TIDMARTL
RNS Number : 1920H
Alpha Real Trust Limited
09 March 2018
9 March 2018
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY")
TRADING UPDATE and dividend announcement
ART today publishes its trading update for the period ended 31
December 2017 and the period up until the date of this
announcement. The information contained herein has not been
audited.
About the Company
Alpha Real Trust Limited ("the Company" or "ART") targets
investment, development, financing and other opportunities in real
estate, real estate operating companies and securities, real estate
services, infrastructure, infrastructure services, other
asset-backed businesses and related operations and services
businesses that offer attractive risk-adjusted total returns.
ART currently focuses on high-yielding property, infrastructure
and asset backed debt and equity investments in Western Europe that
are capable of delivering strong risk adjusted cash flows,
including build-to-rent investments. The current portfolio mix,
excluding sundry assets/liabilities, is as follows:
High yielding debt: 4.7%
High yielding equity
in property investments: 21.3%
Ground rent investments: 24.6%
Other investments: 18.7%
Build-to-rent investments: 25.0%
Cash: 5.7%
The Company's Investment Manager is Alpha Real Capital LLP
("ARC").
Highlights
-- NAV per ordinary and A share 168.4p: 31 December 2017 (167.3p: 30 September 2017)
-- Basic earnings for the nine month period ended 31 December
2017 of 14.4p per ordinary share and of 18.9p per A share (13.3p
per ordinary share and of 17.7p per A share for the six months
ended 30 September 2017)
-- Adjusted earnings for the nine month period ended 31 December
2017 of 3.4p per ordinary and A share (3.0p per ordinary and A
share for the six months ended 30 September 2017)
-- Declaration of a quarterly dividend of 0.6p per share, expected to be paid on 6 April 2018
-- Balanced portfolio: continued capital allocation to a mix of
investments which balance income returns while creating potential
for capital value growth, including a growing build-to-rent
exposure
-- Mezzanine loan investment: four loans totalling GBP3.8
million were completed in the quarter ending 31 December 2017 with
a further three loans totalling GBP5.2 million funded post period
end
-- Data centre Frankfurt: following planning consent being
secured, tendering for pre-development works is underway with a
view to having a development-ready site
-- H2O shopping centre Madrid: record visitor numbers recorded
in 2017, increasing 3.9% over 2016, with like for like tenant sales
increasing 6.4% over the year.
Investment summary
The Company's investments have benefited from an active
management approach with successes evident in both the Company's
directly and indirectly held investments. The current portfolio
mix, as at 31 December 2017 is outlined on the table below.
Portfolio overview as at 31 December 2017
Investment name
Investment Investment Income Investment Property Investment % of
type value return location type / notes portfolio(1)
p.a. underlying
security
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
High yielding debt (4.7%)
--------------------------------------------------------------------------------------------- -------------
Mezzanine
Portfolio
Diversified
loan portfolio
focussed
14.0% on real estate
Mezzanine GBP5.3m to 16.9% investments Secured mezzanine
loans (2) (3) UK and developments facilities 4.7%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
High yielding equity in property investments
(21.3%)
--------------------------------------------------------------------------------------------- -------------
H2O shopping centre
High-yield,
dominant
Madrid shopping
centre and 30% shareholding;
separate 7 year term
Indirect GBP16.7m 6.9% development bank finance
property (EUR18.8m) (4) Spain site facility 14.6%
Active UK Real Estate Fund plc
27.6% of
High-yield ordinary
commercial shares in
Equity GBP6.0m n/a UK portfolio fund 5.3%
---------------- -------------- ---------- ---------- ---------------- ----------------- -------------
Cambourne Business Park
High-yield Medium term
business moderately
Indirect 11.0% park located geared bank
property GBP1.6m (4) UK in Cambridge finance facility 1.4%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Ground rent investments (24.6%)
--------------------------------------------------------------------------------------------- -------------
Freehold Income Authorised Fund
Highly defensive
Ground 3.7% income; freehold No gearing;
rent fund GBP28.0m (5) UK ground rents monthly liquidity 24.6%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Build-to-rent investments (25.0%)
--------------------------------------------------------------------------------------------- -------------
Unity and Armouries, Birmingham
Planning
consent for
Central 90,000 square
