REG-AEW UK REIT plc AEW UK REIT plc: Half Yearly Results
17/11/2021 07:05
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AEW UK REIT plc (AEWU)
AEW UK REIT plc: Half Yearly Results
17-Nov-2021 / 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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17 November 2021
AEW UK REIT PLC
Interim Report and Financial Statements
for the six months ended 30 September 2021
AEW UK REIT PLC ("AEW UK REIT" or the "Company"), , which holds a diversified portfolio of 35 commercial
investment properties throughout the UK, is pleased to publish its Interim Report and Financial Statements
for the six months ended 30 September 2021.
Mark Burton, Chairman of AEW UK REIT, commented: "We are very pleased with the strong performance over the
period with the Company's NAV increasing by 10.96% and a total shareholder return of 28.37%. . The
valuation of the Company's property portfolio rose by 9.81% on a like-for-like basis, chiefly driven by its
industrial assets. The sales of Langthwaite Industrial Estate, South Kirkby for £10.84 million and Wella
Warehouse, Basingstoke for £5.86 million post period end were well above both purchase prices and book
values.
The Company continues to see a number of attractive investment opportunities as it seeks to deliver further
attractive returns to shareholders and support the 8p annual dividend. The Company made two acquisitions
during the period, and one after half-year end, that are aligned with AEWU's strategy of adding value
through active asset management by renewing current tenancies and securing new tenants. "
Financial Highlights
Net Asset Value ('NAV') of £174.29 million and of 110.01 pence per share ('pps') as at 30 September
● 2021 (31 March 2021: £157.08 million and 99.15 pps).
Operating profit before fair value changes of £5.88 million for the period (six months ended 30
● September 2020: £5.93 million).
Profit Before Tax ('PBT') of £23.55 million and earnings per share ('EPS') of 14.86 pps for the
period (six months ended 30 September 2020: £5.72 million and 3.61 pps). PBT includes a £16.60
million gain arising from changes to the fair values of investment properties in the period (six
● months ended 30 September 2020: loss of £3.33 million). This change explains the significant rise in
PBT for the period.
EPRA Earnings Per Share ('EPRA EPS') for the period of 3.45 pps (six months ended 30 September 2020:
● 3.41 pps).
● Total dividends of 4.00 pps declared in relation to the period (six months ended 30 September 2020:
4.00 pps).
Shareholder Total Return for the period of 28.37% (six months ended 30 September 2020: 16.13%).
●
The price of the Company's Ordinary Shares on the London Stock Exchange was 102.80 pps as at 30
● September 2021 (31 March 2021: 83.20 pps).
As at 30 September 2021, the Company had a balance of £50.50 million drawn down (31 March 2021:
£39.50 million) of its £60.00 million (31 March 2021: £60.00 million) term credit facility with the
Royal Bank of Scotland International Limited ('RBSi') and was geared to 28.97% of NAV (31 March
● 2021: 25.15%). The Company can draw £9.50 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 £15.16 million as at 30 September 2021 (31 March 2021:
£17.45 million).
Property Highlights
As at 30 September 2021, the Company's property portfolio had a valuation of £206.69 million across 35
● properties (31 March 2021: £179.00 million across 34 properties) as assessed by the valuer1 and a
historical cost of £197.69 million (31 March 2021: £173.28 million).
The Company acquired two properties during the period for a total purchase price of £18.54 million,
excluding acquisition costs (year ended 31 March 2021: one property for £5.40 million). Post period-end,
● in November 2021, the Company acquired a retail park asset
in Coventry for a purchase price of £16.41 million, excluding acquisition costs.
The Company made one disposal during the period, Langthwaite Industrial Estate, South Kirkby for gross
sale proceeds of £10.84 million (year ended 31 March 2021: two properties for gross sale proceeds of
£29.30 million). Post period-end, in October 2021, the
●
Company disposed of Wella Warehouse, Basingstoke, for gross proceeds of £5.86 million.
The portfolio had an EPRA vacancy rate of 8.59% as at 30 September 2021 (31 March 2021: 8.96%). Excluding
vacancy contributed by Bath Street, Glasgow, which was exchanged to be sold with the condition of vacant
● possession, the vacancy rate was 5.43% (31 March 2021: 5.58%).
Rental income generated during the period was £7.87 million (six months ended 30 September 2020: £8.12
● million).
EPRA Net Initial Yield ('EPRA NIY') of 6.45% as at 30 September 2021 (31 March 2021: 7.37%).
●
Weighted Average Unexpired Lease Term ('WAULT') of 4.00 years to break and 6.20 years to expiry (31 March
● 2021: 4.43 years to break and 6.71 years to expiry).
As at the date of this report, 87% of the rent due for the September 2021 quarter had been collected, 99%
● for the June 2021 quarter and 99% for the March 2021 quarter.
1 The valuation figure is reconciled to the fair value under IFRS in note 10.
Chairman's Statement
Overview
I am pleased to report the unaudited interim results of the Company for the six months ended 30 September
2021 (the 'period'). The Company held a diversified portfolio of 35 commercial investment properties
located throughout the UK with a value of £206.69 million as at 30 September 2021.
The Company's NAV has performed well over the period, having increased by 10.96%. The valuation of the
Company's property portfolio rose by 9.81% on a like-for-like basis over the period, chiefly driven by its
industrial assets. The sales of Langthwaite Industrial Estate, South Kirkby for £10.84 million and Wella
Warehouse, Basingstoke for £5.86 million post period end were undertaken at 1.9x and 1.7x the purchase
prices, respectively. The resulting profits achieved on disposal were £2.25 million and £1.93 million above
book values, respectively, providing a boost to the Company's NAV. The Company closed the period in a
position to take advantage of attractive opportunities to reinvest as a result of its cash position and
debt covenant headroom. The Company has maintained a conservative Loan to NAV ratio, which stood at 29.00%
at 30 September 2021, and had a healthy cash balance of £15.16 million.
Following the disposal of the Corby and Solihull sites in the prior period, the Company reinvested the
sales proceeds to make two acquisitions during the period. Arrow Point Retail Park in Shrewsbury was
acquired in May 2021 for £8.35 million and is a fully-let, purpose-built retail park prominently located on
a busy estate and providing a Net Initial Yield ('NIY') of 8.7%. The second, 15-33 Union Street, Bristol,
is a prime retail site located on a busy pedestrian thoroughfare in Bristol city centre and was purchased
for £10.19 million, equating to a low capital value of £161 per sq ft and reflecting a NIY of 8.0%. Both of
these assets provide opportunity for value growth in the medium to long term, and also have strong and
stable income streams from their tenancy profiles.
The ongoing remedial works in Blackpool, along with the vacancy costs at Glasgow where we have sold an
asset conditional on obtaining vacant possession, have constrained the portfolio's overall EPRA EPS, which
was 3.45 pence for the period, providing a dividend cover of 86.10%. Following the planned sale of Glasgow,
currently anticipated in December 2021, and completion of the works at Blackpool in early 2022, we expect
this cost overhead to fall, leading to an increase in the EPRA EPS. The Company has made one acquisition
post period-end of a retail park in Coventry for a purchase price of £16.41 million. This presents
opportunities to add value through active asset management by renewing current tenancies and securing new
tenants, which will further add to the recent strong income return and NAV growth achieved by the Company.
