Alternative Income REIT PLC NAV, Trading Update and Dividend Declaration (4435E)

TIDMAIRE

RNS Number : 4435E

Alternative Income REIT PLC

05 November 2020

5 November 2020

Alternative Income REIT PLC

(the " Company " or " Group ")

DIVID DECLARATION

UPDATE ON NAV, TRADING AND THE BUSINESS

The Board of Directors of Alternative Income REIT PLC (ticker: AIRE), the owner of a diversified portfolio of UK commercial property assets predominantly let on long leases, today provides a trading and business update and declares an interim dividend for the quarter ended 30 September 2020 .

Steve Smith, Chairman of Alternative Income REIT plc, commented:

"The interim dividend of 1.25 pence per share that we have declared today is consistent with the Company's annual dividend of 5.0 pence per share paid for the year ended 30 June 2020, reflecting the Company's strong collection of its rent for the current quarter to December 2020 and strong cash flow. The Board continues to target a resumption of a fully covered annual dividend of 5.5 pence per share(1) , all else being equal, by September 2022.

The Board firmly believes that the resilience of the Company's diversified portfolio, that remains fully let , its resilient balance sheet and robust rent collection together with the recent significant reduction in the Group's overhead leaves the Group well positioned to pursue its proposed enhanced strategy, supported by its accomplished Investment Adviser, M7 Real Estate Limited, in rapidly changing market conditions suited to a more active and responsive approach.

The Board believes that with additional investment it can deliver to its shareholders both strong performance and a secure and progressive dividend and that the proposed cash tender offer from Glenstone for up to 25% of the Company's shares significantly undervalues the Company."

Dividend declaration and robust rent collection

The Board declares today an interim dividend of 1.25 pence per share for the quarter ended 30 September 2020 . The dividend will be paid on 30 November 2020 to shareholders on the register on 13 November 2020. The ex-dividend date will be 12 November 2020. The dividend will be a Property Income Distribution.

This dividend is consistent with the Company's aggregate dividends of 5.0 pence per share paid in respect of the year ended 30 June 2020.

As announced on 16 October 2020, the Board remains pleased to have reached agreements with all of the Group's tenants and for the quarter ending December 2020, if all agreements are honoured, the Group will collect 100% of its rent for the current quarter. Furthermore, the Group has continued to collect its rent arrears with agreements now in place to collect 100% of the rents outstanding for the March and June 2020 quarter days by October 2021.

Resilient Earnings Per Share, Valuation and Net Asset Value

Unaudited EPRA earnings per share ("EPRA EPS") for the quarter ended 30 September 2020, which includes the profit realised in late July 2020 from the disposal of the Wet 'n' Wild Water Park increased by 65.8% to 2.120 pence per share, representing dividend cover for the quarter of 169.6% (quarter to 30 June 2020: 1.279 pence per share, 89.7% cover).

The EPRA EPS includes accruals to reflect the minimum contracted uplifts under the Group's leases, the spreading of rent free periods, an adjustment for the amortisation of loan arrangement fees and provision for impairment of trade receivables. Excluding these accruals from the Group's EPRA EPS, the unaudited adjusted cash earnings were 1.922 pence per share, reflecting 153.8% cash dividend cover for the quarter (quarter ended 30 June 2020: 1.079 pence per share, 75.7% cash dividend cover). If the profit from the disposal of Wet 'n' Wild is excluded, then the adjusted earnings were 1.394 pence/share, reflecting dividend cover of 111.5%.

As at 30 September 2020, the independent fair valuation undertaken by Knight Frank of the Company's property portfolio was GBP101.76 million (30 June 2020: GBP101.91 million, excluding GBP2.85 million for Wet n Wild sold in July 2020), reflecting a 0.15% reduction, and the net initial yield on the portfolio was 5.76% (30 June 2020: 5.77%).

The Company's unaudited net asset value ("NAV") was GBP67.52 million, 83.882 pence per share as at 30 September 2020, (30 June 2020: GBP67.29 million, 83.586 pence per share). See the table below for NAV movement during the quarter.

