Alpha Real Share Discussion Threads

[sharpshare] 03/3/2015 16:04

"During November 2014, AURE refinanced its borrowings adding a second tranche to its bank debt and reducing the overall cost of the debt.

As part of a larger refinancing of AURE's loan facilities, in which £2.3 million was repaid to ART, ART provided a new mezzanine loan facility of £10.3 million for a two year term expiring November 2016. The loan earns a coupon of 9% per annum plus an upfront and exit fee and an extension fee if the loan is not repaid within the first year. The loan was amortised during the quarter to £9.6 million."

So around 10%+ return on loan asset. Very nice.

[scburbs] 03/3/2015 15:58

Thanks Sharpshare.

The LTV on the AURE loan is now in the c.40-60% tranche at 9% interest rate (plus fees) which looks like a great investment for ARTL with little downside risk. Probably one that should be valued at a slight premium (not too much as it is only a 2 year loan), but certainly not at a discount.

[sharpshare] 03/3/2015 15:56

Ground rent fund doing well.
Makes up about 22p in NAV for ARTL.

[sharpshare] 03/3/2015 15:45

Some key renters at H20 shopping centre Madrid

Net investment worth about 19p in NAV to ARTL.
Gross could be worth around 93p in NAV to ARTL?
(debt for H20 non recourse to ARTL)
So nice upside option for ARTL.

[sharpshare] 03/3/2015 15:02

Active UK Real Estate Fund "AURE" Q3 2014 released.


"As a result of various value-add initiatives and leasing activity, the portfolio valuation has increased from £43.7m as at 30 June 2014 to £45.2m as at 30 September 2014."

"A sale of a vacant industrial unit at 15% above its pro rata valuation was completed during the period. The sale of this vacant unit has helped reduce the overall void level and irrecoverable costs within the portfolio."

So total property value up 3.43% in the quarter.
This should tend to reduce the LTV on the £9.6m mezzanine loan from ARTL to AURE.

Recent news shows that NAV for ARTL is increasing AND quality of assets is increasing.
NAV at 31 Dec 2014 stated at 109.1p (before potential uplift from recent arbitration award which could add another £4.6m or 6.5p making NAV around 115.6p)

Current ARTL share price 69.2p bid to 70.84p offer.
Discount to 31 Dec 2014 NAV of 109.1p of around 35%.

Many property companies are trading at a premium to NAV so ARTL could rerate upwards.

Current quarterly dividend of .52p making 2.08p per year giving a dividend yield of around 3%. Based on the income expected in the latest trading update it appears that the dividend could be doubled and still be covered by earnings.

The flow of A shares into ords seems to have slowed to a dribble, most have now converted. With this tap reducing the share price may respond favourably to ongoing positive news.

[cwa1] 03/3/2015 09:31

Citywire article:-



Snip from it:-

The decisive action taken by the board helped preserve capital and, remarkably I think, Alpha Real’s net asset value has never really dipped below its value at launch and now, post the Galaxia arbitration decision, is probably in excess of 115p.

It is hard to second guess the reason for the wide discount but one might be liquidity as the market capitalisation is fairly small (a function of the discount) and parties associated with the manager hold a fair chunk.

The company is on the Specialist Funds Market, which restricts the audience for it a little. The presence of the A shares might be a further complication – there are about 10.4 million of these still outstanding but this is gradually shrinking as A shareholders convert to ordinary shares.

In my opinion the fees are too high; Alpha Real is one of very few trusts with a 'two and 20' hedge fund level of charges. However, the only controversial thing I can see in the structure is the notice period for the asset manager – it has a contract that runs until December 2022.

It seems that many of these issues could be overcome if the remainder of the A shares converted and the company relisted on the main market, trimming its fees at the same time.

It might then even become interesting enough to attract sufficient investors to enable it to expand.

[sharpshare] 01/3/2015 10:02

For European Properties see HSTN trading at a premium to NAV
For Ground Rents see GRIO trading at a premium to NAV
For Real Estate Loans see RECI trading at a premium to NAV
For UK Properties see SREI trading at a premium to NAV
For all 4 of these categories see ARTL trading at a massive big discount to NAV.

