REG-AEW UK REIT plc Half Yearly Results
18/11/2020 07:05
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AEW UK REIT plc (AEWU)
Half Yearly Results
18-Nov-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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18 November 2020
AEW UK REIT PLC (the "Company")
Interim Report and Financial Statements
for the six months ended 30 September 2020
Financial Highlights
● Net Asset Value ('NAV') of £147.24 million and of 92.73 pence per share ('pps') as at 30 September 2020 (31
March 2020: £147.86 million and 93.13 pps).
● Operating profit before fair value changes of £5.93 million for the period (six months ended 30 September
2019: £7.26 million).
Profit Before Tax ("PBT") of £5.72 million and 3.61 pps for the period (six months ended 30 September 2019:
● £4.16 million and 2.74 pps).
● Shareholder Total Return for the period of 16.13% (six months ended 30 September 2019: 5.50%).
EPRA Earnings Per Share ('EPRA EPS') for the period of 3.41 pps (six months ended 30 September 2019: 4.37
● pps). See below for the calculation of EPRA EPS.
Total dividends of 4.00 pps declared in relation to the period (six months ended 30 September 2019: 4.00
● pps).
● The price of the Company's Ordinary Shares on the London Stock Exchange was 75.20 pps as at 30 September
2020 (31 March 2020: 68.20 pps).
As at 30 September 2020, the Company had a balance of £39.50 million (31 March 2020: £51.50 million) of its
£60.00 million (31 March 2020: £60.00 million) term credit facility with the Royal Bank of Scotland
International Limited ('RBSi') and was geared with a Loan to NAV ratio of 26.83% (31 March 2020: 34.83%).
● The Company can draw £12.03 million of the remaining facility up to the maximum 35% Loan to NAV at drawdown
(see note 13 below for further details).
● The Company held cash balances totalling £13.36 million as at 30 September 2020 (31 March 2020: £9.87
million).
Property Highlights
As at 30 September 2020, the Company's property portfolio had a valuation of £171.36 million across 34
properties (31 March 2020: £189.30 million across 35 properties) as assessed by the valuer and a historical
● cost of £184.07 million (31 March 2020: £197.12 million).
The Company made no acquisitions during the period and disposed of one property, Geddington Road, Corby, for
● net proceeds of £18.68 million, realising a profit on disposal of £3.67 million.
The portfolio had an EPRA vacancy rate of 8.21%. Excluding 225 Bath Street, Glasgow, which has been
● exchanged for sale with a condition of vacant possession, the vacancy rate was 4.90% (31 March 2020: 3.68%).
Rental income generated during the period was £8.12 million (six months ended 30 September 2019: £8.78
● million).
EPRA Net Initial Yield ('EPRA NIY') of 7.21% as at 30 September 2020 (31 March 2020: 8.26%).
●
Weighted Average Unexpired Lease Term ('WAULT') of 4.99 years to break and 6.48 years to expiry (31 March
● 2020: 4.26 years to break and 5.55 years to expiry).
Post period-end, in November 2020, the Company acquired a warehouse asset in Weston-Super-Mare for a
● purchase price of £5.40 million.
● As at the date of this report, rent collection statistics were as follows for the March, June and September
rental quarters:
March 2020 June 2020 September 2020
Current Position as at 12 November 2020
% % %
Received 93 89 72
Monthly Payments Expected Prior to Quarter End - - 15
93 89 87
Agreed on longer term payment plans 4 3 4
Under Negotiation 2 4 4
99 96 95
Outstanding 1 4 5
Total 100 100 100
Chairman's Statement
Overview
I am pleased to report the unaudited interim results of AEW UK REIT plc (the 'Company') for the six months
ended 30 September 2020. The Company had a diversified portfolio of 34 commercial investment properties
throughout the UK with a value of £171.36 million as at 30 September 2020.
The Company's NAV has remained resilient over the period, having fallen by only 0.43% despite the uncertain
economic backdrop caused by the ongoing COVID-19 pandemic. Although the valuation of the Company's property
portfolio has fallen by 1.69% on a like-for-like basis over the period, the sale of 2 Geddington Road, Corby,
at a price significantly ahead of its prevailing valuation, realised a profit on disposal of £3.67 million.
This not only provided a boost to the Company's NAV, but improved the Company's position in terms of its cash
and debt covenants, thus making the Company robustly positioned to deal with uncertainty resulting from the
pandemic. The Company repaid £12.00 million of its debt facility in July 2020, resulting in a Loan to NAV
ratio of 26.83% while maintaining a healthy cash balance of £13.36 million, both as at 30 September 2020.
The sale of Corby and the resulting loss of the Company's largest tenant at the time has contributed to a fall
in rental income and therefore a fall in EPRA EPS, which was 3.41 pence for the period. Proceeds from the sale
of Corby have now begun to be reinvested as our Investment Manager (AEW UK Investment Management LLP) is
starting to see more attractive opportunities in the investment pipeline that should prove to be accretive to
both NAV and earnings. The Company made one acquisition post period-end, acquiring a warehouse asset in
Weston-Super-Mare for a purchase price of £5.40 million. The property shows strong potential for medium and
long term value growth due to neighbouring land sales for residential development as well as offering an
attractive income yield in the meantime. We hope that further opportunities such as this will allow the
Company to increase its earnings over the coming quarters.
The Investment Manager continues to work with the Company's tenants in order to manage the difficulties posed
by the pandemic. To date, the tenancy profile of the Company has remained largely intact, as the vacancy rate
by ERV was just 4.9% as at 30 September 2020 (this excludes vacancy at the Company's property in Glasgow,
which has exchanged to be sold with a condition of vacant possession. Portfolio level vacancy increases to
8.2% with this asset included). Rent collection rates have remained high for the March 2020, June 2020 and
September 2020 rent quarters in comparison with the averages seen in the wider market and we expect that
ultimate rates of collection, following the expiry of longer-term payment plans, should result in collection
rates in excess of 90%. There are tenants who continue to face difficulties in the current environment and in
such instances the Investment Manager has agreed a longer-term payment plan where rental income can be
recovered in full over coming periods. A prudent assessment has been made of the recoverability of the
Company's outstanding receivables, taking into account the uncertain economic climate, and a provision has
been made in the financial statements for expected credit losses.
The active asset management approach of the Investment Manager has continued to add value and limit the
downside in the current market. During the period, the Company has completed a number of lettings and lease
renewals which are noted in more detail in the 'Asset Management' section of the Investment Manager's report.
The most notable of these has been the 15-year lease renewal with the Secretary of State for Housing,
Communities and Local Government at the Company's office asset, Sandford House, Solihull, which resulted in a
30% increase in rental income. In addition to its letting activity, the Company has begun to undertake
remedial works to its property at Bank Hey Street, Blackpool, which include the overhaul and reinstatement of
its cathodic protection system, and comprehensive repairs to faience elevations and windows. The nature of
these repair works means that as the costs are incurred, they will be expensed to the Company's profit or
loss, with a corresponding increase expected to be seen in the revaluation of the property.
The Company's share price was 75.20 pps as at 30 September 2020, representing an 18.90% discount to NAV. This
reflects the declines experienced in equity markets in general and specifically in the real estate sector as a
result of the COVID-19 pandemic. In light of the discount in share price to NAV and cash reserves available,
post period-end the Company has bought back 350,000 of its own shares for gross consideration of £262,995,
which will have a positive impact on the Company's NAV per share.
We are delighted to announce that the Company has received four awards during the year; EPRA Gold medal for
Financial Reporting, EPRA Silver medal for Sustainability Reporting and EPRA Most Improved award for
Sustainability Reporting. The Company has also been named Best UK Real Estate Investment Trust in the Citywire
Investment Trust Awards based upon its strong three year track record. These awards are a reflection of much
hard work committed to the Company by the Investment Manager and the Board would like to thank the team at AEW
and express its positivity and confidence in the Investment Manager's ongoing ability to implement the
Company's strategy.
Financial Results
6 month period from 6 month period from 12 month period from
1 April 2020 to 30 September 1 April 2019 to 30 1 April 2019 to 31
2020 September 2019 March 2020
(unaudited) (unaudited)
(audited)
Operating Profit before fair value 5,934 7,264 14,472
changes (£'000)
Operating Profit (£'000) 6,276 4,901 5,072
PBT (£'000) 5,724 4,159 3,652
Earnings Per Share (basic &diluted) 3.61 2.74 2.40
(pence)
EPRA EPS (basic and diluted) (pence) 3.41 4.37 8.67
Ongoing Charges (%) 1.31 1.34 1.34
NAV per share (pence) 92.73 97.36 93.13
EPRA NAV per share (pence) 92.70 97.32 93.12
Financing
The Company has a £60.00 million loan facility, of which it had drawn a balance of £39.50 million as at 30
September 2020 (31 March 2020: £60.00 million facility; £51.50 million drawn), producing a Loan to NAV ratio
of 26.83% (31 March 2020: 34.83%). During the period, the Company amended the facility to allow the
flexibility to make repayments and re-draw these amounts, akin to a revolving credit facility.
The unexpired term of the facility was 3.1 years as at 30 September 2020 (31 March 2020: 3.6 years). The loan
incurs interest at 3-month LIBOR +1.4%, which equated to an all-in rate of 1.47% as at 30 September 2020 (31
March 2020: 2.10%).
The Company is protected from a significant rise in interest rates as it has in place interest rate caps.
Throughout the period and up to 19 October 2020, the Company had in effect interest rate caps on a notional
value of £36.51 million of the loan, with £26.51 million capped at 2.50% and £10.00 million capped at 2.00%,
which resulted in the loan balance being 92.4% hedged as at 30 September 2020. During the period, the Company
paid a premium of £62,968 to enter into new interest rate caps effective from 20 October 2020 and for the
remaining term of the loan, which cap the LIBOR rate at 1.00% on a notional value of £51.50 million.
As noted in the KPIs, the Company targets a long-term gearing of 35% Loan to NAV, which is the maximum gearing
on drawdown of the RBSi loan facility. The Board and Investment Manager will continue to monitor the level of
gearing and may adjust the gearing according to the Company's circumstances and perceived risk levels.
