INTERIM MANAGEMENT STATEMENT AND DIVIDEND ANNOUNCEMENT ppt

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13 February 2013

INTERIM MANAGEMENT STATEMENT AND DIVIDEND ANNOUNCEMENT

Alpha Real Trust Limited (“ART” or the “Company”) today publishes its interim management statement
for the quarter ending 31 December 2012 and the period up until the date of this announcement. The
information contained herein has not been audited.
Reflecting the progress made by the Company in making income producing investments, the Board
has decided to declare a dividend of 1.05p per share to all shareholders out of earnings. The current
intention of the Company is to pay a dividend semi-annually.

Highlights
NAV per share 105.8p (103.8p: 30 September 2012)
Adjusted earnings per share of 4.3p for the nine months to 31 December 2012
Completion of the Property Investment Portfolio PLC investment portfolio acquisition
Europip: Refinancing of the £59.4 million (NOK 536 million) portfolio of Norwegian commercial real
estate with a senior debt facility of £37.7 million (NOK 340 million)
Europip: £1.6 million (€2.0 million) of net proceeds from the sale of the Paris office asset at above
book value
H2O: Nike is in the process of fitting out its new destination outlet store at the H2O shopping centre;
store opening anticipated at the end of February 2013; market beating visitor footfall increases
recorded in 2012
AURE: extension of the term for £32.5 million of senior debt finance on its portfolio of UK commercial
real estate until 31 December 2013

93% of the Company’s investment portfolio is in income producing investments in the UK and Europe

Investment market commentary
There are some grounds for optimism that improving foundations are being laid for sustainable
economic growth but it is too early to rule out some more bumps on the road to recovery during the
year ahead.
Financial market strains in the eurozone appeared to soften in the latter part of 2012 and this has
continued into the first part of 2013.






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There are some bright spots in the economic data (e.g. UK office-based jobs numbers at record
levels), which are yet to manifest themselves in any substantial rental growth in the real estate sector,
however they may reinforce the embryonic consumer recovery which could boost underlying economic
growth.
There are still risks of increasing inflation but levels are generally subdued across Europe. This
suggests that central banks are placing greater focus on economic growth versus inflation control.
In Spain, the newly created state sponsored “bad bank”, Sareb, is considered a positive step. A
successful Spanish bond auction at reduced yields in January reflects improved investor sentiment.
Norway´s economy outperformed the majority of European economies in 2012 with GDP growth of
approximately 3%. Its comparatively strong economy and the relative scarcity of quality property
assist continued levels of positive occupier take-up across property sectors and supports rental levels.
In the UK, real estate investment transaction volumes remain relatively muted, with overseas investors
continuing to support demand in prime sectors and markets. Reflecting the perceived safe haven
status of the UK market, over 60% of UK investment transactions are generated from foreign
investors.

There is increasing investor interest in opportunistic investments, including recapitalisation of property
investment vehicles, that offer scope for defensive capital positions with high risk adjusted returns.







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Investment summary
Investment
Investment type
Investment
amount
Income
return
Property type
Investment notes
United Kingdom





Alpha UK Real Estate
Fund plc (“AURE”)
Convertible loan
£7.5m
10.7% p.a. 1

High-yield diversified UK
portfolio
Defensive capital structure
Alpha UK Multi Property
Trust PLC (“AUMP”)
Convertible loan
£6.1m
10.8% p.a. 1
High-yield diversified UK
portfolio
Defensive capital structure

Equity
£0.3m
2

19% of ordinary capital
Cambourne Business
Park, Phase 1000,
Cambridge
Indirect property
£1.2m
12.9% p.a. 3
High-yield business park
Bank facility at 50% LTV
(current interest cover of 2.4
times covenant level)
Business Centre
Properties Limited
(“BCP”)

Indirect property
£3.0m
2
Business centre fund
Predominantly ungeared
fund
Freehold Income Trust
(“FIT”)
Ground rent fund
£14.9m
5.2% p.a. 4
Highly defensive income
freehold ground rents
Very low gearing (4% net
LTV); monthly liquidity
Healthcare & Leisure
Property Limited (“HLP”)
Indirect property
£2.9m
2
Leisure property fund
No external gearing
Norway and other European Property Investment Portfolio Plc (“Europip”) investments
Europip Norway
Indirect property
£5.8m
(€7.0m)

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A geared property

investment vehicle
invested in offices and
logistics properties in
Norway
Recently refinanced senior
and mezzanine loan position
Europip loan
Mezzanine loan
£8.9m*
9.0% p.a.

