Alpha Real Trust : 2021-06-11 Annual results to 31 March 2021

11 June 2021

ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY" OR "THE GROUP")

ART ANNOUNCES ITS FULL YEAR RESULTS FOR THE YEAR ENDED 31 MARCH 2020

• NAV per ordinary share 207.7p as at 31 March 2021 (31 March 2020: 213.7p).
• Basic earnings for the year ended 31 March 2021 of 0.0p per ordinary share (31 March 2020: 5.8p per ordinary share).
• Adjusted earnings for the year ended 31 March 2021 of 3.4p per ordinary share (31 March 2020: 6.4p per ordinary share)*.
• Declaration of a quarterly dividend of 1.0p per ordinary share expected to be paid on 16 July 2021.
• Robust financial position: in a year characterised by uncertainty, ART adopted a cautious approach to new investment and conserved cash. As the economy reopens post Covid, the Company's robust financial footing makes it well positioned to take advantage of new investment opportunities.
• New loan investments: after a strategic pause to evaluate how the effects of the economic shock from Covid 19 unfolded, new lending has now recommenced. Growth of the loan portfolio remains a key focus for ART and is expected to attract a dominant weighting of capital allocated for new investments.
• Diversified secured loan portfolio: the Company's existing loan portfolio has demonstrated resilient performance; the average income return on senior secured loans is 8.6% and on mezzanine secured loans is 14.4%.
• The senior portfolio has an average Loan to Value ('LTV')** of 51.6% based on loan commitments, with mezzanine loans having an LTV range of between 54.8% and 76.9%.
• Capital recycling: during the year ART completed the successful sales of its Birmingham development site and the final asset in its UK industrial portfolio and also recovered its original capital investment from its Galaxia investment in India.

* The basis of the adjusted earnings per share is provided in note 9

• See below for more details

Registered office: Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY

Alpha Real Trust Limited is advised by Alpha Real Capital LLP, which is authorised

and regulated by the Financial Conduct Authority in the United Kingdom.

David Jeffreys, Chairman of Alpha Real Trust, commented:

"The economic and social impact of Covid-19 continues to dominate the economic backdrop in which the Company operates. Vaccine development and the fast pace of deployment, particularly in the United Kingdom, provides a supportive tailwind for a return to social normalisation and economic recovery.

Prior to the emergence of Covid-19, the Company had focused on recycling capital into asset backed lending while reducing exposure to development risk. During the past year the result of these efforts yielded successes, with noteworthy capital recycling successes being secured from the sale of two assets and recovery of part of the court award from the historic investment in India. In this time of heightened uncertainty, the Company is benefiting from that strategy and it has placed the Company on a robust financial footing.

Over the past financial year the Company adopted a cautious approach to new investment, including new lending. Supported by the positive performance of the Company's existing investments and more favourable economic indicators, ART has reactivated its investment activities with a key focus on continuing to grow its diversified loan portfolio."

The Investment Manager of Alpha Real Trust is Alpha Real Capital LLP.

For further information please contact:

Alpha Real Trust Limited

David Jeffreys, Chairman, Alpha Real Trust [phone]

Gordon Smith, Joint Fund Manager, Alpha Real Trust [phone]

Brad Bauman, Joint Fund Manager, Alpha Real Trust [phone]

Panmure Gordon, Broker to the Company

Atholl Tweedie / Joanna Langley [phone]

Notes to editors:

About Alpha Real Trust

Alpha Real Trust Limited targets investment, development, financing and other opportunities in real estate, real estate operating companies and securities, real estate services, infrastructure, infrastructure services, other asset-backed businesses and related operations and services businesses that offer attractive risk-adjusted total returns.

Further information on the Company can be found on the Company's website: www.alpharealtrustlimited.com.

About Alpha Real Capital LLP

Alpha Real Capital is a value-adding international property fund management group. Alpha Real Capital is the Investment Manager to ART. Brad Bauman and Gordon Smith of Alpha Real Capital are joint Fund Managers to ART. Both have experience in the real estate and finance industries throughout the UK, Europe and Asia.

For more information on Alpha Real Capital please visit www.alpharealcapital.com.

Registered office: Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY

Alpha Real Trust Limited is advised by Alpha Real Capital LLP, which is authorised

and regulated by the Financial Conduct Authority in the United Kingdom.

Trust summary and objective

Strategy

Alpha Real Trust Limited ("the Company" or "ART" or "the Group") targets investment, development, financing and other opportunities in real estate, real estate operating companies and securities, real estate services, infrastructure, infrastructure services, other asset- backed businesses and related operations and services businesses that offer attractive risk-adjusted total returns.

ART currently focusses on asset-backed lending, debt investments and high return property investments in Western Europe that are capable of delivering strong risk adjusted cash flows. The portfolio mix at 31 March 2021, excluding sundry assets/liabilities, was as follows:

	31 Mar 2021	31 Mar 2020
High return debt:	26.1%	31.9%
High return equity in property investments:	19.5%	26.1%
Other investments:	0.5%	6.2%
Cash:	53.9%	35.8%

The Company currently plans to invest the majority of its cash into secured senior or secured mezzanine debt and grow its diversified loan portfolio.