During the period, the Company obtained consent from its lender, RBSi, to waive the interest cover ratio
('ICR') tests within its loan agreement for July and October 2020, with the next proposed test being in
January 2021, which was considered to be a prudent action given the economic environment. Irrespective of
these waivers the Company would have passed its ICR tests for both July and October 2020.
Dividends
The Company has continued to deliver on its target of paying dividends of 8.00 pps per annum. During the
period, the Company declared and paid two quarterly dividends of 2.00 pps, in line with its target. Dividends
for the period were 85.25% covered by EPRA EPS.
It remains the Company's intention to continue to pay dividends in line with its dividend policy, however the
outlook remains very uncertain given the current COVID-19 pandemic. In determining future dividend payments,
regard will be had 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, which will remain a key
consideration.
Outlook
At the time of writing this report, the UK faces unprecedented economic uncertainty and it appears likely that
the economy will continue to struggle for the remainder of 2020 and beyond. While we expect that this will
continue to impact the property market, the Company remains well positioned to withstand these conditions as a
result of its healthy cash position and borrowing covenant headroom. Since the onset of the pandemic, the
Company has displayed stable NAV performance, reflecting the diversity of the portfolio, its low exposure to
the retail sector and the fact that many of its assets benefit from viable alternative use potential, which
limits downside risk and volatility. We are also encouraged by strong and improving rent collection levels to
date.
In the near term, the Board and Investment Manager will continue to focus on minimising the impact of COVID-19
on its stakeholders and, as more attractive opportunities arise in the investment market, will aim to find
suitable assets to build earnings back towards a fully covered dividend, following the sale of the Company's
Corby asset. The developing economic conditions will be monitored closely and the Company's strategy adjusted
accordingly. There has recently been some positive news regarding the development of a vaccine and it is hoped
that its implementation will kick-start economic recovery and provide the conditions to enable growth of the
Company to resume.
Mark Burton
Chairman
17 November 2020
Key Performance Indicators
KPI AND DEFINITION RELEVANCE TO STRATEGY
TARGET PERFORMANCE
1. EPRA NIY
A representation to the
investor of what their An EPRA NIY profile in line with the 7.21%
initial net yield would be at Company's target dividend yield shows
a predetermined purchase that, after costs, the Company should at 30 September 2020
price after taking account of have the ability to meet its target 7.50 - 10.00% (31 March 2020:
all associated costs, e.g. dividend through property income. 8.26%).
void costs and rent free
periods.
2. True Equivalent Yield
A True Equivalent Yield profile in
The average weighted return a line with the Company's target 8.30%
property will produce dividend yield shows that, after
according to the present costs, the Company should have the at 30 September 2020
income and estimated rental ability to meet its proposed dividend 7.50 - 10.00% (31 March 2020:
value assumptions, assuming through property income. 8.04%).
the income is received
quarterly in advance.
3. Reversionary Yield A Reversionary Yield profile that is
in line with an Initial Yield profile 8.27%
The expected return the shows a potentially sustainable
property will provide once income stream that can be used to at 30 September 2020
rack rented. meet dividends past the expiry of a 7.50 - 10.00% (31 March 2020:
property's current leasing 7.90%).
arrangements.
The Investment Manager believes that
current market conditions present an
4. WAULT to expiry opportunity whereby assets with a
shorter unexpired lease term are 6.48 years
The average lease term often mispriced. It is also the
remaining to expiry across Investment Manager's view that a at 30 September 2020
the portfolio, weighted by shorter WAULT is useful for active >3 years (31 March 2020: 5.55
contracted rent. asset management, particularly in years).
certain growth sectors such as
warehousing, as it allows the
Investment Manager to engage in
direct negotiation with tenants
rather than via rent-review
mechanisms.
The Investment Manager believes that
current market conditions present an
opportunity whereby assets with a
shorter unexpired lease term are
5. WAULT to break often mispriced. As such, it is in
line with the Investment Manager's 4.99 years
The average lease term strategy to acquire properties with a
remaining to break, across WAULT that is generally shorter than at 30 September 2020
the portfolio weighted by the benchmark. It is also the >3 years (31 March 2020: 4.26
contracted rent. Investment Manager's view that a years).
shorter WAULT is useful for active
asset management, particularly in
certain growth sectors such as
warehousing, as it allows the
Investment Manager to engage in
direct negotiation with tenants
rather than via rent-review
mechanisms.
6. NAV
£147.24 million
NAV is the value of an Provides stakeholders with the most
entity's assets minus the relevant information on the fair Increase at 30 September 2020
value of its liabilities. value of the assets and liabilities year-on-year (31 March 2020:
of the Company. £147.86 million).
The Company has changed the measure
of its Leverage KPI from 'Loan to
Gross Asset Value ('GAV')' to 'Loan
7. Leverage (Loan to NAV) to NAV'. This is in line with the
measure used in its banking covenants
The proportion of the and so is considered to be more 26.83 %
relevant to the Company's position.
Company's net assets that is at 30 September 2020
funded by borrowings. 35% (31 March 2020:
The target of 35% Loan to NAV, which 34.83%).
is the gearing limit at drawdown
under the RBSi facility, approximates
to the previous target of 25% Loan to
GAV, which is the measure used in the
Company's Investment Guidelines.
Gearing will continue to be monitored
using both measures.
8. Vacant ERV
The Company's aim is to minimise 8.21% / 4.90%
The space in the property vacancy of the properties. A low excluding Glasgow
portfolio which is currently level of structural vacancy provides
unlet, as a percentage of the an opportunity for the Company to <10.00% at 30 September 2020
total ERV of the portfolio. capture rental uplifts and manage the (31 March 2020:
mix of tenants within a property. 3.68%)
9. Dividend
Dividends declared in
relation to the year. The 4.00 pps
Company targets a dividend of
8.00 pence per Ordinary Share for the six months to
per annum. However, given the The dividend reflects the Company's 30 September 2020.
current COVID-19 situation, ability to deliver a sustainable
regard will be had to the income stream from its portfolio. 4.00 pps (period to This supports an
circumstances prevailing at 30 September) annualised target of
the relevant 8.00 pps (six months
to 30 September 2019:
time in determining dividend 4.00 pps).
payments.
10. Ongoing Charges The Ongoing Charges ratio provides a
measure of total costs associated 1.31%
The ratio of annualised with managing and operating the
administration and operating Company, which includes the for the six months to
costs expressed as a management fees due to the Investment 30 September 2020
percentage of average NAV Manager. This measure is to provide <1.50% (six months to 30
throughout the period. investors with a clear picture of September 2019:
operational costs involved in running 1.34%).
the Company.
11. Profit Before Tax ('PBT')
£5.72 million/3.61
PBT is a profitability pps
measure which considers the The PBT is an indication of the 4.00 pps (period to
Company's profit before the Company's financial performance for for the six months to
payment of income tax. the period in which its strategy is 30 September) 30 September 2020
exercised. (six months to 30
September 2019: £4.16
million/2.74 pps).
12. Shareholder Total Return
16.13%
The percentage change in the
share price assuming This reflects the return seen by for the six months to
dividends are reinvested to shareholders on their shareholdings 30 September 2020
purchase additional Ordinary through share price movements and 8.00% (six months to 30
Shares. dividends received. September 2019:
5.50%).
13. EPRA EPS
Earnings from core
operational activities. A key 3.41 pps
measure of a company's
underlying operating results for the six months to
from its property rental This reflects the Company's ability 4.00 pps (period to 30 September 2020
business and an indication of to generate earnings from the (six months to 30
the extent to which current portfolio which underpins dividends. 30 September) September 2019: 4.37
dividend payments are pps).
supported by earnings. See
note 8.
Investment Manager's Report
Economic Outlook
As a second wave of the COVID-19 pandemic leads to increased lockdown restrictions being implemented across
the country, the UK faces continued uncertainty. The economy has already experienced contraction in the
quarter to 30 June 2020 following a nationwide lockdown and KPMG's September 2020 UK Economic Outlook expects
the economy to contract by 10.3% over the year as a whole. When the Government withdraws its job retention
scheme, unemployment will be expected to rise and key indicators of short term economic outlook will be the
extent of the impact of the second wave, the subsequent responses needed to contain the virus and further
progress in the development of a vaccine.
The strength and timing of the economic recovery thereafter will largely depend on the success in implementing
a vaccine, while a no deal Brexit scenario will also pose a risk. The KPMG Economic Outlook forecasts growth
of 8.4% in 2021, assuming a vaccine is approved in January 2021 and an outline trade agreement is reached with
the EU by the end of the transition period, with the economy forecast to reach pre-COVID-19 levels by the
start of 2023. However, the picture is ever changing and it is difficult to place any significant reliance on
forecasts with such variable assumptions. Inflation is expected to remain well below the Bank of England's 2%
target, which should see the base rate remain at 0.1% or below until at least the end of 2021.
General recovery in the UK commercial property market is expected to track that of the wider UK economy
although recovery in sub sectors of the property market will be driven by structural forces as well. A much
publicised example of this includes the growth of online retail sales at the expense of physical stores, which
has seen a divergence in the capital values of the retail and industrial warehousing sectors. This trend is an
important one for the Company's portfolio due to its high weighting to industrial and warehousing property
which makes up 52.9% of its property assets by value as at 30 September 2020. Given this weighting, the
Company expects to continue its current trend of outperformance against the UK commercial property market as a
whole. The high exposure to this sector is expected to continue to provide a resilient outlook for the
Company's major performance indicators including net asset value, earnings and occupancy, despite wider
economic uncertainty. The high portfolio weighting to warehouses is also expected to continue to provide a
positive outlook for rent collection, which, based on levels seen to date since the start of the pandemic, is
ultimately expected to well exceed 90% in each quarter.
This robust base will further be supported by the Investment Manager's proactive approach to asset management
which, despite the ongoing pandemic, has delivered six new lettings in the portfolio since the start of
UK-wide lockdowns in March 2020 across all major market sectors including retail. These lettings have secured
ongoing rental income to the Company at a weighted average of 5% ahead of previous independent estimates.
