TIDMAEWU
RNS Number : 5700G
AEW UK REIT PLC
20 July 2023
20 July 2023
AEW UK REIT plc
NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) ("AEWU" or the "Company"), which
directly owns a value-focused portfolio of 33 UK commercial
property assets, announces its unaudited Net Asset Value ("NAV") as
at 30 June 2023 and interim dividend for the three-month period
ended 30 June 2023.
Highlights
-- NAV of GBP169.56 million or 107.03 pence per share as at 30
June 2023 (31 March 2023: GBP167.10 million or 105.48 pence per
share).
-- NAV total return of 3.36% for the quarter (31 March 2023 quarter: 2.42%).
-- 0.74% like-for-like valuation increase for the quarter (31
March 2023 quarter decrease: 0.77%).
-- EPRA earnings per share ("EPRA EPS") for the quarter of 1.75
pence (31 March 2023 quarter: 1.77 pence).
-- Interim dividend of 2.00 pence per share for the three months
ended 30 June 2023, paid for 31 consecutive quarters and in line
with the targeted annual dividend of 8.00 pence per share.
-- Loan to NAV ratio at the quarter end was 35.39% (31 March
2023: 35.91%). Loan to GAV ratio at the quarter end was 30.54% (31
March 2023: 28.06%). Significant headroom remains on all loan
covenants.
-- Company continues to benefit from a low fixed cost of debt of 2.959% until May 2027.
-- Disposal of an industrial holding at Deeside Industrial
Estate for GBP4.75 million, reflecting an 8.0% premium to the 31
March 2023 valuation.
-- Disposal of an industrial holding at Lockwood Court, Leeds,
for GBP9.65 million, reflecting a 5.9% NIY and a 3.8% premium to
the 31 March 2023 valuation .
-- Disposal of an industrial holding at Euroway Trading Estate,
Bradford, for GBP6.45 million, reflecting a 6.8% NIY and a 26.5%
premium to the 31 March 2023 valuation .
-- Post quarter end, purchase of a car park asset in central
York for GBP10.02m, reflecting a NIY of 9.3%.
-- Cash available for deployment as at 30 June 2023 of GBP25.0m,
reduced to circa GBP15.0m following the post quarter end
acquisition of York.
-- 14 asset management transactions completed during the quarter.
-- 99% of rental income collected, excluding the current rent
quarter, consistent with each quarter since the onset of the COVID
pandemic in March 2020.
Laura Elkin, Portfolio Manager, AEW UK REIT, commented:
"We are pleased to report continued NAV growth this quarter,
demonstrating the resilience of the Company's strategy, even during
times of prolonged economic uncertainty. This has been driven by a
like-for-like valuation uplift of 0.74% in the Company's portfolio,
following the completion of key asset management transactions and
the profitable sale of three industrial assets at prices exceeding
prior quarter-end valuations. These sales are also expected to be
accretive to earnings, once the capital is redeployed, as yields
achieved are notably lower than those observed in the Company's
investment pipeline.
The Company continues to make progress in our aim to return
towards full dividend cover. Earnings were however, negatively
impacted by 0.09 pence per share during the quarter due to an
increase in bad debt provision for arrears relating to Wilko Retail
at Union Street in Bristol after the tenant appointed CBRE to
advise on its portfolio restructuring in June. Despite the route
forward being as yet unclear, we have taken the prudent decision to
provide for a majority of the outstanding arrears in the quarter
but will continue to pursue the tenant's arrears using all
appropriate means.
The Company has now committed to pay its market-leading dividend
of 2.00 pence per share per quarter for 31 consecutive quarters,
with EPS cover from EPRA earnings since IPO amounting to 94%. The
remainder of the Company's dividend payments have been funded by
the significant sum of profit generated on the NAV accretive sale
of assets. Further gains in EPS are expected in the coming quarters
as high yielding purchases are completed and the ongoing programme
of new lettings provides a boost to income streams."
