TIDMARTL
RNS Number : 1859M
Alpha Real Trust Limited
13 September 2019
13 September 2019
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY")
TRADING UPDATE and dividend announcement
ART today publishes its trading update for the period ended 30
June 2019 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" or "Trust")
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 asset-backed lending, debt investments
and high return property investments in Western Europe that are
capable of delivering strong risk adjusted cash flows. The
portfolio mix at 30 June 2019, excluding sundry assets/liabilities,
was as follows:
30 June 31 Mar
2019 2019
High return equity in property
investments: 26.6% 25.1%
High return debt: 29.1% 26.3%
Other investments: 6.4% 6.3%
Cash: 37.9% 42.3%
The Company's Investment Manager is Alpha Real Capital LLP
("ARC").
Highlights
-- NAV per ordinary share 205.3p: 30 June 2019 (204.3p: 31 March
2019); the pro forma NAV per ordinary share, taking into account
the Tender Offer share buyback in the period, is 212.5p*.
-- Basic earnings for the period ended 30 June 2019 of 0.3p per
ordinary share (33.1p per ordinary share and 33.5p per A share for
the year ended 31 March 2019).
-- Adjusted earnings for the period ended 30 June 2019 of 1.3p
per ordinary share (3.9p per ordinary and A share for year ended 31
March 2019).
-- Declaration of an increased quarterly dividend of 1.0p per
ordinary share (0.8p: quarter ended 31 March 2019), expected to be
paid on 18 October 2019.
-- Active management of shareholder returns: post period end,
the Company announced the result of its tender offer, in which
13,065,348 ordinary shares were validly tendered, representing
approximately 19.48 per cent of the Company's voting shares. All
valid tenders were subsequently satisfied in full.
-- Increased portfolio weighting towards secured loan
investment: ART continues to augment and diversify its portfolio of
secured senior and secured mezzanine loan investments. As at 30
June 2019, the size of ART's secured loan portfolio was GBP39.1
million, representing 29.1% of the investment portfolio; post
period end, further loans totalling GBP7.7 million have been
funded.
-- UK industrial portfolio: asset sales completed during and
post period end in line with valuation.
-- H2O shopping centre Madrid: record visitor numbers were
recorded in the six months to June 2019. Following a successful
transfer of additional building rights to the shopping centre, a
pre-let commitment has been signed for a new retail park unit which
is to be created on the surface parking area.
* This is the 30 June 2019 NAV adjusted for the Tender Offer
payment of GBP22.9 million and the share base adjusted for the
cancellation of 13,065,348 shares.
Investment summary
Portfolio overview as at 30 June 2019
Investment name
Investment Carrying Income Investment Property type Investment notes % of
type value return location / underlying portfolio(1)
p.a. security
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
High return debt (29.1%)
------------------------------------------------------------------------------------------------- -------------
Secured senior
finance
Diversified
loan portfolio
focussed on
real estate
Senior secured GBP23.9m 10.4% investments Senior secured
loans (2) (3) UK and developments debt 17.8%
Secured mezzanine finance
Diversified
loan portfolio
focussed on Secured mezzanine
Second charge real estate debt and
mezzanine GBP15.2m 15.2% investments subordinated
loans (2) (3) UK and developments debt 11.3%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
High return equity in property investments (26.6%)
------------------------------------------------------------------------------------------------- -------------
H2O shopping centre
Dominant Madrid 30% shareholding;
shopping centre medium term
and separate moderately geared
Indirect GBP20.6m 5.5% development bank finance
property (EUR23.0m) (4) Spain site facility 15.3%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Long leased industrial facility, Hamburg
Long leased
industrial
complex Long term
in major European moderately
GBP6.3m* 6.4% industrial and geared bank
Direct property (EUR7.0m) (5) Germany logistics hub finance facility 4.7%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Alpha UK Property Fund Asset Company (No 2)
High-yield 33.6% of ordinary
Indirect 8.4% commercial shares in the
property GBP7.2m (5) UK UK portfolio company 5.3%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Cambourne Business Park
Medium term
High-yield moderately
business geared bank
Indirect 9.4% park located finance
property GBP1.7m (4) UK in Cambridge facility 1.3%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Other investments (6.4%)
