All or nearly all buys today Mark. One poor sod paid 69.4 for a handful of shares. He or she needs to find a better broker. |
Despite light trading AIRE continues to advance, the idea that there is further M&A to come in the REIT sector making sense, bargain opportunities for anyone in cash, and the rate outlook getting better.
Not sure if I am looking at it right but I think there was a buy over 69p this morning and sellers at around 68p ... can't blame a bit of profit taking after a 10p recovery in about 6 weeks. Happy to hold for the income, while there is still a 20% share price discount to NAV. |
I used a bit of the proceeds from EPIC to top up here in September. Still holding my original AIRE shares, but have moved the ex-EPIC tranche into API this morning.
Time will tell if it was a daft thing to do, but the portfolio needed a bit of a rebalance. |
Volumes are still pitiful but I wonder if there will be dividend reinvestment on Friday. There are buyers at 68p today, whittling away at the discount. |
It is more luck than judgement but rolling some EPIC into AIRE at the end of last month is starting to look a good move. Not just the healthy quarterly dividend here but share price progress on the back of cooling inflation, whereas EPIC silence over their winding up is unsettling.
Not quite the same response here as other rate-sensitive stocks but more to come perhaps, AIRE is low cap and low volume, but there are chunky buyers at 66p this afternoon.
Opportunities to reinvest the rest of EPIC proceeds are disappearing fast though, still in plenty of cash. |
@marktime given index had quite a step up last year I would expect a good drop this month should be well below 6% but then i suspect we will see it then follow a much slower decline from there on. |
Interesting to see LXI REIT refinancing in a similar position to AIRE. They have gone for a floating short-term extension of just two years at SONIA + 2.05% from the end of 2024, up from a capped 2.5%. They must be hoping for base rates to fall in the meantime, or to subsequently fall so that they can then refinance for longer on more tolerable terms. Gives hope that any refinancing AIRE might do at such painful rates, and any corresponding trim to the dividend, would be short term too.
All a bit wishful perhaps, trying to find positives to suggest that the 25% discount here is overdone. Fingers crossed for a low CPI on Wednesday. |
Someone sharing our enthusiasm for the risk-reward here, well done to those topping up in the 50's. A few chunky buys and then a lot of silly trades as if a buyer is testing price elasticity, can't find the volume they want. I got the message that reinvestment of the Glasgow Hotel proceeds was nearly in the bag, so I don't think they are too far ahead of themselves with restrained dividend progress.
Nice way to end the week anyway, even if it all doesn't stick. |
I agree also. They have really rolled the dice by increasing the dividend and reaffirming that they want it to be progressive. What they are gambling on is lower interest rates at the refi point and as rates fall a better market not just for bonds but bond proxies and REITS too. All macro issues beyond their control. Having acknowledged that, I have to say I like their approach and fortune sometimes favour the brave |
Divi increase always nice but i would have held off until all proceeds reinvested given volatility of mkt. At least as per @maritime the refi isnt that far away but far enough to benefit from IR reductions but still at least 50% higher than today. |
marktime - hear, hear. Absolute madness at the MPC - 3 giant plonkers actually voted for another rate increase!
Yet they go on to say that only 50% of the effect of past rises has yet been felt in the wider economy; and most especially by mortgagees.
Unemployment rising and GDP stagnant. In those conditions you move to cut, not increase.
Pretty sure they will be having to start moves lower as soon as Q1'24. |
I agree, and for me the balancing input is the risk of tenant default in a recessionary environment. See the latest statistics on company defaults just released yesterday and I prefer to stick mainly to stronger REITs albeit at lower yields. |
I suspect their thought process is something like...
Debt is £41m at 3.19% average. An extra 3% is £1.2m.
Current passing rent at 30.6.23 was £7.6m. It would need to rise by 16% to cover that extra interest. At 3.7% a year that would take 4 years. Over that period, there'd be an overcovered dividend up to refinancing and a decreasing shortfall after. Over the 4 years until full cover there'd be a manageable cost of maintaining the dividend.
Obviously I don't know the actual numbers they've used but I doubt they've just made the announcement without considering the impact of the refinancing. |
They can calculate what they like, but the market in a year's time - and personally, I do not see materially lower rates - will be what it will be. That, as well as the tenant concentration (as previously discussed) suggests better alternatives. A year of inflation uplift to rents is pretty immaterial as compared with the higher refi.
If the refi were 5 years hence, a different equation. |
And they may be able to support the dividend with rental income increases and/or cash reserves. But it’s still a cliff edge…. Refi more like 7%+ than 5%+, I’d guess.
