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ARTL Alpha Real Trust Limited

122.50
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Alpha Real Trust Limited LSE:ARTL London Ordinary Share GB00B13VDP26 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 122.50 115.00 130.00 122.50 122.50 122.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Real Estate Investment Trust 6.65M 631k 0.0107 114.49 72.17M

Alpha Real Trust Limited Trading Update (1920H)

09/03/2018 7:00am

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TIDMARTL

RNS Number : 1920H

Alpha Real Trust Limited

09 March 2018

9 March 2018

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 2017 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 focuses on high-yielding property, infrastructure and asset backed debt and equity investments in Western Europe that are capable of delivering strong risk adjusted cash flows, including build-to-rent investments. The current portfolio mix, excluding sundry assets/liabilities, is as follows:

 
 High yielding debt:            4.7% 
 High yielding equity 
  in property investments:     21.3% 
 Ground rent investments:      24.6% 
 Other investments:            18.7% 
 Build-to-rent investments:    25.0% 
 Cash:                          5.7% 
 

The Company's Investment Manager is Alpha Real Capital LLP ("ARC").

Highlights

   --      NAV per ordinary and A share 168.4p: 31 December 2017 (167.3p: 30 September 2017) 

-- Basic earnings for the nine month period ended 31 December 2017 of 14.4p per ordinary share and of 18.9p per A share (13.3p per ordinary share and of 17.7p per A share for the six months ended 30 September 2017)

-- Adjusted earnings for the nine month period ended 31 December 2017 of 3.4p per ordinary and A share (3.0p per ordinary and A share for the six months ended 30 September 2017)

   --      Declaration of a quarterly dividend of 0.6p per share, expected to be paid on 6 April 2018 

-- Balanced portfolio: continued capital allocation to a mix of investments which balance income returns while creating potential for capital value growth, including a growing build-to-rent exposure

-- Mezzanine loan investment: four loans totalling GBP3.8 million were completed in the quarter ending 31 December 2017 with a further three loans totalling GBP5.2 million funded post period end

-- Data centre Frankfurt: following planning consent being secured, tendering for pre-development works is underway with a view to having a development-ready site

-- H2O shopping centre Madrid: record visitor numbers recorded in 2017, increasing 3.9% over 2016, with like for like tenant sales increasing 6.4% over the year.

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. The current portfolio mix, as at 31 December 2017 is outlined on the table below.

Portfolio overview as at 31 December 2017

 
Investment name 
Investment        Investment       Income     Investment  Property          Investment         % of 
 type              value            return     location   type /             notes              portfolio(1) 
                                    p.a.                  underlying 
                                                          security 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
High yielding debt (4.7%) 
---------------------------------------------------------------------------------------------  ------------- 
Mezzanine 
 Portfolio 
                                                          Diversified 
                                                          loan portfolio 
                                                          focussed 
                                       14.0%              on real estate 
Mezzanine                 GBP5.3m   to 16.9%              investments       Secured mezzanine 
 loans                        (2)        (3)      UK      and developments   facilities                 4.7% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
High yielding equity in property investments 
 (21.3%) 
---------------------------------------------------------------------------------------------  ------------- 
H2O shopping centre 
                                                          High-yield, 
                                                           dominant 
                                                           Madrid shopping 
                                                           centre and       30% shareholding; 
                                                           separate          7 year term 
Indirect                 GBP16.7m       6.9%               development       bank finance 
 property              (EUR18.8m)        (4)    Spain      site              facility                  14.6% 
Active UK Real Estate Fund plc 
                                                                            27.6% of 
                                                          High-yield         ordinary 
                                                           commercial        shares in 
Equity                   GBP6.0m         n/a      UK       portfolio         fund                       5.3% 
----------------  --------------  ----------  ----------  ----------------  -----------------  ------------- 
Cambourne Business Park 
                                                          High-yield        Medium term 
                                                           business          moderately 
Indirect                               11.0%               park located      geared bank 
 property                 GBP1.6m        (4)          UK   in Cambridge      finance facility           1.4% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Ground rent investments (24.6%) 
---------------------------------------------------------------------------------------------  ------------- 
Freehold Income Authorised Fund 
                                                          Highly defensive 
Ground                                  3.7%              income; freehold  No gearing; 
 rent fund               GBP28.0m        (5)      UK      ground rents      monthly liquidity          24.6% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Build-to-rent investments (25.0%) 
---------------------------------------------------------------------------------------------  ------------- 
Unity and Armouries, Birmingham 
                                                                            Planning 
                                                                             consent for 
                                                          Central            90,000 square 
                                                          Birmingham         feet / 162 
                                                          residential        units plus 
PRS development           GBP3.9m        n/a      UK      build-to-rent      commercial                 3.4% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Monk Bridge, Leeds 
                                                                            Planning 
                                                                             consent for 
                                                                             205,129 square 
                                                                             feet / 307 
                                                                             units plus 
                                                                             commercial 
 
