TIDMARTL
RNS Number : 4145E
Alpha Real Trust Limited
28 February 2020
28 February 2020
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 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 the "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 31 December 2019, excluding sundry
assets/liabilities, was as follows:
31 December 30 September
2019 2019
High return debt 39.4% 38.6%
High return equity in property
investments 25.5% 36.0%
Other investments 6.4% 7.1%
Cash 28.7% 18.3%
The Company's Investment Manager is Alpha Real Capital LLP
("ARC").
Highlights
-- NAV per ordinary share 212.7p: 31 December 2019 (213.5p: 30 September 2019).
-- Basic earnings for the period ended 31 December 2019 of 5.7p
per ordinary share (2.7p per ordinary share 30 September 2019).
-- Adjusted earnings for the period ended 31 December 2019 of
4.8p per ordinary share (3.0p per ordinary share 30 September
2019).
-- Declaration of a quarterly dividend of 1.0p per ordinary
share expected to be paid on 9 April 2020.
-- 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 31
December 2019, the size of ART's secured loan portfolio was GBP48.0
million, representing 39.4% of the investment portfolio; post
period end, further loans totalling GBP1.0 million have been
funded.
-- Galaxia update: The Supreme Court upheld the arbitration
award in favour of ART. Logix have been ordered to pay INR 860
million (GBP9.3 million) to ART, of which INR 292 million (GBP3.1
million) is due within 3 months and the balance within 8 months.
The Galaxia site (which was previously charged in favour of ART) is
currently under offer for INR 568 million (GBP6.1 million) and
these sale proceeds will be deposited with the Supreme Court
towards the settlement amount.
-- UK industrial portfolio: GBP5.2 million of disposals
successfully completed, with proceeds to be recycled into the
Company's loan portfolio.
-- H2O shopping centre Madrid: record visitor numbers were
recorded in the 2019 calendar year, increasing 5.2% over 2018; a
new pre-let retail park unit is under construction on the surface
parking area.
Investment summary
Portfolio overview as at 31 December 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 (39.4%)
------------------------------------------------------------------------------------------------ -------------
Secured senior
finance
Senior secured
Senior secured Diversified debt
loans (excluding loan portfolio (during the
committed focussed on period the average
but undrawn real estate senior facilities
facilities GBP25.5m 8.7% investments commitments
of GBP9.2million) (2) (3) UK and developments were GBP31.1m) 20.9%
Secured mezzanine finance
Secured mezzanine
debt and
subordinated
Diversified debt
loan portfolio (during the
focussed on period the average
Second charge real estate mezzanine facilities
mezzanine GBP22.5m 14.5% investments commitments
loans (2) (3) UK and developments were GBP17.8m) 18.5%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
High return equity in property investments (25.5%)
------------------------------------------------------------------------------------------------ -------------
H2O shopping centre
Dominant Madrid 30% shareholding;
shopping centre medium term
and separate moderately geared
Indirect GBP18.6m 5.7% development bank finance
property (EUR21.9m) (4) Spain site facility 15.2%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Long leased industrial facility, Hamburg
Long leased
industrial complex
in major European Long term moderately
GBP6.8m 7.1% industrial and geared bank
Direct property (5) (4) Germany logistics hub finance facility 5.6%
(EUR8.0m)
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Alpha UK Property Fund Asset Company (No 2)
High-yield 100% shareholding;
Indirect 10.5% commercial no external
property GBP4.0m (6) UK UK property gearing 3.3%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Cambourne Business Park
High-yield Medium term
business moderately
Indirect 9.8% park located geared bank finance
property GBP1.7m (4) UK in Cambridge facility 1.4%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Other investments (6.4%)
------------------------------------------------------------------------------------------------ -------------
Unity and Armouries, Birmingham
Planning consent
for 90,000 square
feet / 162 units
plus commercial
Heads of Terms
Development, and exclusivity
Site held GBP4.5 Central Birmingham agreed for offer
for sale m n/a UK residential of GBP4.5m 3.6%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Galaxia
Legal process
underway to
Development recover investment
GBP2.5m site located by enforcing
Joint venture (INR in NOIDA, Delhi, arbitration
