60p offer. 9.5% yield assuming 5.7p payout next year. Is it a bargain or are the assets very susceptible to default when this imminent recession arrives? Had a revisit of the assets over the last week or so and I'm struggling to see the markets concerns. I'm not saying there won't be problems but I don't see lots of defaults happening either. You pays your money... |
mr57var, you epitomise why it is not difficult to make a decent return from ITs. |
FYI. They just sold a hotel for £7.5m for a profit on book of 500k. Quite why you would sell an asset yielding >9% in the depths of a Commerical property crisis is one thing, especially with a tenant who has paid their rent.
But another one is that they actually bough the hotel in Jan18 for £8.0m so they actually made a damn loss for us.
I sense we have been stiffed by them, whilst releasing a RNS which does not make this loss clear. A disgrace.
Let’s see what wonderful investment they churn the cash into, whilst at the same time incurring a lump of stamp duty and transaction costs.
The hotel was in the centre of Glasgow and bought by the operators, who must have clearly been solvent. I’m at a loss. Literally! |
I doubt the management consider day to day share price movement ex dividend or not they don’t have many properties so any deal is news |
Always good news to realise a solid asset and no doubt with an eye on something available at a discount. Timing that news on the eve of ex-div is curious, could have waited a couple of days to counter the share price fall.
Watching for a top-up opportunity if it heads back to 60p.
All that gearing with an Oct 2025 backstop in focus. |
Yes, not necessarily criticizing the deal but if they are selling an asset on a yield of 8.9% with 14 years left on the lease (which, whilst it may have yielded a profit of £550k on the valuation, is £500k less than they paid for it) with a company that looks like it's pretty solid, I hope they have somewhere better to put the money... |
Dont nibd them weeding out weaker assets but hope M7 don't go fiddling too much to drive extra fees. |
"The Group intends to redeploy the proceeds from this into additional investment assets as soon as practical."
I suspect they already have something lined up as was the case with the motor dealership transactions a while back. the new asset will be on better terms than the old will be the story |
And a premium to June, rather than the usual cheeky premium to December that many like to quote.
Should bode well for the valuation of the remainder. |
I know that hotel. I've stayed there on business. It is very average and does not get great reviews. They have done very well to sell it at a premium. |
Deal is fine but I'm scratching my head, I thought the LTV was a few percentage points lower than indicated. |
The 500k gain is around 1% of the current market cap. |
Excellent news, happy with that |
Looks a good move:
"£7.5 MILLION SALE OF HOTEL IN GLASGOW AT 7.9% PREMIUM TO BOOK VALUE AT 30 JUNE 2023
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 with inflation-linked reviews, is pleased to announce that it has completed the sale of the Mercure City Hotel, Ingram Street, Glasgow, for a total consideration of £7,500,000 to the current tenant S Hotels & Resorts (UK) Limited. This property represented 6.5% of the Group's portfolio at 30 June 2023. The disposal represents...a 7.9% premium.." |
That is a very good point and something that went through my mind yesterday in this chat. What precisely is the rule? 90% of what exactly? Obviously unrealised asset price movements within the income statement are ignored but what else? |
Excluding the special, dividend cover was 110%. Therefore, dividend increases will be required, to comply with 90% distribution rule. |
Fair point |
Holding the dividend at 5.5p rather than increasing it to 5.7p would save them £161k. The additional 0.345p they are paying is costing them £278k. Not going to make much of a dent in debt of £41 million. The interest saving, even at say 6%, is ~£10k and ~£17k respectively or 0.01p/share and 0.02/share. Barely noticeable I'd say... |
That's tricky to do whilst maintaining the 90% minimum required payout to prevent the paying of corporation tax (in line with REIT rules). If they were going to cut debt by reducing the payout they may as well axe the dividend completely for a year or two. |
I do think cutting debt ahead of a likely recession is more sensible than paying out a higher dividend than they're required to under the REIT regime. They can't control market rates but you want the LTV as low as possible going into those refi negotiations |
Total div of just over 6p at 106% cover of which (if I understand it correctly) about 6p of the earnings is from rental income. 80m shares in issue so £4.8m cost of dividend. Refinancing right now would cost 3% more which equates to £1.2m but I would hope more like £0.8m in 12 to 18 months time as market expectations ease. Further rent increases will ease the pain by perhaps £0.4m. So, going forward divi of 5.7p looks sustainable ... (ignoring recession risk but that would of course be mitigated by lower financing costs)Happy to hold! |
No, it was just an example |
@SteMis it wont be that high they have a mixture of annual rent reviews which are capped to <4% but if there is periodic review on a property in the portfolio it boosts the qtrly figure. Two five yearly periodic reviews next qtr though should be helpful.
On the debt front they are going to be faced with double IR of today based on current mkt view 2yrs ahead which will only be partly covered by the annualised rent increases built in over the next two years so divi will be at risk imv.
Still my 2nd biggest holding though. |
From the announceement - "Contracted annualised rent increased by 1.9% this quarter , due to annual RPI rent reviews at Dudley & Sheffield (+4.0%) and fixed uplifts to the rents for BGEN Limited in St. Helens (+9.4 %)".
1.9% in a quarter is annualised 7.8%, which is well ahead of many of the caps quoted. Pretty clear that rent caps are cumulative (i.e. a 4% pa cap for a 5 year rent review means the cap is really 21.7% over the period). |
I have bought some this morning. Decent update, I think we may be at the bottom with commercial property. |
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