit.com)
Registered Office
1 King William Street
London
EC4N 7AF
AIFM
Langham Hall Fund Management LLP
1 Fleet Place
8(th) Floor
London
EC4M 7RA
Investment Adviser and Administrator ('Investment Adviser')
M7 Real Estate Limited
3(rd) Floor
The Monument Building
11 Monument Street
London
EC3R 8AF
Property Manager
Mason Owen and Partners Limited
7(th) Floor
20 Chapel Street
Liverpool
L3 9AG
Depositary
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Consultant Portfolio Manager
King Capital Consulting Limited
140a Tachbrook Street
London
SW1V 2NE
Company Secretary
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
Moore Kingston Smith LLP
Devonshire House
60 Goswell Road
Barbican
London
EC1M 7AD
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Corporate Broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Legal Adviser to the Company
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
Communications Advisor
Maitland/AMO
3 Pancras Square
London
N1C 4AG
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. END IR UPUGWWUPPGMARecent news on Alternative Income REIT
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