                                                                             Outline consent 
                                                                             for further 
                                                                             193,071 square 
                                                          Central Leeds      feet / 300 
                                                           residential       units plus 
PRS development           GBP8.6m        n/a      UK       build-to-rent     commercial                 7.6% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Data centre, 
 Frankfurt 
                                                                            Site with 
                                                                             planning consent 
                                                                             for 40,338 
                                                                             square metre 
                                                          Industrial         data centre 
                                                           site with         and commitment 
                                                           secured consent   for 35 MVA 
Direct                   GBP16.0m                          for data          dual feed 
 property              (EUR18.0m)        n/a   Germany     centre use        power supply              14.0% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Other investments (18.7%) 
---------------------------------------------------------------------------------------------  ------------- 
Galaxia 
                                                                            Legal process 
                                                                             underway 
                                                                             to recover 
                                                          Development        investment 
                          GBP5.2m                          site located      by enforcing 
Indirect                     (INR                          in NOIDA,         arbitration 
 property                   450m)        n/a    India      Delhi, NCR        award                      4.6% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Indirect asset backed investment 
                                                          Indirect 
                                                           investment       Short term 
                                                           in diversified    investment 
                                                           real estate       in fund with 
Elm Trading                                                and renewables    low external 
 Limited                 GBP15.3m       5.0%      UK       portfolio         gearing                   13.3% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Europip plc 
                                                          Awaiting 
                                                          final             47% of ordinary 
Indirect                  GBP0.4m                         shareholder        shares in 
 equity                 (EUR0.5m)        n/a     N/A      distribution       fund                       0.4% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Healthcare & Leisure Property Limited 
Indirect                                                  Leisure property  No external 
 property                 GBP0.4m        n/a      UK       fund              gearing                    0.4% 
----------------  ---------------  ---------  ----------  ----------------  -----------------  ------------- 
Cash and short term investments (5.7%) 
---------------------------------------------------------------------------------------------  ------------- 
                                                          Current or 
Cash (Company                                              'on call' 
 only)                    GBP6.5m       0.1%      UK       accounts                                     5.7% 
-----------------  --------------  ---------  ----------  ----------------  -----------------  ------------- 
 
 

(1) Percentage share shown based on NAV excluding the company's sundry assets/liabilities

(2) Including accrued coupon at the balance sheet date

(3) Annual coupon

(4) Yield on equity over 12 months to 31 December 2017

(5) 12 month income return; post tax

ART has a diversified portfolio of asset backed investments spread across different sectors and asset types. The Company's portfolio includes income producing assets, build-to-rent projects, secured debt and mezzanine loan investments. Each investment offers a different risk-return profile however the overall portfolio seeks to provide a balance of stable income returns and scope for capital growth.

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 creates the opportunity for capital allocation to new investments.

Further to the half year results announcement on 17 November 2017, the following are key investment updates.

