21 November 2014

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

ALPHA REAL TRUST ANNOUNCES ITS HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014

Highlights include:

·     NAV per share 108.3p: 30 September 2014 (107.0p: 31 March 2014)

·     Adjusted earnings per share of 3.0p for the six months to 30 September 2014

·     Declaration of a dividend of 0.525p per share, expected to be paid on 19 December 2014

·     Capital recycling: continued strategic sales of non-core investments with a view to reinvesting in opportunities across the asset-backed spectrum that offer high risk-adjusted total returns

·     H2O: more than 15 new lease contracts signed in the calendar year to 30 September 2014

·     Continued earnings growth: income from core and non-core investments, both equity and high yield debt, continue to add to the Group's earnings position

·     94% of the Group's investment portfolio is in income producing investments in the UK and Europe

David Jeffreys, Chairman of Alpha Real Trust, commented:

"A broadly stable economic backdrop continues to support improved investor sentiment and a widening of the availability of liquidity and financing across the Company´s investment markets.

ART continues to see encouraging performance in its underlying investments and remains well positioned to capitalise on new opportunities across asset backed investment and debt markets in the UK and Europe.

Over the past six months, active asset management has been a dominant theme for both the Company's directly and indirectly held investments, with a series of asset level initiatives being completed to increase valuations. A further notable theme has been the recycling of capital from non-core investments, as evidenced in the Norwegian portfolio, paving the way for reinvestment into further high yielding opportunities that meet ART's investment criteria.

Looking ahead, we envisage that the Company's portfolio will continue to undergo a steady process of enhancement focussed around the twin strategy of investing in debt investments where its capital can benefit from a preferred risk position and asset investments and co-investments with substantial cash flows and the benefit of ARC´s management of the underlying assets." 

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 +44 (0) 1481 231 100

Gordon Smith, Joint Fund Manager, Alpha Real Trust +44 (0) 207 391 4700

Brad Bauman, Joint Fund Manager, Alpha Real Trust +44 (0) 207 391 4700

Panmure Gordon, Broker to the Company

Richard Gray / Andrew Potts +44 (0) 20 7886 2500

Notes to editors:

About Alpha Real Trust

Alpha Real Trust Limited targets investment opportunities across the asset-backed spectrum, including real estate operating companies, securities, services and other related businesses that offer high 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.

Trust summary and objective

Strategy

Alpha Real Trust Limited ("the Company" or "ART") targets investment opportunities across the asset-backed spectrum, including real estate operating companies, securities, services and other related businesses that offer high risk-adjusted total returns. 

ART currently focuses on high-yielding property debt and equity investments in Western Europe that benefit from underlying strong cash flows. The current portfolio mix, excluding sundry assets / liabilities, is as follows:

High yielding equity in property investments:          25.3%

High yielding debt:                                                   38.3%

Cash and freehold ground rents:                            23.7%

Other investments:                                                  12.7%

Dividends

The current intention of the Directors is to pay a dividend quarterly.

Listing

The Company's shares are traded on the Specialist Fund Market ("SFM") 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 focuses on the potential to enhance earnings and add value to the underlying assets, and on the risk profile of each investment within the capital structure to best deliver high-risk adjusted returns. 

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

Financial highlights

* The adjusted earnings per share includes adjustments for the effect of the fair value revaluation of investment properties and indirect property investments, the fair value movements on financial assets and deferred tax provisions: full analysis is provided in note 9 to the accounts.

Chairman's statement

I am pleased to present the Company's half year report for the six months ended 30 September 2014.

Within the investment markets in which the Company operates, there are continuing signs that investor demand for assets is broadening beyond core investment markets and asset types. This positive and improving outlook does not appear to have dampened despite recent hesitant macro-economic indicators from the eurozone. The combination of a deferral of anticipated interest rate rises in the UK and Europe and a perception of medium term exposure to inflationary pressures is helping to support a positive outlook for assets generally and real estate in particular.

A wider availability of finance, although still not at the levels reached in 2007, indicates an acceptance by an increasing number of lenders that asset backed risks have normalised. This is seen in improved margins for borrowers and an acceptance of higher LTVs by lenders. This bodes well for ART´s equity investments whose values and liquidity are further underpinned, and for the Company's debt investments which have increasingly protected exit positions upon refinancing.

