TIDMARTL
RNS Number : 9456S
Alpha Real Trust Limited
15 March 2019
15 March 2019
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 2018 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 focusses on high-yielding property, infrastructure and
asset backed debt and equity investments that are capable of
delivering strong risk adjusted cash flows. The portfolio mix at 31
December 2018, excluding sundry assets/liabilities, was as
follows:
High return equity in property
investments: 25.6%
High return debt: 17.2%
Build-to-rent investments: 41.9%
Other investments: 3.2%
Cash: 12.1%
The Company's Investment Manager is Alpha Real Capital LLP
("ARC").
Highlights
-- NAV per ordinary and A share 205.6p: 31 December 2018 (178.4p: 30 September 2018)
-- Basic earnings for the nine-month period ended 31 December
2018 of 31.9p per ordinary and A share (6.5p per ordinary and A
share for the six-month period ended 30 September 2018)
-- Adjusted earnings for the nine-month period ended 31 December
2018 of 3.0p per ordinary and A share (2.5p per ordinary and A
share for the six-month period ended 30 September 2018)
-- Declaration of an increased quarterly dividend of 0.8p per
ordinary share, expected to be paid on 26 April 2019
-- Scrip dividend alternative for the next dividend available to
shareholders who elect by 12 April 2019
-- Total shareholder return: NAV growth of 19% over the
twelve-month period to 31 December 2018, principally driven by
realised sales.
-- Portfolio profit taking and de-risking: material post period
end sales of the Company's build-to-rent investments; sale of the
Frankfurt data centre site for EUR44.8 million (reflected in period
end NAV) and the Monk Bridge, Leeds Private Rented Sector
residential site for GBP15.2 million
-- Capital recycling: the sale proceeds of the Frankfurt and
Leeds projects are to be primarily redeployed into the Company's
growing secured senior and mezzanine debt portfolio.
-- Growing secured loan portfolio: eight loans were completed
during the three months to 31 December 2018 with GBP23.5 million
invested at period end; post period end, further loans totalling
GBP1.1 million have been funded
-- H2O shopping centre Madrid: record visitor numbers recorded in 2018.
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. ART continues to recycle
capital from the sale of selected assets. Recent capital recycling
has focussed on reducing exposure to development and leasing risk,
as well as profit-taking and portfolio optimisation.
ART is currently planning to allocate the proceeds from its
recycled capital to augment and diversify its portfolio of secured
real estate senior and mezzanine loan investments. This is expected
to increase the company's current earnings.
Portfolio overview as at 31 December 2018
Investment name
Investment Carrying Income Investment Property type Investment notes % of
type value return location / underlying portfolio(1)
p.a. security
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
High return debt (17.2%)
---------------------------------------------------------------------------------------------------- -------------
Secured senior
finance
Diversified
loan portfolio
focussed on
7.5% real estate
Senior secured GBP7.4m to 9.0% investments Senior secured
loans (2) (3) UK and developments debt 5.4%
Secured mezzanine finance
Diversified
loan portfolio
focussed on Secured mezzanine
Second charge 6.5% real estate debt and
mezzanine GBP16.1m to 25.0% investments subordinated
loans (2) (3) UK and developments debt 11.8%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
High return equity in property investments (25.6%)
---------------------------------------------------------------------------------------------------- -------------
H2O shopping centre
Dominant Madrid 30% shareholding;
shopping centre medium term
and separate moderately geared
Indirect GBP19.9m 6.1% development bank finance
property (EUR22.2m) (4) Spain site facility 14.6%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Long leased industrial facility, Hamburg
Long leased Long term
industrial moderately
GBP6.4m* 6.7% complex geared bank
Equity (EUR7.1m) (5) Germany in major finance facility 4.7%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Active UK Real Estate Fund plc
High-yield
8.7% commercial 27.8% of ordinary
Equity GBP6.8m (4) UK UK portfolio shares in fund 5.0%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Cambourne Business Park
Medium term
High-yield moderately
business geared bank
Indirect 9.9% park located finance
property GBP1.8m (4) UK in Cambridge facility 1.3%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Build-to-rent investments (41.9%)
---------------------------------------------------------------------------------------------------- -------------
Unity and Armouries, Birmingham
Central Planning consent