High yielding equity in property investments

ART continues to remain focused on investments that offer the potential to deliver attractive risk-adjusted returns by way of value enhancement through active asset management, improvement of net rental income, selective deployment of capital expenditure and the ability to undertake strategic sales when the achievable price is accretive to returns.

H2O shopping centre, 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 asset management initiatives implemented during ART's ownership. The centre attracted record visitor numbers in the 2017 calendar, with an increase of 3.9% above 2016. Like-for-like sales performance from tenants increased strongly by 6.4% over the same period.

Mercadona supermarket, one of H2O's principal anchors, has undertaken a complete refurbishment of its store during February 2018. This major investment after only 7 years in occupation is a positive sign of the tenant's commitment to the shopping centre and provides H2O's customers with an enhanced shopping experience.

High yielding debt

ART continues to augment and diversify its portfolio of secured real estate loan and mezzanine loan investments. These loans are typically secured on real estate investment and development assets with high risk-adjusted income returns.

During the quarter ended 31 December 2017, a further four loans were completed for GBP3.8 million; the total loan investment at period end is GBP5.3 million. Post period end, a further three loans totalling GBP5.2 million were funded bringing the total secured debt portfolio to GBP10.5 million.

Further loan investments are continually being evaluated. Each loan will typically have a two year term and a maximum 75.0% loan to value ratio and is targeted to generate a double digit income return. Repayment proceeds will be rotated into new loans.

Ground rent investments

Freehold Income Authorised Fund ("FIAF")

ART invests in a fund which holds a diversified portfolio of UK residential property freehold ground rents with a view to achieving steady and predictable returns, a consistent income stream and prospects for growth. The Company has invested GBP28.0 million as at 31 December 2017 in FIAF, an open-ended fund that invests in UK freehold ground rents with a net asset value of GBP307.4 million as at 31 December 2017.

The following highlights were reported in the FIAF fact sheet as at 31 December 2017 (published in January 2018):

-- FIAF owns over 65,000 freeholds with a gross annual ground rent income of circa GBP8.7 million.

-- 85% of its freeholds have a form of inflation protection through periodic uplifts linked to Retail Price Index, property values or fixed uplifts.

-- FIAF's assets are defensive in nature, very long dated (with an average lease length in excess of 100 years).

The total return on ART's investment in FIAF was 8.9% (annualised post tax) for the 12 months ending 31 December 2017.

Build-to-rent investments

ART has achieved the significant milestone of securing planning consent for each of its build-to-rent investments. These investments offer the opportunity to create a higher yield on cost than is available from purchasing existing built investments of the same quality. The investments also offer scope for capital growth as the sites mature or planning is enhanced.

Build-to-rent investments provide the Company with flexibility to add value by either constructing the development, funded with either equity capital, joint venture capital or debt, and subsequently holding the completed assets as investments; or, alternatively, forward selling all or some of the developed property.

Residential Private Rented Sector ("PRS")

The Company's investments in the residential Private Rented Sector ("PRS") in central Leeds and central Birmingham are opportunities that were secured early in the build-to-rent process that offer potential to create an initial capital uplift in value through enhanced planning and the opportunity to develop and let in order to achieve resilient equity income returns at an attractive yield on cost.

Planning consent for both sites has been secured. The Birmingham project has implemented non-material amendments to its planning consent for 162 residential units and ground floor commercial space. The Leeds project has detailed planning consent for 307 residential units (which the Company intends to develop for PRS) plus commercial development within the adjacent existing railway arches and outline planning consent for a further 350 residential units, for which detailed planning consent is now being advanced.

Preferred construction partners have been selected. The project design team continues to review the existing detailed planning consent for possible enhancements to meet best in class PRS requirements and a value engineering process is underway to identify the most efficient and effective construction processes and potential cost savings.