Valuation movement
As at 30 June 2023, the Company owned investment properties with
a fair value of GBP196.47 million. The like-for-like valuation
increase for the quarter of GBP1.45 million (0.74%) is broken down
as follows by sector:
Sector Valuation 30 June Like-for-like valuation
2023 movement for the
quarter
GBP million % of portfolio GBP million %
------------ --------------- ---------------- --------
Industrial 77.29 39.34 1.49 1.97
------------ --------------- ---------------- --------
Retail
Warehouses 44.60 22.70 0.70 1.59
------------ --------------- ---------------- --------
High
Street
Retail 39.32 20.01 (0.58) (1.45)
------------ --------------- ---------------- --------
Other 20.00 10.18 (0.12) (0.62)
------------ --------------- ---------------- --------
Office 15.26 7.77 (0.04) (0.26)
------------ --------------- ---------------- --------
Total 196.47 100.00 1.45 0.74*
------------ --------------- ---------------- --------
* This is the overall weighted average like-for-like valuation
increase of the portfolio.
Portfolio Manager's Review
This quarter has seen the culmination of a number of asset
management initiatives, highlighting the robust nature of the
Company's assets and our ability to actively manage them throughout
market cycles. Asset management transactions were completed across
all major property sectors, but with a higher concentration in
retail, a sector that we have favoured for a number of recent
purchases. We completed transactions during the quarter in high
street retail, with lettings to Specsavers and Dimension Vintage,
and in retail warehousing, with lettings to B&Q, Boots, Oak
Furnitureland and Universal Consumer Products.
At the Company's office asset at Queen Square, Bristol, rental
growth was achieved during the quarter following the settlement of
the 2021 rent review with tenant, Turley. The completion of this
review follows the recent settlement of two other outstanding rent
reviews at the building, the outcomes of which were not previously
announced, so as not to compromise ongoing negotiations. The
combined outcome of this activity sees rental income from these
tenants increase by 32%.
Our ability to drive performance through asset management is
particularly pertinent in trying times. During the quarter, the
Company's tenant Mecca Bingo at the Railway Station Retail Park in
Dewsbury announced the closure of the hall, despite having been
well progressed in a lease renewal discussion with the Company.
Although this is disappointing, we are buoyed by the strong level
of interest we have received in the unit from various well-known
national retail and leisure occupiers. The lease to Mecca Bingo
will end on 25 December 2023. We hope to be able to agree terms for
a new letting prior to expiry.
The Company also sold three industrial assets at a premium to
their latest valuations. Our portfolio has gradually been reducing
its industrial exposure over the past 18 months, and although this
may not continue at the same rate going forward, it has allowed us
to crystallise profits made in the sector and concurrently recycle
the resulting capital into high yielding assets in our pipeline,
mostly within other market sectors. We believe that this ability to
move nimbly between property sectors in order to extract maximum
value from our portfolio is a key strength of our strategy.
With this in mind, we were pleased to demonstrate in our recent
Annual Report that, over the 12-month period to 31 March 2023, the
AEWU portfolio had delivered outperformance against the MSCI index
in all of the main property sectors. This again demonstrates the
varied abilities of our team and we continue to make progress in
our business plans across all property sectors.
Net Asset Value
The Company's unaudited NAV at 30 June 2023 was GBP169.56
million, or 107.03 pence per share. This reflects an increase of
1.47% compared with the NAV per share at 31 March 2023. The
Company's NAV total return, which includes the interim dividend of
2.00 pence per share for the period from 1 January 2023 to 31 March
2023, was 3.36% for the three-month period ended 30 June 2023.
Pence per GBP million
share
NAV at 1 April 2023 105.48 167.10
Gain on sale of investments 1.04 1.65
Portfolio acquisition costs (0.02) (0.03)
Capital expenditure (0.21) (0.33)
Valuation change in property portfolio 0.99 1.57
Income earned for the period 3.05 4.83
Expenses and net finance costs for
the period (1.30) (2.06)
Interim dividend paid (2.00) (3.17)
NAV at 30 June 2023 107.03 169.56
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards. It incorporates
the independent portfolio valuation at 30 June 2023 and income for
the period, but does not include a provision for the interim
dividend declared for the three-month period to 30 June 2023.
Share price and Discount
The closing ordinary share price at 30 June 2023 was 92.7p. This
represents a discount to the NAV per share of 13.39% and an
increase of 0.65% compared with the share price of 92.1p at 31
March 2023. The Company's share price total return, which includes
the interim dividend of 2.00 pence per share for the period from 1
January 2023 to 31 March 2023, was 2.82% for the three-month period
ended 30 June 2023.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence
per share for the period from 1 April 2023 to 30 June 2023. The
dividend payment will be made on 31 August 2023 to shareholders on
the register as at 28 July 2023. The ex-dividend date will be 27
July 2023. The Company operates a Dividend Reinvestment Plan
("DRIP"), which is managed by its registrar, Link Group. For
shareholders who wish to receive their dividend in the form of
shares, the deadline to elect for the DRIP is 10 August 2023.