The acquisition is accretive to EPRA EPS and takes the Company close to full investment.
The Company continues to work with its tenants in order to manage the difficulties posed by the pandemic.
To date, the tenancy profile of the Company has proved to be resilient, demonstrated by the Company's low
underlying vacancy rate of 5.43%* by Estimated Rental Value ('ERV') as at 30 September 2021. Rent
collection rates have remained high for the March and June 2021 quarters, being 99% for both and 87% has
been collected to date for the September 2021 rent quarter. These collection rates are high 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 98%. There are a small
number of tenants who continue to face challenges in the current environment, and in a small number of
cases the Company has agreed a longer-term payment plan to recover rental income in full over an extended
period. A prudent assessment has been made of the recoverability of the Company's outstanding debts and a
provision has been made in the financial statements for potential debt write-offs.
The office park at Oxford continues to perform well with its transition to life sciences/medical use, a
sector which is seeing particularly strong investor demand at present. Moreover, after a tumultuous period
for the retail sector, we have seen valuations stabilise this period, with our valuations increasing by
1.36% on a like-for-like basis, particularly driven by our new retail warehousing holding in Shrewsbury.
Stock selection and active asset management continue to be key features of the Company's strategy and
drivers of performance. During the period, the Company completed a number of lettings and lease renewals,
the most notable of which was two new lettings at our office holding in Bristol, both of which were 15%
above ERV. These are noted in more detail below in the 'Asset Management' section of the Investment
Manager's Report.
The Company's share price was 102.80 pence per share as at 30 September 2021, representing a 6.56% discount
to NAV (31 March 2021: 83.20 pence per share, representing a 16.1% discount to NAV). Subsequent to the
period-end, the Company's share price has experienced additional growth, causing a further reduction in the
discount to NAV.
* Including vacancy contributed by Bath Street, Glasgow, which has been sold with the condition of vacant
possession, the vacancy rate was 8.59%.
Financial Results
Six months ended 30 Six months ended 30
September 2021 Year ended 31 March September 2020
2021
Operating Profit before fair value changes 5,879 10,735 5,934
(£'000)
Operating Profit (£'000) 23,919 23,102 6,276
Profit Before Tax (£'000) 23,547 22,172 5,724
Earnings Per Share (basic and diluted) (pence)* 14.86 13.98 3.61
EPRA Earnings Per Share (basic and diluted) 3.45 6.19 3.41
(pence)*
Ongoing Charges (%) 1.31 1.36 1.31
Net Asset Value per share (pence) 110.01 99.15 92.73
EPRA Net Asset Value per share (pence) 109.94 99.11 92.70
* see note 8 of the Financial Statements for the corresponding calculations.
Financing
The Company has a £60.00 million loan facility, of which it had drawn a balance of £50.50 million as at 30
September 2021 (31 March 2021: £60.00 million facility; £39.50 million drawn), producing a Loan to NAV
ratio of 28.97% (31 March 2021: 25.15%).
The unexpired term of the facility was 2.1 years as at 30 September 2021 (31 March 2021: 2.6 years). The
loan incurs interest at 3-month SONIA +1.4%, which equated to an all-in rate of 1.47% as at 30 September
2021 (31 March 2021: 3-month LIBOR + 1.4% equating to an all-in rate of 1.44%).
The Company is protected from a significant rise in interest rates as it has interest rate caps in place.
Throughout the period and up to the date of this report, the Company had in effect interest rate caps on a
notional value of £51.50 million of the loan, capped at 1.00%, which resulted in the loan balance being
102.0% hedged as at 30 September 2021.
As noted in the KPIs, the Company targets long-term gearing of 35% Loan to NAV, which is the maximum
gearing on drawdown of the RBSi facility. The Board and Investment Manager continue to monitor the level of
gearing and have the ability to adjust the target gearing according to the Company's circumstances and
perceived risk levels.
The Company passed its Interest Cover Ratio ('ICR') tests for April, July and October 2021 with significant
headroom.
Dividends
The Company has continued to deliver on its target of paying dividends of 8.00 pence per share per annum.
During the period, the Company declared and paid two quarterly dividends of 2.00 pence per Ordinary Share,
in line with its target. Dividends for the period were 86.00% covered by EPRA EPS.
It remains the Company's intention to continue to pay dividends in line with its dividend policy, and the
existing portfolio and investment opportunities support this policy. However, the outlook remains unclear
in the wake of the COVID-19 pandemic and 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.
Outlook
The easing of most of the remaining COVID-19 restrictions, combined with the continued rollout of the
vaccination programme, has lifted most economists' outlook for the post COVID-19 rebound in the second half
of 2021. In light of this, the property market has experienced a gradual recovery, with rent collection
levels greatly improving, as cash flow pressures on tenants ease. With its strong cash position and
borrowing covenant headroom, the Company is well positioned to take advantage of attractive opportunities
coming to the market. During the period, the Company has displayed strong NAV performance, reflecting the
geographical diversity of the portfolio, its circa 50% exposure to the industrial sector and the fact that
many of its assets benefit from viable alternative use potential, limiting downside risk and volatility.
In the near term, the Board and Investment Manager will continue to focus on minimising the legacy 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 to a fully covered dividend. The developing economic
conditions will be monitored closely and the Company's strategy adjusted accordingly. It is hoped that the
start of 2022 will build upon the economic recovery of the second half of 2021, providing conditions to
enable further growth of the Company
Mark Burton
Chairman
16 November 2021
Key Performance Indicators
KPI AND DEFINITION RELEVANCE TO STRATEGY
TARGET PERFORMANCE
1. EPRA NIY
A representation to
investors of what their 6.45%
initial net yield would be The Company's EPRA NIY demonstrates
at a predetermined purchase the ability to generate income from at 30 September 2021
price after taking account its portfolio in the short-term in 7.50 - 10.00% (31 March 2021:
of all associated costs, order to meet its target dividend. 7.37%).
e.g. void costs and rent
free periods.
2. True Equivalent Yield
The average weighted return
a property will produce 7.67%
according to the present The Company's True Equivalent Yield
income and ERV assumptions, demonstrates the Company's ability at 30 September 2021
assuming the income is to generate income, both from its 7.50 - 10.00% (31 March 2021:
received quarterly in existing leases and its ERVs, in 8.15%).
advance. order to meet its target dividend.
3. Reversionary Yield 7.67%
The expected return the A Reversionary Yield profile shows a at 30 September 2021
property will provide once potentially sustainable income (31 March 2021:
rack rented. stream that can be used to meet 7.50 - 10.00% 8.18%).
dividends past the expiry of a
property's current leasing
arrangements.
The Investment Manager believes that
current market conditions present an
opportunity whereby assets with a
4. WAULT to expiry shorter unexpired lease term are
often mispriced. It is also the 6.20 years
The average lease term Investment Manager's view that a
remaining to expiry across shorter WAULT is useful for active at 30 September 2021
the portfolio, weighted by asset management, particularly in >3 years (31 March 2021: 6.71
contracted rent. certain growth sectors such as years).