[cwa1] 27/2/2015 16:00

Will be interesting to see how easily they can pick up stock IF they ever do go ahead with the share buyback.

[bisiboy] 27/2/2015 09:23

good to see this going the right way.

[tiltonboy] 27/2/2015 09:14

scb,

Indeed, that was how I picked up my stock. Wait for the announcement, and then bid cheaply. Actually got offered a decent number at 54p, and turned it down...d'oh...

[scburbs] 27/2/2015 08:57

Good to see this one starting to move from unfathomably cheap to ridiculously cheap.

On the liquidity front one thing that worked for me was keeping an eye on the admission to trading announcements re: conversion of A shares as some of those converting may be doing so in order to sell. I think that may be why this was available so cheaply after 1.3m converted on 26 August last year and provided reasonable liquidity for buyers like me (albeit into a falling price at that time).

[cwa1] 27/2/2015 08:31

Agreed tilts, liquidity is certainly an issue with this one, especially when trying to buy(or sell) a few on the "wrong" day!

[tiltonboy] 27/2/2015 08:26

bb2,

It was a response to badtime' comment about moving on few trades.

[battlebus2] 27/2/2015 08:14

Stark discount to NAV is more an issue than liquidity and with the dividend why would you worry.

[tiltonboy] 26/2/2015 17:22

Liquidity is an issue.

[badtime] 26/2/2015 16:53

Seems to move on very few trades

[battlebus2] 26/2/2015 16:13

I've added to my small holding here, the discount gap has to close imv..25% discount is around 80p so i'm in agreement with you langland.

[langland] 25/2/2015 09:07

No real resistance till we reach 77/78.

[badtime] 24/2/2015 23:25

76% discount isn't right based on those figures

[glasshalfull] 24/2/2015 21:48

Agree scburbs...now one of my larger holdings too. Can't fathom why they're trading at such a steep discount still.

Noticed Citywire published the undernoted article earlier today.

@Glasshalfull1: ARTL (Alpha Real Trust) - NAV 109p vs shareprice 61.75p ... 43% discount. This article concurs + 4% div yield #TMFPP


Regards
GHF

EDIT - Fat finger on calculator....tweet corrected. Thanks badtime

[scburbs] 18/2/2015 07:48

Spanish retail increasingly attractive to investors.

"The Spanish shopping experience is getting a multibillion-dollar makeover as the nation’s economy improves and foreign investment flows in.

...

In all, investment in retail real estate totaled €3.34 billion ($3.78 billion) in 2014, nearly triple the amount of the previous year and topping the record of €3.1 billion in 2006, according to property consultant JLL, formerly known as Jones Lang LaSalle. At least 67% of investments came from outside Spain. There was more investment in retail than in any other class of commercial real estate over the past year, according to JLL."

hxxp://www.wsj.com/articles/recovery-has-investors-stocking-up-on-spanish-malls-1423594281

[scburbs] 13/2/2015 09:00

Looks like it is just do-able. Property worth c. £65m with c. £55m debt (rough numbers for illustration only). If they could get new 5 year debt at similar interest rate to existing loan at 60% LTV that would be £39m then using £10.5m of their own cash would allow them to buy the loan at 10% discount. NAV enhancement 7-8p per share similar to tender offer, but preferable as it would put H2O on a secure footing.

Easier said than done (by a long way!).

[scburbs] 13/2/2015 08:41

Just for interest a £10m tender offer at 75p per share would take NAV to £1.17.

An even more interesting use for the cash might be to try and arrange a refinancing of H2O through buying back the debt at a discount (using ARTL cash plus a new lower leverage loan from a third party). Unfortunately Lone Star already acquired this loan in August 2014. However, I expect they got a large discount so it may be possible to get a moderate discount (e.g. 10%) from them so they can lock in some profit.

Press references suggest Lone Star bought Spanish loans (not sure if H2O in this portfolio) from Eurohypo at c.30-35% discount to par. A sale at a 10% discount within 1 year would provide a great IRR for Lone Star.

[cwa1] 13/2/2015 08:40

Thanks for the comments s. Quietly encouraging. Fingers crossed and all that stuff.