Financial Results
The Company's NAV as at 30 September 2020 was £147.24 million or 92.73 pps (31 March 2020: £147.86 million or
93.13 pps). This is a decrease of 0.40 pps or 0.27% over the period.
EPRA EPS for the year was 3.41 pps which, based on dividends paid of 4.00 pps, reflects a dividend cover of
85.25%. The reduction in dividend cover has largely come about due to the loss of rental income following the
disposal of 2 Geddington Road, Corby, in May 2020, which realised a profit on disposal of £3.67 million.
Income from the remaining tenancy profile has remained largely intact. Collection rates have reached 93% and
89% for the March 2020 and June 2020 quarters respectively, with further payments expected to be received
under longer-term payment plans. Of the outstanding arrears, £0.20 million has been provided for expected
credit losses.
Financing
As at 30 September 2020, the Company has a £60.0 million loan facility with RBSi, in place until October 2023,
the details of which are presented below:
30 September 2020 31 March 2020
Facility £60.00 million £60.00 million
Drawn £39.50 million £51.50 million
Gearing (Loan to NAV) 26.83% 34.83%
Interest rate 1.47% all-in (LIBOR + 1.40%) 2.10% all-in (LIBOR + 1.4%)
Notional Value of Loan Balance Hedged 92.40% 70.90%
On 24 June 2020, the Company announced an amendment to its facility, allowing the flexibility to make
repayments and re-draw these amounts, akin to a revolving credit facility.
Property Portfolio
During the period, the Company disposed of 2 Geddington Road, Corby, for net proceeds of £18.68 million. The
Company made no acquisitions during the period.
The Company made no acquisitions during the period and disposed of one property, Geddington Road, Corby, for
net proceeds of £18.68 million, realising a profit on disposal of £3.67 million. The following tables
illustrate the composition of the portfolio in relation to its properties, tenants and income streams:
Summary by Sector as at 30 September 2020
Gross Gross Like- Like-
passing passing for for
like like
Vacancy WAULT rental rental Rental
Number to rental rental
of Valuation Area by ERV income income ERV ERV income
break growth* growth*
Sector assets (£m) (sq ft) (%) (£m) (£psf) (£m) (£psf) (£m)
(years) (£m) %
Industrial 20 90.61 2,336,087 5.13 3.64 7.03 3.01 8.60 3.68 4.23 0.13 3.24
Office 6 45.85 286,909 2.76 4.15 2.91 10.15 4.16 14.50 1.60 -0.08 -5.01
Alternatives 2 13.00 112,355 0.00 7.85 1.50 13.31 1.28 11.44 0.96 0.04 3.41
Standard 5 16.40 168,917 11.02 4.82 2.06 12.17 1.65 9.76 1.03 -0.29 -22.15
Retail
Retail 1 5.50 51,021 0.00 3.51 0.61 11.96 0.52 10.09 0.30 0.00 0.07
Warehouse
Portfolio 34 171.36 2,955,289 8.21** 4.99 14.11 4.77 16.21 5.49 8.12 -0.20 -2.26
Summary by Geographical Area as at 30 September 2020
Gross Gross Like- Like-
passing passing for for
like like
Vacancy WAULT rental rental Rental
Number to rental rental
of Valuation Area by ERV income income ERV ERV income
Geographical break growth* growth*
Area assets (£m) (sq ft) (%) (£m) (£psf) (£m) (£psf) (£m)
(years) (£m) %
Yorkshire
and 8 34.46 1,027,801 4.59 1.87 2.43 2.37 3.49 3.31 1.58 -0.03 -1.59
Humberside
South East 5 25.83 195,545 8.95 3.77 2.11 10.78 2.21 11.67 1.23 -0.18 -12.93
Eastern 5 20.50 344,885 11.36 1.99 1.47 4.27 2.10 6.10 0.96 0.03 3.75
South West 3 20.60 125,004 0.00 2.31 1.73 13.82 1.77 14.14 0.83 0.01 0.64
West 4 21.15 398,273 3.59 7.21 1.84 4.62 1.75 4.69 0.96 0.03 2.69
Midlands
East 1 4.00 28,219 0.00 5.65 0.39 13.64 0.40 18.59 0.38 -0.07 -7.92
Midlands
North West 4 13.87 302,061 6.11 4.66 1.39 4.61 1.28 4.30 0.66 -0.04 -6.27
Wales 2 13.25 376,138 0.00 8.58 1.25 3.31 1.30 3.44 0.64 0.00 0.52
Greater 1 9.25 71,720 0.00 11.12 0.96 13.40 0.75 10.45 0.52 0.05 10.05
London
Scotland 1 8.45 85,643 51.1 1.49 0.54 6.33 1.16 13.54 0.36 0.00 2.52
Portfolio 34 171.36 2,955,289 8.21** 4.99 14.11 4.77 16.21 5.49 8.12 -0.20 -2.26
*like-for-like rental growth is for the six months ended 30 September 2020.
**excluding Glasgow, total vacancy is 4.90%.
Source: Knight Frank/AEW, 30 September 2020.
Individual Property Classifications
Market Value
Property Sector Region Range (£m)
1 40 Queen Square, Bristol Offices South West 10.0 - 15.0
2 Eastpoint Business Park, Oxford Offices South East 10.0 - 15.0
3 Sandford House, Solihull Offices West Midlands 7.5 - 10.0
4 London East Leisure Park, Dagenham Other (Leisure) Greater London 7.5 - 10.0
5 Gresford Industrial Estate, Wrexham Industrial Wales 7.5 - 10.0
6 225 Bath Street, Glasgow Offices Scotland 7.5 - 10.0
7 Langthwaite Grange Industrial Estate, South Kirby Industrial Yorkshire and Humberside 7.5 - 10.0
8 Lockwood Court, Leeds Industrial Yorkshire and Humberside 5.0 - 7.5
9 Storeys Bar Road, Peterborough Industrial Eastern 5.0 - 7.5
10 Sarus Court Industrial Estate, Runcorn Industrial North West 5.0 - 7.5
The Company's top ten properties listed above comprise 50.1% of the total value of the portfolio.
Market Value
Property Sector Region Range (£m)
11 Apollo Business Park, Basildon Industrial Eastern 5.0 - 7.5
12 Barnstaple Retail Park Retail Warehouse South West 5.0 - 7.5
13 Euroway Trading Estate, Bradford Industrial Yorkshire and Humberside 5.0 - 7.5
14 Brockhurst Crescent, Walsall Industrial West Midlands 5.0 - 7.5
15 Above Bar Street, Southampton Standard Retail South East <5.0
16 Diamond Business Park, Wakefield Industrial Yorkshire and Humberside <5.0
17 Cranbourne House, Basingstoke Industrial South East <5.0
18 Excel 95, Deeside Industrial Wales <5.0
19 Oak Park, Droitwich Industrial West Midlands <5.0
20 Commercial Road, Portsmouth Standard Retail South East <5.0
21 Pearl Assurance House, Nottingham Standard Retail East Midlands <5.0
22 Walkers Lane, St. Helens Industrial North West <5.0
23 Cedar House, Gloucester Offices South West <5.0
24 Odeon Cinema, Southend Other (Leisure) Eastern
<5.0
25 Brightside Lane, Sheffield Industrial Yorkshire and Humberside
<5.0
26 Magham Road, Rotherham Industrial Yorkshire and Humberside
<5.0
27 Pipps Hill Industrial Estate, Basildon Industrial Eastern
<5.0
28 Bank Hey Street, Blackpool Standard Retail North West
<5.0
29 Eagle Road, Redditch Industrial West Midlands
<5.0
30 Clarke Road, Milton Keynes Industrial South East
<5.0
31 Knowles Lane, Bradford Industrial Yorkshire and Humberside
<5.0
32 Vantage Point, Hemel Hempstead Offices Eastern
<5.0
33 Moorside Road, Salford Industrial North West
<5.0
34 Fargate and Chapel Walk, Sheffield Standard Retail Yorkshire and Humberside
<5.0
Sector and Geographical Allocation by Market Value as at 30 September 2020
Sector Allocation
Sector %
Standard Retail 9.6
Retail Warehouse 3.2
Offices 26.8
Industrial 52.8
Other 7.6
Geographical Allocation
Location %
Greater London 5.4
South East 15.1
South West 12.1
Eastern 12.0
West Midlands 12.3
East Midlands 2.3
North West 8.1
Yorkshire and Humberside 20.1
Wales 7.7
Scotland 4.9
Top Ten Tenants
% of
Passing Portfolio
Rental Total
Tenant Sector Property
Income Contracted
(£'000) Rental
Income
1 The Secretary of State for Housing, 984 6.4
Communities and Local Government
Office Sandford House, Solihull and Cedar
House, Gloucester
2 Plastipak UK Limited Industrial Gresford Industrial Estate, 883 5.8
Wrexham
3 Ardagh Glass Limited Industrial Langthwaite Industrial Estate, 676 5.0
South Kirkby
4 Mecca Bingo Limited Leisure London East Leisure Park, Dagenham 625 4.1
5 Harrogate Spring Water Industrial Lockwood Court, Leeds 603 3.9
6 Odeon Cinemas Leisure Odeon Cinema, Southend 535 3.5
7 Sports Direct Retail Barnstaple Retail Park and Bank 525 3.4
Hey Street, Blackpool
8 Wyndeham Peterborough Limited Industrial Storeys Bar Road, Peterborough 525 3.4
9 Egbert H Taylor & Company Limited Industrial Oak Park, Droitwich 500 3.3
10 HFC Prestige Manufacturing Industrial Cranbourne House, Basingstoke 460 3.0
The Company's top ten tenants, listed above, represent 41.8% of the total passing rental income of the
portfolio.