in arbitration 235m) n/a India NCR award 2.1%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Realhousingco
High-yield 100% shareholding;
Residential GBP0.6 residential no external
Investment m n/a UK UK portfolio gearing 0.5%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Healthcare & Leisure Property Limited
Indirect GBP0.2 Leisure property No external
property m n/a UK fund gearing 0.2%
------------------ ------------- ------- ---------- ------------------ -------------------- -------------
Cash and short-term investments (28.7%)
------------------------------------------------------------------------------------------------ -------------
GBP34.9 0.1% 'On call' and
Cash (7) m (8) UK current accounts 28.7%
------------------------ ------- ------- ---------- ------------------ -------------------- -------------
(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) The income returns for high return debt are the annualised
actual finance income return over the period shown as a percentage
of the average committed
capital over the period
(4) Yield on equity over 12 months to 31 December 2019
(5) Property value net of associated debt including sundry
assets/liabilities
(6) Annualised income return, post tax
(7) Company only
(8) Weighted average interest earned on call accounts
Further to the half year results announcement on 29 November
2019, the following are key investment updates.
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 senior and secured mezzanine real estate
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
well-resourced team of investment 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 31 December 2019, ART had committed GBP57.0 million across
forty-one loans, of which four were completed during the quarter to
31 December 2019 and of which GBP48.0 million was drawn. Over the
past twelve months the loan portfolio has more than doubled, with
GBP22.8 million of investment into the secured loan portfolio
completing in the nine-month period ended 31 December 2019, with an
additional GBP0.4 million of loans granted post period end and
GBP0.6 million drawn post period end from previously committed
loans. The largest individual loan in the portfolio is a senior
loan of GBP5.3 million which represents 9.3% of committed
capital.
In the quarter to 31 December 2019, ART invested in four new
loans with a total capital commitment of GBP5.1 million. Of this,
GBP3.7 million were senior secured development loans and GBP1.4
million were mezzanine secured development loans.
As at 31 December 2019, 54% of the Company's loan investments
were senior loans and 46% were mezzanine loans. The underlying
assets in the loan portfolio as at 31 December 2019 had geographic
diversification with a London and South East weighting. The South
of England (including London) accounted for 56% and London
accounted for 31%, of the committed capital within the loan
investment portfolio. Loans will continue to be made throughout the
UK with a target of continued geographic diversification.
During the period ended 31 December 2019, seven loans totalling
GBP5.3 million (including accrued interest and exit fees) were
fully repaid and eight loans were partly repaid (repayments
totalling GBP9.6 million). Post period end, further loan repayments
of GBP7.4 million were received.
Each loan will typically have a term of up to two years, a
maximum 75% loan to gross development value ratio and be targeted
to generate attractive risk-adjusted income returns. Repayment
proceeds will be re-invested into new facilities. The Company
continues to develop a strong pipeline of new lending
opportunities.
To date the fund has experienced no defaults.
UK industrial
During the period, the sale of the penultimate asset in the
Alpha UK Property Fund Asset Company (No. 2) Limited ("Alpha2")
portfolio completed realising proceeds of GBP5.2 million (the sale
price was in line with the asset's 30 September 2019
valuation).
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, attracting record visitor
numbers during the 2019 calendar year, increasing 5.2% above
2018.
Earlier in 2019, 9,000 square metres of building rights were
transferred to the H2O plot from a small vacant site located in the
same planning zone and held as part of the H2O investment. An
active leasing programme has helped secure a pre-let of a 1,100
square metre retail park unit. Construction has commenced and is
targeted for completion in the first quarter of 2020. The new unit
is to be located on part of the centre's surface car park area, as
envisaged within a recently completed masterplan design for the
shopping centre.
