They'd need to start negotiations in around a year, with a view to having it sorted 12 months before Oct 2025 expiry. As @LG says, the future trajectory of rates may well appear downwards by then (I don't personally see any rate cuts in the next 12 months). |
A single loan due October 2025. Although nobody likes Getting boxed into a corner,There is no need to start loan renegotiations untillat least 2 years time. |
Good point Speccy. I don’t know the detail of AIRE’s borrowings, but any renewals due next year will be negotiating quite soon as these things are never left to the last minute. Pity really as I think that interest rates will be over the hill and on a downward trend by this time next year. Hopefully, this view will also be reflected in any deal struck. One thing is for certain, it won’t be 3.19%. As welcome as the extra dividend is, it makes me wonder why the company isn’t prioritising debt reduction to reduce LTV. |
Reads well this morning, albeit that:
"Whilst many commercial real estate portfolios, and businesses in general, are struggling with the impact of rising debt costs on their profitability, the Group benefits from the security of a fixed low rate of 3.19% until October 2025."
is a bit disingenuous (all the REITs trumpet their fixed-rate debt), and will soon come around (just over a year to start looking at it). |
Joined you all on Friday at 61.2P |
62.15p to buy, still some stock around - 62/64. |
Agree with @chucko1 (messaged you @CWA1). |
There is something to be said about the recession risk AIRE is more exposed to than some others. But at 60p combined with a higher probability of less severe rate rises combined with a more recent price of around 69p combined with a significant rally in many REITs represents an entirely different risk/reward - at least for a moderate holding. |
Punted a few at 61p. Don't tell Specto ;-) |
Specto - very true. API, EBOX, EPIC & SREI all yielding over 8%, without the tenant risk associated with AIRE. Nick details that risk in his above post. |
Wouldn't touch it with a bargepole personally, going into a recession. Albeit when the WetnWild closed down, AIRE still came out of it OK. Is possible the Meridians will be few & far between.
Still tho - there's care homes, gym, Hoddeston as @nickrl says. What's your reward for recession risk and a sub-scale portfolio, over & above what you can get elsewhere? |
Divi is covered at cash level currently and with most rent on some form of index linking albeit capped the NRI will grow slowly such that an increase of c3% pa should be deliverable. No immediate breaks/expiries to worry about for next 12mths but this one is exposed to one of it key tenants going under or pursuing some form of administration of course as we previously saw with Meriden metals We do know that Hoddeston Energy (333k) is a possible risk as the operation is suspended but thats been know for nearly a year but they are still paying.
One of my bigger holdings has dissuaded me from adding further but certainly tempted at these levels. |
Getting rather interesting down at this level: 64.0p-64.4p
64.4p provides a 22.9% discount & an 8.85% yield - now the highest yield in the sector, barring RGL of course. |
Despite some reasonable rental increases due to annual RPI reviews at Brough & Solihull (+3.5%), Dudley (+4%), Glasgow (+11.9%) and a 5 yearly RPI rent review of the Pure Gym, London (+21.7%) still only boosted contracted annual rent by 0.85% this quarter.
Anyhow more to come in next qtr with 11.5% of income to be reviewed (three annual index-linked rent reviews and two fixed uplift rent reviews) so if full occupancy is maintained (that is a big risk here due to small size)should allow 3-4% divi growth pa. |
 Simon Bennett, Non-Executive Chair of Alternative Income REIT plc, comments:
"The Board is pleased to declare a third interim dividend of 1.375pps for the quarter ended 31 March 2023, which is 110.9% covered by cash earnings. The dividend is in line with the Board's previously announced target of an annual dividend of at least 5.7pps for the financial year ending 30 June 2023, which is expected to be fully covered and remains subject to continued strong rent collection. The target annual dividend for 2023 represents a 3.6% increase on the 5.5pps annual dividend paid for the prior year.
In the second half of 2022, the UK commercial real estate sector suffered significant repricing as a result of the rapid increase in interest rates as the Bank of England reacted decisively to the sharp rise in inflation.
