TIDMAIRE
RNS Number : 9543T
Alternative Income REIT PLC
30 November 2021
30 November 2021
Alternative Income REIT P LC
(the " Company " or " Group ")
AGM STATEMENT AND BUSINESS AND PORTFOLIO UPDATE AND DISPOSAL
On track to deliver target annual dividend of 5.5 pence per
share with full dividend cover expected, all else being equal, by
September 2022
Alternative Income REIT PLC (ticker: AIRE), the owner of a
diversified portfolio of UK commercial property assets,
predominantly let on long leases, will hold its Annual General
Meeting today at 10.00am GMT, at which, the following statement
will be made:
Alan Sippetts, Non-Executive Chairman of Alternative Income REIT
plc, comments:
"The Company's portfolio continues to weather the pandemic well.
With a long term, secure and indexed-linked income flow plus
continuing very strong rent collection figures, the Company is well
placed to deliver attractive income and capital growth.
Higher inflation should deliver enhanced income and capital
growth with 87% of portfolio's leases indexed linked, with the
potential for further enhancement through asset management
initiatives and transactions initiated on an opportunistic basis
only. This includes the sale, expected to complete tomorrow, to the
occupier of the Audi showroom asset in Huddersfield, at a 3.8%
premium on the book value as at June 2021. M7 is actively pursuing
opportunities for the redeployment of the proceeds of the sale.
Yields in the portfolio have been resilient, even in those
sectors most impacted by the pandemic. There is further potential
for yield compression as trading and the market generally
improves.
When combined with the Company's robust balance sheet and modest
overhead, this leaves the Board confident that the Company is on
track to deliver on its target annual dividend of 5.5 pence per
share with full dividend cover expected, all else being equal, by
September 2022."
Portfolio and Disposal Update
The portfolio has a long term, secure and attractive income flow
with predominantly indexed linked rent reviews, and a very strong
rent collection history. The portfolio has a weighted average
unexpired lease term of 17.4 years to the earlier of break and
expiry and 19.6 years to expiry.
As announced on 3 November 2021, the net initial yield on the
Company's portfolio as at 30 September 2021 was 5.85%(1) , compared
with 5.93% on 30 June 2021.
The current portfolio is stable in nature to meet the Investment
Objectives of the Company, with transactions initiated on an
opportunistic basis only.
The Company remains fully invested, pending the completion of
the sale of Huddersfield expected tomorrow, with a diversified
portfolio of UK commercial property assets.
The Company exchanged contracts earlier this month with occupier
of the Audi car showroom in Huddersfield for them to buy the
Company's freehold interest for GBP5.5 million, representing a 3.8%
premium on the book value as at June 2021 and a net exit yield of
6.75%. Completion is expected tomorrow, 1 December. M7 is actively
pursuing opportunities for the redeployment of the proceeds of the
sale.
The portfolio is fully let, save for an area of land at St
Helens recently vacated, on which negotiations are ongoing with the
neighbouring tenant, Bgen Ltd, for a higher rent.
Rent Collection
To date, the Company has collected 91.8% of the current
quarter's rent and this increases to 98.3% when taking into account
the tenants who are contracted to pay monthly.
The current quarter's rent collections are split 80% quarterly
and 20% monthly.
Of the remaining 1.7%, 1.4% will be collected during Q4 2021
through monthly payments, with an expected collection rate this
quarter of at least 99.7%.
The portfolio has weathered the pandemic well. All current
tenants, save for Pure Gym, have repaid outstanding
arrears/deferrals. Pure Gym are expected to adhere to the agreed
plan to repay all arrears by July 2022.
Rent Reviews
87% of the portfolio's income stream is reviewed periodically,
on an upward only basis, in line with inflation. 65% is indexed to
RPI and 22% is indexed to CPI.
The remainder of the portfolio's income stream is short term or
linked to open market rental levels.
Further Potential Income and Capital Growth through Asset
Management
Rent reviews are a key feature of the Company's asset management
programme and are expected to deliver enhanced income and capital
growth:
-- 55% of the portfolio's contracted rent is due to be reviewed
during the year to June 2022. There are 8 indexed annual reviews
(expected increases averaging 2% to 3.5%), 2 indexed 3/5 yearly
reviews (expected increases averaging 19% to 20%) and 1 lease
expiry.
-- 57% of the portfolio's contracted rent is due to be reviewed
during the year to June 2023. There will be 8 indexed annual
reviews (expected increases averaging 2% to 3.5%), 4 indexed 3/5
yearly reviews (expected increases averaging 7.5% to 9%) and 2
lease expiries/tenant's breaks.
In addition, lease expiries/breaks represent opportunities to
deliver further potential income and valuation enhancement:
-- St Helens - Terms are agreed for a lease extension to Bgen
Limited for a further five years with a break at year three at a
rent reflecting a significant increase on current levels. Bgen are
also considering extending their site to the adjacent unlet land
and negotiations with the Company are ongoing.
-- Droitwich - the lease to Pets at Home expires on 13 January
2023 and they have indicated that they would be interested in
extending their occupation. Potential terms have not yet been
agreed.
-- Swindon: Travelodge CVA - Travelodge Hotels Limited are the
main occupiers of the Swindon property. They filed for a CVA on 3
June 2020. Under the terms of the CVA, the current rent payable by
the tenant is 70% of the contractual rent as at the CVA, so as at
September 2021 quarter, a rate GBP245,000 per annum was paid.
On 1 January 2022, the rent will increase to GBP403,148 per
annum, following a fixed uplift rent review on 1 June 2021.
Effectively the rental income will increase by 65% with 100% of the
contractual rent payable plus back rent of circa GBP21,000.(2)
-- Ayrshire Metals are marketing their leases for GBP95,000 per
annum or GBP700,000. These are ground leases, paying a ground rent
of GBP241 per annum, which expire in 2045. A lease re-gear or joint
sale of the freehold remains an option depending on market
demand.
-- Meridian Metals , the tenants at Dudley & Sheffield, are
upgrading their crane and steel handling facilities in Dudley with
an investment of circa GBP3 million. This shows a long term
commitment by the business in this location.
Swindon - Cladding Litigation
Works to replace the cladding on the 6(th) and 7(th) floor of
Duke House in Swindon were completed in December 2020. The cladding
was installed when the property was extended in 2006/2007.
A claim against the cladding sub-contractor and architect is
on-going. Particulars of Claim were lodged on 12 November 2021. The
total value of the potential claim, at that time, being
approximately GBP1 million plus VAT and legal expenses.
Notes
(1) Contracted rent divided by valuation plus estimated
purchaser's costs at 6.5%.
(2) 70% of the increased rent from June to December 2021.
ENQUIRIES
Alternative Income REIT PLC
Alan Sippetts - Chairman via Maitland/AMO below
M7 Real Estate Ltd
Richard Croft +44 (0)20 3657 5500
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 * .
* 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
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. It has over 220 employees in 15
countries across Europe. The team manages over 570 properties with
a value of circa EUR4.1 billion.
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END
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