The Company´s earnings continue to increase as a consequence of ART's investment policy of targeting investments and allocation of capital to income focused investments. The Company has maintained its policy of paying quarterly dividends during the period and I am pleased to announce that the Company declares a dividend for the quarter of 0.525p per share which is expected to be paid on 19 December 2014.

Over the reporting period, underlying asset value increases have been reported within the Company's Industrial Multi Property Trust plc ("IMPT") and Alpha UK Real Estate Fund ("AURE") investments in the UK and at the H2O shopping centre in Spain. This reflects the value adding management initiatives being implemented and increasing investor demand for broader real estate opportunities that are underpinned by strong property fundamentals.

ART´s debt investments continue to perform strongly. Underlying asset prices have benefited from an improvement in the wider investment market meaning that loan to value ratios have either improved or are more firmly supported as a result of greater liquidity and debt availability. It is pleasing to note that the broadening of the debt market supply has meant that ART's debt investments made during the past couple of years are in many cases now yielding market beating returns.

Recycling of capital from mature investments to investments that offer scope for higher risk adjusted returns has continued. To this end, post period end, there have been further strategic asset sales in the Company´s Europip investment in Norway where non-core assets have been sold which will allow further amortisation of ART's high yielding loan to Europip in addition to amortising the Norwegian bank loan facility.

Within the Company's directly and indirectly held investments, notable active management successes are evident. At the H2O investment in Spain, more than 15 new leases have been signed in the calendar year to September 2014. Aided by continued asset management successes in signing new anchor tenants and upgrading the physical space, such as the recent installation of a new pedestrian bridge walkway to connect with an adjacent retail park, footfall and sales are also increasing at a greater rate than our peers.

The Company´s debt and equity investments in IMPT have benefited from an active period. Following the announcement of its change of name to better reflect the nature of its portfolio of predominantly industrial assets, IMPT reported that it had gained approval for a transfer of its ordinary shares to the SFM of the London Stock Exchange. At an asset level, heightened leasing activity was reported with forty six new leases signed as announced in its latest half year report.

As announced by the Company in July 2014, following receipt of proceeds from the disposal of its investment in Active Commercial Estates PLC ("ACE"), a special dividend of 1.0623p per share was paid to all holders of ART A shares. No future proceeds from ACE are anticipated. ACE was acquired as part of the Property Investment Portfolio plc ("PIP") portfolio purchase in 2012. ART ascribed zero value to ACE at that time and it was agreed that any realized value from these investments is to be passed solely to holders of A shares (being former shareholders of PIP who have not converted their A Shares to ordinary shares in ART).

During the period, further arbitration hearings have been held as part of the process that the Company initiated to protect its Galaxia investment in India. With further arbitration submissions made during the reporting period, a verdict is anticipated in late December 2014.

The Company is continuously evaluating new investment opportunities. ART´s investment policy to target both asset backed investments and investment in high yield debt markets will allow it to continue to capitalise on new investment opportunities and optimise returns. The liquid reserves of the Company mean that it is well placed to secure suitable opportunities.

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 preferred capital positions. For the Company´s investments that sit outside the core portfolio of equity investments and preferred loan facilities, a managed exit is anticipated over a phased period in order to recycle capital into new investment opportunities.

The Company is actively seeking to increase the yield and underlying capital value of its portfolio by enhanced performance from existing investments, asset management initiatives and by additional investment, funded from its cash and liquid holdings, strong cashflow and capital recycling.

A detailed summary of the Company's investments is contained within the investment review section.

Results and dividends

Dividends

Adjusted earnings for the period show a profit after interest and tax of £2.1 million and adjusted earnings per share for the period of 3.0 pence (see note 9 of the financial statements). This compares with adjusted earnings per share of 2.2 pence for the same period in 2013. The increase is mainly the result of the incremental income received from the Company's investments in IMPT and AURE together with lower costs incurred for the Galaxia investment arbitration proceedings.

In line with its aim to pay dividends quarterly, the Board announces a dividend of 0.525 pence per share which is expected to be paid on 19 December 2014 (Ex dividend date 4 December 2014 and record date 5 December 2014).

