Thanks Nick, good summary
Hoddeson is indeed a concern. Mothballed for a year now. Comment in the last full year results that they are looking for a buyer. Represents c. 5% of annual rent and valued at £5m back then. Any idea the structure of that deal? Looks like it was a c. £80m investment presumably project financed. Looks like Mcquarrie were in there. Is the AIRE asset just the land? |
 What the report tells us beyond the NAV update
they got an 8.4% uplift off rent reviews undertaken over last 6mths and passing rent is up c14% (+0.9m) and with a 100% paid.
Further to @maikinbuks comment the 26% figure is leases due a review in six months for context over next 12mths 63% of the Group's income will be reviewed (45% annual index-linked, 16% periodic index-linked 5 yearly reviews 2% on fixed uplifts).
The lease due up this year (Pets at Home) has been renewed and the next event is a break in 04/25.
Inv mgt fee will be on min payment now that NAV has fallen although exactly what we get for 360k/yr with a company that has very little to worry about from year to year you could get from a decent director with property experience imv.
Anyhow divi is well covered at cash level and would expect the final to have a top up from last years 1.6p
As ever here risk is one tenant going under will leave them wide open and they are already at risk with Hoddeston Energy having mothballed its plant and un likely to be sold as Energy from Waste is over capacity across most of UK.
In the long run loan has 30mths to run so i guess BoD have to be mindful that with interest costs likely double at renewal how far do they let divi rise?
Happy holder but alive to the risks. |
Councils! Yes - a slow-burning scandal waiting to break there. |
SpectoAcc r.e. worse than benchmark: pension funds, private investors and councils. |
I agree, flowery language and emphasis of the good news is something regulators should look at.
My issue is whether the yield is real and sustainable. I am in no rush to realise a capital gain. Capped inflation rises are a positive in that regard |
"..Benefits from index-linked rent reviews.." is a phrase I find intensely annoying and misleading.
Inflation 14%, max rise all too often 4%. 4% isn't nothing, but nor is it index-linked. Can recall only one uncapped RPI tenancy at AIRE, a small one, but AFAIK the rest are capped at 3% or 4%, and often CPI not RPI.
As an aside, every REIT I follow trumpets their valuation fall as being less than the benchmark - which poor sod is stuck with the worse-than-benchmark falls? |
Delivered what they promised in 2022, 26% of leases subject to revue in 2023. Fully covered dividend providing the rent all gets paid. Its a risky play but if you took the dividends for the next three years and the discount halved thats a very decent return |
Half year results to 31 Dec out this morning
"During the period under review the real estate sector as a whole has seen an upward movement in property yields, which therefore results in a downward movement in valuations. The Company's portfolio was not immune to this adverse movement and for the half year ended 31 December 2022 the Group's net asset value showed a fall of £9.7 million to £67.9 million (30 June 2022: £77.6 million) [equivalent to 84.34pps]... That said, the portfolio has shown some resilience as the valuation fall has, in the main part, been materially lower than the benchmark property indices and the Company's peer group.
"The half year results reflect the resilience of the Company's portfolio, and the Company remains on track to deliver the Board's previously announced target annual dividend of at least 5.7 pence per share1 ("pps"), which is expected to be fully covered.
Whilst not immune from the headwinds affecting the UK and wider global economy at the present time, 96% of the Group's portfolio benefits from index-linked rent reviews. Combining this with a strong balance sheet, modest overheads and low fixed borrowing costs until 2025, helps ensure the Company is well positioned to ride-out successfully the current economic storm and to continue to deliver attractive, secure and progressive income to our shareholders." |
Doh, thanks @Marko60, I should have spotted that. |
It's because the quarterly dividends are not of equal size 1.375p against 1.6p and therefore the dividend cover changes accordingly. |
Closing the stable door not only after the horse has bolted, but after the horse has died of old age, and the stable almost fallen into ruin.
Ironically, of course, the save-us-from-Kwarteng QE actually worked. Go BoE. |
On the subject of QE/QT
"The cross-party committee of MPs will examine the impact quantitative tightening is likely to have on inflation, the economy, households, the financial sector, inflation and growth, while also considering the role quantitative easing may have had in the "outbreak of double-digit inflation"."
Well, that's nice to know given QE started about 15 years ago, that now we are going to take a look to see if it's value for money and whether it has an impact on inflation |
If I was a holder, I'd be picking up the phone.
I note a similar jump qtr-on-qtr in the corresponding RNS last year - are some tenants paying half-yearly, or annually? They really should say if so - they've made a song & dance about the leap in cover, without explaining if it's simply a timing issue. |
"AIRE now covering the dividend very nicely at 136% could bode well for a top up later in the year as long tenants stick around"
Anyone else bemused by that figure? The 136%.