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
often mispriced. As such, it is in
5. WAULT to break line with the Investment Manager's
strategy to acquire properties with 4.00 years
The average lease term a WAULT that is generally shorter
remaining to break, across than the benchmark. It is also the at 30 September 2021
the portfolio weighted by Investment Manager's view that a >3 years (31 March 2021: 4.43
contracted rent. shorter WAULT is useful for active years).
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
£174.29 million
NAV is the value of an Provides stakeholders with the most
entity's assets minus the relevant information on the fair at 30 September 2021
value of its liabilities. value of the assets and liabilities Increase (31 March 2021:
of the Company. year-on-year £157.08 million).
The Company has changed the measure
of its Leverage KPI from 'Loan to
Gross Asset Value ('GAV')' to 'Loan
to NAV'. This is in line with the
measure used in its banking
covenants and so is considered to be
7. Leverage (Loan to NAV) more relevant to the Company's
position. 28.97%
The proportion of the
Company's net assets that is at 30 September 2021
funded by borrowings. The target of 35% Loan to NAV, which 35% (31 March 2021:
is the gearing limit at drawdown 25.15%).
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.
8.59% / 5.43%
8. Vacant ERV excluding vacancy
The Company's aim is to minimise contributed by
The space in the property vacancy of the properties. A low Glasgow*
portfolio which is currently level of structural vacancy provides
unlet, as a percentage of an opportunity for the Company to at 30 September 2021
the total ERV of the capture rental uplifts and manage <10.00% (31 March 2021:
portfolio. the mix of tenants within a 8.96%/5.58% excluding
property. vacancy contributed
by Glasgow).
9. Dividend
4.00 pps
Dividends declared in
relation to the year. The for the six months to
Company targets a dividend 30 September 2021.
of 8.00 pence per Ordinary
Share per annum. However, The dividend reflects the Company's This supports an
given the current COVID-19 ability to deliver a sustainable 4.00 pps (six month annualised target of
situation, regard will be income stream from its portfolio. period to 30 8.00 pps (six months
had to the circumstances September) to 30 September 2020:
prevailing at the relevant 4.00 pps).
time in determining dividend
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 30 September 2021
percentage of average NAV Investment Manager. This measure is <1.50% (six months to 30
throughout the period. to provide investors with a clear September 2020:
picture of operational costs 1.31%).
involved in running the Company.
11. Profit before Tax £23.55 million/14.86
('PBT') pps
PBT is a profitability The PBT is an indication of the 4.00 pps (six month for the six months to
measure which considers the Company's financial performance for period to 30 September 2021
Company's profit before the the period in which its strategy is (six months to 30
payment of income tax. exercised. 30 September) September 2020: £5.72
million/3.61 pps).
12. Shareholder Total Return
The percentage change in the 28.37%
share price assuming This reflects the return seen by
dividends are reinvested to shareholders on their shareholdings for the six months to
purchase additional Ordinary through share price movements and 8.00% 30 September 2021
Shares. dividends received. (six months to 30
September 2020:
16.13%).
13. EPRA EPS
Earnings from core
operational activities. A 3.45 pps
key 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 (six month 30 September 2021
business and an indication to generate earnings from the period to (six months to 30
of the extent to which portfolio which underpins dividends. September 2020: 3.41
current dividend payments 30 September) pps).
are supported by earnings.
See note 8.
* Glasgow has exchanged to be sold with condition of vacant possession.
Investment Manager's Report
Economic Outlook
The easing of most of the remaining COVID-19 restrictions has increased market optimism in both the direct
and indirect markets. Oxford Economics' latest forecasts published in mid-September 2021 indicate UK GDP
growth to be 6.9% for the whole year, compared with the 9.8% contraction in 2020. However, the Bank of
England signalled its concerns on inflation being well ahead of its target in mid-October. Due to energy,
labour and materials shortages UK inflation is expected to peak near 6% in early 2022. As a result, gilt
markets are pricing in interest rate hikes starting in December 2021 followed by further increases in 2022.
Despite these interest rate increases, Oxford Economics' latest forecast confirms the continued strong UK
economic recovery with GDP growth of 6.7% in 2022.
Although the direct markets are still strongest in the industrial and warehouse sector, the next year is
expected to be a year of recovery and growth where some parts of the retail and leisure sectors may be the
beneficiaries. The Company is focusing on portfolio adjustments to take advantage of value opportunities,
driven more by the specifics of the asset than the sector. This may see the Company realise profits through
sales where it believes values have been optimised and where the funds can be recycled into assets with
better growth potential going forwards. There is likely to be a slightly reduced weighting to business
space and a rotation towards retail warehousing, leisure and a continued focus on assets with viable
alternative use value. Assets whose current value is supported by long-term alternative use optionality,
irrespective of current use, will be of increasing importance in our stock selection process. Moreover,
recent changes to the Use Classes Order are likely to have a significant impact on portfolios in terms of
broadening potential use. Finally, in line with market optimism and a period of post pandemic growth, rent
collection rates have strongly improved and this trend is expected to continue.
Financial Results
The Company's NAV as at 30 September 2021 was £174.29 million or 110.01 pps (31 March 2021: £157.08 million
or 99.15 pps). This is an increase of 10.86 pps or 10.96% over the period.
EPRA EPS for the period was 3.45 pence which, based on dividends paid of 4.00 pps, reflects a dividend
cover of 86.00%. The increase in dividend cover compared to the prior six-month period has largely arisen
due to improvements in rent collection levels, along with successful legal outcomes that have recovered
significant arrears. Income across the tenancy profile has remained largely intact. Collection rates have
reached 99% for both the March and June 2021 quarters respectively, with further payments expected to be
received under longer-term payment plans. Of the outstanding arrears, £0.61 million has been provided for
expected credit losses.
Financing
As at 30 September 2021, the Company has a £60.00 million loan facility with RBSi, in place until October
2023, the details of which are presented below:
30 September 2021 31 March 2021
Facility £60.00 million £60.00 million
Drawn £50.50 million £39.50 million
Gearing (Loan to NAV) 28.97% 25.15%
Interest rate 1.47% all-in (SONIA + 1.4%) 1.44% all-in (LIBOR +1.4%)
Notional Value of Loan Balance Hedged 102.0% 130.4%
Due to GBP LIBOR ending at the end of 2021, the Company transitioned to SONIA on 20 July 2021, with a
credit adjustment spread of 0.0981%.