Secured mezzanine loan,
9% coupon p.a.
Europip Mosaic
Indirect property
£0.4m
(€0.5m)
n/a
Minority investment in a
central / eastern European
commercial property fund
Property held via investment
vehicles, varying debt levels
Europip France
Indirect property
£0.8m
(€0.9m)
n/a
Paris office

Spain





H2O, Madrid, Spain
Direct property
£13.6m
(€16.6m)
11.3% p.a. 3
High-yield, dominant
shopping centre
Debt facility with no LTV
covenant and a 1.1x ICR
covenant
India





Galaxia, NOIDA, Delhi
NCR
Direct property
£5.1m
(INR 450m)
n/a
Special Economic Zone
development site

Asset held for sale
* Position as at 31 December 2012, following the re-investment of Europip income (see below), as of
today’s date the loan has been repaid down to £8.7 million






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1 Based on coupon plus redemption premium annualised
2 Asset returns to be included after the first full reporting period
3 Over 12 months to 31 December 2012
4 Annualised quarterly return

ART has also acquired, at an ascribed zero value, Property Investment Portfolio Plc’s (“PIP”)
investments in Active Commercial Estates PLC (“ACE”), a fund invested in secondary commercial UK
property and The Romulus High Income Trust (“Romulus”), a fund holding four UK business centres.
Any realised value from these investments will be passed exclusively to ART A shareholders. As at 31
December 2012, the net asset value of both ACE and Romulus was zero.

Key investment updates
Further to the half year report dated 22 November 2012, the following are key investment updates:
PIP acquisition
ART´s acquisition of the investment portfolio from PIP completed on 3 December 2012. The PIP
investment, which had a combined NAV of £26.4 million as at 30 June 2012, has a diversified
exposure to the UK and European commercial property markets through a range of specialist fund
investment vehicles, which include some of ART’s existing investment vehicles. The acquisition was
structured on a NAV-for-NAV basis with consideration by way of a new unlisted class of ART A shares
(“A Shares”), with the holders having the option to convert A Shares one-for-one into listed ART

ordinary shares. Accordingly, 23,914,323 new Class A Shares have been issued to PIP for issuance
to its shareholders.
Continued active management
The Company’s investments have benefited from an active management approach with successes
evident in both the Company’s direct and indirectly held investments.
At the H2O shopping centre asset in Madrid, following the recent letting to Nike for a large destination
factory store, the tenant is in the process of fitting out its unit for an opening at the end of February
2013. Aided by the asset management initiatives implemented by ART, the H2O shopping centre
recorded market beating footfall increases of 2.3% in 2012 compared to 2011 (Spain´s national index
decreased by 4% for the same period).
In AURE, the terms of the £32.5 million senior loan on its portfolio of UK commercial real estate has
been extended until 31 December 2013.
Fund restructuring is underway in the Company´s FIT investment which is anticipated to complete
during the first quarter of 2013. The Financial Services Authority (“FSA”) has approved FIT´s
application to convert into an authorised fund, subject to investor consent, and the HM Revenue and
Customs provided approval for FIT to enter the Property Authorised Investment Fund (“PAIF”) tax






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regime. A PAIF is specifically designed for open ended FSA authorised investments. The tax
advantages of a PAIF are similar to those of a Real Estate Investment Trust (“REIT”), including
favourable capital gains tax treatment.
European Property Investment Portfolio Plc
As part of the PIP transaction, ART acquired a 47% stake in European Property Investment Portfolio
Plc (“Europip”), an Isle of Man domiciled open ended investment company. Europip invests in a
directly owned commercial property portfolio in Norway comprising 11 assets located in the Oslo

