Alternative Income REIT PLC: Update on NAV, Trading and the Business and Dividend declaration

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, has provided a trading and business update and declares an interim dividend for the quarter ended 30 June 2020.

Steve Smith, Chairman of Alternative Income REIT plc, commented:

“The Board remains confident that the Company is well positioned given its resilient balance sheet, diversified portfolio of predominantly long let, index-linked assets that remain fully let with strong recent rent collection. Additionally, the Company has a lower overhead following the changes to service providers announced on 25 February 2020, the effect of which started to be realised in the final quarter of its financial year ended 30 June 2020, with significantly enhanced service levels, helping the Company to navigate the effects of the COVID-19 pandemic.

On 18 May 2020, the Board announced the appointment of M7 as Investment Adviser and is delighted with its contribution to date. The Board continues to work closely with M7 to identify a clear path both to grow the Company and enhance its performance and a further announcement will be made in due course. Until 1 October 2020, there is no fee payable to M7 by the Company.

This interim dividend of 1.425 pence per share declared is a significant increase on the 0.825 pence per share paid for the March 2020 quarter, underlining the Company’s strong rent collection and cash flows.”

Dividend declaration and strong rent collection

The Board declares an interim dividend of 1.425 pence per share for the quarter ended 30 June 2020. The dividend will be paid on 28 August 2020 to shareholders on the register on 14 August 2020. The ex-dividend date will be 13 August 2020. The dividend will be a Property Income Distribution.

This interim dividend is an increase on the 0.825 pence per share paid for the prior quarter, underlining the Company’s strong rent collection and cash flows. This brings the combined total dividends declared for the financial year ended 30 June 2020 to 5.0 pence per share, ensuring the Company continues to adhere to its distribution obligations as a UK REIT.

As announced on 13 July 2020, the Board continues to expect that at least 84% of Q3 rents due will be collected by September 2020 and, to date, 82% of all Group’s Q2 2020 rents have been collected. Of the remaining 18%, the Board expects to recover 2% through monthly payments during August 2020, whilst deferral arrangements have been agreed or are being discussed on the remaining 16%.

Resilient EPRA Earnings Per Share, Valuation and Net Asset Value

Unaudited EPRA earnings per share (“EPRA EPS”) for the quarter ended 30 June 2020 increased by 9.12% to 1.384 pence per share, representing dividend cover for the quarter of 97.1% (quarter to 31 March 2020: 1.268 pence per share, 153.7% cover).

The EPRA EPS includes accruals to reflect the minimum contracted uplifts under the Group’s leases, the spreading of rent free periods and an adjustment for the (non-cash) amortisation of loan arrangement fees. Excluding these accruals from the Group’s EPRA EPS, the unaudited cash earnings were 0.828 pence per share, reflecting 58.1% cash dividend cover for the quarter (quarter ended 31 March 2020: 0.946 pence per share, 114.7% cash dividend cover).

As at 30 June 2020, the independent fair valuation undertaken by Knight Frank of the Company’s property portfolio was £104.76 million (31 March 2019: £108.78 million), reflecting a 3.70% reduction, and the yield on the portfolio was 5.77 % (31 March 2020: 5.27%).

The Company’s unaudited net asset value (“NAV”) was £67.30 million, 83.601 pence per share as at 30 June 2020, which takes account of the above valuation (31 March 2020: £70.86 million, 88.024 pence per share).

Diversified portfolio, fully let predominantly on long, index-linked, leases

Following the sale of the Wet ‘n’ Wild Water Park announced on 3 August 2020, the Group owns a diversified portfolio of UK commercial property assets that are fully let, with a weighted average unexpired lease term (“WAULT”) of 19.4 years (31 March 2020: 19.75 years) to the earlier of break and expiry and 21.6 years to expiry.

88% of the portfolio’s income stream is reviewed periodically, on an upward only basis, in line with inflation; with 64% and 24% of the portfolio indexed (subject to floors and caps) to RPI and CPI respectively and, except for the rent for 2021 from Travelodge (as a result of the terms of Travelodge’s Company Voluntary Arrangement (“CVA”) as announced by the Company on 13 July 2020), none of the rents are pegged to the tenant’s turnover or trading volumes.

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the European Union and incorporates both the Group’s property portfolio individually valued on a ‘Red Book’ valuation basis as at 30 June 2020 and net income for the quarter, but does not include a provision for the interim dividend (see above) for the quarter ended 30 June 2020.

The income earned for the period includes an accrual for the minimum contractual uplifts defined within the index linked leases. In the event that inflation is greater than these minimum contractual uplifts, the actual income will be greater than that currently accrued.