Birmingham for 90,000 square
residential feet / 162 units
PRS development GBP4.8m n/a UK build-to-rent plus commercial 3.5%
----------------- ----------------------- ------- ---------- ---------------- ----------------- -------------
Monk Bridge, Leeds
Central Leeds Sale completed
residential post period
PRS development GBP15.2m n/a UK build-to-rent end. 11.2%
----------------- ----------------------- ------- ---------- ---------------- ----------------- -------------
Data centre, Frankfurt
Site with
planning
and committed
GBP37.0m** power for data Sale completed
Direct property (EUR41.3m) n/a Germany centre use post period end. 27.2%
----------------- ----------------------- ------- ---------- ---------------- ----------------- -------------
Other investments (3.2%)
---------------------------------------------------------------------------------------------------- -------------
Galaxia
Legal process
underway to
recover
Development investment
GBP3.9m site located by enforcing
Investment (INR in NOIDA, Delhi, arbitration
receivable 350m) n/a India NCR award 2.9%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Europip plc
Awaiting final 47% of the total
Indirect GBP0.3m shareholder ordinary shares
equity (EUR0.3m) n/a N/A distribution in fund 0.2%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Healthcare & Leisure Property Limited
Indirect Leisure property No external
property GBP0.2m n/a UK fund gearing 0.1%
----------------- ------------------- ----------- ---------- ---------------- ----------------- -------------
Cash and short-term investments (12.1%)
---------------------------------------------------------------------------------------------------- -------------
Current or 'on
Cash GBP17.0m 0.1% UK call' accounts 12.1%
------------------------ ------------ ----------- ---------- ---------------- ----------------- -------------
* Property value net of associated debt including sundry
assets/liabilities
** Property value net of provision for deferred tax
(1) Percentage share shown based on NAV excluding the company's
sundry assets/liabilities
(2) Including accrued interest/coupon at the balance sheet
date
(3) Annual interest/coupon
(4) Yield on equity over 12 months to 31 December 2018
(5) Annualised income return; post tax
Further to the annual results announcement on 16 November 2018,
the following are key investment updates.
Total shareholder returns
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 is demonstrated by the post period end sale of
the Frankfurt data centre and the Leeds residential site.
This investment policy has helped ART deliver a significant
increase in total shareholder return, with NAV growth per ordinary
share of 19% achieved over the twelve-month period to 31 December
2018.
Positioning for continued investment
The Company continues to maintain a pipeline of new investment
opportunities under active review which compete for capital
allocation. ART is currently planning to primarily allocate the
proceeds from its recycled capital to augment and diversify its
portfolio of secured senior and mezzanine loan investments. This is
expected to increase the company's current earnings. ART continues
to evaluate equity investments that offer attractive risk-adjusted
returns.
ART benefits from the depth of experience, strength and size of
its Investment Manager. Alpha Real Capital has a team of over 100
investment, asset management and debt professionals based
throughout the UK and Europe. ART's active management approach has
helped deliver improvements in underlying asset values, in both
directly and indirectly held investments across our investment
markets.
Sale of Frankfurt data centre site
As announced on 14 February 2019, the sale of the Company's data
centre site in Frankfurt completed for a cash consideration of
EUR44.8 million. The sale price was above the Company's latest
published value for the site.
ART originally acquired an interest in the site by way of an
option to acquire, subject to obtaining power and planning
enhancements, which the Company funded during the option period.
ART site enhancement strategy involved the undertaking of a
detailed design and pre-development process for the building and
its mechanical and electrical systems that led to the grant of
planning consent for a five-storey data centre extending to over
40,000 square metres. In parallel, an agreement was reached with
the local utility provider who contracted to upgrade the power
supply to the site to deliver a 35 Mega Volt Ampere ('MVA') dual
feed power supply on a phased basis to 2020, synchronised with
local electricity substation and cable route upgrades. The Company
also undertook site enabling works to complete pre-identified
ground remediation works and create an electricity receptor
building capable of accommodating the upgraded power supply.