Dividends

The current intention of the Directors is to pay a dividend and offer a scrip dividend alternative quarterly to all shareholders.

Listing

The Company's shares are traded on the Specialist Fund Segment ("SFS") of the London Stock Exchange ("LSE"), ticker ARTL: LSE.

Management

The Company's Investment Manager is Alpha Real Capital LLP ("ARC"), whose team of investment and asset management professionals focus on the potential to enhance earnings in addition to adding value to the underlying assets, and also focus on the risk profile of each investment within the capital structure to best deliver attractive risk adjusted returns.

Control of the Company rests with the non-executive Guernsey based Board of Directors.

Financial highlights

	12 months ended		6 months ended		12 months ended
	31 March		30 September		31 March
	2021		2020		2020
Net asset value (£'000)	126,076		127,055		127,627
Net asset value per ordinary share	207.7p		211.1p		213.7p
Earnings per ordinary share (basic and diluted) (adjusted)*	3.4p		1.6p		6.4p
(Losses)/earnings per ordinary share (basic and diluted)	0.0p		(1.3)p		5.8p
Dividend per ordinary share (paid during the period)	4.0p		2.0p		3.6p

• The adjusted earnings per share includes adjustments for the effect of the fair value revaluation of investment property and indirect property investments, capital element on Investment Manager's fees, the fair value movements on financial assets and deferred tax provisions: full analysis is provided in note 9 to the financial statements.

Registered office: Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY

Alpha Real Trust Limited is advised by Alpha Real Capital LLP, which is authorised

and regulated by the Financial Conduct Authority in the United Kingdom.

Chairman's statement

I am pleased to present the Company's annual report and accounts for the year ended 31 March 2021.

Given the extraordinary events of the past year, the health and wellbeing of ART's stakeholders remains foremost in our minds. The economic and social impact of Covid-19 continues to dominate the economic backdrop in which the Company operates. Vaccine development and the fast pace of deployment, particularly in the United Kingdom, provides a supportive tailwind for a return to social normalisation and economic recovery.

ART's investment portfolio benefits from diversification across geographies, sectors and asset types. Prior to the emergence of Covid-19, the Company had focused on recycling capital into asset backed lending while reducing exposure to development risk. During the past year the result of these efforts yielded successes, with noteworthy capital recycling successes being secured from the sale of two assets and recovery of part of the court award from the historic investment in India. In this time of heightened uncertainty, the Company is benefiting from that strategy and it has placed the Company on a robust financial footing.

Over the past financial year the Company adopted a cautious approach to new investment, including new lending. Supported by the positive performance of the Company's existing investments and more favourable economic indicators, ART has reactivated its investment activities with a key focus on continuing to grow its diversified loan portfolio.

Diversified secured lending investment

Despite a year that was characterised by significant uncertainty, the Company's loan portfolio has proved to be relatively resilient. In terms of debt servicing, allowing for some temporary agreed extensions, interest and debt repayments have been received in accordance with the loan agreements. The growth of the loan portfolio remains a key investment objective for ART and is likely to attract a dominant weighting of capital allocated for new investments.

As at 31 March 2021, ART had committed £34.9 million across twenty three senior and mezzanine loan investments, of which £32.8 million was drawn. The loans are typically secured on real estate investment and development assets.

Overall activity and values in the UK housing market remained relatively resilient during the financial year, with notable demand pick up and value increases witnessed in some markets. Housing market activity has been supported by continued low interest rates and competitive mortgage availability coupled with ongoing Government support, particularly for first time buyers via the "Help to Buy" scheme and the recently announced government-backed mortgage scheme to help people with 5% deposits. The scheme will help buyers secure a mortgage with a 5% deposit on purchases of up to £600,000. The government will offer lenders a guarantee to provide mortgages that cover the other 95%, subject to affordability checks. These initiatives support ongoing residential development, which bodes well for the Company's lending ambitions.

Reflecting the strategic cautious approach to new lending adopted as the Covid-19 pandemic unfolded, the loan portfolio was characterised by net repayments during the financial year. Eighteen loans were fully repaid, and four loans were partly repaid, for total receipts of £17.8 million (including accrued interest and exit fees), resulting in a decrease in the loan portfolio by 17.8% over the period.

The largest individual loan in the portfolio as at 31 March 2021 is a senior loan of £4.0 million which represents 3.2% of the Company's NAV.

Post year end, three new loans were granted for £3.9 million, £0.7 million was drawn from previously committed loans and loan repayments of £2.9 million were received (including accrued interest and exit fees).

Portfolio loans are underwritten against value for investment loans or gross development value for development loans as relevant and collectively referred to as LTV in this report. The portfolio has an average LTV of 59.3% (with an average approved LTV between 54.8% and 76.9% for mezzanine loans whilst the highest approved LTV for senior loans is 72.9%).

As at 31 March 2021, 42.4% of the Company's loan investments were senior loans and 57.6% were mezzanine loans, with a weighted average LTV ratio of 59.3% based on commitments, i.e. including amounts available for drawing. The underlying assets in the loan portfolio as at 31 March 2021 had geographic diversification with a London and South East focus. The South of England (including London) accounted for 67%, of which London accounted for 38%, of the committed capital within the loan investment portfolio.