region. Europip had also owned an office asset in Paris, which was sold in December 2012
subsequent to ART´s investment (see below). In addition, Europip has a minority (23%) interest in
Mosaic Property CEE Limited (“Mosaic”), a central and eastern European focussed commercial
property fund.
ART has provided mezzanine finance to Europip in the form of two loans (one of which was acquired
from PIP). The 12 month loans, maturing on 27 November 2013, pay a coupon of 9% per annum. The
loans have similar security, with share pledges over two of the un-geared Europip Norwegian assets
(valued at £5.8 million (NOK 52.3 million) as at 31 December 2012) with additional rights over
proceeds released from the Mosaic investment. Following completion of the sale of the Paris office
building, Europip’s net proceeds of £1.6 million (€2.0 million) are to be used to partly repay ART´s
mezzanine loan with a further repayment to be made of £0.2 million, following the decommissioning of
committed and uncalled capital in the Mosaic investment.
Norwegian asset refinance
Europip has refinanced the £59.4 million (NOK 536 million) portfolio of Norwegian commercial real
estate with a senior debt facility of £37.7 million (NOK 340 million) at a loan to value covenant of 73%
over the secured assets (further details below).
The senior debt facility with Norwegian banks comprises:
A five year term facility for £31.0 million (NOK 280 million), at a 2.4% margin over NIBOR. This facility
will be amortised at £1.1 million (NOK 10.2 million) per annum from cashflows, although the amount of
required amortisation will be reduced pro-rata in the event of property sales. £23.3 million (NOK 210
million) of this facility has been fixed for five years at a NIBOR rate of 2.49% p.a
A two year term facility for £6.6 million (NOK 60 million), at a 3.1% margin over NIBOR with repayment
coming from the sale of two assets which are currently being marketed for sale.
Prepayment fees of 0.75% of any amount repaid apply across both tranches during the first two years
if the facilities are refinanced with an alternative lender. There are no prepayment fees on asset sales.
The intention is for the shorter term facility to be repaid by sales of property.

AUMP
The loan facility of £51.2 million provided by Bank of Scotland in respect of AUMP’s wholly owned
subsidiaries, CHIP (One) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited

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expired on 31 January 2013. At the current time, no extension to the term of the loan facility has been
approved by Bank of Scotland.
The loan facility of £8.65 million provided by Nationwide Building Society in respect of the Company’s
wholly owned subsidiary, CHIP (Two) Limited was due to expire on 23 January 2013. AUMP has
announced that CHIP (Two) Limited has agreed with Nationwide Building Society to amend the loan
facility agreement such that the term of the facility is extended to 31 March 2013.
Discussions with its lenders, alternative banks and providers of capital are continuing in order to
pursue a further extension to, or refinancing of, the loan facilities.

Share buybacks
Further to a separate announcement, a circular has been posted to shareholders today seeking a
general authority for the Company to buy back ordinary shares.
The ART Board will consider the possibility of share buybacks of up to 10% of the share capital of the
Company.

Dividend
The Company´s earnings are continuing to increase as a consequence of allocation of capital to yield
driven investments. Approximately 93% of the Company´s investment portfolio is in income producing
investments in the UK and Europe, including exposure to the northern European market by way of the
Europip portfolio located in the strong Norwegian economy.
The Board has accordingly declared a dividend of 1.05p per share to all shareholders out of earnings.
The record date for this dividend is 19 April 2013 with an ex-dividend date of 17 April 2013; the
dividend will be paid 3 May 2013. The current intention of the Company is to pay a dividend semi-

annually.

Alpha Real Trust Limited is advised by Alpha Real Capital LLP, which is authorised
and regulated by the Financial Services Authority in the United Kingdom.
Registered office
Old Bank Chambers
La Grande Rue
St Martin’s
Guernsey GY4 6RT



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Net asset value
The unaudited net asset value per share of the Company for all share classes was 105.8 pence at 31
December 2012 (30 September 2012: 103.8 pence).
There was no revaluation of the Company’s directly owned investment properties during the period.

Foreign currency
The Company monitors foreign exchange exposures and considers hedging where appropriate.
Foreign currency balances have been translated at the period end rates of £1:€1.222, £1:NOK9.023 or
£1:INR88.341, as appropriate.

Strategy
ART is committed to its disciplined strategy and investment principles, which focus on opportunities
that can deliver high risk adjusted total returns while seeking to manage risk through a combination of
operational controls, diversification and defensive return structures. ART remains in a strong position
to capitalise on further income enhancing opportunistic investments.
The Company’s current focus is on investments with strong cashflows and/or defensive risk profiles.

Contact:
Alpha Real Trust Limited
David Jeffreys, Chairman, ART +44 (0)1481 231 100
Gordon Smith, Joint Fund Manager, ART +44 (0) 207 268 0300
Brad Bauman, Joint Fund Manager, ART +44 (0) 207 268 0300

Panmure Gordon, Broker to the Company
Richard Gray/Andrew Potts +44 (0)207 886 2500