Property Portfolio
During the period, the Company disposed of Langthwaite Industrial Estate, South Kirkby, for net proceeds of
£10.84 million. The Company made two acquisitions during the period being: Arrow Point Retail Park in
Shrewsbury, which was acquired in May 2021 for £8.35 million, and 15-33 Union Street, Bristol, which was
purchased in June 2021 for a price of £10.19 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 2021
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 20 114.72 2,428,590 6.45 3.73 8.04 3.31 9.28 3.82 4.20 0.10 2.42
Offices 5 39.95 251,812 18.73 3.12 2.19 8.71 3.62 14.38 1.16 0.02 1.83
Standard 6 24.62 237,792 10.35 4.60 2.65 11.13 2.36 9.92 1.21 (0.02) (1.76)
retail
Retail 2 14.85 145,912 0.00 1.95 1.32 9.07 1.21 8.29 0.57 (0.02) (6.93)
warehouses
Alternatives 2 12.55 112,355 0.00 6.85 1.50 13.31 1.23 10.99 0.73 (0.04) (5.01)
Portfolio 35 206.69 3,176,461 8.59 4.00 15.70 4.94 17.70 5.57 7.87 0.04 0.57
Summary by Geographical Area as at 30 September 2021
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) %
South West 5 37.69 517,232 12.65 2.85 2.70 5.21 3.40 6.57 1.21 (0.03) (3.08)
Yorkshire
and 7 34.10 796,951 4.51 2.59 2.43 3.05 3.10 3.89 1.41 (0.20) (12.34)
Humberside
South East 5 30.32 195,545 3.94 3.99 2.03 10.40 2.19 11.19 1.13 (0.01) (0.41)
Eastern 5 23.85 344,339 10.23 2.29 1.84 5.33 2.06 5.98 0.91 0.21 29.68
West 4 23.22 458,613 3.42 3.46 1.90 4.14 1.83 4.00 0.85 (0.02) (2.71)
Midlands
Wales 2 18.55 376,138 0.00 7.58 1.25 3.31 1.43 3.82 0.64 (0.03) (4.97)
North West 4 18.28 302,061 0.00 4.44 1.56 5.18 1.40 4.64 0.78 0.16 25.32
Rest of 1 9.25 71,720 0.00 10.12 0.96 13.40 0.75 10.45 0.47 (0.02) (4.87)
London
Scotland 1 7.50 85,643 51.1 1.38 0.64 7.49 1.16 13.54 0.27 (0.01) (2.92)
East 1 3.93 28,219 0.00 5.16 0.39 13.82 0.38 13.38 0.20 (0.01) (2.96)
Midlands
Portfolio 35 206.69 3,176,461 8.59 4.00 15.70 4.94 17.70 5.57 7.87 0.04 0.57
*like-for-like rental growth is for the six months ended 30 September 2021.
Source: Knight Frank/AEW, 30 September 2021.
Individual Property Classifications
Market Value
Range
Property Sector Region
(£m)
Eastpoint Business Park, Oxford Offices South East
1 15.0-20.0
Gresford Industrial Estate, Wrexham Industrial Wales
2 10.0-15.0
3 40 Queen Square, Bristol Offices South West 10.0-15.0
4 15-33 Union Street, Bristol Standard retail South West 10.0-15.0
5 Lockwood Court, Leeds Industrial Yorkshire and Humberside 7.5-10.0
London East Leisure Park, Dagenham Other Rest of London
6 7.5 -10.0
Arrow Point Retail Park, Shrewsbury Retail warehouses West Midlands
7 7.5-10.0
Storey's Bar Road, Peterborough Industrial Eastern
8 7.5-10.0
9 Sarus Court, Runcorn Industrial North West 7.5-10.0
10 225 Bath Street, Glasgow Offices Scotland 7.5-10.0
The Company's top ten properties listed above comprise 49.2% of the total value of the portfolio.
Market Value
Range
Property Sector Region
(£m)
11 Euroway Trading Estate, Bradford Industrial Yorkshire and Humberside 5.0-7.5
12 Apollo Business Park, Basildon Industrial Eastern 5.0-7.5
13 Brockhurst Crescent, Walsall Industrial West Midlands 5.0-7.5
14 Westlands Distribution Park, Weston Super Mare Industrial South West 5.0-7.5
15 Barnstaple Retail Park, Barnstaple Retail warehouses South West 5.0-7.5
16 Walkers Lane, St Helens Industrial North West 5.0-7.5
17 Deeside Industrial Park, Deeside Industrial Wales 5.0-7.5
18 Diamond Business Park, Wakefield Industrial Yorkshire and Humberside 5.0-7.5
19 Wella Warehouse, Basingstoke Industrial South East 5.0-7.5
20 Oak Park, Droitwich Industrial West Midlands <5.0
21 Mangham Road, Rotherham Industrial Yorkshire and Humberside <5.0
22 Pearl House, Nottingham Standard retail East Midlands <5.0
23 710 Brightside Lane, Sheffield Industrial Yorkshire and Humberside <5.0
24 Hall Industrial Estate, Basildon Industrial Eastern <5.0
25 Cedar House, Gloucester Offices South West <5.0
26 75 Above Bar Street, Southampton Standard retail South East <5.0
27 Eagle Road, Redditch Industrial West Midlands <5.0
28 Odeon Cinema, Southend Other Eastern <5.0
29 Commercial Road, Portsmouth Standard retail South East <5.0
30 Clarke Road, Milton Keynes Industrial South East <5.0
31 Bridge House, Bradford Industrial Yorkshire and Humberside <5.0
32 Pricebusters Building, Blackpool Standard retail North West <5.0
33 Vantage Point, Hemel Hempstead Offices Eastern <5.0
34 Moorside Road, Swinton Industrial North West <5.0
35 11/15 Fargate, Sheffield Standard retail Yorkshire and Humberside <5.0
Sector and Geographical Allocation by Market Value as at 30 September 2021
Sector Allocation
Sector %
Standard retail 11.9
Retail warehouses 7.2
Offices 19.3
Industrial 55.5
Other 6.1
Geographical Allocation
Location %
Rest of London 4.5
South East 14.7
South West 18.2
Eastern 11.6
West Midlands 11.2
East Midlands 1.9
North West 8.8
Yorkshire and Humberside 16.5
Wales 9.0
Scotland 3.6
Source: Knight Frank valuation report as at 30 September 2021.
Top Ten Tenants
% of
Passing Portfolio
Rental Total
Tenant Sector Property
Income Contracted
(£'000) Rental
Income
1 Plastipak UK Ltd Industrial Gresford Industrial Estate, Wrexham 883 5.6
2 Wyndeham Group Industrial Wyndeham, Peterborough 644 4.1
3 Mecca Bingo Ltd London East Leisure Park, Dagenham 625 4.0
Leisure
4 Harrogate Spring Water Limited Industrial Lockwood Court, Leeds 603 3.8
5 Odeon Cinemas Leisure Odeon Cinema, Southend-on-Sea 535 3.4
6 Wilko Retail Limited Retail 15-33 Union Street, Bristol 481 3.1
7 Advanced Supply Chain (BFD) Ltd Industrial Euroway Trading Estate, Bradford 467 3.0
8 HFC Prestige Manufacturing Limited Industrial Cranbourne House, Basingstoke 460 2.9
9 Charlies Stores Retail Arrow Point Retail Park, Shrewsbury 440 2.8
10 Poundland Limited Retail Pricebusters Building, Blackpool 414 2.6
The Company's top ten tenants, listed above, represent 35.4% of the total passing rental income of the
portfolio.