The dividends paid and declared for the twelve months to 30 September 2014 total 2.1 pence per share, representing a dividend yield of 3.9% on average share price over the period and 1.9% on current net asset value.

The net asset value per share at 30 September 2014 is 108.3 pence (31 March 2014: 107.0 pence per share) (see note 10 of the financial statements).

Financing

Some of ART's underlying investments are part funded through non-recourse loan facilities with external debt providers.

For the H2O shopping centre, bank borrowings now stand at €72.3 million (£56.5 million), which, following repayments, represents a reduction of €2.7 million from the initial €75.0 million borrowed. The bank facilities do not have any loan to value covenants and there is sufficient headroom in relation to the interest cover ratio covenants. There continues to be a substantial surplus of rental income in excess of finance charges.

The Europip portfolio of Norwegian commercial real estate has senior bank borrowings as at 30 September 2014 of £22.6 million (NOK 237 million); which, following repayments, represents a reduction of NOK 103 million (30%) from the initial NOK 340 million borrowed in November 2012.

Further details of individual asset financing can be found under the individual investment review sections later in this report.

Foreign currency

The Board monitors foreign exchange exposures and considers hedging where appropriate. All foreign currency balances have been translated at the period-end rates of £1:€1.280, £1:NOK10.478 and £1:INR99.840.

Share buyback

On 13 August 2014, the Company published a circular giving notice of its Annual General Meeting on 5 September 2014. The proposed resolutions, including those in relation to the Takeover Panel Waiver and the Share Purchase Authority were approved by shareholders. This allows the Company to acquire up to 24.99% of the Voting Share Capital during the period expiring on the earlier of (i) the conclusion of the Annual General Meeting of the Company in 2016 and (ii) 4 March 2016.

Summary

A broadly stable economic backdrop continues to support improved investor sentiment and a widening of the availability of liquidity and financing across the Company´s investment markets.

ART continues to see encouraging performance in its underlying investments and remains well positioned to capitalise on new opportunities across asset backed investment and debt markets in the UK and Europe.

Over the past six months, active asset management has been a dominant theme for both the Company's directly and indirectly held investments, with a series of asset level initiatives being completed to increase valuations. A further notable theme has been the recycling of capital from non-core investments, as evidenced in the Norwegian portfolio, paving the way for reinvestment into further high yielding opportunities that meet ART's investment criteria.

Looking ahead, we envisage that the Company's portfolio will continue to undergo a steady process of enhancement focussed around the twin strategy of investing in debt investments where its capital can benefit from a preferred risk position and asset investments and co-investments with substantial cash flows and the benefit of ARC´s management of the underlying assets.

David Jeffreys
Chairman

20 November 2014

Investment review

Portfolio Summary

¹ Percentage share shown based on NAV excluding parent company's sundry assets/liabilities

² Including accrued interest at the balance sheet date

³ Annual coupon plus redemption premium annualised

⁴ Annual coupon

⁵ Over 12 months to 30 September 2014

⁶ Annualised six month income return; post tax

⁷ Return over the average investment during the ownership period

High yielding debt

Market overview

During the reporting period, economic performance across the Company´s investment markets were broadly positive but with significant variations between markets. The UK economy appears to be returning to strong growth while in the eurozone as a whole, GDP growth and other economic growth indicators remained weak. Despite an intermittent bounce in optimism that has since moderated, the outlook for European economic recovery has not changed considerably since the beginning of the year and low growth rates remain the base case for many forecasters. The eurozone has however witnessed falling risk premiums, including a steady reduction in Spanish bond yields. In terms of the real estate market, investor outlook for many countries across Europe remains cautiously optimistic.

Commercial real estate lending continues to stabilise and improve, again with varying degrees of acceleration between the UK and many eurozone countries. In general, there is a greater supply of debt finance and a more tolerant view of what is acceptable risk than was the case six to twelve months ago. There continues to be an increasingly diversified supply of active lenders, with the previous dominance of traditional banks being supplemented and, in part, replaced by the entry of non-bank financial institutions, such as insurance companies, debt funds and private equity. This is providing increasing competition for the Company in the high yield debt market and downward pressure on coupons.