Asset Management
The Company completed the following material asset management transactions during the period:
Bank Hey Street, Blackpool - In May 2020, the Company signed a reversionary lease with existing tenant JD
Wetherspoon. This documents the removal of the tenant's break option in 2025 and provides an additional
10-year lease term taking the earliest expiry from 2025 to 2050. The annual rent payable by the tenant has
reduced from £96,750 to £90,000 but the lease now provides five-yearly fixed increases reflecting 1% per
annum.
2 Geddington Road, Corby - On 22 May 2020, the Company disposed of its largest asset at 2 Geddington Road,
Corby, for gross proceeds of £18.80 million, 25% ahead of the valuation level immediately prior and 52% ahead
of its acquisition price in 2018. The asset had been delivering an income yield to the Company of 10% per
annum.
Sandford House, Solihull - During June 2020, the Company completed a 15-year renewal lease with its existing
tenant, the Secretary of State for Housing, Communities and Local Government. The agreement documents the
increase of rental income from the property by 30% as well as providing for five-yearly open market rent
reviews and a tenant break option at year 10. The tenant intends to carry out a full refurbishment of the
property over coming weeks requiring no capital payment by the Company either by way of refurbishment cost or
capital incentive to the tenant. In addition, no rent free incentive has been granted to the tenant.
Throughout its hold period the Company has so far received a net income yield from the asset in excess of 9%
per annum against its purchase price of £5.4 million.
Bessemer Road, Basingstoke - In July 2020, the Company completed a 5-year lease renewal at its 58,000 sq ft
industrial premises in Basingstoke. The lease has been granted with no rent free incentive given to the tenant
and secures a rental income to the Company 6% ahead of independent valuer's estimated levels. The tenant has
the benefit of a break option in year 3.
Langthwaite Grange Industrial Estate, South Kirkby - During August 2020, a lease renewal was signed with the
Company's third largest tenant, Ardagh Glass. Rent payable under the new lease has been agreed 13% ahead of
both independent valuer's estimated levels and the previous level of passing rent. The lease is for a
five-year term and the tenant will benefit from four months' rent free and a tenant break option after three
years.
Clarke Road, Milton Keynes and Moorside Road, Swinton - Nationwide Crash Repair Centres Limited, the tenant of
this asset, which comprises 2% of the Company's annual rental income, appointed administrators on 3 September
2020 although subsequently, on 4 September 2020, the business was acquired by Redde Northgate Plc. Redde
Northgate have confirmed that they intend to operate the Milton Keynes branch, the larger of the two within
AEWU ownership, and negotiations are currently underway to extend the terms of this lease which should prove
to be value accretive to the Company. Redde Northgate is a substantial and well capitalised business reporting
profit before tax of over £60 million for the year ending 30 April 2019. The former Swinton branch of
Nationwide Crash Repair Centres, representing 0.8% of the Company's annual rental income, will not be operated
by Redde Northgate on an ongoing basis, however interest has already been received from a prospective new
tenant.
Apollo Business Park, Basildon - During September 2020, the Company completed a 5-year lease renewal on 35,300
sq ft of these multi-let industrial premises in Basildon. The lease secures a rental income to the Company 4%
ahead of independent valuer's estimated levels and 30% ahead of the previous rental level. The tenant will
benefit from 6 months' rent free.
Wheeler Gate, Nottingham - In September 2020, a 5-year renewal lease was completed with Costa Coffee on a
1,400 sq ft retail unit located in central Nottingham. The reversionary lease documents the rebasing of
Costa's rent from £110,000 to £52,000 per annum in line with its estimated rental value. The tenant benefits
from 9 months' rent free.
Bath Street, Glasgow - During October 2020, the Company exchanged contracts to sell its 85,000 sq ft office
holding at 225 Bath Street in Glasgow city centre to a subsidiary company of IQ Student Accommodation. The
transaction is conditional upon various matters including the grant of planning permission for the development
of a 480 bedroom student housing development. Sale pricing will be determined following the approval of all
conditions according to an agreed matrix ranging from £8.55 to £9.30 million. Transaction pricing reflects 98%
of pricing levels being discussed by the parties prior to the onset of the COVID-19 pandemic.
Bank Hey Street, Blackpool - The Company has begun to undertake remedial works to its property in Blackpool,
which include the overhaul and reinstatement of its cathodic protection system, and comprehensive repairs to
faience elevations and windows. Works have been budgeted at a total cost to the Company of £1.7 million over
two years. The nature of these repair works means that as the costs are incurred, they will be expensed to the
Company's profit or loss, with a corresponding increase expected to be seen in the revaluation of the
property, all else being equal.
Weston Super Mare - Post period end, the Company acquired the multi-let Westlands Distribution Park in Weston
Super Mare for a purchase price of £5.4 million. The purchase price reflects a low capital value of £175,000
per acre which provides strong potential for future capital value growth based upon nearby comparable land
transactions which range between £350,000 and £500,000 per acre for other commercial and residential uses. The
estate, located 3 miles from the M5 Motorway, provides a net initial yield of 6.4% which is expected to
increase to at least 7.4% within the medium term. The average passing rent of £1.50 per sq ft also provides
strong potential for rental growth. Tenants include North Somerset District Council who make up 30% of the
income stream.
Vacancy - The portfolio's overall vacancy level now sits at 4.9%, excluding vacancy contributed by the asset
at 225 Bath Street, Glasgow which, as discussed above, has now been exchanged for sale for alternative use
redevelopment. As a condition of the sale agreement, full vacancy must be achieved in the building before the
sale can be completed. Including this asset, overall vacancy is 8.21%.
AEW UK Investment Management LLP
17 November 2020
Principal Risks and Uncertainties
The Company's assets consist primarily of UK commercial property. Its principal risks are therefore related to
the commercial property market in general, but also to the particular circumstances of the individual
properties and the tenants within the properties.
The Board has overall responsibility for reviewing the effectiveness of the system of risk management and
internal control which is operated by the Investment Manager. The Company's ongoing risk management process is
designed to identify, evaluate and mitigate the significant risks the Company faces.
At least twice a year, the Board undertakes a formal risk review with the assistance of the Audit Committee,
to assess the adequacy and effectiveness of the Investment Manager and other service providers' risk
management and internal control processes.
The Board has carried out a robust assessment of the principal and emerging risks facing the Company,
including those that would threaten its business model, future performance, solvency or liquidity.
An analysis of the principal risks and uncertainties is set out below. The risks below do not purport to be
exhaustive as some risks are not yet known and some risks are currently not deemed material but could turn out
to be material in the future. Changes to the principal risks since the date of the Annual Report and Financial
Statements for the year ended 31 March 2020 are indicated below.
Principal risks and their potential impact How risk is managed Risk assessment
REAL ESTATE RISKS
1. Property market
Any property market recession or future
deterioration in the property market could,
inter alia, (i) cause the Company to realise The Company has investment Probability: High
its investments at lower valuations; and (ii) restrictions in place to invest and
delay the timings of the Company's manage its assets with the objective Impact: High
realisations. These risks could have a material of spreading and mitigating risk.
adverse effect on the ability of the Company to Movement: No change
achieve its investment objective.
2. Property valuation
Property and property-related assets are
inherently difficult to value due to the
individual nature of each property.
The Company uses an independent
external valuer (Knight Frank LLP) to Probability: Moderate
value the properties at fair value in
There may be an adverse effect on the Company's accordance with accepted RICS Impact: Low to Moderate
profitability, the NAV and the price of appraisal and valuation standards.
Ordinary Shares in cases where properties are Movement: Decrease
sold whose valuations have previously been
materially overstated.
Comprehensive due diligence is
3. Tenant default undertaken on all new tenants. Tenant
covenant checks are carried out on all
Failure by tenants to fulfil their rental new tenants where a default would have Probability: High
obligations could affect the income that the a significant impact.
properties earn and the ability of the Company Impact: High
to pay dividends to its shareholders.
Movement: No change
Asset management team conducts ongoing
monitoring and liaison with tenants to
manage potential bad debt risk.
4. Asset management initiatives
Asset management initiatives, such as Costs incurred on asset management
refurbishment works, may prove to be more initiatives are closely monitored Probability:
extensive, expensive and take longer than against budgets and reviewed in
anticipated. Cost overruns may have a material regular presentations to the Low to moderate
adverse effect on the Company's profitability, Investment Management Committee of the Impact: Low to moderate
the NAV and the share price. Investment Manager. Movement: Increase
5. Due diligence
Due diligence may not identify all the risks
and liabilities in respect of an acquisition The Company's due diligence relies on
(including any environmental, structural or work (such as legal reports on title, Probability: Low
operational defects) that may lead to a property valuations, environmental and
material adverse effect on the Company's building surveys) outsourced to third Impact: Moderate
profitability, the NAV and the price of the parties who have expertise in their
Company's Ordinary Shares. areas. Such third parties have Movement: No change
professional indemnity cover in place.
6. Fall in rental rates
Rental rates may be adversely affected by The Company builds a diversified
general UK economic conditions and other property and tenant base with
factors that depress rental rates, including subsequent monitoring of concentration
local factors relating to particular to individual occupiers (top 10
properties/locations (such as increased tenants) and sectors (geographical and
competition). sector exposure). Probability: Moderate
to High
Impact: Moderate to
Any fall in the rental rates for the Company's The Investment Manager holds quarterly High
properties may have a material adverse effect meetings with its Investment Strategy
on the Company's profitability, the NAV, the Committee and regularly meets the Movement: No change
price of the Ordinary Shares and the Company's Board of Directors to assess whether
ability to meet interest and capital repayments any changes in the market present
on any debt facilities. risks that should be addressed in the
Company's strategy.
FINANCIAL RISKS
7. Breach of borrowing covenants
The Company has entered into a term credit
facility. Probability:
The Company monitors the use of
borrowings on an ongoing basis through Low to Moderate
weekly cash flow forecasting and
Material adverse changes in valuations and net quarterly risk monitoring to monitor Impact: High
income may lead to breaches in the LTV and financial covenants.
interest cover ratio covenants. Movement: No change
8. Interest rate rises (short term) The Company uses interest rate caps on
a significant notional value of the
The Company's borrowings through a term credit loan to mitigate the adverse impact of Probability:
facility are subject to interest rate risk possible interest rate rises.
through changing LIBOR rates. Any increases in Low to Moderate
LIBOR rates may have an adverse effect on the
Company's ability to pay dividends. Impact: Low
The Investment Manager and Board of
Directors monitor the level of hedging Movement: Decrease
and interest rate movements to ensure
that the risk is managed
appropriately.