This was from the August 3rd annoucment:
"The Adjusted EPS was 1.36 p for the quarter giving a total of 5.55 pps for the year (2021: 5.07 pps). The dividend cover for the year was 100.9%, which compares favourably with the prior year's cover of 99%."
That's quite a leap in cover - anyone care to hazard an explanation? If the cover were to stay at that level - I don't think it will - then we don't need to worry about PureGym or one or two other tenants failing to pay/going down the CVA route. |
They have to continue QT, & there's £800bn of it.
That there's so much demand for it is a surprise to me, but also shows how far we/BoE have to go to drain the system of 14 years of ZIRP. |
@specto actually 26.3% but very little comes up for redemption in the short term Mar24, Jul 24 then Mar26 mind you the two in 24 already upto 45B on the 22B originally issued so will be well north of 50B by redemption. So whilst DMO still getting gilts away (got 3B today on a green gilt for 3.4%) the level of issuance is just climbing year on year so even if BoE starts cutting rates you have to wonder if the gilt rate will drop back so do will BoE have to revert QE mode again although again there selling back 650m a week at c 3.4% without issue currently so who knows. |
Indeed @nicrkl, & the harsh truth is that 25% of our (the UK's) debt is index-linked! I'd like to know which fool thought that a good idea - is going to make the "inflating it away" task very much harder. |
@stemis on PureGym but i would be surprised a tenant would enter into an arrangement that was like that but get your analysis. Also PureGym are one that would use a CVA at a moments notice and as specto says they don't have much in the tank for tenant losses.
@specto the hidden truth is they need some inflation now to manage the debt problem although they will never say it. |
@SteMiS - Interesting, I remember that debate, & that we weren't sure at the time, thanks.
It doesn't change my view tho - particularly not since I reckon c.4-6% is going to be the new normal going forwards. I don't believe the BoE can tighten enough to choke out inflation, nor do they seem to want to (housing market).
But makes 5yr uplifts better than annual, except for the fact that they've had to wait for the extra? |
Don't get me started on "inflation-protected" @nickrl ;)
There's an interesting piece of information hidden in the announcement about how inflation protection works. Sometime ago I posted
-----------------------------------
SteMiS 5 May '22 - 11:04 - 718 of 788 Edit
In your example (but taking annual), if the 7% came first, they've lost the extra permanently. Eg 100 - 107 - 110.21 - 111.3 for compound inflation at 7%, 3%, 1%, with a 1% collar. On an AIRE cap at 3.5%, that's 100 - 103.5 - 106.6 - 107.6.
Depends whether the cap works on an annual basis or a cumulative i.e. is it calculated taking each year separately or, on a 3 year rent review taking the example above, is it 1.035^3 (i.e 10.9%) over the period. I don't know the answer to that.
------------------------------------
The results disclose a 5 yearly RPI rent review of the Pure Gym , London of 21.7%. According to their web site the property is subject to 5 yearly rent uplifts linked to RPI – capped at 4% pa, 1% pa collar. 21.7% is exactly 4% pa compounded. There have certainly been years in the last 5 in which RPI was below 4% which shows that, at least in the case of Pure Gym, the cap works on a cumulative basis. Which means that current high inflation will be protected, at least in part, by carry forward of 'under used' protection from earlier years. |
Don't get me started on "inflation-protected" @nickrl ;)
Personally I think they'll lose a tenant again, eventually, & the discount's not wide enough to account for that.
But yes, if divi covered with some to spare, it's a plus. And as they (all) say, they're outperforming the property index. |
AIRE now covering the dividend very nicely at 136% could bode well for a top up later in the year as long tenants stick around. Their inflation linked portfolio actually only gave 3.4% so you could feel hard done by when they promote it as "Resilient portfolio providing secure, inflation-linked income". Reality is majority is capped at 4% but i knew that before buying. |
The REITs are a mixed bag atm - some well above recent lows, some testing them, some down through, with seemingly no rhyme nor reason for the discrepancy (not sub-sector, discount, or gearing).
Personally think the economy's in trouble and it'll only take one of AIRE's tenants to go pop, Meridian-style, for a big drop. But should that not happen, the divi looks reasonably secure - good luck.
Damning it with faint praise, & not long. |
Never expected to get back in here. Brought a modest amount at 66.55p. 8.56% dividend yield and 31% discount to nav. Debt fixed at 3.19% next 3 years. Nice addition to my long-term income portfolio. |
Thank you nick I was just looking for that read across to retail parks. |
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