Other investments
Galaxia, India
The Supreme Court of India has rejected Logix's challenge of the
ICC Arbitration award.
Following breaches by Logix with respect to the Galaxia joint
venture, ART initiated arbitration proceedings to protect its
Galaxia investment - a 50:50 joint venture with Logix that owns an
11.2 acre development site located in NOIDA, the National Capital
Region, India. In January 2015, the International Chamber of
Commerce Arbitration declared an award in favour of ART ordering
Logix to return the entire amount invested by ART along with
interest and costs.
Logix challenged the arbitration award at both the Delhi High
Court and latterly a Division Bench of the Delhi High Court,
however both courts declared in favour of the Company and rejected
Logix's appeal. Logix later appealed the dismissal before the
Supreme Court. The Supreme Court ordered Logix to deposit INR 200
million with the court to partially secure the Company's claim.
This amount, reflecting GBP2.3 million at the prevailing exchange
rate and including interest, has since been successfully recovered
by the Company.
On 18 February 2020, the Supreme Court upheld the arbitration
award in favour of ART and dismissed Logix's appeal. In addition to
the court held deposit historically recovered by the Company, Logix
were ordered to pay INR 860 million (GBP9.1 million) to ART, of
which INR 292 million (GBP3.1 million) is due within 3 months and
the balance within 8 months. The court is permitting Logix to sell
the Galaxia site, which was previously charged in favour of ART, in
order to raise capital. The site is currently under offer for INR
568 million (GBP6.0 million) and these sale proceeds will be
deposited with the Supreme Court towards the settlement amount.
Failure by Logix to make payment would result in higher interest
rates applicable under the arbitration award.
As announced in December 2019, the Supreme Court permitted ART
to withdraw the remaining INR 100 million plus interest accrued
totalling INR 115 million (GBP1.2 million) of the court held
deposit funded by Logix.
Although ART continues to actively pursue its claim, the Company
carried the joint venture in arbitration in its accounts as at 30
September 2019 at INR 350 million. The further sum of INR 115
million has since been received by the Company. The amount
recognised in the accounts as at 31 December 2019 (INR 235 million,
GBP2.5 million) does not include the additional compensation
awarded by the courts, above the carried value, due to uncertainty
over timing and final value of this award.
Selective asset disposals
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. Contracts have been exchanged based
on an offer of GBP4.5 million.
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 62,124 shares in the market
during the nine month period ended 31 December 2019: these shares
are held in treasury.
As at the date of this announcement, the ordinary share capital
of the Company is 61,654,242 (including 1,940,797 ordinary shares
held in treasury) and the total voting rights in the Company are
59,713,445.
Dividends
The Board announces a dividend of 1.0 pence per ordinary share
which is expected to be paid on 9 April 2020 (ex-dividend date 12
March 2020 and record date 13 March 2020).
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 31 December
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 to receive scrip may complete a Scrip Mandate Form (this
can be obtained from the registrar: contact Computershare (details
below)), which must be returned by 26 March 2020 to benefit from
the scrip dividend alternative for the next dividend.
Net asset value ('NAV')
As at 31 December 2019, the unaudited NAV per ordinary share of
the Company was 212.7p (213.5p: 30 September 2019).
The movement in NAV mainly reflects the earnings of the Company
less the dividend paid in the period less negative 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:EUR1.178 or
GBP1:INR94.363, as appropriate.
Strategy and outlook
ART's diversified portfolio continues to increase the weighting
towards debt 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 twelve months the loan portfolio has more than doubled,
with GBP22.8 million of investment into the secured loan portfolio
completing in the nine-month period ended 31 December 2019, with an
additional GBP1.0 million of loans granted post period end.
As the Company continues to actively reposition 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
Computershare, Registrar to the Company
Telephone number +44 (0)370 707 4040
Email: info@computershare.co.je
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END
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