Whilst there is increased competition within the lending market, it is expected to remain less competitive for some time for smaller transactions in non-prime sectors where a strong knowledge of the underlying assets is required. ART remains well positioned to take advantage of further debt investment opportunities as they are identified. The acquisition and refinancing needs of many real estate investment vehicles throughout Europe remain high and opportunities for lenders with real estate debt expertise continue to remain attractive.

The increased liquidity in debt markets and number of new lenders entering the market helps underwrite exit assumptions for ART's current debt investments whilst also contributing to benefit the value of the Company´s equity investment portfolio.

Alpha UK Real Estate Fund plc

² Including accrued interest at the balance sheet date

³ Annual coupon plus redemption premium annualised

⁴ Annual coupon

The Company has invested a total of £12.7 million in AURE by way of two loan agreements. AURE is an Irish resident open ended investment company listed on the Irish Stock Exchange which is invested in a portfolio of UK commercial property (16 properties comprising industrial, office and retail properties valued at £43.7 million as at 30 June 2014).  ART's investment in AURE aims to deliver a high and stable income yield, supported by a diversified portfolio of UK real estate assets.

ART has provided two loans to AURE, both of which mature in November 2014:

·     a £7.5 million three-year convertible loan (granted in 2011) which earns a coupon of 6% per annum and a 14% redemption premium if not converted, providing a minimum return of 10.7% per annum. The balance, including rolled up redemption premium, at 30 September 2014 is £8.9 million.

·     a £6 million mezzanine loan paying a coupon of 9% per annum; the loan was granted in September 2013, contemporaneous with a refinancing of the existing AURE senior debt for a new five year senior debt facility. Following repayments after asset sales the balance at 30 September 2014 is £3.8 million.

Based upon the value of the underlying AURE portfolio of £43.7 million as at 30 June 2014 and the balance of the bank debt of £18 million as at 30 September 2014, the senior lenders' loan to value ratio is 41.2%. ART´s loan positions sit between 41.2% and 70.3% loan to value.

Post period end, ART has agreed to refinance its loans to AURE, which mature in November 2014. New loan documentation is currently being prepared. As part of a larger refinancing of AURE's loan facilities, in which £2.3 million will be repaid to ART, ART will provide a new mezzanine loan facility of £10.3 million for a two year term expiring November 2016. The loan will have a coupon of 9% per annum plus an upfront fee of 1% and an exit fee of 1%; additionally, a 2% fee will apply should the facility not be repaid within the first year.

The following highlights were included in the recent AURE factsheet for the quarter ended 30 June 2014 (published in September 2014):

·      Valuation uplift - as a result of various value-add initiatives and leasing activity, on a like-for-like basis after sales, the net increase in AURE portfolio valuation over the quarter was £3.5m. The portfolio valuation has increased from £40.7 million as at 31 March 2014 to £43.7 million as at 30 June 2014.

·      New Lettings - two new lettings during the period have contributed an additional £370,000 of income per annum and resulted in a significant reduction in the overall void level within the portfolio.

·      Benchmark Ranking - significant outperformance of the IPD Benchmark from the portfolio has resulted in AURE now being the 11th best performing fund out of 229 peer funds.

ARC is the investment manager of AURE. ARC is pursuing value enhancement opportunities in the AURE portfolio assets to increase net income and improve the profile of this income through lease extensions, renewals and reducing unrecoverable void costs.

Industrial Multi Property Trust plc ("IMPT") (previously named Alpha UK Multi Property Trust plc)

² Including accrued interest at the balance sheet date

⁴ Annual coupon

Further to its equity investment (described below) ART has provided a loan to IMPT.

As part of the refinancing of IMPT in December 2013, ART provided a new subordinated debt facility of £11.5 million. The loan has a five-year term, expiring in December 2018, and earns a coupon of 15% per annum.

The proceeds of the new senior, mezzanine and subordinated facilities were applied to recapitalise IMPT, repay the previous debt and to provide for IMPT's ongoing working capital requirements.