9. Interest rate rises (long term) The Company uses interest rate caps on
a significant notional value of the
The Company's borrowings through a term credit loan to mitigate the adverse impact of
facility are subject to interest rate risk possible interest rate rises. Probability: High
through changing LIBOR rates. Any increases in
LIBOR rates may have an adverse effect on the Impact: Low to Moderate
Company's ability to pay dividends.
The Investment Manager and Board of Movement: Increase
Directors monitor the level of hedging
and interest rate movements to ensure
that the risk is managed
appropriately.
10. Availability and cost of debt The Company maintains a good
relationship with the bank providing
The term credit facility expires in October the term credit facility. Probability:
2023. In the event that RBSi does not renew the
facility, the Company may need to sell assets Low to Moderate
to repay the outstanding loan. Any increase in
the financing costs of the facility on renewal The Company monitors the projected Impact: High
would adversely impact on the Company's usage and covenants of the credit
profitability. facility on a quarterly basis. Movement: No change
CORPORATE RISKS
11. Use of service providers
The Company has no employees and is reliant
upon the performance of third party service The performance of service providers
providers. in conjunction with their service Probability: Moderate
level agreements is monitored via to High
regular calls and face-to-face
meetings and the use of key Impact: Moderate
Failure by any service provider to carry out performance indicators, where
its obligations to the Company in accordance relevant. Movement: Increase
with the terms of its appointment could have a
materially detrimental impact on the operation
of the Company.
12. Dependence on the Investment Manager
The Investment Manager is responsible for
providing investment management services to the
Company.
The Investment Manager has endeavoured
to ensure that the principal members Probability: Moderate
of its management team are suitably Impact: Moderate to
The future ability of the Company to incentivised. High
successfully pursue its investment objective
and investment policy may, among other things, Movement: No change
depend on the ability of the Investment Manager
to retain its existing staff and/or to recruit
individuals of similar experience and calibre.
13. Ability to meet objectives
The Company may not meet its investment The Company has an investment policy
objective to deliver an attractive total return to achieve a balanced portfolio with a
to shareholders from investing predominantly in diversified asset and tenant base. The
a portfolio of smaller commercial properties in Company also has investment Probability: High
the United Kingdom. restrictions in place to limit
exposure to potential risk factors. Impact: High
These factors mitigate the risk of
fluctuations in returns. Movement: No change
Poor relative total return performance may lead
to an adverse reputational impact that affects
the Company's ability to raise new capital.
TAXATION RISKS
14. Company REIT status
The Company has a UK REIT status that provides
a tax-efficient corporate structure.
The Company monitors REIT compliance
through the Investment Manager on
acquisitions; the Administrator on
If the Company fails to remain a REIT for UK asset and distribution levels; the Probability: Low
tax purposes, its profits and gains will be Registrar and Broker on shareholdings
subject to UK corporation tax. and the use of third-party tax Impact: High
advisers to monitor REIT
Movement: No change
compliance requirements.
Any change to the tax status or UK tax
legislation could impact on the Company's
ability to achieve its investment objectives
and provide attractive returns to shareholders.
15. POLITICAL/ECONOMIC RISKS
15. General political/economic environment
Political and macroeconomic events present
risks to the real estate and financial markets The Board considers the impact of
that affect the Company and the business of its political and macroeconomic events Probability: High
tenants. The level of uncertainty that such when reviewing strategy.
events bring has been highlighted in recent Impact: High
times, most pertinently following the EU
referendum vote (Brexit) in June 2016. Movement: No change
16. COVID-19
The economic disruption arising from the The Investment Manager is in close
COVID-19 virus could impact rental income contact with tenants. The Investment Probability: High
receipts from tenants, the ability to access Manager has put in place social
funding at competitive rates, maintain the distancing measures as advised by the Impact: High
Company's dividend policy and its adherence to UK government. The Investment Manager
the HMRC REIT regime, particularly if the UK has maintained a close relationship Movement: Increase
government restrictions are in place for a with RBSi to ensure continuing
prolonged period. dialogue around covenants.
Interim Management Report and Directors' Responsibility Statement
Interim Management Report
The important events that have occurred during the period under review, the key factors influencing the
financial statements and the principal risks and uncertainties for the remaining six months of the financial
year are set out above.
Responsibility Statement
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU;
• the interim management report includes a fair review of the information required by:
a. DTR 4.2.7R, being an indication of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of the year; and
b. DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or performance of the entity
during that period; and any changes in the related party transactions described in the last annual report
that could do so.
On behalf of the Board
Mark Burton
Chairman
17 November 2020
Independent Review Report to AEW UK REIT PLC
Conclusion
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 2020 which comprises the Condensed Statement of
Comprehensive Income, Condensed Statement of Changes in Equity, Condensed Statement of Financial Position,
Condensed Statement of Cash Flows and the related explanatory notes.
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 ended 30 September 2020 is not
prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU
and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the
UK FCA').
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410
Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the
Auditing Practices Board for use in the UK. 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. We read the other information contained in the half-yearly financial report and
consider whether it contains any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on
Auditing (UK) 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.
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 DTR of the UK
FCA.
The annual financial statements of the Company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in
the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Matthew Williams
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
17 November 2020
Financial Statements
Condensed Statement of Comprehensive Income
for the six months ended 30 September 2020
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Income
Rental and other income 3 8,838 8,777 17,790
Property operating expenses 4 (1,933) (509) (1,326)
Net rental and other income 6,905 8,268 16,464
Other operating expenses 5 (971) (1,004) (1,992)
Operating profit before fair value changes 5,934 7,264 14,472
Change in fair value of investment properties 10 (3,328) (2,407) (9,444)
Realised gains on disposal of investment properties 10 3,670 44 44
Operating profit 6,276 4,901 5,072
Finance expense 6 (552) (742) (1,420)
Profit before tax 5,724 4,159 3,652
Taxation 7 - - -
Profit after tax 5,724 4,159 3,652
Other comprehensive income - - -
Total comprehensive income for the period 5,724 4,159 3,652
Earnings per share (pence per share) (basic and diluted) 8 3.61 2.74 2.40
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Changes in Equity
for the six months ended 30 September 2020
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
For the period 1 April 2020 to capital account earnings the Company
30 September 2020 (unaudited) Notes £'000 £'000 £'000 £'000
Balance as at 1 April 2020 1,587 56,578 89,698 147,863
Total comprehensive income - - 5,724 5,724
Dividends paid 9 - - (6,351) (6,351)
Balance as at 30 September 2020 1,587 56,578 89,071 147,236
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
For the period 1 April 2019 to capital account earnings the Company
30 September 2019 (unaudited) Notes £'000 £'000 £'000 £'000
Balance at 1 April 2019 1,515 49,770 98,171 149,456
Total comprehensive income - - 4,159 4,159
Dividends paid 9 - - (6,062) (6,062)
Balance as at 30 September 2019 1,515 49,770 96,268 147,553
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
capital account earnings the Company
For the year ended 31 March 2020 (audited)
Notes £'000 £'000 £'000 £'000
Balance at 1 April 2019 1,515 49,770 98,171 149,456
Total comprehensive income - - 3,652 3,652
Ordinary shares issued 72 6,928 - 7,000
Share issue costs - (120) - (120)
Dividends paid 9 - - (12,125) (12,125)
Balance as at 31 March 2020 1,587 56,578 89,698 147,863
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Financial Position
as at 30 September 2020
As at As at As at
30 September 2020 30 September 2019 31 March 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Notes
Assets
Non-Current Assets
Investment property 10 160,601 193,979 187,042
160,601 193,979 187,042
Current Assets
Receivables and prepayments 11 9,063 7,621 7,351
Other financial assets held at fair value 12 49 58 14
Cash and cash equivalents 13,357 2,012 9,873
22,469 9,691 17,238
Held for sale assets
Investment property held for sale 10 8,212 - -
Total assets 191,282 203,670 204,280
Non-Current Liabilities
Interest bearing loans and borrowings 13 (39,082) (49,528) (51,047)
Lease obligations 15 (635) (636) (635)
(39,717) (50,164) (51,682)
Current Liabilities
Payables and accrued expenses 14 (4,281) (5,905) (4,687)
Lease obligations 15 (48) (48) (48)
(4,329) (5,953) (4,735)
Total Liabilities (44,046) (56,117) (56,417)
Net Assets 147,236 147,553 147,863
Equity
Share capital 1,587 1,515 1,587
Share premium account 56,578 49,770 56,578
Capital reserve and retained earnings 89,071 96,268 89,698
Total capital and reserves attributable to equity 147,236 147,553 147,863
holders of the Company
Net Asset Value per share (pps) 8 92.73 97.36 93.13
The financial statements were approved by the Board of Directors on 17 November 2020 and were signed on its
behalf by:
Mark Burton
Chairman
AEW UK REIT plc
Company number: 09522515
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Cash Flows
for the six months ended 30 September 2020
Period from
Period from Year ended
1 April 2020 to
1 April 2019 to 31 March
30 September
30 September 2019 2020
2020
(unaudited) (audited)
(unaudited)
£'000 £'000
£'000
Cash flows from operating activities
Profit after tax 5,724 4,159 3,652
Adjustment for non-cash items:
Finance expenses 552 742 1,420
Loss from change in fair value of investment property 3,328 2,407 9,444
Realised gains on disposal of investment property (3,670) (44) (44)
Increase in other receivables and prepayments (1,573) (3,152) (2,882)
(Decrease)/Increase in other payables and accrued expenses (463) 2,640 1,424
Net cash generated from operating activities 3,898 6,752 13,014
Cash flows from investing activities
Purchase of and additions to investment property (106) (257) (358)
Proceeds of disposal of investment property 18,676 44 44
Net cash generated from/(used in) investing activities 18,570 (213) (314)
Cash flows from financing activities
Proceeds from issue of ordinary share capital - - 7,000
Share issue costs - - (120)
Loan draw down - - 1,500
Loan repayment 12,000 - -
Arrangement loan facility fee paid (13) - (39)
Premiums on interest rate caps (63) - -
Finance costs (557) (596) (1,174)
Dividends paid (6,351) (6,062) (12,125)
Net cash flow used in financing activities (18,984) (6,658) (4,958)
Net increase/(decrease) in cash and cash equivalents 3,484 (119) 7,742
Cash and cash equivalents at start of the period/year 9,873 2,131 2,131
Cash and cash equivalents at end of the period/year 13,357 2,012 9,873
The notes below form an integral part of these condensed financial statements.