The Company estimates that up to GBP23.7 million could be invested to undertake the development of its PRS sites alongside debt financing. The Company is exploring ways to optimise the returns from its PRS investments and is exploring joint development opportunities with potential partners.

Data centre investment

ART owns an industrial site in Frankfurt, Germany, for which it has secured detailed planning consent for a five-story data centre extending to 40,338 square metres and a commitment from the local utility provider to install a 35 MVA a dual feed power supply. The power supply will be installed, and funded by ART, on a phased basis over the coming three years, synchronised with local electricity substation and cable route upgrades.

ART is in the process of arranging tenders for the construction of an electricity receptor building on the site and pre-identified ground preparation works. ART's total investment into the data centre project is estimated to be approximately EUR28 million (GBP24.7 million).

Active marketing of the project to potential data centre occupiers is underway.

Other investments

Galaxia, India

On 2 February 2011, ART recommenced arbitration proceedings against its development partner Logix Group ("Logix") in order to protect its Galaxia investment, an 11.2 acre Special Economic Zone, in NOIDA, the National Capital Region, 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 450.0 million (equivalent to GBP5.2 million using the period end exchange rate as at 31 December 2017) 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 have since appealed the dismissal to the Supreme Court of India. The Supreme Court admitted the appeal and ordered Logix to deposit INR 200 million (GBP2.3 million) with the court, which is held on deposit to partially secure ART's claim. The Supreme Court also upheld the earlier order of the Delhi High Court attaching the residential property of Logix directors to secure ART's claim. The next hearing is scheduled for March 2018.

The sum awarded to the Company has now accrued to approximately GBP14.5 million at the period end exchange rate. ART continues to hold the indirect investment at INR 450.0 million (GBP5.2 million) in the accounts due to uncertainty over timing and final value.

Share buybacks

On 12 December 2017, the Company published a circular giving notice of an Extraordinary General Meeting on 5 January 2018. 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 4 January 2019. The shareholders approved the proposal.

On 24 January 2018, 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 24 January 2018 and share repurchases may be undertaken until the earlier of the maximum amount being repurchased and 4 January 2019. The maximum amount of money allocated for the share repurchases is GBP1 million.

During the quarter, the Company made no share buybacks.

Dividend

The Board announces the next dividend of 0.6p per share for the quarter ended 31 December 2017 which is expected to be paid on 6 April 2018 (ex dividend date 22 March 2018 and record date 23 March 2018).

Net asset value ('NAV')

As at 31 December 2017, the unaudited NAV per ordinary share of the Company was 168.4p (30 September 2017: 167.3p).

The movement in NAV reflects the earnings of the Company less the dividend paid in the period.

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:EUR1.127 or GBP1:INR86.359, 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.

The Company currently focuses on high-yielding property, infrastructure and asset backed debt and equity investments in Western Europe that are capable of delivering strong risk adjusted cash flows, including an increasing focus on build to own investments. The Company will consider investments and assets that offer scope to generate long term income streams off a lower entry cost through development. This approach provides ART with the flexibility to take advantage of new investment opportunities where ART sees best value.

ART has achieved the significant milestone of securing planning consent for each of its build-to-rent investments. These investments offer the opportunity to create a higher yield on cost than is available from purchasing existing built investments of the same quality. During the development period, a greater proportion of the Company's total return is likely to come from capital growth rather than earnings until its build-to-rent investments become income producing.

During the period the Company has increased its mezzanine loan investment portfolio. New investment opportunities that are capable of delivering strong risk adjusted cash flows are being actively pursued. ART's active investment approach means that short term investment positions will be considered when accretive to overall returns.

The Company remains well positioned to continue to deliver attractive returns through investing, realising and re-investing its capital in asset backed investment opportunities.

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/Andrew Potts +44 (0) 207 886 2500

This information is provided by RNS

The company news service from the London Stock Exchange

END

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(END) Dow Jones Newswires

March 09, 2018 02:00 ET (07:00 GMT)

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