ATLANTIC LEAF PROPERTIES LIMITED Results presentation Year ended - - PowerPoint PPT Presentation

ATLANTIC LEAF PROPERTIES LIMITED

Results presentation

Year ended 28 February 2020

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Introduction Financial results Asset management Closing and summary

CONTENTS

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> Presentation will focus on the results for 2020 > Given the current market uncertainty, no forward looking information will be provided at this stage > Atlantic Leaf’s management team and our external auditors, Mazars, are also to be commended for the timely completion of the year-end audit under difficult conditions

CONTENTS

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Fully operational

• Staff safe

›

Disaster recovery plan fully implemented

›

All staff working remotely

• Property manager operational

›

Rent collections continuing

OPERATING ENVIRONMENT

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OVERVIEW – FEB 2020

AVERAGE PROPERTY YIELDS

7.05%

AVERAGE COST OF DEBT

3.57%

WALT

8.67yrs

INDUSTRIAL ASSETS

77%

RETAIL EXPOSURE Reduced to

1%

CURRENT LTV Reduced to

40%

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FINANCIAL RESULTS 2019/20

Impact of COVID-19

• Post balance sheet event
• Strong cash position: £26m at year end
• Valuations confirmed as at 28 February
• Greater uncertainty in the markets
• Positive first rental collection period

(March-June) since COVID-19 lockdown

• Majority of rents collected quarterly in

advance

• 85% collected in full
• 4% of tenants paying monthly in

advance

• Payment terms being agreed with the

balance

Adjusted Earnings 10.56 pence

(2019: 9.3 pence)

13% H2 Dividend: 4.5 pence (full year dividend

• f 9.0 pence)

Sale of Runcorn asset: 28 February

• £4.3m capital profit
• IRR: 16%

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> Cash and available cash > Key cash flow assumptions

›

UK REIT’s required to distribute at least 90% of its property income

• Final dividend of 4.5 pence declared (£8m)

›

No debt maturities in the 2020/21 financial year

›

Peterborough multi-let conversion to go ahead – expected to cost £3,3m

> Strong cash position even after payment of dividend > Atlantic Leaf is comfortable that it has sufficient resources to continue as a going concern for the next 12 months

OUR CASH POSITION

28 February Cash 26 158 106 RCFs 1 599 252 27 757 358

FINANCIAL RESULTS

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2019/2020 FULL YEAR REVIEW

* Net rental revenue includes straight line lease adjustments relating to rent free incentive periods but excludes inflation related straight line lease adjustments

NET RENTAL REVENUE*

£26.6 million £24.4 million

(Feb 2019)

ADJUSTED EARNINGS

£19.9 million £17.6 million

(Feb 2019)

ADJUSTED EARNINGS PER SHARE

10.5 pence

9.3 pence

(Feb 2019)

DIVIDEND PER SHARE

9.00 pence

9.30 pence

(Feb 2019)

NET LTV

40%

48%

(Feb 2019)

NAV PER SHARE

£1.04 £1.03

(Feb 2019)

NET RENTAL REVENUE

+8.8% 4.5p

FINAL DISTRIBUTION

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KEY EVENTS DURING THE YEAR

SOLD RETAIL WAREHOUSE JOINT VENTURE April 2019

£22.8m

NEW DEBT FACILITY WITH LLOYDS BANK August 2019

£22m RCF

INCREASED DEBT HEDGING TO OVER

90%

REDEPLOYED PROCEEDS INTO FIVE INDUSTRIAL ASSETS

£39.9m £34m £7m

ASSET SALES RUNCORN February 2020 BOOKER LEICESTER & BARNSLEY October 2019

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ADJUSTED EARNINGS

26.6 19.9 3.8 (0.5) (3.0) (6.8) 5 10 15 20 25 30 35

Net rental income Capital Gains & Other Income Property operating expenses Other operating expenses Finance costs Adjusted earnings