Notes to the Condensed Financial Statements
for the six months ended 30 September 2020
1. Corporate information
AEW UK REIT plc (the 'Company') is a closed ended Real Estate Investment Trust ('REIT') incorporated on 1
April 2015 and domiciled in the UK.
2. Accounting policies
2.1 Basis of preparation
These interim condensed unaudited financial statements have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU, and should be read in conjunction with the Company's last financial
statements for the year ended 31 March 2020. These condensed unaudited financial statements do not include all
information required for a complete set of financial statements proposed in accordance with IFRS as adopted by
the EU ('EU IFRS'). However, selected explanatory notes have been included to explain events and transactions
that are significant in understanding changes in the Company's financial position and performance since the
last financial statements.
The financial information contained in this Interim Report and Financial Statements for the six months ended
30 September 2020 and the comparative information for the year ended 31 March 2020 does not constitute
statutory accounts as defined in sections 435(1) and (2) of the Companies Act 2006. Statutory accounts for the
year ended 31 March 2020 have been delivered to the Registrar of Companies. The Auditor reported on those
accounts. Its report was unqualified and did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.
A review of the interim financial information has been performed by the Auditor of the Company for issue on 17
November 2020.
The comparative figures disclosed in the condensed unaudited financial statements and related notes have been
presented for both the six month period ended 30 September 2019 and year ended 31 March 2020 and as at 30
September 2019 and 31 March 2020.
These condensed unaudited financial statements have been prepared under the historical-cost convention, except
for investment property and interest rate derivatives that have been measured at fair value. The condensed
unaudited financial statements are presented in Sterling and all values are rounded to the nearest thousand
pounds (£'000), except when otherwise indicated.
The Company is exempt by virtue of section 402 of the Companies Act 2006 from the requirement to prepare group
financial statements. These financial statements present information solely about the Company as an individual
undertaking.
New standards, amendments and interpretations
There were a number of new standards and amendments to existing standards which are required for the Company's
accounting periods beginning after 1 April 2020, which have been considered and applied. These being:
• Amendments to IFRS 3 "Business Combinations", definition of a business
• Amendments to IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in
Accounting Estimates and Errors", definition of material
• Revised Conceptual Framework for Financial Reporting
• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
The Company has applied the new standards and there has been no impact on the financial statements.
As a result of COVID-19 there was an amendment to IFRS 16, Leases, for COVID-19 related rent concessions. The
amendment to the standard has been considered, however at the reporting date had not been required to be
applied.
There are a number of new standards and amendments to existing standards which have been published and are
mandatory for the Company's accounting periods beginning on or after 1 April 2021 or later. The Company has
not early adopted any of these new or amended standards as the impact of the adoption is not considered to be
significant.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IAS 34 requires the Directors of the Company to
make judgements, estimates and assumptions that affect the reported amounts recognised in the financial
statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability in the future.
i) Valuation of investment property
The Company's investment property is held at fair value as determined by the independent valuer on the basis
of fair value in accordance with the internationally accepted Royal Institution of Chartered Surveyors
('RICS') Appraisal and Valuation Standards.
2.3 Segmental information
The Board of Directors retains overall control of the Company but the Investment Manager (AEW UK Investment
Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing the
performance of the Company's operating segments and is therefore considered to be the Chief Operating Decision
Maker ('CODM'). In accordance with IFRS 8, the Company considers each of its properties to be an individual
operating segment. The CODM allocates resources, and reviews the performance of, the Company's portfolio on a
property-by-property basis and discrete financial information is available for each individual property.
These operating segments have similar economic characteristics and, as such, are aggregated into one reporting
segment, being investment in property and property-related investments in the UK.
2.4 Going concern
The Directors assessed the Company's ability to continue as a going concern, which takes into consideration
the uncertainty surrounding the outbreak of COVID-19, as well as the Company's cash flows, financial position,
liquidity and borrowing facilities.
In that assessment the Directors' considered that the Company benefits from a diversified income stream from
numerous tenants and sectors, which reduces risk. They also noted that:
• The Company's rent collection has been strong with at least 90% of contracted rent either collected - or
payment plans agreed - for each of the March, June and September 2020 quarters. Based on the contracted
rent as at 30 September 2020, a reduction of 64% could be accommodated before breaching the interest cover
ratio (ICR) covenant in the Company's debt arrangements;
• Based on the property valuation at 30 September 2020, the Company had room for a £59m fall in valuations
before reaching the maximum Loan to Value (LTV) covenant in the Company's debt arrangements. If certain
conditions are met, a further £16m fall in values could be accommodated.
Finally, the Directors' note that the Company's cash flow can also be significantly managed through the
adjustment of dividend payments.
Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months, including a
severe but plausible downside scenario which makes the following assumptions:
• A reduction in rental income of 45% and collection of 70% of those rents on the quarter date, with
remaining collection deferred for three quarters;
• No new lettings or renewals, other than those where terms have already been agreed; and
• A 15% fall in property valuations.
Given the Company's financial position and headroom on covenants then even in this severe scenario, the
Directors do not consider there are any material uncertainties in relation to the Company's ability to meets
its liabilities as they fall due and continue in operation for a period of 12 months from the date of approval
of these financial statements. They therefore consider the going concern basis adopted in the preparation of
the interim financial statements is appropriate.
2.5 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are consistent with
those applied within the Company's Annual Report and Financial Statements for the year ended 31 March 2020
except for the changes as detailed in note 2.1.
3. Revenue
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross rental income 8,124 8,777 17,418
Service charge income 674* - -
Dilapidation income 40 - 372
Total rental and other income 8,838 8,777 17,790
Gross rental income includes adjustment for the effect of any incentives agreed.
*For the current period, service charge income has been presented gross to reflect the Company's role as
principal in its agreements with tenants. In comparative periods, they have been presented net, however the
difference in presentation is considered to be immaterial.
4. Property operating expenses
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Recoverable service charge expense 674* - -
Non-recoverable service charge expense 601# 143 436
Other property operating expenses 658 366 890
Total property operating expenses 1,933 509 1,326
* For the current period, recoverable service charge expenditure has been presented gross to reflect the
Company's role as principal in its agreements with tenants. In comparative periods, they have been presented
net, however the difference in presentation is considered to be immaterial.
# Of the c. £601,000 non-recoverable service charge expenditure c. £394,000 relates to Bank Hey Street,
Blackpool which includes costs relating to the remedial works as detailed in the Investment Manager's Report.
5. Other operating expenses
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment management fee 579 665 1,308
Audit fee 30 24 82
ISRE 2410 review (interim review fee) 25 24 24
Operating costs 289 230 463
Directors' remuneration 48 61 115
Total other operating expenses 971 1,004 1,992
6. Finance expense
Period from Period from
1 April 2020 1 April 2019 Year
to to ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest payable on loan borrowings 438 556 1,108
Amortisation of loan arrangement fee 49 53 110
Commitment fee payable on loan borrowings 37 29 54
524 638 1,272
Change in fair value of interest rate derivatives 28 104 148
Total 552 742 1,420
7. Taxation
Period from Period from Year
1 April 2020 to 1 April 2019 to ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Analysis of charge in the period
Profit before tax 5,724 4,159 3,652
Theoretical tax at UK corporation tax standard rate of 19% (30 1,088 790 694
September 2019: 19%; 31 March 2020: 19%)
Adjusted for:
Exempt REIT income (1,023) (1,239) (2,488)
Non taxable investment losses/(gains) (65) 449 1,794
Total - - -
8. Earnings per share and NAV per share
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Earnings per share:
Total comprehensive income (£'000) 5,724 4,159 3,652
Weighted average number of shares 158,774,746 151,558,251 152,208,919
EPS (basic and diluted) (pence) 3.61 2.74 2.40
EPRA earnings per share:
5,724 4,159 3,652
Total comprehensive income (£'000)
Adjustment to total comprehensive income:
Change in fair value of investment property (£'000) 3,328 2,407 9,444
Realised gain on disposal of investment property (£'000) (3,670) (44) (44)
Change in fair value of interest rate derivatives (£'000) 28 104 148
Total EPRA Earnings (£'000) 5,410 6,626 13,200
EPRA earnings per share (basic and diluted) (pence) 4.37 8.67
3.41
NAV per share:
Net assets (£'000) 147,236 147,553 147,863
Ordinary Shares 158,774,746 151,558,251 158,774,746
NAV per share (pence) 92.73 97.36 93.13
EPRA NAV per share:
Net assets (£'000) 147,236 147,553 147,863
Adjustments to net assets:
Other financial assets held at fair value (£'000) (49) (58) (14)
EPRA NAV (£'000) 147,187 147,495 147,849
EPRA NAV per share (pence) 92.70 97.32 93.12
Earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity
holders of the Company by the weighted average number of Ordinary Shares in issue during the period. As at 30
September 2020, EPRA NNNAV was equal to IFRS NAV and as such a reconciliation between the two measures has not
been presented.
9. Dividends paid
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
Dividends paid during the period £'000 £'000 £'000
Represents two/two/four interim dividends of 2.00 pps each 6,351 6,062 12,125
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
Dividends relating to the period £'000 £'000 £'000
Represents two/two/four interim dividends of 2.00 pps each 6,351 6,062 12,269
Dividends paid relate to Ordinary Shares only.
