ACE (ALSP) acquires and rents secondary assets largely in regional cities in the UK. HM government and city councils’ contribution to rental income accounted for 58% of rental revenues 1H20A vs. 59% FY19A. Major industrial and commercial companies account for the balance of revenues.
ACE collected 82% of revenues in the face of Covid at the end of March. Just £78k of deferrals have entered into CVAs. The remaining £672k of deferred rents are renegotiated and ALSP expects to collect this back log by Dec 2021. ACE traditionally looks for two types of core opportunities – 1) end of life tenancies to provide rental uplift via change of use and, in time, capital appreciation and 2) longer-term tenancies (weighted average life of tenancy agreements greater than 8 years) to underpin cash flows. ALSP announced in April 2020 that post Brexit (i.e., 31 Dec 2020) it would be looking for entire portfolios to acquire, signalling a potential nuancing of strategy.
The UK property market (commercial, retail and residential) slowed in terms of the rate at which transactions are completed post the Brexit vote and now Covid is slowing all bar fire sales – this is part of the property landscape for now. In our view, property portfolios (as opposed to individual properties) attractive to ALSP are more rather than less likely to become available, because of the extended Covid crisis.