GBP millions

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CAPITAL GAINS

* Net of £620k dividends received in current financial year

Runcorn

IRR: 16% Sold: February 2020 Proceeds: £34m Capital Gain: £4,3m

Booker: Leicester & Barnsley

IRR: 10% Sold: October 2019 Proceeds: £7m Capital Gain: £-m

DFS JV Investment

IRR: 9% Sold: April 2019 Proceeds: £22,6m Net Loss: £0,7m*

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IFRS 16 long leaseholds

> Right of Use Asset > Listed Shares

FAIR VALUE & IMPAIRMENTS

FAIR VALUE

Included in average cost of debt – will unwind over term Cash flow hedges taken directly to other comprehensive income Swaps not designated as cash flow hedges - Statement of Comprehensive Income

> Swaps

IMPAIRMENT

> APIL Loan

Upward: £17,1m

> Investment Properties

Downward*: (£15,4m) Straight line lease: (£1,8m) Loan not due and payable – Serviced from dividends received Decrease in JSE share price resulted in a provision Downward movement on listed REIT’s

• Includes £2,9m reversal of fair value gains relating to the investment properties sold
• Acquisition costs of £2,6m incurred on new investment properties

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Strong cash position

^ Adoption of IFRS 16

STATEMENT OF FINANCIAL POSITION

28 Feb 2020 £’m 28 Feb 2019 £’m Investment properties – direct 334.9 328.9 – right of use 15.9

• Investment in JV
• 23.0

Listed Investments 2.9 3.6 Cash 26.1 12.6 Interest bearing borrowings (162.4) (170.1) ^Long term lease liabilities (15.9)

• Fair value of derivatives

(3.4) (1.2) Other net assets/(liabilities) (1.7) (1.5) Net assets 196.5 195.3 Interest bearing borrowings (162.4) (170.1) Short term interest-bearing borrowings (6.5) (6.3) Long term interest-bearing borrowings (155.9) (163.8)

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NAV BRIDGE

^ Excluded from adjusted earnings

GBP pence NAV on 28 February 2019 103.30 Dividends paid (9.15) Other comprehensive Income (1.12) Retained earnings 10.94

• Adjusted earnings

10.54

• ^Straight line lease income

0.74

• ^Impairment

(0.32)

• ^Fair value: Properties (net)

0.89

• ^Fair value: Other (ROU Asset, listed investments, asset

held for sale) (0.91) NAV at 28 February 2020 104.00 Dividend to be paid May 2020 (4.50)

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* On a gross proportional look through to the JV debt in 2018 but excluded in 2019 onwards due to sale

DEBT AND HEDGING

47% 46% 48% 40% Feb 17 Feb 18 Feb 19 Feb 20

Loan to value ratio* (%)

4.0 4.2 3.9 4.1 Feb 17 Feb 18 Feb 19 Feb 20 3.2% 3.2% 3.3% 3.6% Feb 17 Feb 18 Feb 19 Feb 20 2.9 2.0 4.0 3.1 Feb 17 Feb 18 Feb 19 Feb 20

Interest cover ratio Cost of debt (%) ^ Maturity debt (years)

74% 66% 77% 91% Feb 17 Feb 18 Feb 19 Feb 20

Debt hedged* (%)

^ Refinance in Oct 2018 to longer maturities increased the weighted average cost of debt in 2019/20

• Debt covenants have been met
• Maintained good relationships with funders
• Funders remain supportive if needed
• Funders been kept fully up to date with rent collections

ASSET MANAGEMENT

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UK PROPERTY MARKET

Demand for logistics space in the UK will continue to be resilient during 2020 whilst industrial and logistics rents are due to continue to outperform most other sectors Over the longer term the outbreak may fast-track the adoption of remote working and investment into collaborative technologies Structural, cyclical and temporary factors will continue to exert pressure on the retail sector throughout 2020 resulting in further CVA’s and business failure In the short term it is expected that volumes may decline and selective yield hardening may occur Investment activity is likely to slow in H1 2020 as investors react to uncertainty, with the retail and hospitality sectors being the most affected. A shift to defensive assets is expected