Birmingham feet / 162
residential units plus
PRS development GBP3.9m n/a UK build-to-rent commercial 3.4%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Monk Bridge, Leeds
Planning
consent for
205,129 square
feet / 307
units plus
commercial
Outline consent
for further
193,071 square
Central Leeds feet / 300
residential units plus
PRS development GBP8.6m n/a UK build-to-rent commercial 7.6%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Data centre,
Frankfurt
Site with
planning consent
for 40,338
square metre
Industrial data centre
site with and commitment
secured consent for 35 MVA
Direct GBP16.0m for data dual feed
property (EUR18.0m) n/a Germany centre use power supply 14.0%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Other investments (18.7%)
--------------------------------------------------------------------------------------------- -------------
Galaxia
Legal process
underway
to recover
Development investment
GBP5.2m site located by enforcing
Indirect (INR in NOIDA, arbitration
property 450m) n/a India Delhi, NCR award 4.6%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Indirect asset backed investment
Indirect
investment Short term
in diversified investment
real estate in fund with
Elm Trading and renewables low external
Limited GBP15.3m 5.0% UK portfolio gearing 13.3%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Europip plc
Awaiting
final 47% of ordinary
Indirect GBP0.4m shareholder shares in
equity (EUR0.5m) n/a N/A distribution fund 0.4%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Healthcare & Leisure Property Limited
Indirect Leisure property No external
property GBP0.4m n/a UK fund gearing 0.4%
---------------- --------------- --------- ---------- ---------------- ----------------- -------------
Cash and short term investments (5.7%)
--------------------------------------------------------------------------------------------- -------------
Current or
Cash (Company 'on call'
only) GBP6.5m 0.1% UK accounts 5.7%
----------------- -------------- --------- ---------- ---------------- ----------------- -------------
(1) Percentage share shown based on NAV excluding the company's
sundry assets/liabilities
(2) Including accrued coupon at the balance sheet date
(3) Annual coupon
(4) Yield on equity over 12 months to 31 December 2017
(5) 12 month income return; post tax
ART has a diversified portfolio of asset backed investments
spread across different sectors and asset types. The Company's
portfolio includes income producing assets, build-to-rent projects,
secured debt and mezzanine loan investments. Each investment offers
a different risk-return profile however the overall portfolio seeks
to provide a balance of stable income returns and scope for capital
growth.
ART actively manages its investment portfolio which continues to
be replenished via capital recycling from the sale of non-core
assets, loan repayments or strategic full or partial disinvestment
from assets that allow for profit-taking and portfolio
optimisation. This creates the opportunity for capital allocation
to new investments.
Further to the half year results announcement on 17 November
2017, the following are key investment updates.
High yielding equity in property investments
ART continues to remain focused on investments that offer the
potential to deliver attractive risk-adjusted returns by way of
value enhancement through active asset management, improvement of
net rental income, selective deployment of capital expenditure and
the ability to undertake strategic sales when the achievable price
is accretive to returns.
H2O shopping centre, Madrid
ART has a 30% stake in joint venture with CBRE Global Investors
in the H2O shopping centre in Madrid. H2O continues to benefit from
asset management initiatives implemented during ART's ownership.
The centre attracted record visitor numbers in the 2017 calendar,
with an increase of 3.9% above 2016. Like-for-like sales
performance from tenants increased strongly by 6.4% over the same
period.
Mercadona supermarket, one of H2O's principal anchors, has
undertaken a complete refurbishment of its store during February
2018. This major investment after only 7 years in occupation is a
positive sign of the tenant's commitment to the shopping centre and
provides H2O's customers with an enhanced shopping experience.
High yielding debt
ART continues to augment and diversify its portfolio of secured
real estate loan and mezzanine loan investments. These loans are
typically secured on real estate investment and development assets
with high risk-adjusted income returns.
During the quarter ended 31 December 2017, a further four loans
were completed for GBP3.8 million; the total loan investment at
period end is GBP5.3 million. Post period end, a further three
loans totalling GBP5.2 million were funded bringing the total
secured debt portfolio to GBP10.5 million.