I’m sure they know what they’re doing. 😂😂😂 |
I very much doubt that they haven't carefully calculated refinance requirements and likely costs. I also very much doubt that they would raise the dividend now if they thought they would need to cut it again next year. |
Partially agree. Clearly they were value down at 58p; but they are very exposed on the debt front.
They will have to refinance this time next year. Interest rates may be easing off by then; possibly aided by a mild recession. But they are more vulnerable than peers to a recession - just one tenant failing punches quite a hole in their revenues.
Whatever, they will likely refinance at 5%+, so clearly the f/c 5.9p dividend will likely be the peak; thereafter 5p absolute maximum. |
What are these people on???
The re-fi risk is significant. Likely pricing +4% on current fixed rate which would cost an extra £1.6m therefore a 2p (-33%) divi cut. And that’s assuming they could even get the same level of debt - LTV is high and the portfolio was valued at £120m when they took out the current fixed rate debt package - now valued at £100m.
Lots of REITs in the same position…. Debt refi carnage to come… and tenant risk/recession just getting started.
Interest rates are “higher for longer” and no one thinks they’ll be coming down anytime soon.
Btw I’ve now sold all my REIT positions so am not a holder. Just a view… |
 Update:-
ET ASSET VALUE, DIVIDEND DECLARATION AND PORTFOLIO VALUATION UPDATE
TO 30 SEPTEMBER 2023
Resilient portfolio well placed to continue to provide secure, index-linked income with the potential for capital growth
New target annual dividend of at least 5.9 pence per share, a 3.5% increase on the prior year target of 5.7 pence per share
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 index-linked rent reviews, provides a trading and business update and declares an interim dividend for the quarter ended 30 September 2023.
Simon Bennett, Non-Executive Chair of Alternative Income REIT plc, comments:
"AIRE completed the disposal of its hotel in Glasgow for £7.5 million in August 2023 at a 7.9% premium to its book value. The Board has considered a number of attractive potential investment opportunities and now expects to reinvest the net proceeds into two alternative investments, with one of the acquisitions at an advanced stage with completion expected prior to 31 December 2023.
The Company achieved its target dividend of 5.7 pence per share ("pps") last year, and subject to the reinvestment of the Glasgow sale proceeds as anticipated and the continued collection of rent from the Group's property portfolio as it falls due, the Board has set a new dividend target of at least 5.9pps for the year ending 30 June 2024. This represents an increase of at least 3.5% over the previous year and reflects the Board's intention to pay a progressive dividend.
The Group's portfolio has delivered income growth for the quarter ended September 2023 of 2.5% (after discounting for the conclusion of the rent-free period on Pets at Home) as a result of its 96% index-linked rent review profile, with 40% of this rental income reviewed annually. Contracted annualised rent increased by 4.2% this quarter. The portfolio continues to be actively managed and during the quarter, three rent reviews were successfully completed and regearing discussions have started with three tenants, combining lease extensions with ESG initiatives and EPC improvements.
During the quarter, the Group's portfolio valuation, portfolio net initial yield and unaudited NAV remained broadly stable. The Company delivered an unaudited NAV total return for the quarter of 1.6%.
The Group's portfolio is relatively insulated from market fluctuations, benefiting from being 100% let, with 100% collection of rent due and 96% index-linked rent review profile, and low borrowing costs fixed at a weighted average interest rate of 3.19% until October 2025, which together continue to provide a secure and growing rental income stream.
The Board remains confident that the Company is well-positioned to continue to deliver value to shareholders through a progressive dividend policy and with a portfolio that has the potential for capital growth." |
Good article, wouldn't disagree with anything he says. What he doesn't highlight of course is the concentration risk and the credit ratings of the tenants with a recession looming |
Thompson has tipped this. Wondered why it was going up.
Double your money with this high-yielding Reit
It offers a near-11 per cent yield even though rents are rising and the portfolio is fully let
October 20, 2023
By Simon Thompson |
And SHIP, just about. According to my screen AA4 the airplane leasing company have over 250% gearing and are on a 63% discount so you may be redefining good.
Interesting lists, interesting times. They are all a gamble, right? Whereas there are / must be some stocks in the 8-10% bracket now which have a stronger claim to being good.
Maybe I will wait to hear back from nickrl and frazboy before going again here, at the risk of missing the boat. |
Companies on my watch list that yield 10%+ (or did recently, I haven't updated current share prices)
MNG, CAL, GCP, GSF, CAML, SOHO, SEIT, GSF, SQZ, FAIR, VTA
I'm not particularly recommending any of them, just remarking that these days 10% isn't that unusual.
I do hold AIRE (FAIR and SQZ) |
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