Based on the value of the IMPT portfolio as at 30 June 2014 of £78.1 million, and the balance of the bank and mezzanine finance of £53.1 million as at 30 September 2014, this reflects a loan to value ratio of 68.0%. ART's subordinated loan sits between 68.0% and 83.0% loan to value.

European Property Investment Portfolio plc ("Europip")

² Including accrued interest at the balance sheet date

⁴ Annual coupon

Further to the equity investment (described below) ART has provided mezzanine finance to Europip. ART has a charge over Europip´s portfolio of commercial assets ranking after the senior lender's charge over the Norway portfolio and Mosaic investments. In addition, ART has the right to take a charge over a single unencumbered property within the Norway portfolio, which is outside the senior lender's security pool of assets.

Post period end, ART has agreed to extend its current loan facility to Europip, amounting to £4.3 million (following a repayment made in October 2014), for a period of two years, expiring in November 2016. Documentation is currently being prepared. The new loan will be on substantially the same terms as the current facility and will have a coupon of 9% per annum plus an upfront fee of 1% and an exit fee of 1%; additionally, a 2% fee will apply should the facility not be repaid within 12 months.

As at 30 September 2014, the value of the portfolio of seven assets was £38.1 million (NOK 399.3 million) based on the 30 June 2014 valuation, and the balance of the bank debt was £22.6 million (NOK 237 million); reflecting a LTV ratio of 59.4%. As at 30 September 2014, including the property which is outside the senior lender's security pool of assets, ART´s loan position sits between 59.4% and 72.4% loan to value. Post period end, the sale of the Pancoveien asset has completed, and the net proceeds have been used to further amortise the bank facility and the ART loan to Europip.

High yielding equity in property investments

Commercial property market overview

The UK real estate market recovery is ahead of many eurozone countries and has been enjoying a virtuous cycle; with low interest rates supporting improving yields and in turn higher value, and with an increasingly stable economic recovery implying greater potential for rental growth. Across the eurozone the economic position is more mixed, but property investment volumes and pricing have recovered strongly across many countries and sectors as investors increasingly take the view that the substantial value lost since 2007 will be recaptured.

Over the past few years, it has been the "weight of money" that has been driving investor demand and against a backdrop of economic uncertainty much of this demand did not apply beyond investment in prime assets, regions and sectors. Increasingly however, there are signs that a narrow investor focus on prime assets is giving way to an objective analysis of strengths and weakness of broader commercial property and asset backed investments. An acceptance of a stabilisation of asset values in broader markets has led to investors seeking higher yielding assets with the confidence that total returns in these markets are likely to outstrip returns from low yielding prime assets, particularly on a risk-adjusted basis. This bodes well for ART´s portfolio.

Demand from occupiers across the Company´s investment markets is showing signs of improvement. This is evident in ART´s UK investments such as IMPT and AURE and at the H2O shopping centre in Spain. Whilst occupier demand and leasing activity has increased, rental growth remains subdued outside prime sectors. However, value increases witnessed over a broader range of assets, suggest that investors are of the opinion that rental growth prospects are improving.

The change in investor sentiment towards the Spanish real estate market has continued but the market continues to remain polarised. Investment activity in the prime asset category has increased and pricing has rebounded as such assets are being more closely benchmarked against prime assets in other markets where a recovery is more advanced. In a number of markets this has progressed to edge-of-prime assets also. Activity in the distressed asset segment of the market has also increased as investors seek to purchase at deep discounts, often wholly through equity. This increase in investor liquidity is now expected to spread to core assets in the centre ground, which is expected to benefit the Company´s H2O investment.

ART continues to remain focused on investments that offer potential to deliver high risk adjusted returns via value enhancement through active asset management, improvement of net rental income, selective deployment of capital expenditure and the ability to undertake strategic sales when the achievable price is accretive to returns.

ART benefits from the depth of experience, strength and size of the Investment Manager's real estate business which has a broad network of offices and funds under management throughout Europe. This enables the Company to identify a number of attractive opportunities.

Industrial Multi Property Trust plc

ART has 19% of IMPT´s ordinary share capital, representing £0.8 million in equity value based on IMPT's share price, as at 30 September 2014.

IMPT is a LSE listed UK property fund with a regionally diversified portfolio of over 50 multi-let light industrial and office properties valued at £78.1 million (at 30 June 2014).