Source: Knight Frank valuation report as at 30 September 2021.
Asset Management
The Company completed the following material asset management transactions during the period:
Acquisitions - Arrow Point Retail Park in Shrewsbury was acquired in May 2021 for £8.35 million and is a
fully-let, purpose-built retail park prominently located on a busy commercial estate, providing a NIY of
8.7%. The second acquisition, 15-33 Union Street, Bristol, is a retail/leisure site located on a busy
pedestrian thoroughfare in Bristol city centre and provides a NIY of 8.0%. Both of these assets provide
opportunity for value growth in the medium to long term as well as strong and stable income streams from
their tenancy profiles.
Disposals - Sales of Langthwaite Industrial Estate, South Kirkby for £10.84 million and Wella Warehouse,
Basingstoke for £5.86 million have now been completed, with the latter completing post period end. The
sales prices achieved were 31% and 35% ahead of their March 2021 valuations, and also 1.9x and 1.7x their
purchase prices, respectively.
Arrow Point Retail Park, Shrewsbury - We have extended British Heart Foundation's unexpired term to break
by moving their November 2021 break option out to December 2024 in return for four months' rent free. The
majority of the rent free was used to write off rent arrears predating the Company's ownership. British
Heart Foundation's lease expires in November 2028.
Diamond Business Park, Wakefield - We have completed a new five year ex-Act lease at £41,866 per
annum/£3.75 per sq ft on Unit 14, which reflects a rent 25% above the March 2021 ERV. The tenant has
provided a rent deposit equivalent to six month's rent. Six months' rent free was given as an incentive.
40 Queen Square, Bristol - We have completed a new five year ex-Act lease to Brewin Dolphin at £103,770 per
annum/£30 per sq ft versus the previous passing rent of £22 per sq ft and the March 2021 ERV of £26 per sq
ft. A 12 month rent free incentive was given. We have now also completed a lease renewal to Candide Limited
until February 2025 at the same rent of £30 psf (£116,970 per annum). The previous passing rent was £22.81
per sq ft and only 1.5 months' rent free incentive was given. These lettings at £30 psf have produced an
increase in the property's valuation of £1.05 million (9.9%) over the past six months.
Vantage Point, Hemel Hempstead - We have completed a new five year ex-Act lease (tenant break option at the
end of year three) to Netronix Integration Limited at a rent of £33,683 per annum/£14.50 per sq ft, which
is £3 per sq ft above ERV. Four months' rent free incentive was given, with a further two months should the
tenant not exercise their tenant break option at the end of the third year.
Above Bar Street, Southampton - We have exchanged on a new straight five year ex-Act lease to Shoe Zone at
a gross rent of £80,000 per annum, subject to approximately £40,000 landlord works. 12 months' rent free
incentive was given.
Sarus Court, Runcorn - We have completed a ten year lease renewal with NTT United Kingdom Limited
(Dimension Data) at £5.75 per sq ft (£64,066.50 per annum) versus the previous passing rent of £5.25 per sq
ft. There is a tenant break option in December 2025. Five months' rent free incentive was given. The
valuation of this asset has increased by £1.05 million (15.3%) over the past six months to £7.9 million.
Vacancy - The portfolio's overall vacancy level is 8.59%. Excluding vacancy contributed by the asset at 225
Bath Street, Glasgow, the vacancy level is 5.43%. This asset has now been exchanged for sale for
alternative use redevelopment as student accommodation. As a condition of the sale agreement, full vacancy
must be achieved before the sale can be completed. Completion of the sale is expected in Q4 2021 - Q1 2022.
The purchaser has submitted a planning application and is awaiting confirmation on a committee date.
Regarding achieving vacant possession, only one tenant remains in the building having recently exchanged on
the variation of W.A. Fairhurst's lease, bringing their occupation to an end on 31 January 2022, in
exchange for an £800,000 surrender premium, plus nine months' rent free from 28 February 2021 to 1 December
2021.
Environmental, Social and Governance ('ESG') Update
The Company has maintained its two stars Global Real Estate Sustainability Benchmark ('GRESB') rating for
2021 and maintained its score of 65 (GRESB Average 72). A large portion of the GRESB score relates to
performance data coverage where, due to the high percentage of single-let assets with tenant procured
utilities, the Company does not score as well as funds with a smaller holding of single-let assets and a
higher proportion of multi-let assets where the owner is responsible for the utilities and can therefore
gather the relevant data.
We continue to implement our plan to improve overall data coverage and data collection for all utilities
through increased tenant engagement at our single-let assets and by installing automated meter readers
('AMR') across the portfolio. So far, we are in the process of installing AMRs in all of our multi-let
properties. We are also in discussions with the tenants of our top 10 single-let FRI assets (in terms of
floor area) regarding the installation of AMR.
We endeavour, where the opportunity presents itself through a lease event, to include green clauses in
leases, covenanting landlord and tenant to collaborate over the environmental performance of the property.
We continue to assess and strengthen our reporting and alignment against the framework set out by the
Taskforce on Climate-Related Financial Disclosures ('TCFD') with further disclosure and update to be
provided in the 2022 annual report and accounts. We are pleased to report the Company has maintained its
EPRA Silver rating for sBPR for ESG disclosure and transparency.
We have an Asset Sustainability Action Plan ('ASAP') initiative, tracking ESG initiatives across the
portfolio on an asset by asset basis for targeted/relevant and specific implementation of ESG improvements.
In doing so, all managed assets and units have recently been contracted to High Quality Green Tariffs,
ensuring that electricity supply is from renewable sources. All void/vacant unit supplies have also been
transferred to High Quality Green Tariffs.
All managed assets will be moved to 'Green Gas' supplies in 2022.
We are underway with implementing initiatives such as a new landscaping/biodiversity programme at our
retail warehouse in Barnstaple, replacing the existing plants and shrubs with a greater diversity of
appropriate species which in turn will attract a wider variety of insects and wildlife to the property.
Lease Expiry Profile
Approximately £3.48 million of the Company's current contracted income stream is subject to an expiry or
break within the 12 month period commencing 1 October 2021. 12.87% (£447,984) of this income (Indigo
Lighthouse Solutions and WA Fairhurst) is attributable to our office holding in Glasgow, which has
exchanged for sale. A further 9.38% (£326,668) of this income relates to a property where we expect the
tenants to stay, renewing their leases. 18.31% (£637,238) of this income is in the industrial sector, where
we anticipate strong occupier demand, low incentives and reversionary rents. Regarding the remainder, we
will proactively manage, looking to unlock capital upside, whether that be through lease regears/renewals,
or through refurbishment/capex projects and new lettings.
Source: Knight Frank valuation report as at 30 September 2021.