Further loan investments are continually being evaluated. Each
loan will typically have a two year term and a maximum 75.0% loan
to value ratio and is targeted to generate a double digit income
return. Repayment proceeds will be rotated into new loans.
Ground rent investments
Freehold Income Authorised Fund ("FIAF")
ART invests in a fund which holds a diversified portfolio of UK
residential property freehold ground rents with a view to achieving
steady and predictable returns, a consistent income stream and
prospects for growth. The Company has invested GBP28.0 million as
at 31 December 2017 in FIAF, an open-ended fund that invests in UK
freehold ground rents with a net asset value of GBP307.4 million as
at 31 December 2017.
The following highlights were reported in the FIAF fact sheet as
at 31 December 2017 (published in January 2018):
-- FIAF owns over 65,000 freeholds with a gross annual ground
rent income of circa GBP8.7 million.
-- 85% of its freeholds have a form of inflation protection
through periodic uplifts linked to Retail Price Index, property
values or fixed uplifts.
-- FIAF's assets are defensive in nature, very long dated (with
an average lease length in excess of 100 years).
The total return on ART's investment in FIAF was 8.9%
(annualised post tax) for the 12 months ending 31 December
2017.
Build-to-rent investments
ART has achieved the significant milestone of securing planning
consent for each of its build-to-rent investments. These
investments offer the opportunity to create a higher yield on cost
than is available from purchasing existing built investments of the
same quality. The investments also offer scope for capital growth
as the sites mature or planning is enhanced.
Build-to-rent investments provide the Company with flexibility
to add value by either constructing the development, funded with
either equity capital, joint venture capital or debt, and
subsequently holding the completed assets as investments; or,
alternatively, forward selling all or some of the developed
property.
Residential Private Rented Sector ("PRS")
The Company's investments in the residential Private Rented
Sector ("PRS") in central Leeds and central Birmingham are
opportunities that were secured early in the build-to-rent process
that offer potential to create an initial capital uplift in value
through enhanced planning and the opportunity to develop and let in
order to achieve resilient equity income returns at an attractive
yield on cost.
Planning consent for both sites has been secured. The Birmingham
project has implemented non-material amendments to its planning
consent for 162 residential units and ground floor commercial
space. The Leeds project has detailed planning consent for 307
residential units (which the Company intends to develop for PRS)
plus commercial development within the adjacent existing railway
arches and outline planning consent for a further 350 residential
units, for which detailed planning consent is now being
advanced.
Preferred construction partners have been selected. The project
design team continues to review the existing detailed planning
consent for possible enhancements to meet best in class PRS
requirements and a value engineering process is underway to
identify the most efficient and effective construction processes
and potential cost savings.
The Company estimates that up to GBP23.7 million could be
invested to undertake the development of its PRS sites alongside
debt financing. The Company is exploring ways to optimise the
returns from its PRS investments and is exploring joint development
opportunities with potential partners.
Data centre investment
ART owns an industrial site in Frankfurt, Germany, for which it
has secured detailed planning consent for a five-story data centre
extending to 40,338 square metres and a commitment from the local
utility provider to install a 35 MVA a dual feed power supply. The
power supply will be installed, and funded by ART, on a phased
basis over the coming three years, synchronised with local
electricity substation and cable route upgrades.
ART is in the process of arranging tenders for the construction
of an electricity receptor building on the site and pre-identified
ground preparation works. ART's total investment into the data
centre project is estimated to be approximately EUR28 million
(GBP24.7 million).
Active marketing of the project to potential data centre
occupiers is underway.
Other investments
Galaxia, India
On 2 February 2011, ART recommenced arbitration proceedings
against its development partner Logix Group ("Logix") in order to
protect its Galaxia investment, an 11.2 acre Special Economic Zone,
in NOIDA, the National Capital Region, India.
In January 2015, the ICC Arbitral Tribunal decreed that Logix
and its principals had breached the terms of the shareholders
agreement and has awarded the Company:
-- Return of its entire capital invested of INR 450.0 million
(equivalent to GBP5.2 million using the period end exchange rate as
at 31 December 2017) along with interest at 18% per annum from 31
January 2011 to 20 January 2015.