The dividend of 2.00 pence per share will be designated 2.00
pence per share as an interim property income distribution ("PID")
and 0.00 pence per share as an interim ordinary dividend
("non-PID").
The Company has now paid a 2.00 pence quarterly dividend for 31
consecutive quarters (1) , providing high levels of income
consistency to our shareholders.
(1) For the period 1 November 2017 to 31 December 2017, a pro
rata dividend of 1.33 pence per share was paid for this two-month
period, following a change in the accounting period end.
Dividend outlook
It remains the Company's intention to continue to pay dividends
in line with its dividend policy and this will be kept under
review. In determining future dividend payments, regard will be
given to the circumstances prevailing at the relevant time, as well
as the Company's requirement, as a UK REIT, to distribute at least
90% of its distributable income annually.
Financing
Equity:
The Company's share capital consists of 158,774,746 Ordinary
Shares, of which 350,000 are currently held by the Company as
treasury shares.
Debt:
The Company has a GBP60.00 million, five-year term loan facility
with AgFe, a leading independent asset manager specialising in
debt-based investments. The loan is priced as a fixed rate loan
with a total interest cost of 2.959% until May 2027.
The loan was fully drawn at 30 June 2023, producing a Loan to
NAV ratio of 35.39%.
Headroom on the debt facility's loan to value ("LTV") covenant
continues to be conservative. For those properties secured under
the loan, a 36.06% fall in valuation would be required before the
LTV covenant were breached.
Investment Update
During the quarter the Company completed the following
disposals.
Excel 95, Deeside Industrial Estate (industrial) - the Company
has completed the sale of its industrial holding in Deeside for
GBP4,750,000, reflecting a capital value of circa GBP49 per sq ft.
The 96,597 sq ft industrial unit, known as Excel 95, was acquired
in July 2017 for GBP4,310,000, reflecting a 7.9% net initial yield.
The property was let to Magellan Aerospace until they vacated in
July 2022, paying a GBP250,000 dilapidations settlement. The
Company has disposed of the vacant asset to an owner-occupier, with
the price reflecting an 8.0% premium to the 31 March 2023
valuation. By disposing of the asset, the Company has also avoided
a speculative refurbishment project costing approximately
GBP1,000,0000.
E uroway Trading Estate, Bradford and Lockwood Court, Leeds
(both industrial) - during June, the Company completed the sale of
two industrial assets, being Euroway Trading Estate, Bradford and
Lockwood Court, Leeds, for combined proceeds of GBP16,100,000. This
reflects a blended net initial yield (NIY) of 6.2% and a weighted
average premium to acquisition price of 31.2%.
Euroway Trading Estate was acquired in November 2016 for
GBP4,950,000, reflecting an 8.1% NIY. At acquisition, the property
benefitted from a new eight-year lease to Advanced Supply Chain
(BFD) Ltd. In December 2019, the Company completed a rent review
which resulted in a 9.1% annual rental uplift.
Lockwood Court was acquired in February 2019 for GBP7,320,000,
reflecting a 7.7% NIY. The property was acquired with the benefit
of a new 10-year lease to LWS, guaranteed by Harrogate Spring
Water. In December 2019, AEWU secured a new 10-year lease to
Harrogate Spring Water, following L.W.S. entering into
liquidation.
Both sales realise significant profit for AEWU's shareholders.
For Euroway Trading Estate and Lockwood Court respectively, their
sales prices exceeded their 31 March 2023 valuations by 26.5% and
3.8%, as well as their acquisition prices by 30.3% and 31.8%.
Reinvestment of the sales proceeds into comparatively higher
yielding pipeline assets will be accretive to the Company's
earnings.
No purchases were made during the quarter . Post quarter end,
the Company completed the following purchase:
Tanner Row, York (car park) - in July, the Company completed the
acquisition of a mixed use asset within York city centre for
GBP10,020,000, reflecting an attractive net initial yield of 9.3%.