The following highlights were included in IMPT's half year results for the six months ended 30 June 2014 (published August 2014):

·      New lettings: 46 new lettings and 12 lease renewals achieved during the six months to 30 June 2014, (represents 10.8% of the estimated rental value of the total portfolio based on the final achievable annual rent including stepped rent).

·      Additional rent: £0.4 million per annum of additional passing rent is contracted to start during the twelve months to 30 June 2015, benefitting cash flow.

·      Occupancy improved: the occupancy level by estimated rental value stood at 86.2% as at 30 June 2014 compared with 84.6% as at 31 December 2013.

·      Portfolio valuation increased: the IMPT property portfolio was valued at £78.1 million as at 30 June 2014 (£77.5 million as at 31 December 2013), an increase of £0.6 million (0.8%) during the six month period.

ARC is the investment manager of IMPT. ARC is pursuing value enhancement opportunities in IMPT portfolio assets to increase net income and improve the profile of this income through lease extensions, renewals and reducing unrecoverable void costs.

Cambourne Business Park, Phase 1000, Cambridge

⁵ Over 12 months to 30 September 2014

The Company has invested £1.2 million in a joint venture that owns Phase 1000 of Cambourne Business Park. The property consists of three Grade A specification modern office buildings constructed in 1999 and located in the town of Cambourne, approximately 8 miles west of Cambridge city centre. The property comprises 9,600 square metres of lettable area, is self-contained and has 475 car parking spaces. Phase 1000 is situated at the front of the business park with good access and visibility.

Phase 1000 is a high quality asset, fully let to Netcracker Technology EMEA Ltd, Citrix Systems and Regus. The property has open B1 Business user planning permission and has potential value-add opportunities.

Phase 1000 was purchased in a joint venture partnership with a major overseas investor for £23.0 million including acquisition costs. Bank finance of £10.8 million was obtained. ART´s equity contribution of £1.2 million, which represents 10% of the total equity commitment, was invested into a newly formed joint venture entity, a subsidiary of which holds the property. The property was acquired for an 8.5% net initial yield and is currently delivering an annualised income return of 12.9% as at 30 September 2014.

ARC is the investment manager to the joint venture owning the Cambourne property and continues to pursue opportunities to add value to the investment.

European Property Investment Portfolio plc ("Europip")

⁵ Over 12 months to 30 September 2014

As part of the Property Investment Portfolio transaction, ART acquired a 47% stake in Europip (shares are non-voting), an Isle of Man domiciled open ended investment company. Europip invests in a directly owned commercial property portfolio in Norway and holds a minority interest in Mosaic Property CEE Limited ("Mosaic"), a Central European focused commercial property fund.

The Norwegian portfolio of directly owned commercial properties is concentrated around Oslo. The value of the seven asset portfolio is NOK 399.3 million (£38.1 million) based on the 30 June 2014 valuation with a passing rental level of NOK 35.7 million (£3.4 million) as at 30 September 2014. Post period end, one of the assets was sold in line with the current valuation.

The Norwegian portfolio´s occupancy rate was 97% by rental value and the weighted average lease length was 4.4 years as at 30 September 2014.

In November 2012, Europip refinanced the portfolio of Norwegian real estate with a senior debt facility of £32.4 million (NOK 340 million) arranged in two tranches, one of which has subsequently been fully repaid.

The five year senior debt facility currently stands at £22.6 million (NOK 237 million), at a 2.25% p.a. margin (reduced from the initial rate of 2.4% p.a.) over NIBOR. This facility is to be amortised at circa £1.0 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. £20.0 million (NOK 210 million) of this facility has been fixed for five years at a NIBOR rate of 2.49% p.a.

A subsidiary of ARC, Alpha Real Property Investment Advisers LLP ("ARPIA") is the investment manager for the Norway portfolio and Malling & Co. is responsible for the day to day property management.