AEW UK Investment Management LLP
16 November 2021
Principal Risks and Uncertainties
The Company's assets consist 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 2021 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, Probability:
inter alia, (i) cause the Company to realise The Company has investment restrictions Moderate
its investments at lower valuations; and (ii) in place to invest and manage its assets
delay the timings of the Company's with the objective of spreading and Impact: Moderate to
realisations. These risks could have a mitigating risk. High
material adverse effect on the ability of the
Company to achieve its investment objective. Movement: Decrease
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 Probability: Low
valuer (Knight Frank LLP) to value the
properties at fair value in accordance Impact: Low to
There may be an adverse effect on the with accepted RICS appraisal and Moderate
Company's profitability, the NAV and the valuation standards.
price of Ordinary Shares in cases where Movement: Decrease
properties are sold whose valuations have
previously been materially overstated.
Comprehensive due diligence is undertaken
on all new tenants. Tenant covenant
3. Tenant default checks are carried out on all new tenants
where a default would have a significant Probability:
Failure by tenants to fulfil their rental impact. Moderate
obligations could affect the income that the
properties earn and the ability of the Impact: Moderate to
Company to pay dividends to its shareholders. High
Asset management team conducts ongoing
monitoring and liaison with tenants to Movement: Decrease
manage potential bad debt risk.
4. Asset management initiatives
Asset management initiatives, such as Costs incurred on asset management Probability:
refurbishment works, may prove to be more initiatives are closely monitored against
extensive, expensive and take longer than budgets and reviewed in regular Low to Moderate
anticipated. Cost overruns may have a presentations to the Investment
material adverse effect on the Company's Management Committee of the Investment Impact: Low to
profitability, the NAV and the share price. Manager. Moderate
Movement: No change
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
general UK economic conditions and other The Company builds a diversified property
factors that depress rental rates, including and tenant base with subsequent
local factors relating to particular monitoring of concentration to individual
properties/locations (such as increased occupiers (top ten tenants) and sectors
competition). (geographical and sector exposure). Probability:
Moderate to High
Impact: Moderate to
Any fall in the rental rates for the The Investment Manager holds quarterly High
Company's properties may have a material meetings with its Investment Strategy
adverse effect on the Company's Committee and regularly meets the Board Movement: No change
profitability, the NAV, the price of the of Directors to assess whether any
Ordinary Shares and the Company's ability to changes in the market present risks that
meet interest and capital repayments on any should be addressed in the Company's
debt facilities. strategy.
BORROWING RISKS
7. Breach of borrowing covenants
The Company has entered into a term credit
facility with RBSi. Probability:
The Company monitors the use of Low to Moderate
borrowings on an ongoing basis through
Material adverse changes in valuations and weekly cash flow forecasting and Impact: Moderate to
net income may lead to breaches in the Loan quarterly risk monitoring to monitor High
to Value ('LTV') and interest cover ratio financial covenants.
covenants. Movement: Decrease
8. Interest rate rises The Company uses interest rate caps on a
significant notional value of the loan to
The Company's borrowings through a term mitigate the adverse impact of possible Probability:
credit facility are subject to interest rate interest rate rises.
risk through changing SONIA rates. Any Moderate to High
increases in SONIA rates may have an adverse
effect on the Company's ability to pay Impact: Low to
dividends. The Investment Manager and Board of Moderate
Directors monitor the level of hedging
and interest rate movements to ensure Movement: No change
that the risk is managed appropriately.
The Company maintains a good relationship
with the bank providing the term credit
facility.
9. Availability and cost of debt
Probability:
The term credit facility expires in October
2023. In the event that RBSi does not renew The Company monitors the projected usage Moderate
the facility, the Company may need to sell and covenants of the credit facility on a
assets to repay the outstanding loan. Any quarterly basis. Impact: Moderate to
increase in the financing costs of the High
facility on renewal would adversely impact on
the Company's profitability. Movement: Increase
The Company actively monitors the loan
term and engages in loan extension
negotiations far in advance of expiry.
CORPORATE RISKS
10. Dependence on Investment Manager and
other third party service providers
The Company has no employees and is reliant
upon the performance of its Investment
Manager and third party service providers. The Investment Manager has endeavoured to
Failure by the Investment Manager and/or any ensure that the principal members of its
service provider to carry out its obligations management team are suitably
to the Company in accordance with the terms incentivised. The performance of service Probability:
of its appointment could have a materially providers in conjunction with their Moderate to High
detrimental impact on the operation of the service level agreements is monitored via
Company. The future ability of the Company to regular calls and face-to-face meetings Impact: Moderate
successfully pursue its investment objective and the use of key performance
and investment policy may, among other indicators, where relevant. Movement: No change
things, depend on the ability of the
Investment Manager to retain its existing
staff and/or to recruit individuals of
similar experience and calibre.
11. Ability to meet objectives
The Company may not meet its investment
objective to deliver an attractive total
return to shareholders from investing The Company has an investment policy to
predominantly in a portfolio of smaller achieve a balanced portfolio with a Probability:
commercial properties in the United Kingdom. diversified asset and tenant base. The Moderate to High
Company also has investment restrictions
in place to limit exposure to potential Impact: Moderate to
risk factors. These factors mitigate the High
Poor relative total return performance may risk of fluctuations in returns.
lead to an adverse reputational impact that Movement: Decrease
affects the Company's ability to raise new
capital.
The Investment Manager and other service
12. Business interruption providers' staff are capable of working
remotely for an extended time period. The Probability: Low to
Cyber-attacks on the Investment Manager's Investment Manager's and other service Moderate
and/or other service providers' IT systems, providers' IT systems are protected by
could lead to disruption, reputational anti-virus software and firewalls that Impact: Moderate
damage, regulatory (including GDPR) or are updated regularly. Fire protection
financial loss to the Company. and access security procedures exist at Movement: Increase
all the Company's managed properties,
along with the offices of its Investment
Manager and other service providers.
TAXATION RISKS
13. Company REIT status
The Company has a UK REIT status that
provides a tax-efficient corporate structure.
The Company monitors REIT compliance
If the Company fails to remain a REIT for UK through the Investment Manager on
tax purposes, its profits and gains will be acquisitions; the Administrator on asset Probability: Low
subject to UK corporation tax. and distribution levels; the Registrar
and Broker on shareholdings and the use Impact: Moderate to
of third-party tax advisers to monitor High
REIT compliance requirements.
Any change to the tax status or UK tax Movement: No change
legislation could impact on the Company's
ability to achieve its investment objectives
and provide attractive returns to
shareholders.
POLITICAL/ECONOMIC RISKS
14. General political and economic risks
Political and macroeconomic events present The Board considers the impact of
risks to the real estate and financial political and macroeconomic events when Probability:
markets that affect the Company and the reviewing strategy. The UK's exit from Moderate to High
business of its tenants. The level of the EU is not considered to generate any
uncertainty that such events bring has been risks specific to the Company and is not Impact: Moderate to
highlighted in recent times, most pertinently considered to have any material effect on High
the effects of the UK's exit from the EU in the financial statements.
January 2021. Movement: No change
15. COVID-19
The economic disruption arising from the
COVID-19 virus could impact rental income The Investment Manager is in close Probability: Low to
receipts from tenants, the ability to access contact with tenants. The Investment Moderate
funding at competitive rates, maintain the Manager has put in place social
Company's dividend policy and its adherence distancing measures as advised by the UK Impact: Moderate to
to the HMRC REIT regime, particularly if the government. The Investment Manager has High
UK government restrictions are in place for a maintained a close relationship with RBSi
prolonged period. to ensure continuing dialogue around Movement: Decrease
covenants.