The site totals 0.8 acres and is well located inside the York City
Wall, bounding the historic centre of the city, within the
"Micklegate Quarter".
The 99,769 sq ft asset is multi-let to five tenants, with 75% of
the income received from National Car Parks Ltd who have a further
9 years remaining. NCP have occupied the 297-space car park since
2005 and the lease benefits from a 2027 rent review which will
increase rent payable in line with uncapped Retail Price Index,
resulting in a forecast reversionary yield in excess of 10%. A
further four tenants occupy ground and first floor retail and
office accommodation fronting onto George Hudson Street.
Asset Management Update
The Company completed the following asset management
transactions during the quarter:
Central Six Retail Park, Coventry (retail warehousing) - in
April, the Company completed a lease renewal with existing tenant,
Grahams Baked Potatoes Limited. The tenant has entered into a new
four-year lease with rolling mutual break options at a rent of
GBP24,500 per annum, equating to GBP45 per sq ft.
In May, the Company completed a lease renewal with existing
tenant, Oak Furnitureland Group Limited, for Unit 12. The tenant
has entered into a new two-year lease with rolling mutual break
options at a rent of GBP25,000 per annum, equating to GBP2.50 per
sq ft. This flexible renewal will facilitate a longer-term
transaction to a new tenant, which is currently being
negotiated.
In May, the Company also completed a reversionary lease with
existing tenant, Boots UK Limited, for Unit 7. The tenant has
entered into a new five-year lease with effect from 28 February
2024 at a rent of GBP259,293 per annum, equating to GBP14.25 per sq
ft. The letting also includes seven and a half months' rent free
taken under the existing lease.
In June, the Company completed the acquisition of the freehold
interest in units 1-11, which had previously been held by way of
long leasehold from Friargate JV Projects Limited. The acquisition
of the freehold interest is expected to increase the liquidity of
the asset in case of its future sale and also removes user
restrictions within the long lease which are constrictive to
lettings. In exchange for the freehold interest, the Company has
granted to Friargate JV Projects an option to acquire the Company's
long leasehold interest in units 12 A & B over a five-year
period, commencing in two years' time.
Post quarter end, the Company completed a new 20-year lease to
Aldi Stores Limited, following the completion of the agreement for
lease in October 2022. The lease provides an annual rent of
GBP270,166 per annum, reflecting GBP13 per sq ft, to be reviewed
every five years based on compounded annual RPI, collared and
capped at 1% and 3% respectively. The lease provides Aldi with a
12-month rent-free incentive and a tenant break option at year
15.
Barnstaple Retail Park, Barnstaple (retail warehousing) - the
Company has completed an eight-year reversionary lease with B&Q
from 29 September 2024 at the current passing rent of GBP348,000
per annum (GBP9.75 per sq ft). In return, the tenant has been
granted a six-month rent-free period.
40 Queens Square, Bristol (office) - after protracted
negotiations, the Company has settled three outstanding rent
reviews at the building dating back to 2021 and 2022 with the
following tenants: Leonard Curtis Recovery Limited, Chapman Taylor
LLP, and Turley Associates. The outcome of the reviews will see the
annual rent from the three tenant's increase from GBP213,812 per
annum to GBP281,550, reflecting a 32% uplift.
Arrow Point Retail Park, Shrewsbury (retail warehousing) - the
Company has completed a three-year lease to Universal Consumer
Products Limited at a rent of GBP110,000 per annum (GBP8 per sq
ft). The previous passing rent was GBP95,844 (GBP7 per sq ft). No
lease incentive was given.
Oak Park, Droitwich (industrial) - the Company has completed a
new three-year ex-Act lease on units 266-270 to Roger Dyson at a
stepped rent starting at GBP123,000 per annum in year one,
GBP135,000 per annum in year two and GBP148,000 per annum in year
three. There is a mutual break option on the expiry of the second
year. The tenant was granted a one-month rent free period.
The Company has also completed a new three-year ex-Act lease to
Adam Hewitt Ltd at units 263 and 265 at a rent of GBP70,000 per
annum. There is a tenant break option after the first year. No rent
incentive was given.
Diamond Business Park, Wakefield (industrial) - in April, the
Company completed the settlement of an open market rent review with
Tasca Tankers, dating back to June 2022. The review will see the
rent received increase from GBP209,000 to GBP229,900 per annum,
reflecting an uplift of 9.6%.