------------------------------------------------------------------------------------------------- -------------
Unity and Armouries, Birmingham
Planning consent
for 90,000 square
feet / 162 units
plus
commercialHeads
Central of Terms and
PRS development, Birmingham exclusivity
held for residential agreed for offer
sale GBP4.5m n/a UK build-to-rent of GBP4.9m 3.3%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Galaxia
Legal process
underway to
recover
Development investment
GBP4.0m site located by enforcing
Joint venture (INR in NOIDA, Delhi, arbitration
in arbitration 350m) n/a India NCR award 3.0%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Healthcare & Leisure Property Limited
Indirect Leisure property No external
property GBP0.2m n/a UK fund gearing 0.1%
----------------- ------------------- ------- ---------- ----------------- ----------------- -------------
Cash and short-term investments (37.9%)
------------------------------------------------------------------------------------------------- -------------
Short term
deposits,
0.8% 'on call' and
Cash GBP51.0m (6) UK current accounts 37.9%
------------------------ ------------ ------- ---------- ----------------- ----------------- -------------
* Property value net of associated debt including sundry
assets/liabilities
(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) Weighted average income return
(4) Yield on equity over 12 months to 30 June 2019
(5) Annualised income return, post tax
(6) weighted average interest earned on current deposits
Further to the annual results announcement on 14 June 2019, the
following are key investment updates.
Active management of shareholder returns
ART seeks to actively manage shareholder returns. In July 2019,
post period end, the Company announced the result of its tender
offer in which 13,065,348 ordinary shares were validly tendered,
representing approximately 19.48 per cent of the Company's voting
shares. All valid tenders were subsequently satisfied in full.
Income focussed investment
Following an active period of capital recycling, ART currently
focusses on asset-backed lending, debt investments and high return
property investments in Western Europe that are capable of
delivering strong risk-adjusted cashflows. In line with this focus,
capital is predominantly being deployed to augment and diversify
its portfolio of secured real estate senior and mezzanine loan
investments. Over the medium term the Company's returns are likely
to see greater contributions from the growing senior debt and
mezzanine loan portfolio and less from capital gains.
The Company continues to maintain a pipeline of new investment
opportunities under active review which compete for capital
allocation. ART benefits from the depth of experience, strength and
size of its Investment Manager. Alpha Real Capital has a team of
over one hundred investment, asset management, sales 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.
New secured lending investment
The Company's portfolio of secured senior and mezzanine loan
investments continues to increase in scale and diversity. The loans
are typically secured on real estate investment and development
assets with attractive risk-adjusted income returns.
As at 30 June 2019, ART had invested a total amount of GBP39.1
million across thirty-one loans, of which five were completed
during the quarter to 30 June 2019. Over the past year the loan
portfolio has almost tripled, with GBP7.1 million of investment
into the secured loan portfolio completing in the quarter ending 30
June 2019, with an additional GBP7.7 million of loans granted post
period end.
During the quarter to 30 June 2019, six loans were repaid for
GBP4.0 million, generating an annualised return of 14.7%, and two
loans were partly repaid by GBP1.3 million. Post period end, loan
repayments of GBP1.5 million were received.
The Company is currently targeting up to GBP70 million for
investment in secured senior and mezzanine loans.
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 continues to develop a
strong pipeline of new lending opportunities.
Selective asset disposals
UK industrial portfolio
ART owns a 33.6% share in Alpha UK Property Fund Asset Company
(No 2) Limited ('Alpha2'). As at 30 June 2019, Alpha2 owned four UK
industrial assets.
During the period, one of the assets was sold and is reflected
in the 30 June 2019 reporting. Post period end, a further asset was
sold for GBP1.7 million, in line with its 30 June 2019
valuation.
Birmingham residential site
ART owns Unity and Armouries, a development site located in
central Birmingham with planning consent for 90,000 square feet of
net saleable space comprising 162 residential apartments with
ground floor commercial areas. A sale of the investment is being
pursued.
