Alternative Income Reit Share Discussion Threads

[stemis] 19/12/2023 10:01

I'm a bit tied up today so if anyone else wants to follow this up, be my guest...

[skinny] 19/12/2023 09:44

How times change 'affluent' and Streatham' would not have been in the same sentence 40 years ago - an oxymoron even!

[lord gnome] 19/12/2023 09:35

Thanks SteMiS. That thought had also occurred to me. Will you email them for an explanation or shall I?

[nickrl] 19/12/2023 09:14

@SteMis oh good spot suggest you drop them an email give the investment adviser something to do for our money to explain

[stemis] 19/12/2023 08:04

I'm confused. The announcement says

"the Company has completed the acquisition of the Virgin Active leisure club in an affluent suburban location in Streatham, in South-West London (the "Asset") for £5.1 million"

"The Asset has a passing rent topped up by the vendor to £390,121 pa"

I make the passing rent as 7.65% of acquisition cost, however they also say

"The price reflects a net initial yield of 9.8%"

?

[lord gnome] 30/11/2023 15:07

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.

[marktime1231] 30/11/2023 13:40

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.

[fordtin] 20/11/2023 12:54

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.

[marktime1231] 20/11/2023 12:41

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.

[marktime1231] 15/11/2023 13:22

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.

[nickrl] 13/11/2023 22:30

@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.

[marktime1231] 13/11/2023 11:50

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.

[marktime1231] 03/11/2023 16:03

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.

[makinbuks] 03/11/2023 14:18

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

[nickrl] 03/11/2023 07:14

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.

[skyship] 02/11/2023 16:07

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.

[chucko1] 02/11/2023 10:38

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.

[stemis] 02/11/2023 09:56

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.

[chucko1] 02/11/2023 09:03

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.

[jh27] 02/11/2023 08:49

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. 😂😂😂

[lord gnome] 02/11/2023 08:41

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.

[skyship] 02/11/2023 08:36

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.

[jh27] 02/11/2023 08:22

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…