ENVIRONMENTAL RISKS
The Company has engaged specialist
environmental consultants to advise the
Board on compliance with regulatory
16. Environmental transition risk requirements and adopting best practice
where possible. All prospective
Failure to identify and mitigate the acquisitions and asset management
transition risk for climate change could lead initiatives are influenced by
to the Company holding stranded assets and environmental assessments undertaken by Probability:
lead to a negative impact on its reputation. the Company, such as ensuring they are in Moderate
Failure by the Company to meet required conformance with the Minimum Energy
regulatory standards could Efficiency Standard ('MEES') Regulations. Impact: Moderate
An Asset Sustainability Action Plan
lead to increased stakeholder concern and ('ASAP') initiative has been introduced Movement: Increase
negative feedback. by the Company, which tracks ESG
initiatives across the portfolio on an
asset-by-asset basis for targeted,
relevant and specific implementation of
ESG improvements.
17. Physical risk to properties
The Company obtains environmental surveys
The risk of physical damage to properties as for all acquisitions, which mitigate the Probability: Low
a result of environmental factors such as short-term risk of climate related damage
flooding and natural fires. In the long-term, to properties owned. The Investment Impact: Moderate to
changes in climate and/or weather systems may Manager's asset management team perform High
mean properties become unviable to tenants. regular site visits to the Group's
properties in order to continually assess Movement: Increase
the physical risk posed to them.
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 UK;
• 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
Company 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
16 November 2021
Independent Review Report to AEW UK REIT PLC
Introduction
We have been engaged by the Company to review the condensed set of Financial Statements in the Interim
Report and Financial Statements for the six months ended 30 September 2021 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 related notes.
We have read the other information contained in the Interim Report and Financial Statements and considered
whether it contains any apparent misstatements or material inconsistencies with the information in the
condensed set of financial statements.
Directors' responsibilities
The Interim Report and Financial Statements is the responsibility of and has been approved by the
Directors. The Directors are responsible for preparing the Interim Report and Financial Statements in
accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2, the annual financial statements of the Company will be prepared in accordance with
UK adopted international accounting standards. The condensed set of financial statements included in this
Interim Report and Financial Statements has been prepared in accordance with UK adopted International
Accounting Standard 34, ''Interim Financial Reporting''.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements
in the Interim Report and Financial Statements based on our review.
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 Financial Reporting Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is substantially less in scope than
an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of
Financial Statements in the Interim Report and Financial Statements for the six months ended 30 September
2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in
meeting its responsibilities in respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no
other purpose. No person is entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly
authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this
report to any other person or for any other purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
United Kingdom
16 November 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number
OC305127).
Financial Statements
Condensed Statement of Comprehensive Income
for the six months ended 30 September 2021
Period from Period from
1 April 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Income
Rental and other income 3 8,630 8,838 17,491
Property operating expenses 4 (1,760) (1,777) (3,754)
Impairment loss on trade receivables 188 (156) (944)
Net rental and other income 7,058 6,905 12,793
Other operating expenses 5 (1,179) (971) (2,058)
Operating profit before fair value changes 5,879 5,934 10,735
Change in fair value of investment properties 10 16,596 (3,328) 5,324
Realised gains on disposal of investment properties 10 2,273 3,670 7,043
Realised loss on disposal of investment property held 10 (829) - -
for sale
Operating profit 23,919 6,276 23,102
Finance expense 6 (372) (552) (930)
Profit before tax 23,547 5,724 22,172
Taxation 7 - - -
Profit after tax 23,547 5,724 22,172
Other comprehensive income - - -
Total comprehensive income for the period 23,547 5,724 22,172
Earnings per share (pence) (basic and diluted) 8 14.86 3.61 13.98
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 2021
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained Buyback owners of
For the period 1 April 2021 to capital account earnings reserve the Company
30 September 2021 (unaudited) Notes £'000 £'000 £'000* £'000 £'000
Balance as at 1 April 2021 1,587 56,578 99,179 (265) 157,079
Total comprehensive income - - 23,547 - 23,547
Dividends paid 9 - - (6,337) - (6,337)
Balance as at 30 September 2021 1,587 56,578 116,389 (265) 174,289
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained Buyback owners of
For the period 1 April 2020 to capital account earnings* reserve the Company
30 September 2020 (unaudited) Notes £'000 £'000 £'000 £'000 £'000
Balance 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 Buyback owners of
capital account earnings* reserve the Company
For the year ended 31 March 2021 (audited)
Notes £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2020 1,587 56,578 89,698 - 147,863
Total comprehensive income - - 22,172 - 22,172
Ordinary shares bought back - - - (263) (263)
Share buyback costs - - - (2) (2)
Dividends paid 9 - - (12,691) - (12,691)
Balance as at 31 March 2021 1,587 56,578 99,179 (265) 157,079
* The capital reserve has arisen from the cancellation of part of the Company's share premium account and
is a distributable reserve.
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Financial Position
as at 30 September 2021
As at
As at As at
30 September 2020
30 September 2021 31 March 2021
(unaudited)
(unaudited) (audited)
£'000
Notes £'000 £'000
Assets
Non-Current Assets
Investment property 10 191,336 160,601 169,092
191,336 160,601 169,092
Current Assets
Investment property held for sale 10 12,931 8,212 7,251
Receivables and prepayments 11 10,198 9,063 6,977
Cash and cash equivalents 15,159 13,357 17,450
Other financial assets held at fair value 12 112 49 61
38,400 30,681 31,739
Total assets 229,736 191,282 200,831
Non-Current Liabilities
Interest bearing loans and borrowings 13 (50,171) (39,082) (39,131)
Lease obligations 15 (635) (635) (635)
(50,806) (39,717) (39,766)
Current Liabilities
Payables and accrued expenses 14 (4,593) (4,281) (3,938)
Lease obligations 15 (48) (48) (48)
(4,641) (4,329) (3,986)
Total Liabilities (55,447) (44,046) (43,752)
Net Assets 174,289 147,236 157,079
Equity
Share capital 1,587 1,587 1,587
Buyback reserve (265) - (265)
Share premium account 56,578 56,578 56,578
Capital reserve and retained earnings 116,389 89,071 99,179
Total capital and reserves attributable to 174,289 147,236 157,079
equity holders of the Company
Net Asset Value per share (pence) 8 110.01 92.73 99.15
EPRA Net Tangible Assets per share (pence) 8 109.94 92.70 99.11
The financial statements were approved by the Board of Directors on 16 November 2021 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 2021
Period from
Period from
1 April 2021 to Year ended
1 April 2020 to
30 September 31 March
30 September 2020
2021 2021
(unaudited)
(unaudited) (audited)
£'000
£'000 £'000
Cash flows from operating activities
Profit before tax 23,547 5,724 22,172
Adjustment for:
Finance expenses 372 552 930
(Gain)/loss from change in fair value of investment (16,596) 3,328 (5,324)
property
Realised gains on disposal of investment property (2,273) (3,670) (7,043)
Realised loss on disposal of investment property held for 829 - -
sale
(Increase)/decrease in other receivables and prepayments (3,419) (1,573) 374
Increase/(decrease) in other payables and accrued expenses 537 (463) (647)
Net cash generated from operating activities 2,997 3,898 10,462
Cash flows from investing activities
Purchase of and additions to investment property (19,539) (106) (5,983)
Disposal of investment property 10,796 18,676 29,049
Costs in respect of investment property held for sale
(829) - -
Net cash (used in)/generated from investing activities (9,572) 18,570 23,066
Cash flows from financing activities
Share buyback cash paid - - (263)
Share buyback costs - - (2)
Loan drawdown/(repayment) 11,000 (12,000) (12,000)
Arrangement loan facility fee paid - (13) (13)
Premium for interest rate caps - (63) (63)
Finance costs (379) (557) (919)
Dividends paid (6,337) (6,351) (12,691)
Net cash flow generated from/(used in) financing activities 4,284 (18,984) (25,951)
Net (decrease)/increase in cash and cash equivalents (2,291) 3,484 7,577
Cash and cash equivalents at start of the period/year 17,450 9,873 9,873
Cash and cash equivalents at end of the period/year 13,357 17,450
15,159
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 2021
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 UK, and should be read in conjunction with the Company's last
financial statements for the year ended 31 March 2021. 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 UK ('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 2021 and the comparative information for the year ended 31 March 2021 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 2021 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
16 November 2021.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 2020 and year ended 31
March 2021 and as at 30 September 2020 and 31 March 2021.
