Alternative Income REIT is positioning itself for a recovery in the real estate market, hunting out its next acquisition and posting a notable narrowing in its share price’s discount to asset value.
Over the six months ending 31 December, the REIT made a £7.5m sale of the Mercure City Hotel in Glasgow to its operator, S Hotels & Resorts. That deal was struck at a 7.9% premium to the building’s June book value. The REIT then acquired a Virgin Active gym in Streatham for £5.5m, and chairman Simon Bennett said it aims to reinvest the remaining proceeds from the Glasgow sale in another property in the coming month. The REIT added that the sale proceeds will help it to meet an annual dividend target of at least 5.9p per share.
Alternative Income now has a 19-property portfolio, asset managed by M7 Real Estate and valued at £103.3m. On a like-for-like basis, the portfolio value fell by 1.9%, or £1.9m, during the half-year, with residential, leisure and retail warehouse assets leading the drop. Net asset value was £65.7m, down by 3% over the period, while the share price rose by 10%, taking its discount to NAV from 32% at the end of June to 12.4% at the end of December.
“The group’s portfolio is relatively insulated from market fluctuations, benefiting from being 100% let and with 100% collection of rent due,” Bennett said. “In addition, the group benefits from low fixed borrowing costs. Combining these factors provides a secure and growing rental income stream. The board remains confident that the company is well-positioned for the future, with a portfolio that continues to deliver secure, index-linked income and has the potential for capital growth as the property market recovers.”
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