Analysis of Movement in NAV

 
 Movement during the quarter                Pence per share   GBP million 
 NAV at 30 June 2020                                 83.586        67.287 
                                           ----------------  ------------ 
 Valuation change in property portfolio*            (0.399)       (0.321) 
                                           ----------------  ------------ 
 Income earned for the period                         2.226         1.792 
                                           ----------------  ------------ 
 Expenses for the period                            (0.193)       (0.156) 
                                           ----------------  ------------ 
 Reversal of impairment of trade 
  receivables                                         0.145         0.117 
                                           ----------------  ------------ 
 Net finance costs for the period                   (0.443)       (0.357) 
                                           ----------------  ------------ 
 Net gain on sale of Wet n Wild, 
  North Shield                                        0.385         0.309 
                                           ----------------  ------------ 
 Interim dividend paid in respect 
  of the quarter ended 30 June 2020                 (1.425)       (1.147) 
                                           ----------------  ------------ 
 NAV at 30 September 2020                            83.882        67.524 
                                           ----------------  ------------ 
 

* The quarter's reduction in the independent fair valuation of GBP0.15 million was further reduced by GBP0.17 million to reflect the minimum contracted rental uplifts and the rent frees in the quarter, resulting in a net valuation change in the quarter of GBP0.32 million.

Proposed amendment of Investment Policy

The Company is tabling an ordinary resolution at its AGM on Thursday 26 November 2020 to seek permission from shareholders to amend the Company's Investment Policy. The principal changes to the Investment Policy include a reduction in the minimum WAULT of the portfolio to 12 years, the removal of the requirement for leases representing 85% of gross passing rent to be linked to inflation and the removal of the restrictions relating to permitted sectors, including the differentiation between traditional and non-traditional sectors.

The Board believes that with the implementation of the proposed amendments to the investment policy and strategy set out in the Annual Report and Notice of AGM, the Group has the potential to outperform from what is now a relatively strong base.

Response to proposed tender offer from Glenstone Property PLC

As announced on 27 October 2020, the Board believes that Glenstone's proposed cash Tender Offer price of 59.25 pence per share for up to 20,125,000 ordinary shares in AIRE, representing up to 25.0% of AIRE's issued share capital, significantly undervalues the Company, representing a discount of 29.3% to the 30 September 2020 net asset value per share of 83.882 pence, underpinned by the robust rent collections.

Diversified portfolio, fully let predominantly on long, index-linked, leases

Following the sale of the Wet 'n' Wild Water Park announced on 3 August 2020, the Group owns a diversified portfolio of UK commercial property assets that are fully let, with a w eighted average unexpired lease term ("WAULT") of 19.2 years (30 June 2020: 19.5 years) to the earlier of break and expiry and 21.4 years (30 June 2020: 21.6 years) to expiry as at 30 September 2020.

88 % of the portfolio's income stream is reviewed periodically, on an upward only basis, in line with inflation; with 64 % and 24 % of the portfolio indexed (subject to floors and caps) to RPI and CPI respectively and, except for the rent for 2021 from Travelodge (as a result of the terms of Travelodge's Company V oluntary A rrangement (" CVA ") as announced by the Company on 13 July 2020 ) , none of the rents are pegged to the tenant's turnover or trading volumes .

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the European Union and incorporates both the Group's property portfolio individually valued on a 'Red Book' valuation basis as at 30 September 2020 and net income for the quarter, but does not include a provision for the interim dividend (see above) for the quarter ended 30 September 2020.

The income earned for the period includes an accrual for the minimum contractual uplifts defined within the index linked leases. In the event that inflation is greater than these minimum contractual uplifts, the actual income will be greater than that currently accrued.

ENQUIRIES

 
 Alternative Income REIT PLC 
 Steve Smith - Chairman                   via Maitland/AMO below 
 
 M7 Real Estate Ltd 
  Richard Croft                           [phone] 
 
 Panmure Gordon (UK) Limited              [phone] 
 Alex Collins 
 Tom Scrivens 
 Chloe Ponsonby 
 
 Maitland/AMO (Communications Adviser)    [phone] 
 James Benjamin                           [e-mail] 
 

The Company's LEI is 213800MPBIJS12Q88F71.

Further information on Alternative Income REIT plc is available at www.alternativeincomereit.com (2)

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. Majority owned by its senior managers, it has over 200 employees in 14 countries across Europe. The team manages over 835 properties with a value of circa EUR5.1 billion.

1 This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indicator of the Company's expected or actual results.

2 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.

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November 05, 2020 12:44 ET (17:44 GMT)