10. Investments
10.a) Investment property
Period from 1 April 2020 to
30 September 2020 (unaudited)
Period from
1 April 2019 Year ended
Investment Investment
to 30 September 31 March
properties properties Total
2019 2020
freehold leasehold £'000
(unaudited) (audited)
£'000 £'000
Total Total
£'000 £'000
UK Investment property
As at beginning of period 147,400 41,900 189,300 197,605 197,605
Purchases and capital expenditure in the period 106 - 106 257 358
Disposals in the period - (15,006) (15,006) - -
Revaluation of investment property (4,901) 1,856 (3,045) (1,812) (8,663)
Valuation provided by Knight Frank 142,605 28,750 171,355 196,050 189,300
Adjustment to fair value for lease incentive (3,225) (2,755) (2,941)
debtor
Adjustment for lease obligations* 683 684 683
Total Investment property 168,813 193,979 187,042
Classified as:
Investment property held sale# 8,212 - -
Investment property 160,601 193,979 187,042
168,813 193,979 187,042
Change in fair value of investment property
Change in fair value before adjustments for (3,045) (1,812) (8,663)
lease incentives
Adjustment for movement in the period:
in value of lease incentive debtor (283) (595) (781)
(3,328) (2,407) (9,444)
Gains realised on disposal of investment
property
Net proceeds from disposals of investment 18,676 44 44
property during the period
Fair value at beginning of period (15,006) - -
Gains realised on disposal of investment 3,670 44 44
property
* Adjustment in respect of minimum payment under head leases separately included as a liability within the
Condensed Statement of Financial Position.
# 225 Bath Street, Glasgow, has been classified as held-for-sale as at 30 September 2020. Contracts to sell
the property were exchanged post period-end, details of which can be found in Note 18 to the Financial
Statements.
Valuation of investment property
Valuation of investment property is performed by Knight Frank LLP, an accredited external valuer with
recognised and relevant professional qualifications and recent experience of the location and category of the
investment property being valued.
The valuation of the Company's investment property at fair value is determined by the external valuer on the
basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards
(incorporating the International Valuation Standards).
The determination of the fair value is based upon the income capitalisation approach. This approach involves
applying capitalisation yields to current and future rental streams net of income voids arising from vacancies
or rent-free periods and associated running costs. These capitalisation yields and estimated rental values are
based on comparable property and leasing transactions in the market using the valuer's professional judgement
and market observation. Other factors taken into account in the valuations include the tenure of the property,
tenancy details, capital values of fixtures and fittings, environmental matter and the overall repair and
condition of the property.
In the annual report to 31 March 2020 the report of the valuer included a material valuation uncertainty
clause due to COVID 19 and its unknown impact at that point in time. This valuation uncertainty clause had
been removed for the valuation provided as at 30 September 2020.
10.b) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for non-current assets:
Quoted prices
Significant Significant
in active
observable unobservable
markets
inputs inputs
(Level 1)
(Level 2) (Level 3) Total
Assets measured at fair value £'000
£'000 £'000 £'000
30 September 2020
Investment property - - 168,813 168,813
30 September 2019
Investment property - - 193,979 193,979
31 March 2020
Investment property - - 187,042 187,042
Explanation of the fair value hierarchy:
Level 1 - Quoted prices for an identical instrument in active markets;
Level 2 - Prices of recent transactions for identical instruments and valuation techniques using observable
market data; and
Level 3 - Valuation techniques using non-observable data.
There have been no transfers between Level 1 and Level 2 during either period, nor have there been any
transfers in or out of Level 3.
Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair
value hierarchy of the entity's portfolios of investment properties are:
1) ERV
2) Equivalent yield
Increases/(decreases) in the ERV (per sq ft per annum) in isolation would result in a higher/(lower) fair
value measurement. Increases/(decreases) in the yield in isolation would result in a lower/(higher) fair value
measurement.
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair
value hierarchy of the portfolio of investment property are:
Significant
Fair value Valuation unobservable
Class £'000 technique inputs Range
30 September 2020
ERV £0.50- £95.00
Investment Property 171,355 Income capitalisation
Equivalent yield 6.23% - 10.48%
30 September 2019
ERV £0.50- £127.00
Investment Property 196,050 Income capitalisation
Equivalent yield 5.95% - 9.69%
31 March 2020
ERV £0.50- £105.00
Investment Property 189,300 Income capitalisation
Equivalent yield 5.71% - 10.54%
Fair value per Knight Frank LLP.
Where possible, sensitivity of the fair values of Level 3 assets are tested to changes in unobservable inputs
to reasonable alternatives.
Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3
of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment
property and investments held at the end of the reporting period.
With regards to both investment property and investments, gains and losses for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy, prior to adjustment for rent free debtor
and rent guarantee debtor, are recorded in profit and loss.
The tables below set out a sensitivity analysis for each of the key sources of estimation uncertainty with the
resulting increase/(decrease) in the fair value of investment property.
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +5% -5% +5% -5%
30 September 2020 171,355 176,434 161,957 163,582 179,481
30 September 2019 196,050 204,427 187,935 185,802 207,198
31 March 2020 189,300 197,146 180,075 179,906 199,956
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +10% -10% +10% -10%
30 September 2020 171,355 183,940 154,933 156,710 188,744
30 September 2019 196,050 213,858 179,153 178,444 217,351
31 March 2020 189,300 205,933 171,723 171,251 211,640
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +15% -15% +15% -15%
30 September 2020 171,355 191,497 147,893 150,433 199,087
30 September 2019 196,050 222,863 170,767 170,822 229,917
31 March 2020 189,300 214,777 163,364 163,327 224,687
11. Receivables and prepayments
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Receivables
Rent debtor 3,469 2,789 2,579
Allowance for expected credit losses (207) (51) (190)
Rent agent float account 2,056 1,363 1,486
Dilapidations receivable 69 - 372
Other receivables 368 481 115
5,755 4,582 4,362
Rent free debtor 3,225 2,755 2,941
Prepayments 83 284 48
Total 9,063 7,621 7,351
The aged debtor analysis of receivables as follows:
30 September 30 September 31 March
2020 2019 2020
£'000 £'000 £'000
Less than three months due 4,206 4,257 4,317
Between three and six months due 1,549 325 45
Total 5,755 4,582 4,362
12. Interest rate derivatives
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 14 162 162
Interest rate cap premium paid 63 - -
Changes in fair value of interest rate derivatives (28) (104) (148)
At the end of the period 49 58 14
The Company is protected from a significant rise in interest rates as it currently has interest rate caps in
effect with a combined notional value of £36.51 million (31 March 2020: £36.51 million), with £26.51 million
capped at 2.50% and £10.00 million capped at 2.00%, resulting in the loan being 92% hedged (31 March 2020:
71%). These interest rate caps are effective until 19 October 2020. The Company has additional interest rate
caps covering the remaining period of the loan from 20 October 2020 to 23 October 2023. During the period, the
Company replaced its existing caps covering this period, which capped the interest rate at 2.00% on a notional
value of £49.51 million, with new caps covering the same period capping the interest rate at 1.00% on a
notional value of £51.50 million. The Company paid a premium of £62,968.
Fair Value hierarchy
The following table provides the fair value measurement hierarchy for interest rate derivatives:
Assets measured at fair value
Quoted prices Significant Significant
in active observable unobservable
markets input inputs
(Level 1) (Level 2) (Level 3) Total
Valuation date £'000 £'000 £'000 £'000
30 September 2020 - 49 - 49
30 September 2019 - 58 - 58
31 March 2020 - 14 - 14
The fair value of these contracts is recorded in the Condensed Statement of Financial Position as at the
period end.
There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers
between Level 2 and Level 3 during the period.
13. Interest bearing loans and borrowings
Bank borrowings drawn
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 51,500 50,000 50,000
Bank borrowings drawn in the period - - 1,500
Bank borrowings repaid in the period (12,000) - -
Interest bearing loans and borrowings 39,500 50,000 51,500
Unamortised loan arrangement fees (418) (472) (453)
At the end of the period 39,082 49,528 51,047
Repayable between two and five years 39,500 50,000 51,500
Bank borrowings available but undrawn in the period 20,500 10,000 8,500
Total facility available 60,000 60,000 60,000
The Company has a £60.00 million (31 March 2020: £60.00 million) credit facility with RBSi of which £39.50
million (31 March 2020: £51.50 million) has been utilised as at 30 September 2020.
The Company has a target gearing of 35% Loan to NAV, which is the maximum gearing on drawdown under the terms
of the facility. As at 30 September 2020, the Company's gearing was 26.83% Loan to NAV (31 March 2020:
34.83%).
Borrowing costs associated with the credit facility are shown as finance costs in note 6 to these financial
statements.
14. Payables and accrued expenses
31
30 September 30 September
March
2020 2019
2020
(unaudited) (unaudited)
(audited)
£'000 £'000
£'000
Deferred income 2,835 3,312 2,906
Accruals 991 1,037 814
Other creditors 455 1,556 967
Total 4,281 5,905 4,687
15. Lease obligation as lessee
Leases as lessee are capitalised at the lease's commencement at the present value of the minimum lease
payments. The present value of the corresponding rental obligations are included as liabilities.
The following table analyses the present value of the minimum lease payments under non-cancellable finance
leases:
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current 48 48 48
Non Current 635 636 635
Lease liabilities included in the Statement of Financial Position 683 684 683
at 30 September 2020
16. Issued share capital
There was no change to the issued share capital during the period. The number of ordinary shares in issue and
fully paid remains 151,774,746 of £0.01 each.
17. Transactions with related parties
As defined by IAS 24 Related Party Disclosures, parties are considered to be related if one party has the
ability to control the other party or exercise significant influence over the other party in making financial
or operational decisions.
For the six months ended 30 September 2020, the Directors of the Company are considered to be the key
management personnel. Directors' remuneration is disclosed in note 5.
