Atlantic Leaf Properties primed for recovery
CEO Paul Leaf-Wright says Reit will weather Brexit, deal or not
Atlantic Leaf Properties, a UK-based real-estate investment trust (Reit) which has shifted its focus from retail centres to distribution warehouses, is primed to recover now that its shares have gained liquidity, CEO Paul Leaf-Wright said.
More institutions have invested in the Reit in 2019 as they start to put money back into UK property companies, he said in an interview. They have also concluded equity raises, increasing the liquidity of stock.
Online sales make up about 16% of UK retail, according to research by the Office for National Statistics. Increasing demand means more tenants need to rent space in distribution warehouses.
He said the company’s share price had improved significantly but it still “lagged its dual-listed peers in share price correction, which creates some opportunities for investors on the back of strong fundamentals”.
Leaf-Wright said Atlantic Leaf’s shift in strategy would help it weather the effects of Brexit it and when it occurs. Prime Minister Boris Johnson has been given until the end of January 2020 to deliver Brexit.
While all UK invested stocks have been hit Brexit uncertainty, Atlantic Leaf’s share price took a further hit as SA investors tended to buy into larger stocks, he said. Atlantic Leaf’s market capitalisation is a relatively small R2.9bn.
“In our view, the industrial and distribution warehouse sector in the UK remains attractive and continues to benefit from the growth being experienced in underlying rentals and general demand driven by increasing volumes in e-commerce and logistics,” said Leaf-Wright.
He said whether the UK left the EU with or without a deal, Atlantic Leaf would meet its targets.
UK-focused property stocks have been under pressure since the Brexit referendum of June 23. Uncertainty around the process of the UK leaving the EU has resulted in the value of commercial property in England, Scotland, Northern Ireland and Wales being eroded. The share price of JSE and UK listed Atlantic Leaf fell a third since the referendum. UK mall owner Intu Properties lost 91% and the owner of Covent Garden and Earl’s Court, Capital & Counties lost 39%.
“We believe owning last mile distribution centres in areas outside London is a good strategy. There is so much demand for distribution centre space and people will keep on spending online. High street shopping is more likely to come under pressure,” said Leaf-Wright.
He said trading liquidity continued to improve for Atlantic Leaf, and that over the past three weeks this had increased significantly, with more than R350m shares traded.
In a typical week, no more than R10m worth of Atlantic Leaf’s stock would trade, according to Leaf-Wright.
“This is as a result of some fund mandate changes which have necessitated portfolio rebalancing by some of our shareholders. While this activity has created share price pressure, it has also had a positive impact on liquidity. I think people are starting to understand what Atlantic Leaf Properties is about now. In the past some SA investors would avoid our stock as they didn’t think there was enough liquidity but now they are buying the stock, knowing there is liquidity,” said Leaf-Wright.
JSE-listed Vukile Property Fund is the largest shareholder in Atlantic Leaf with a stake of about 35%. Vukile CEO Laurence Rapp said in 2019 that the stake would be sold within a few months so that Vukile could focus on investing in SA and Spain.