5.04%

The UK average prime yield

10%

Rise in 2020 investment activity (Q1 compared to same period in 2019 Disruptions in business caused by COVID-19 will have a ripple effect that will slow economic growth in the short-term, but a degree of bounce back is likely, albeit unevenly distributed

£12.7bn

Investment volume in Q1 2020

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PROPERTY PORTFOLIO – 28 FEB 2020

Salient details

Feb 2020 Feb 2019

AUM – Direct assets (£m) 335 367 AUM – JV assets (£m) 43 No of properties 51 54 No of tenants 31 37 Property forward yield* 7.05% 7.24% WALT (years)* 8.67 9.01 Vacancy (sq ft)* 2.68% 0.5%

Sector spread (by value) Tenant classification (by income) Regional spread (by value)

31% 4% 8% 16% 4% 8% 11% 7% 9% 2% West Midlands East Midlands North East North West South East South West East Anglia York & the Humber Scotland Wales 34% 9% 8% 5% 5% 5% 4% 3% 3% 3% 3% 3% 3% 2%2% 8% Booker Santander Halfords Epwin B&M

• E. ON

Smurfit Kappa Buffaload Koito EE Gestamp Law Bauer Lockwood Group Ltd Robert McBride Other 77% 22% 1% 28 Feb 2020 Industrial warehouse/logistics Office Retail warehouse 79% 20% 10% 28 Feb 2019

*Feb 2020 including Thomas Cook on like for like basis:

• Forward yield – 7.45% ● WALT (years) – 8.88 ● Vacancy – 0.29%

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ASSET MANAGEMENT REVIEW

TRANSACTIONAL OPERATIONAL

REDUCE EXPOSURE TO RETAIL SECTOR Sale of DFS which achieved a 9% IRR TARGETED INDUSTRIAL ACQUISITIONS £39.9m re-invested into quality mid-box units (6.5 year WAULT, NIY of 6.7%) STRATEGIC SALES OF BOOKER ASSETS 2 Booker sales re-affirming valuations and desirability

• f asset class

OPPORTUNISTIC SALE TO REDUCE PORTFOLIO RISK Disposal of DHL asset – achieving a 16% IRR CONCLUDED NEW LEASE AT BRECON Re-let to B&M on 15 year lease post Homebase CVA CONCLUDED NEW LEASE AT HAYDOCK Re-let to Law Distribution following administration

• f Palmer & Harvey

CONFIRM STRATEGY FOR PETERBOROUGH ASSET Repositioning of asset following liquidation of Thomas Cook – in progress BOOKER RENT REVIEW Discussions commenced

• n rent reviews above the

minimum

… …

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COVID-19: CREDIT / RENTAL

• Atlantic Leaf is well placed with 77% of assets in industrial

sector which have proved resilient to date

• Atlantic Leaf has strong relationships with its underlying
• ccupiers and continue to engage with all parties through

this challenging period

• Where appropriate, discussions are on-going to structure

rental payments during the current period of economic uncertainty to assist tenant businesses

• The majority of the portfolio forms essential services and

remains operational

• We have engaged with all tenants, 88% (by Gross Rental)
• f portfolio operating/partially operating

7%: Automotive exposure

• Koito & Gestamp – Both international

companies with strong cash flow positions

7%: Home improvement exposure

• Epwin –Listed company with strong

balance sheet

• Cassellie – Bathroom supply company

TENANT EXPOSURE^ (BY GROSS INCOME) BREAKDOWN: NON-ESSENTIAL (REDUCED OPERATIONS)

66% 19% 14%

Essential services (operational) Non-essential (operational) Non-essential (reduced operation)