H2O Shopping Centre, Madrid

⁵ Over 12 months to 30 September 2014

H2O was opened in June 2007 and built to a high standard providing shopping, restaurants and leisure around a central theme of landscaped gardens and an artificial lake. H2O has a gross lettable area of 51,825 square metres comprising 118 retail units. In addition to a multiplex cinema, supermarket (let to leading Spanish supermarket operator Mercadona) and restaurants it has a large fashion retailer base, including some of the strongest international fashion brands, such as Nike, Zara, Mango, Cortefiel, H&M, C&A and Massimo Dutti.

The H2O shopping centre was acquired in April 2010 and to date ART has committed €5.3 million in capital improvements.

The asset management highlights are as follows:

·      Centre occupancy: 89.1% by rental value (76.8% by area) as at 30 September 2014.

·      Footfall: the year to date 2014 visitor numbers at H2O continue to outperform its peers with footfall continuing to be assisted by the presence of the new Nike destination factory store opened in 2013, the improved foodcourt area and innovative  marketing events. It is noteworthy that visitor numbers in some recent months have been at record levels in H2O's history.

·      Lease length: weighted average lease length of 10.4 years to expiry and 2.2 years to next break (as at 30 September 2014).

·      Leasing update: more than 15 new leases signed in the calendar year to 30 September 2014.

·      Lake terrace: the new lakeside "fun boulevard" terrace kiosks are fully let to café/bar operators and recent lettings of the lake restaurant area to two leading restaurant brands reinforce the shopping centre's destination status.

·      Access improvements: associated with the recent external restaurant lettings, a new pedestrian bridge over the H2O lake has been completed, providing greater connectivity and footfall to and from the adjoining retail park.

·      Marketing: innovative events continue to be carried out to attract new visitors, build customer loyalty and increase dwell time; an extended kid's summer camp has been held during recent months and the exclusive Lego themed play area continues to perform strongly.

·      Cost control: an active cost management exercise continues to be implemented to reduce the centre´s operating costs and improve the quality and efficiency of services.

Cash and freehold ground rents

Cash balances

As at 30 September 2014, the Company had cash balances of £2.9 million.

Freehold Income Authorised Fund ("FIAF")

⁶ Annualised six month income return; post tax

The Company has invested a total of £15.3 million as at 30 September 2014 in FIAF, an open-ended fund that invests in UK freehold ground rents with a net asset value of £220.8 million as at 30 September 2014.

The investment is expected to continue to provide a better return than currently earned on the Company's cash balances. FIAF operates a monthly dealing facility to provide liquidity.

The following highlights were reported in the FIAF fact sheet as at 30 September 2014 (published in October 2014):

·      FIAF continues its unbroken 21 year track record of positive inflation beating returns, generating a total return for the year to 31 March 2014 of 6.94% (based on the bid price of accumulation shares), which included an income distribution for the year of 4.71%.

·      80% of FIAF's freeholds have a form of inflation protection through periodic uplifts linked to Retail Price Index, property values or fixed uplifts.

·      As of 13 October 2014 a 5% dilution levy will be applied to all subscriptions into the Fund.

·      No debt had been drawn and cash reserves are £43.8 million as at 30 September 2014.

Other investments

Healthcare & Leisure Property Limited ("HLP")

⁷ Return over the average investment during the ownership period

Healthcare & Leisure Property Limited has invested in companies operating in the hotel, care home, house building and leisure sectors throughout the UK. HLP´s investments are predominantly un-geared.

HLP is managed by Albion Ventures LLP, a specialised UK venture capital manager. No new investments are being made by HLP.

ART currently has £2.3 million invested in HLP as at 30 September 2014. HLP subsequently holds minority stakes in the underlying investments.

ART continues to receive income from its investment while HLP´s underlying assets are sold. HLP has delivered a return of 7.4% over the average investment during ART's ownership period, and ART will continue to benefit from its share of net proceeds from the sales of the underlying assets as they are progressed.

Business Centre Properties Limited ("BCP")

BCP is a business centre fund that owns 2 serviced office properties in the UK, as at 30 September 2014, each operated by Citibase plc. BCP is an Isle of Man registered Open-Ended Investment Company providing investors with exposure to the serviced office sector. BCP is currently in the process of realising assets and returning capital to its investors.

ART's equity interest is 95% of BCP share capital. BCP´s net asset value is concentrated in the Stratford business centre property (which is ungeared) and its liquid cash reserves.