Sale of Leeds PRS
On 1 March 2019, the Company announced the sale of its private
rental sector residential development site, 'Monk Bridge' in Leeds
for a total transaction value of GBP15.4 million.
The Company acquired the development site in December 2015 at
which time the site had implemented planning consent for 269
residential units.
Detailed consent was subsequently granted for a further 395
residential units in the development over 5 buildings of up to 21
storeys. Full planning permission was obtained for the site which
has a residential and commercial net lettable area of around
386,000 square feet and 16,000 square feet respectively.
The sale price is above the Company's latest published value for
the site. ART has sold the site with the benefit of full detailed
planning permission and completed final stage plans.
Proceeds from the sale are to be deployed in line with the
Company's investment strategy.
New secured lending investment
ART has a portfolio of secured senior and mezzanine loan
investments which continues to increase in scale and diversity.
These loans are typically secured on real estate investment and
development assets with attractive risk-adjusted income returns. As
at 31 December 2018, ART had invested a total amount of GBP23.5
million across 28 loans, of which 8 loans were completed during the
quarter to 31 December 2018. Post period end, a further GBP1.1
million of loans were granted.
During the quarter to 31 December 2018, one mezzanine loan was
repaid generating an annualised return of circa 18.8%. Post period
end, part repayment of a senior loan was received amounting to
GBP0.7 million.
Each loan will typically have a term of up to two years, a
maximum 75% loan to value ratio and be targeted to generate
attractive risk-adjusted income returns. Repayment proceeds will be
reinvested into new facilities. The Company is developing a strong
pipeline of opportunities.
H2O, 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
ongoing asset management initiatives. The centre attracted record
visitor numbers in 2018, despite one of the main anchor tenants,
the Mercadona supermarket, closing for a month to undertake a
complete refurbishment and upgrade of the store. Like-for-like
sales performance from tenants increased by 3.0% over the same
period.
Other investments
Galaxia, India
The Galaxia project is a joint venture with Logix Group, to
develop a site extending to 11.2 acres with the potential to
develop 1.2 million square feet. Galaxia is located in NOIDA, an
established, well planned suburb of Delhi that continues to benefit
from new infrastructure projects and is one of the principal office
micro-markets in India. The Company has a 50.0% shareholding in the
SPV which controls the Galaxia site. There are no bank borrowings
on the asset.
In February 2011, ART recommenced arbitration proceedings
against Logix Group ("Logix") in order to protect its Galaxia
investment, an 11.2 acre development site, in NOIDA, the National
Capital Region (NCR), 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 million
(equivalent to GBP5.0 million using the period end exchange rate as
at 30 June 2018) 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 appealed the
dismissal before the Supreme Court of India. The Supreme Court
admitted the appeal and ordered Logix to deposit GBP2.2 million
(INR 200 million). In May 2018, the Supreme Court permitted the
Company to unconditionally withdraw INR 100 million (GBP1.1
million). The remaining INR 100 million (GBP1.1 million) deposited
by Logix maybe released against a bank guarantee suitable to the
Supreme Court. The next Supreme court hearing is scheduled for
April 2019.
ART has commenced execution of the award and the Delhi High
Court has issued a warrant of attachment against the primary
residential property owned by Shakti Nath and Meena Nath, promoters
of Logix Group. The Court has also restrained Logix from alienating
their immovable assets. ART continues to actively pursue Logix
directors for the recovery of the award.
The sum awarded to ART, including the recovered deposits, has
now accrued to GBP14.2 million at the period end exchange
rates.
The Directors, taking into consideration legal advice received
following Logix's challenge of the Award and following the recovery
of INR 100 million (GBP1.1 million) noted above, consider it
appropriate to carry this joint venture in its accounts at INR 350
million (GBP3.9 million). The amount recognised in the accounts
does not include the additional compensation awarded by the courts
due to uncertainty over timing and final value of the award.
Share buybacks
On 18 December 2018, the Company published a circular giving
notice of an Extraordinary General Meeting on 8 January 2019.