Northgate House, Bath (retail) - in June, the Manager completed
a new five-year ex-Act lease to Dimension Vintage limited at a rent
of GBP40,000 per annum. Four months' rent-free has been
granted.
Commercial Road, Portsmouth (retail) - in June, a new 10-year
lease was completed to Specsavers at a rent of GBP60,000 per annum
in vacant accommodation previously let to River Island. An
incentive of nine months' rent free was granted to the tenant,
along with a GBP40,000 capital contribution to improvement works.
There will be a tenant only break option after six years on six
months' notice.
Sarus Court, Runcorn (industrial) - The Manager has completed
three lease renewals with existing tenant CJ Services for their
leases at units 1001, 1002 and 1003. The total rent is GBP276,283
per annum reflecting GBP6.50 per sq ft, an increase from the
previous average passing rent of GBP5.25 per sq ft. Five-year
ex-Act leases were granted, with incentives equal to six months'
rent-free.
Glossary of Commonly Used Terms
For assistance with the interpretation of any industry specific
terms used in the Company's communications, please refer to our
glossary of commonly used terms which can be found on the Company's
website in the following location:
https://www.aewukreit.com/investors/glossary
AEW UK
Laura Elkin laura.elkin@eu.aew.com
+44(0) 20 7016 4869
Henry Butt henry.butt@eu.aew.com
+44(0) 20 7016 4869
Nicki Gladstone nicki.gladstone-ext@eu.aew.com
+44(0) 7711 401 021
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
TB Cardew AEW@tbcardew.com
Ed Orlebar +44 (0) 7738 724 630
Tania Wild +44 (0) 7425 536 903
Liberum Capital
Darren Vickers / Owen Matthews +44 (0) 20 3100 2000
Notes to Editors
About AEW UK REIT
AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total
return to shareholders by investing predominantly in smaller
commercial properties (typically less than GBP15 million), on
shorter occupational leases in strong commercial locations across
the United Kingdom. The Company is currently invested in office,
retail, industrial and leisure assets, with a focus on active asset
management, repositioning the properties and improving the quality
of income streams. AEWU is currently paying an annualised dividend
of 8p per share.
The Company was listed on the Official List of the Financial
Conduct Authority and admitted to trading on the Main Market of the
London Stock Exchange on 12 May 2015. www.aewukreit.com
LEI: 21380073LDXHV2LP5K50
About AEW
AEW is one of the world's largest real estate asset managers,
with EUR84.3bn of assets under management as at 31 March 2023. AEW
has over 880 employees, with its main offices located in Boston,
London, Paris and Hong Kong and offers a wide range of real estate
investment products including comingled funds, separate accounts
and securities mandates across the full spectrum of investment
strategies. AEW represents the real estate asset management
platform of Natixis Investment Managers, one of the largest asset
managers in the world.
As at 31 March 2023, AEW managed EUR39.2bn of real estate assets
in Europe on behalf of a number of funds and separate accounts. AEW
has over 480 employees based in 12 locations across Europe and has
a long track record of successfully implementing core, value-add
and opportunistic investment strategies on behalf of its clients.
In the last five years, AEW has invested and divested a total
volume of over EUR22bn of real estate across European markets.
www.aew.com
AEW UK Investment Management LLP is the Investment Manager. AEW
is a group of companies which includes AEW Europe SA and its
subsidiaries as well as affiliated company AEW Capital Management,
L.P. in North America and its subsidiaries. AEW Europe SA, together
with its subsidiaries AEW UK Investment Management LLP, AEW
S.à.r.l., AEW Invest GmbH and AEW SAS, is a European real estate
investment manager with headquarter offices in Paris and London.
AEW Europe SA and AEW Capital Management, L.P. are owned by Natixis
Investment Managers. Natixis Investment Managers is an
international asset management group based in Paris, France, that
is principally owned by Natixis, a French investment banking and
financial services firm. Natixis is principally owned by BPCE,
France's second largest banking group.
Disclaimer
This communication cannot be relied upon as the basis on which
to make a decision to invest in AEWU. This communication does not
constitute an invitation or inducement to subscribe to any
particular investment. Issued by AEW UK Investment Management LLP,
33 Jermyn Street, London, SW1Y 6DN.
Company number : OC367686 England. Authorised and regulated by
the Financial Conduct Authority.
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END
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