The UK property investor has been shielded from the weak retail sector by its larger exposure to industrial and office properties
Atlantic Leaf Properties is feeling the pain of the UK retail sector, as yields continue to soften due to insolvencies and company voluntary arrangements. Its Haydock property near Merseyside, formerly let to Palmer & Harvey, has been vacant since the wholesaler went into administration last year. Homebase, which occupies its Brecon property in Wales, was granted a company voluntary arrangement in August, resulting in a 45% reduction in rent. However, Atlantic Leaf believes it will attract a new long-term tenant in the next few months.
Fortunately for the property group, 70% of its exposure is to the industrial sector, which continues to strengthen. In March, it bought a 15 million multi-let industrial and office property in Knowsley outside Liverpool which it says has performed well since acquisition.
For the six months to end-August, adjusted headline earnings per share rose 5.5% to 4.76p and it's raised its interim dividend by 3.3% to 4.65p. Total assets amounted to 374 million, at an average forward yield of 7.1%. It said its loan-to-value ratio was 43%.
The group says it's considering the sale of some of its smaller properties which management believes it can realise good value for in the current market. It will redeploy the proceeds into newer assets where longer-term growth is achievable.
It sold its Upton asset at auction in June for 1.2 million, reflecting a 6% net initial yield and a realised profit of 250 000. Overall, it earned a return of 21% over the period the asset was held.
This strategy will in the short to medium-term improve the overall quality of the portfolio and assist in rebalancing the asset spread from a tenant concentration risk perspective," Atlantic Leaf said. "We are currently in final negotiations to acquire an asset that would fit with this strategy."
Atlantic Leaf says its plans to convert to a UK REIT and redomicile to Jersey are well on track and it's in the process of obtaining final regulatory approvals.
Its shares closed unchanged at R18.50.