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 7 January 2020. Shareholders
approved the proposal.
On 19 January 2019, 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 19
January 2019 and share repurchases may be undertaken until the
earlier of the maximum amount being repurchased and 7 January 2020.
The maximum amount of money allocated for the share repurchases is
GBP1 million.
During the quarter, 1,584,564 ordinary shares were tendered
under a Tender Offer announced by the Company on 5 October 2018.
The Tender Price was 138 pence per ordinary share.
Conversion of A shares
On 24 January 2019 all outstanding A shares were mandatorily
converted to ordinary shares. This followed the payment of the
final special dividend to holders of A shares from the Company's
investment in The Romulus High Income Trust.
Scrip dividend alternative
In the circular published on 18 December 2018 the Company sought
Shareholders' approval to enable a scrip dividend alternative to be
offered to ordinary Shareholders whereby they could elect to
receive additional ordinary shares in lieu of a cash dividend, at
the absolute discretion of the Directors, from time to time. This
was approved by Shareholders at the Extraordinary General Meeting
on 8 January 2019.
The number of ordinary shares that an Ordinary Shareholder will
receive under the Scrip Dividend Alternative will be the average of
the closing middle market quotations of an ordinary share for five
consecutive dealing days after the day on which the ordinary shares
are first quoted "ex" the relevant dividend.
The Board has elected to offer the scrip dividend alternative to
Shareholders for the dividend for the period. The Scrip Mandate
form must be returned by 12 April 2019 to receive the scrip
alternative for the next dividend.
Dividend
The Board announces the next dividend of 0.8p per share for the
quarter ended 31 December 2018 which is expected to be paid on 26
April 2019 (ex-dividend date 28 March 2019 and record date 29 March
2019): this date has changed from 5 April 2019, as previously
announced, due to timing of dividend procedures related to the
scrip dividend alternative.
Revised financial calendar
Financial Reporting Dividend Ex-dividend Record Last date Share Payment
reporting dates period date date for election certificates date
to scrip posted
dividend (if applicable)
(if applicable)
-------------- ---------- --------- ------------ --------- ----------------- ----------------- ---------
Trading 15 March Quarter 28 March 29 March 12 April 25 April 26 April
update 2019 ending 2019 2019 2019 2019 2019
(Qtr 3) 31 Dec
2018
-------------- ---------- --------- ------------ --------- ----------------- ----------------- ---------
Annual report 14 June Quarter 27 June 28 June 5 July 18 July 19 July
and dividend 2019 ending 2019 2019 2019 2019 2019
announcement 31 Mar
2019
Net asset value ('NAV')
As at 31 December 2018, the unaudited NAV per ordinary share of
the Company was 205.6p (30 September 2018: 178.4p).
The movement in NAV mainly reflects the earnings of the Company
less the dividend paid in the period plus other investments' fair
value uplift (mainly the Frankfurt data centre) and positive
foreign currency movements.
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:EUR1.117 or
GBP1:INR89.111, 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.
ART continues to recycle capital from the sale of selected
assets. Recent capital recycling has focussed on reducing exposure
to development and leasing risk, as well as profit-taking and
portfolio optimisation. Post period end the sale of the Company's
data centre site in Frankfurt and its residential site in Leeds
were completed, following the securing of significant enhanced
planning consents under the Company's ownership. The realisation of
these sales has helped deliver 19% growth in ART's NAV per ordinary
share over the twelve-month period to 31 December 2018.
ART is currently planning to allocate the proceeds from its
recycled capital to augment and diversify its portfolio of secured
real estate loan and secured mezzanine loan investments which is
expected to increase the Company's current earnings. During the
quarter to 31 December 2018 a further GBP3.1 million was invested
into the secured loan portfolio, with an additional GBP1.1 million
of loans granted post period end.
The Company remains well positioned to continue to deliver
attractive returns through investing, realising and re-investing
its capital in asset backed investment opportunities and maintains
an active pipeline of potential new secured senior and mezzanine
loans and other investment opportunities under review.
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 +44 (0) 207 886 2500
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END
MSCGGUGPWUPBGMC
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