However, the first quarter of 2023 has been characterised by a more measured approach to valuations with the value of the Group's portfolio falling by just £0.7 million or 0.7% to £106.7 million (31 December 2022: £107.4 million) over the period.
As previously stated, the Group has avoided the worst of the property market downturn due to the composition of its portfolio which has seen consistently strong income growth, with 96% of the rental income inflation linked and 100% of rents due continuing to be collected, which is expected to continue for the March 2023 quarter. In addition, the low exposure to prime industrial and warehouse assets, which have seen the worst of the downward movement in valuations, has also helped to insulate the portfolio.
The wider economic outlook remains uncertain, however, the Group continues to benefit from a well-managed, diversified and resilient portfolio, which remains fully let. Furthermore, all of our debt is fixed at a historically low rate of 3.19% until October 2025. The Board therefore remains confident that the Company will achieve its dividend target for this financial year and that it is well positioned for the future." |
I fear I disagree. Inflation will definitely drop - how can it not, with those comparatives? - but the problem is beyond that.
To give an example - in April we all get hit with the RPI rises (some RPI plus) on our "fixed" mobile and broadband bills.
Wage rises are running at c.6% even before any settlement or the strikers.
PPI, and in particular food prices, are high and rising.
The BoE looks 2 years ahead (or so they claim). Rates are phenomenally negative but before long they'll be positive. Inflation is going to settle at 4-6% IMO, with a margin of error.
Barring a sustained and sustainable fall in energy prices - which is either Russia back into the fold, the end of climate change, or a huge recession - interest rates are going higher for longer. |
IF inflation does drop to OBR's forecast 2.9% by end of year then, with growth still weak, the outlook for interest rates should be back downwards which will see property values start to increase and long term interest costs constrained. This isn't 2008. |
Hugely fluffed by Ramper Tommo, but doubt it's shortable from here. Will phone around if the market starts dragging down REITs too. |
Opposite IMO, the IC have some great analysis, some good writers on the property side, but Tommo is & has always been Sir Rampalot. His following's sufficiently large to ensure his tips always go up, but he buries the bad ones pretty quickly.
As @Makinbuks points out, he has only a superficial knowledge of AIRE, but having tipped it previously, will likely keep doing so. |
yeah and hes messed me up getting a few more in the bag!! |
He always sounds so compelling! No mention of the concentrated risk of a small portfolio or the effect a single default might have. He has to write like that of course to sell magazines. The IC is in a dreadful mess editorially and he is their last remaining jewel |
Thommo tips AIRE in the IC:-
In the first half, operating profit of £3.5mn covered interest costs of £0.71mn almost five times, leaving surplus cash to reward shareholders with two quarterly dividends of 1.375p a share that were well covered by interim EPRA earnings per share (EPS) of 3.45p. The payout was up almost 6 per cent on the same period of 2021. The board forecast a fully covered payout of 5.7p a share for the 12 months to 30 June 2023, implying the shares offer a prospective dividend yield of 8.5 per cent and are rated on 10 times projected earnings.
Furthermore, a deep 20.5 per cent share price discount to NAV offers investors a ‘margin of safety’ to counter the risk of further falls in commercial property values. Interestingly, property consultancy CBRE made the case that commercial property prices are likely to stabilise this year in its UK Real estate market outlook for 2023, noting that the spread over gilt yields will be tighter than in the past decade. They also believe that income returns, rather than capital, will drive commercial real estate returns in the coming year. I concur.
So, although the share price is no higher than it was five months ago (‘Targeting high yield property bargains’, 3 October 2022), the improvement in the UK economic outlook and pullback in UK government gilt yields since the autumn greatly mitigate investment risk for income seekers looking to lock in a secure chunky dividend. Buy. |
@makinbuks the RNS refers to it as 47k sq ft but not clear if building or land although looking at Hoddeson Energy accounts they refer to lease commitments as to being for land. Anyhow plot is a bit awkward its next to a gas fired power station so shouldn't be too much issue turning it into warehousing although that would need AIRE to sell it on we don't want them getting into capex. Its still got nine years till a break but depends on whether the various part owners are liable or not to provide guarantees or whether they could walk away from it. |
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