Events after the balance sheet date:

·      The Reading property, held in a subsidiary, was sold. Proceeds were applied to partially repay the loan with Bank of Scotland.

·      The Stratford property is under offer, with completion expected in December 2014.

Galaxia, National Capital Region, NOIDA

ART invested INR 450 million (£4.5 million) in the Galaxia project, a development site extending to 11.2 acres which enjoys SEZ status with the potential to develop 1.2 million square feet. Galaxia is located in NOIDA, an established, well planned suburb of Delhi that continues to benefit from new infrastructure projects and is one of the principal office micro-markets in India. The Company has a 50% shareholding in the SPV which controls the Galaxia site. There are no bank borrowings on the asset.

On 2 February 2011, ART recommenced arbitration proceedings against its development partner Logix Group in order to protect its Galaxia investment.

Both sides presented further summary closing submissions during the reporting period and the arbitration panel is expected to announce a verdict by the end of December 2014.

Notwithstanding the above, the Company is continuing to explore avenues for a sale of the development site.

Summary

Over the past six months, despite mixed economic indicators in some of the Company's investment markets, real estate investment volumes and values have continued to recover. A more confident investor outlook has led to an increase in transactions and price rises spreading from prime assets and markets to broader geographic markets and asset types.

The Company continues to implement its active management policy and this has seen encouraging results in both directly and indirectly held investments throughout the UK and European portfolio.

ART remains active in both its target investment sectors of high yield debt and equity in assets with high risk adjusted returns typically when there is scope to add value through active asset management and/or the restructuring or recapitalisation of property investment vehicles.

The Company continues to source new investment opportunities with strong cash-flows and/or managed risk profiles that are accretive to its earnings position. ART remains well placed to find value for its investors and to capitalise on new investment opportunities across asset backed investment and debt markets in the UK and Europe.

Brad Bauman and Gordon Smith

For and on behalf of the Investment Manager

20 November 2014

Principal risks and uncertainties

The principal risks and uncertainties facing the ART Group (the "Group") can be outlined as follows:

·      Rental income, fair value of investment properties (directly or indirectly held) and fair value of the Group's equity investments are affected, together with other factors, by general economic conditions and/or by the political and economic climate of the jurisdictions in which the Group's investment properties are located.

·      The Group's loan investments are exposed to credit risk which arise by the potential failure of the Group's counter parties to discharge their obligations when falling due; this could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date; the Group receives regular updates from the relevant investment manager as to the performance of the underlying investments and assesses its credit risk as a result.

The Board believes that the above principal risks and uncertainties, which are discussed more extensively in the annual report for the year ended 31 March 2014, would be equally applicable to the remaining six month period of the current financial year.

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

·      the condensed financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; and

·      the condensed financial statements meet the requirements of an interim management report (as defined below), and includes a fair review of the information required by:

a)     DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six month period of the financial year; and their impact on the interim condensed financial statements; and a description of the principal risks and uncertainties of the remaining six months of the year; and

b)     DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six month period of the current financial year and that have materially affected the financial position or performance of the Company during the period.

The Directors of Alpha Real Trust Limited are listed below and have been Directors throughout the period.

By order of the Board

David Jeffreys
Chairman

20 November 2014

Independent review report

To Alpha Real Trust Limited

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2014 which comprises the consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the Directors.  The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review. 

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months to 30 September 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO Limited

Chartered Accountants

Place du Pré

Rue du Pré

St Peter Port

Guernsey

20 November 2014

Condensed consolidated statement of comprehensive income

The total column of this statement represents the Group's income statement, prepared in accordance with IFRS. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. The accompanying notes form an integral part of this statement.

Condensed consolidated balance sheet

The financial statements were approved by the Board of Directors and authorised for issue on 20 November 2014. They were signed on its behalf by David Jeffreys and Serena Tremlett.

David Jeffreys                                                                                                      Serena Tremlett

Director                                                                                                                 Director

The accompanying notes form an integral part of this statement.

Condensed consolidated cash flow statement

The accompanying notes form an integral part of this statement

Condensed consolidated statement of changes in equity

The accompanying notes form an integral part of this statement