The Company is party to an Investment Management Agreement with the Investment Manager, pursuant to which the
Company has appointed the Investment Manager to provide investment management services relating to the
respective assets on a day-to-day basis in accordance with their respective investment objectives and
policies, subject to the overall supervision and direction of the Board of Directors.
Under the Investment Management Agreement, the Investment Manager receives a quarterly management fee which is
calculated and accrued monthly at a rate equivalent to 0.9% per annum of NAV (excluding uninvested proceeds
from fundraising).
During the period from 1 April 2020 to 30 September 2020, the Company incurred £578,821 (six months ended 30
September 2019: £665,344) in respect of investment management fees and expenses of which £304,595 was
outstanding at 30 September 2020 (31 March 2020: £311,683).
18. Events after reporting date
Dividend
On 22 October 2020, the Board declared its second interim dividend of 2.00 pps in respect of the period from 1
July 2020 to 30 September 2020. The dividend payment will be made on 30 November 2020 to shareholders on the
register as at 30 October 2020. The ex-dividend date was 29 October 2020.
The dividend of 2.00 pps was designated as an interim property income distribution ('PID'). Unless
shareholders have elected to receive the PID gross, 20% tax will be deducted at source.
Property acquisitions
Post period-end, in November 2020, the Company acquired a warehouse asset in Weston-Super-Mare for a purchase
price of £5.40 million.
Share buybacks
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. This reflects 350,000 Ordinary Shares having been bought back since the period
end for a gross consideration of £262,995.
Bath Street, Glasgow
During October 2020, the Company exchanged contracts to sell its 85,000 sq ft office holding at 225 Bath
Street in Glasgow city centre. The transaction is conditional upon various matters including the grant of
planning permission for the development of a 480 bedroom student housing development. Sale pricing will be
determined following the approval of all conditions according to an agreed matrix ranging from £8.55 to £9.30
million. Due to these conditions, there is some uncertainty as to the date of completion of the transaction,
but there is considered to be a high probability that the transaction will complete within 12 months of the
balance sheet date and, as such, the property has been classified as held-for-sale in these financial
statements
EPRA Performance Measures
Detailed below is a summary table showing the EPRA performance measures of the Company. All EPRA performance
measures have been calculated in line with EPRA Best Practices Recommendations Guidelines which can be found
at 1 www.epra.com.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
A key measure of a company's £5.41 million/3.41 pps
1. EPRA Earnings underlying operating results and an
indication of the extent to which EPRA earnings for the six month
Earnings from operational activities. current dividend payments are period ended 30 September 2020
supported by earnings. (six month period ended 30
September 2019: £6.63
million/4.37 pps)
2. EPRA NAV
NAV adjusted to include properties and Makes adjustments to IFRS NAV to
other investment interests at fair value provide stakeholders with the most £147.19 million/92.70 pps EPRA
and to exclude certain items not expected relevant information on the fair NAV as at 30 September 2020 (At
to crystallise in a long-term investment value of the assets and liabilities 31 March 2020: £147.85 million/
property business. within a true real estate 93.12 pps)
investment company with a long-term
investment strategy.
3. EPRA NNNAV
EPRA NAV adjusted to include the fair Makes adjustments to EPRA NAV to
values of: provide stakeholders with the most
relevant information on the current £147.24 million/92.73 pps EPRA
(i) financial instruments; fair value of all the assets and NNNAV as at 30 September 2020
liabilities within a real estate
(ii) debt; and company. (At 31 March 2020: £147.86
million/93.13 pps)
(iii) deferred taxes.
4.1 EPRA NIY
Annualised rental income based on the 7.21%
cash rents passing at the balance sheet A comparable measure for portfolio
date, less non-recoverable property valuations. This measure should EPRA NIY
operating expenses, divided by the market make it easier for investors to
value of the property, increased with judge themselves, how the valuation as at 30 September 2020
(estimated) purchasers' costs. of portfolio X compares with
portfolio Y. (At 31 March 2020: 8.26%)
4.2 EPRA 'Topped-Up' NIY
This measure incorporates an adjustment A comparable measure for portfolio 8.39%
to the EPRA NIY in respect of the valuations. This measure should
expiration of rent-free periods (or other make it easier for investors to EPRA 'Topped-Up' NIY
unexpired lease incentives such as judge themselves, how the valuation
discounted rent periods and step rents). of portfolio X compares with as at 30 September 2020
portfolio Y.
(At 31 March 2020: 8.66%)
5. EPRA Vacancy
8.21%
Estimated Market Rental Value ('ERV') of
vacant space divided by ERV of the whole A "pure" (%) measure of investment EPRA vacancy
portfolio. property space that is vacant,
based on ERV. as at 30 September 2020
(At 31 March 2020: 3.68%)
27.15%
EPRA Cost Ratio (including
direct vacancy cost) as at
30 September 2020
6. EPRA Cost Ratio (At 30 September 2019: 16.93%)
Administrative and operating costs A key measure to enable meaningful
(including and excluding costs of direct measurement of the changes in a
vacancy) divided by gross rental income. company's operating costs. 16.70%
EPRA Cost ratio excluding direct
vacancy costs as at
30 September 2020
(At 30 September 2019: 13.76%)
7. EPRA Capital Expenditure
Property which has been held at both the £0.11 million for the period
current and comparative balance sheet Is used to illustrate change in ended 30 September 2020
dates for which there has been no comparable capital values.
significant development. (31 March 2020: £0.29 million)
8. EPRA Like-for-like Rental Growth
Net income generated by assets which were (£0.20 million)/(2.26%) for the
held by the Company throughout both the Is used to illustrate change in period ended 30 September 2020
current and comparable periods which comparable income values. (31 March 2020: £0.29
there has been no significant development million/1.71%)
which materially impacts upon income.
Calculation of EPRA NIY and 'topped-up' NIY
30 September
2020
£'000
Investment property - wholly-owned 171,355
Allowance for estimated purchasers' costs at 6.8% 11,652
Grossed-up completed property portfolio valuation (B) 183,007
Annualised cash passing rental income 14,144
Property outgoings (955)
Annualised net rents (A) 13,189
Rent from expiry of rent-free periods and fixed uplifts 2,169
'Topped-up' net annualised rent (C) 15,558
EPRA NIY (A/B) 7.21%
EPRA 'topped-up' NIY (C/B) 8.39%
EPRA NIY basis of calculation
EPRA NIY is calculated as the annualised net rent, divided by the gross value of the completed property
portfolio.
The valuation of grossed up completed property portfolio is determined by our external valuers as at 30
September 2020, plus an allowance for estimated purchasers' costs. Estimated purchasers' costs are determined
by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional
acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on
future recurring non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent
from expiry of rent-free periods and future contracted rental uplifts.
Calculation of EPRA Vacancy Rate
30 September
2020
£'000
Annualised potential rental value of vacant premises (A) 1,330
Annualised potential rental value for the completed property portfolio (B) 16,211
EPRA Vacancy Rate (A/B) 8.21%
Calculation EPRA Cost Ratios
30 September
2020
£'000
Administrative/operating expense per IFRS income statement 2,230
Less: Ground rent costs (33)
EPRA costs (including direct vacancy costs) 2,197
Direct vacancy costs (846)
EPRA costs (excluding direct vacancy costs) (B) 1,351
Gross rental income less ground rent costs (C) 8,091
EPRA Cost Ratio (including direct vacancy costs) (A/C) 27.15%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 16.70%
The Company has not capitalised any overhead or operating expenses in the accounting period disclosed above.
Only costs directly associated with the purchase or construction of properties as well as all subsequent
value-enhancing capital expenditure are capitalised.
Company Information
Shareholder Enquiries
The register for the Ordinary Shares is maintained by Computershare Investor Services PLC. In the event of
queries regarding your holding, please contact the Registrar on +44 (0)370 707 1341 or email:
2 web.queries@computershare.co.uk.
Changes of name and/or address must be notified in writing to the Registrar, at the address shown below. You
can check your shareholding and find practical help on transferring shares or updating your details at
3 www.investorcentre.co.uk. Shareholders eligible to receive dividend payments gross of tax may also download
declaration forms from that website.
Share Information
Ordinary £0.01 Shares 158,774,746
SEDOL Number BWD2415
ISIN Number GB00BWD24154
Ticker/TIDM AEWU
The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange.
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the Company's website: 4 www.aewukreit.com.
Provisional Financial Calendar
31 March 2021 Year end
June 2021 Announcement of annual results
September 2021 Annual General Meeting
30 September 2021 Half-year end
November 2021 Announcement of interim results
Dividends
The following table summarises the dividends declared in relation to the period:
£
Interim dividend for the period 1 April 2020 to 30 June 2020 (payment made on 28 August 2020) 3,175,495
Interim dividend for the period 1 July 2020 to 30 September 2020 (payment to be made on 30 November 3,175,495
2020)
Total 6,350,990
Independent Directors
Mark Burton (Non-executive Chairman)
Bimaljit ('Bim') Sandhu (Non-executive Director and Chairman of the Audit Committee)
Katrina Hart (Non-executive Director)
Registered Office
6th Floor
65 Gresham Street
London
EC2V 7NQ
Investment Manager and AIFM
AEW UK Investment Management LLP
33 Jermyn Street
London
SW1Y 6DN
Tel: 020 7016 4880
Website: www.aewuk.co.uk
Property Manager
Mapp
180 Great Portland Street
London
W1W 5QZ
Corporate Broker
Liberum
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Legal Adviser
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Depositary
Langham Hall UK LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
EX4 4EP
Company Secretary
Link Company Matters Limited
6th Floor
65 Gresham Street
London
EC2V 7NQ
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Frequency of NAV publication:
The Company's NAV is released to the London Stock Exchange on a quarterly basis and is published on the
Company's website.
National Storage Mechanism
A copy of the Interim Report will be submitted shortly to the National Storage Mechanism ('NSM') and will be
available for inspection at
5 https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.
LEI: 21380073LDXHV2LP5K50
══════════════════════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00BWD24154
Category Code: IR
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
Sequence No.: 88041
EQS News ID: 1148838
End of Announcement EQS News Service
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