-- All costs incurred towards the arbitration.
-- A further 15% interest per annum on all sums was awarded to
the Company from 20 January 2015 until the actual date of payment
by Logix of the award.
Logix challenged the validity of the arbitration award in the
Delhi High Court and latterly to the Division Bench of the Delhi
High Court. Both courts dismissed the respective appeals and upheld
the award declared in favour of the Company. Logix have since
appealed the dismissal to the Supreme Court of India. The Supreme
Court admitted the appeal and ordered Logix to deposit INR 200
million (GBP2.3 million) with the court, which is held on deposit
to partially secure ART's claim. The Supreme Court also upheld the
earlier order of the Delhi High Court attaching the residential
property of Logix directors to secure ART's claim. The next hearing
is scheduled for March 2018.
The sum awarded to the Company has now accrued to approximately
GBP14.5 million at the period end exchange rate. ART continues to
hold the indirect investment at INR 450.0 million (GBP5.2 million)
in the accounts due to uncertainty over timing and final value.
Share buybacks
On 12 December 2017, the Company published a circular giving
notice of an Extraordinary General Meeting on 5 January 2018.
Consistent with the Company's commitment to shareholder value, the
Company asked its shareholders to approve a general authority
allowing the Company to acquire up to 24.99% of the Voting Share
Capital during the period expiring on 4 January 2019. The
shareholders approved the proposal.
On 24 January 2018, the Company announced its intention to buy
back its ordinary shares using its existing cash resources,
pursuant to the general authority granted by shareholders.
The share repurchase programme commenced with effect from 24
January 2018 and share repurchases may be undertaken until the
earlier of the maximum amount being repurchased and 4 January 2019.
The maximum amount of money allocated for the share repurchases is
GBP1 million.
During the quarter, the Company made no share buybacks.
Dividend
The Board announces the next dividend of 0.6p per share for the
quarter ended 31 December 2017 which is expected to be paid on 6
April 2018 (ex dividend date 22 March 2018 and record date 23 March
2018).
Net asset value ('NAV')
As at 31 December 2017, the unaudited NAV per ordinary share of
the Company was 168.4p (30 September 2017: 167.3p).
The movement in NAV reflects the earnings of the Company less
the dividend paid in the period.
Foreign currency
The Company monitors foreign exchange exposures and considers
hedging where appropriate. Foreign currency balances have been
translated at the period end rates of GBP1:EUR1.127 or
GBP1:INR86.359, as appropriate.
Strategy and outlook
ART's diversified portfolio provides a balance of investments
that offer scope to deliver strong cashflows, capital value growth
and attractive risk adjusted total returns.
The Company currently focuses on high-yielding property,
infrastructure and asset backed debt and equity investments in
Western Europe that are capable of delivering strong risk adjusted
cash flows, including an increasing focus on build to own
investments. The Company will consider investments and assets that
offer scope to generate long term income streams off a lower entry
cost through development. This approach provides ART with the
flexibility to take advantage of new investment opportunities where
ART sees best value.
ART has achieved the significant milestone of securing planning
consent for each of its build-to-rent investments. These
investments offer the opportunity to create a higher yield on cost
than is available from purchasing existing built investments of the
same quality. During the development period, a greater proportion
of the Company's total return is likely to come from capital growth
rather than earnings until its build-to-rent investments become
income producing.
During the period the Company has increased its mezzanine loan
investment portfolio. New investment opportunities that are capable
of delivering strong risk adjusted cash flows are being actively
pursued. ART's active investment approach means that short term
investment positions will be considered when accretive to overall
returns.
The Company remains well positioned to continue to deliver
attractive returns through investing, realising and re-investing
its capital in asset backed investment opportunities.
Contact:
Alpha Real Trust Limited
David Jeffreys, Chairman, ART +44 (0)1481 231 100
Brad Bauman, Joint Fund Manager, ART +44 (0) 20 7391 4700
Gordon Smith, Joint Fund Manager, ART +44 (0) 20 7391 4700
Panmure Gordon, Broker to the Company
Richard Gray/Andrew Potts +44 (0) 207 886 2500
This information is provided by RNS
The company news service from the London Stock Exchange
END
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