To date, the Company has experienced no defaults, but the underlying loan portfolio continues to be closely monitored especially considering the Covid-19 pandemic and its potential impact on construction timelines and sales periods. Where it is considered appropriate, on a case-by-case basis, underlying loan terms may be extended or varied.

Capital recycling

During the period the Company's capital recycling programme continued with total proceeds of £8.3 million being received from

Registered office: Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY

Alpha Real Trust Limited is advised by Alpha Real Capital LLP, which is authorised

and regulated by the Financial Conduct Authority in the United Kingdom.

investment sales. In June 2020, the sale of the Unity and Armouries development site in Birmingham completed in line with book value. This was followed in September 2020 by the sale of the final asset in the Alpha UK Property Fund Asset Company (No. 2) Limited portfolio of UK industrial assets at a price marginally ahead of book value. Further capital was recovered from the Galaxia investment in India as outlined below.

H2O, Madrid

ART has a 30% stake in joint venture with CBRE Global Investors in the H2O shopping centre in Madrid. It has been a very challenging year for shopping centre assets. At the start of the financial year all shopping centres in Spain were required to close, except for stores deemed essential such as supermarkets and pharmacies. For H2O this resulted in partial closure from mid-March to early June 2020.

Less onerous restrictions were applied at a local level periodically for much of the remaining calendar year, limiting store and restaurant capacity and opening hours. The last quarter of the year was marked by an extreme storm in Madrid in early 2021, which had the effect of limiting mobility across the Madrid region, further complicating trading conditions.

During the period of mandatory closure, a rent-free period was offered to tenants experiencing trading distress in return for lease extensions and/or an increase in turnover rent to capture any future increase in trading. A practical approach continues to be taken with tenants to manage any rent arrears whilst seeking to protect the long-term value of the centre.

Unsurprisingly, there have been store closures resulting from the stressed trading conditions. More positively, there has also been some notable new lease signings during the period amounting to c. 2,800 sqm. These include top tier restaurants such as Tony Romas ribs and popular domestic burger chain Goiko, along with international electronics retailer Xiaomi and a new tenant for a 1,100 square metre retail park unit located on part of the centre's surface car park area which completed in March 2021. H2O occupancy by area as at 31 March 2021 was 90.1% including new lease signings outlined above, which compares to 93.8% as at 31 March 2020.

The H2O valuation reduced by 9.0% over the past year. The lingering economic effect of Covid-19 on the retail sector is expected to continue to have a significant, albeit less severe, impact on the earnings of H2O for the coming year.

Galaxia, India

As previously announced, the Supreme Court of India ruled in favour of ART's dispute regarding its Galaxia investment, a 50:50 joint venture with Logix Group ("Logix") that owns an 11.2 acre development site located in NOIDA, the National Capital Region, India.

In upholding the arbitration award in favour of ART and dismissing Logix's appeal, the Supreme Court ordered Logix to pay ART a total of INR 860 million (£8.5 million at the year end exchange rate). Including amounts recovered during the financial year, amounting to £3.0 million, ART has now successfully recovered in excess of the full amount of its capital originally invested into the Galaxia joint venture (£2.5 million): the excess of £0.5m received during the year has been recognised as a gain in the consolidated statement of comprehensive income.

The court permitted Logix to sell the Galaxia site, which was previously charged in favour of ART, to raise capital to contribute towards the balance of the award. A purchaser for the site has been identified who, during November 2020, deposited INR 568 million with the Supreme Court towards the sale price. The potential purchaser is seeking an amendment of development consents and payment obligations in relation to the land. The release of the funds deposited with the Supreme court to ART is dependent on how the sale process advances.

Failure to recover the proceeds from a sale would mean that Logix would be required to pay the remainder of the liability due to ART under the court award of INR 568 million (£5.6 million at the year end exchange rate) plus a higher interest rate applicable under the arbitration award.

ART continues to actively pursue its claim to collect the balance of the arbitration award. Given the uncertainty about the quantum and timing of any future recovery, the Company carried the joint venture in arbitration in its accounts as at 31 March 2021 at nil value. Any future receipt will be accounted for as a capital gain from the joint venture.

Results and dividends

Results

Adjusted earnings for the year ended 31 March 2021 are £2.1 million (3.4 pence per ordinary share, see note 9 of the financial statements). This compares with adjusted earnings per ordinary share of 6.4 pence for the previous year. The decrease in earnings was mainly the result of the Company's cautious approach to new investment, including lending commitments, combined with the cost of tenant support measures at the H2O shopping centre joint venture.

The net asset value per ordinary share at 31 March 2021 is 207.7 pence per share (31 March 2020: 213.7 pence per ordinary share) (see note 10 of the financial statements). This reduction is primarily due to the impact of the reduced property valuation of the H2O shopping centre joint venture in Madrid.

Registered office: Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 4LY

Alpha Real Trust Limited is advised by Alpha Real Capital LLP, which is authorised

and regulated by the Financial Conduct Authority in the United Kingdom.