Alternative Income Reit Share Discussion Threads

[frazboy] 02/8/2023 11:48

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!

[stemis] 02/8/2023 10:46

No, it was just an example

[nickrl] 02/8/2023 10:43

@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.

[stemis] 02/8/2023 08:46

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).

[rcturner2] 02/8/2023 07:44

I have bought some this morning. Decent update, I think we may be at the bottom with commercial property.

[spectoacc] 02/8/2023 07:31

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).

[2wild] 02/8/2023 07:24

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.

[lord gnome] 02/8/2023 06:35

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.

[spectoacc] 02/8/2023 06:26

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).

[flyer61] 24/7/2023 07:42

Joined you all on Friday at 61.2P

[spectoacc] 24/7/2023 07:28

62.15p to buy, still some stock around - 62/64.

[spectoacc] 21/7/2023 08:57

Agree with @chucko1 (messaged you @CWA1).

[chucko1] 21/7/2023 08:56

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.

[cwa1] 21/7/2023 08:50

Punted a few at 61p. Don't tell Specto ;-)

[skyship] 05/7/2023 06:28

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.

[spectoacc] 04/7/2023 14:39

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?

[nickrl] 04/7/2023 14:17

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.

[skyship] 04/7/2023 12:11

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.

[nickrl] 05/5/2023 11:24

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.

[cwa1] 04/5/2023 15:09

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."

[spectoacc] 16/3/2023 07:21

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.

[stemis] 15/3/2023 19:05

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.

[spectoacc] 15/3/2023 18:35

Hugely fluffed by Ramper Tommo, but doubt it's shortable from here. Will phone around if the market starts dragging down REITs too.

[spectoacc] 08/3/2023 11:58

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.