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 during the six-month period to 30 June 2019,
increasing 5.6% above the same period in 2018.
The H2O investment includes a small vacant site located in the
same planning zone as H2O that was acquired during 2017. As
previously announced, following a successful planning process which
involved an amendment to the local zoning plan, 9,000 square metres
of building rights have been transferred to the H2O plot which,
subject to obtaining building licences, creates potential for the
future expansion of the shopping centre. An active leasing
programme has helped secured a pre-let to a leading Spanish pet
supplies company for a 1,100 square metre retail park unit which
will be constructed by the landlord over the coming year on part of
the centre's surface car park area. This creation of new retail
park units was anticipated as part of a recently completed
masterplan design for the shopping centre.
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 the Company's entire capital invested of INR 450
million (equivalent to GBP5.1 million using the period end exchange
rate as at 30 June 2019) 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. Following several
postponements to scheduled hearings, the next Supreme Court hearing
is scheduled for 17(th) September 2019.
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 GBP15.1 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)
deposited by Logix at the Supreme Court, consider it appropriate to
carry this joint venture in its accounts at INR 350 million (GBP4.0
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
Under the general authority, approved by Shareholders on 8
January 2019, the Company announced a tender offer on 14 June 2019
for up to 16,666,771 ordinary shares at a price (before expenses)
of 175.0 pence per share. In total 13,065,348 ordinary shares were
validly tendered under the tender offer. All purchased ordinary
shares were cancelled.
The Company additionally purchased 52,124 shares in the market
during the period ended 30 June 2019, and a further 10,000 shares
on 1 August 2019.
As at the date of this announcement, the ordinary share capital
of the Company is 61,165,783 (including 6,971,081 ordinary shares
held in treasury) and the total voting rights in the Company is
54,194,702.
Scrip dividend alternative
Shareholders of the Company have the option to receive shares in
the Company in lieu of a cash dividend, at the absolute discretion
of the Directors, from time to time.
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 quarter ended 30 June 2019.
Shareholders who returned the Scrip Mandate Form and elected to
receive the scrip dividend alternative will receive shares in lieu
of the next dividend. Shareholders who have not previously elected
receive scrip may complete a Scrip Mandate Form (this can be
obtained from the registrar: contact Computershare (details
below)), which must be returned by 4 October 2019 to benefit from
the scrip dividend alternative for the next dividend.
Net asset value ('NAV')
As at 30 June 2019, the unaudited NAV per ordinary share of the
Company was 205.3p (31 March 2019: 204.3p).
The movement in NAV mainly reflects the earnings of the Company
less the dividend paid in the period plus positive foreign currency
movements.
The pro forma NAV per ordinary share, taking into account the
Tender Offer share buyback in the period, is 212.5p (this is the 30
June 2019 NAV adjusted for the Tender Offer payment of GBP22.9
million and the share base adjusted for the cancellation of
13,065,348 shares).
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:INR87.587, as appropriate.
Strategy and outlook
ART's diversified portfolio continues to increase the weighting
towards cashflow driven investments, particularly senior debt,
whilst retaining scope for creating capital value growth. Following
an active period of capital recycling, ART currently focusses on
asset-backed lending, debt investments and high return property
investments in Western Europe that are capable of delivering strong
risk-adjusted cashflows.
ART continues to actively augment and diversify its portfolio of
secured real estate loan and secured mezzanine loan investments
which are expected to enhance the Company's current earnings. Over
the past year the loan portfolio has increased almost threefold,
with GBP7.1 million of investment into the secured loan portfolio
completing in the quarter ending 30 June 2019, with an additional
GBP7.7 million of loans granted post period end.
The Company is actively repositioning its investments to deliver
attractive income returns. For the medium term, the Company's
returns are likely to see greater contributions from the growing
senior debt and mezzanine loan portfolio and less from capital
gains. The Company maintains an active pipeline of potential new
secured senior and mezzanine loans and equity investment
opportunities under review.
Contact:
Alpha Real Trust Limited
David Jeffreys, Chairman, ART +44 (0)1481 742 742
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
Atholl Tweedie / Joanna Langley +44 (0) 20 7886 2500
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END
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