^ Excludes vacant units

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• Independent valuer guidance suggests

no current impact on portfolio valuations as at year-end

• Limited transaction evidence since

year-end

• Any impact will be specific to sector and

fundamentals of individual assets

COVID-19

• The portfolio has been independently

valued up by £4.4 million for the year on a like-for-like basis

• Westpoint Peterborough was written

down £4.3 million following liquidation of Thomas Cook

• Industrial assets have performed well
• Portfolio remains resilient to current

environment supported by strong sector focus and tenant covenants

SUMMARY

VALUATIONS

Atlantic Leaf valuations remain conservative and robust

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WESTPOINT PETERBOROUGH

Management have considered three scenarios to ensure the most feasible outcome for the company:

Day 1 exit

1

Single

• ccupier

campaign

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Multi-let conversion

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• Following extensive market research, the multi-let approach is the

most attractive and feasible for the building and location

• The impacts of COVID-19 assessed to be minimal – effect to be

largely through refurb period

• Capital expenditure of £3.3 million
• Take-up assumptions of 3 – 12 months post refurb
• Headline rental projections of £15 – 18/sq ft
• Overbury Plc appointed as main contractor
• 10 new lettable zones ranging from 5 000 – 12 000 sq ft to target

the most active size requirements in the market

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Re-positioning strategy underway to create a quality multi-let office environment which will provide…

• A new furnished agile working/meeting

neighbourhood in ‘The Street’

• Fully glazed acoustic partitions to provide

self contained suites and natural light

• New gym facility with sports hall and showers
• Refurbished shared reception
• Large break out areas and business lounge
• Furnished plug-and-play space available
• Enhanced restaurant/café facility
• Lakeside terrace with seating
• Excellent car park ratio of 1:139 sq ft

(800 car parking spaces in total)

• Excellent WC provision

WESTPOINT REPOSITIONED

CLOSING & SUMMARY

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2020/2021

• Lower LTV levels
• Reduce debt

amortisations

• Improved risk profile

LTV and debt

• Re-development of

Peterborough

• Key rent reviews of

Booker

Asset management

• bjectives
• Key focus on rent

collection

• Tenant assistance

where possible

Cash flow

Atlantic Leaf in a strong cash position Very pleased to be able to distribute a final dividend

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This document is not, nor is it intended to be, any financial, investment, trading, tax, legal, accounting, actuarial or other professional advice (“advice”). Atlantic Leaf Properties Limited (“Atlantic Leaf”), their agents and affiliates, are dealing with you exclusively on the basis that you have sufficient knowledge, experience and/or professional financial, tax, legal and other advice to undertake your own assessment of the information. The views in this document are those of Atlantic Leaf and are subject to change, and Atlantic Leaf has no obligation to update its views or the information in this document. This document does not aim to notify you of any possible risks, direct or indirect, in undertaking a transaction and counterparties should ensure that they fully understand and obtain professional advice in respect of the terms of the transaction, including the relevant risk factors and any legal, tax and accounting consideration applicable to them, prior to transacting. The information contained in this publication has been obtained from sources that Atlantic Leaf believes are reliable, but we do not represent or warrant that it is accurate or complete. The information may be based on assumptions or market conditions and my change without notice. Market fluctuations and changes in exchange rates may have an effect on the value or price of investments. Past performance is not a guide to future investment performance. This document is confidential and the recipient may not distribute it to other persons without prior written consent of Atlantic Leaf. Distribution of this information may be restricted by law and persons who come into possession of this document should seek advice on and observe any restrictions. Neither Atlantic Leaf nor any of its affiliates or agents accepts any liability whatsoever for any direct, indirect or consequential damages or loss arising from any use of or reliance on this documentation or its contents. No proposal put forward in this document is intended to be binding upon Atlantic Leaf or any of its affiliates or agents whether by way of agreement, representation or otherwise. Atlantic Leaf will not be obliged to carry out any proposals or fulfill any terms mentioned herein. All terms hereby proposed are subject to, among other things, obtaining the necessary mandate appointment for Atlantic Leaf, completion of due diligence as required and execution of the documentation.

DISCLAIMER