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
The Company has considered and applied the following new standards and amendments to existing standards
which are required for the accounting period beginning on 1 April 2021:
* Amendments to IFRS 16 Covid-19 Related Rent Concessions beyond 30 June 2021; and
* Interest Rate Bench Reform - Phase 2 (Amendments to various standards: IFRS 9 'Financial Instruments',
IAS 39 'Financial Instruments: Recognition and Measurement, IFRS 7 'Financial Instruments: Disclosures',
IFRS 4 'Insurance Contracts' and IFRS 16 'Leases').
The Company has applied the new standards and there has been no significant impact on the financial
statements.
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 2022 or later. The Company has
not early adopted any of these new or amended standards.
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 99% of contracted rent collected for the March and
June 2021 quarters. At least 87% of contracted rent has either been collected, or payment plans agreed, for
the September 2021 quarter. Based on the contracted rent as at 30 September 2021, a reduction of 66% in
total rents could be accommodated before breaching the ICR covenant in the Company's debt arrangements;
* Based on the property valuation at 30 September 2021, the Company had room for a £62.10 million fall in
NAV before reaching the maximum LTV covenant in the Company's debt arrangements. If certain conditions are
met, such as providing security, a further £20.40 million fall in NAV 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 30%;
* No new lettings or renewals, other than those where terms have already been agreed; and
* A 10% fall in property valuations.
Given the Company's financial position and headroom on covenants, the Directors do not consider that
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
2021 except for the changes as detailed in note 2.1.
3. Revenue
Period from Period from
1 April 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rental income 7,866 8,124 15,714
Service charge income 485 674 1,535
Dilapidation income received 272 40 197
Other property income 7 - -
Surrender premium received - - 45
Total rental and other income 8,630 8,838 17,491
4. Property operating expenses
Period from Period from
1 April 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-recoverable service charge expense 644* 601 1,166
Recoverable service charge expense 485 674 1,535
Other property expenses 631 502 1,053
Total property operating expenses 1,760 1,777 3,754
* Of the c. £644,000 non-recoverable service charge expenditure (30 September 2020: £601,000) c. £552,000
relates to Bank Hey Street, Blackpool (30 September 2020: £394,000) 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 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment management fee 732 579 1,229
Operating costs 289 289 594
Audit fee 82 30 110
ISRE 2410 review (interim review fee) 28 25 25
Directors' remuneration 48 48 100
Total other operating expenses 1,179 971 2,058
6. Finance expense
Period from Period from
1 April 2021 1 April 2020 Year
to to ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest payable on loan borrowings 344 438 722
Amortisation of loan arrangement fee 41 49 97
Commitment fee payable on loan borrowings 38 37 95
423 524 914
Change in fair value of interest rate derivatives (51) 28 16
Total 372 552 930
7. Taxation
Period from Period from Year
1 April 2021 to 1 April 2020 to ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Analysis of charge in the period
Profit before tax 23,547 5,724 22,172
Theoretical tax at UK corporation tax standard rate of 19% (30
September 2020: 19%; 31 March 2021: 19%) 1,088
4,474 4,213
Adjusted for:
Exempt REIT income (1,046) (1,023) (1,863)
Non taxable investment gains (3,428) (65) (2,350)
Total - - -
8. Earnings per share and NAV per share
Period from Period from
1 April 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
Earnings per share:
Total comprehensive income (£'000) 23,547 5,724 22,172
Weighted average number of shares 158,424,746 158,774,746 158,620,910
Earnings Per Share (basic and diluted) (pence) 14.86 3.61 13.98
EPRA earnings per share:
5,724
Total comprehensive income (£'000) 23,547 22,172
Adjustment to total comprehensive income:
Change in fair value of investment property (£'000) 3,328
(16,596) (5,324)
Realised gain on disposal of investment property (£'000) (3,670)
(2,273) (7,043)
Realised loss on disposal of investment property held for
sale -
829 -
Change in fair value of interest rate derivatives (£'000) 28
(51) 16
Total EPRA Earnings (£'000) 5,456 5,410 9,821
EPRA earnings per share (basic and diluted) (pence)
3.45 3.41 6.19
NAV per share:
Net assets (£'000) 174,289 147,236 157,079
Ordinary Shares 158,424,746 158,774,746 158,424,746
NAV per share (pence) 110.01 92.73 99.15
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.
Current measures Previous measures
EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NAV NNNAV
As at 30 September 2021
£'000 £'000 £'000 £'000 £'000
IFRS NAV attributable to shareholders 174,289 174,289 174,289 174,289 174,289
Mark-to-market adjustment of derivatives (112) (112) - (112) -
Real estate transfer tax1 - 13,642 - - -
At 30 September 2021 174,177 187,819 174,289 174,177 174,289
Number of Ordinary Shares 158,424,746 158,424,746 158,424,746 158,424,746 158,424,746
NAV per share 109.94p 118.55p 110.01p 109.94p 110.01p
Current measures Previous measures
EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NAV NNNAV
As at 30 September 2020
£'000 £'000 £'000 £'000 £'000
IFRS NAV attributable to shareholders 147,236 147,236 147,236 147,236 147,236
Mark-to-market adjustment of derivatives (49) (49) - (49) -
Real estate transfer tax and other - 11,309 - - -
purchasers' costs1
At 30 September 2020 147,187 158,496 147,236 147,187 147,236
Number of Ordinary Shares 158,774,746 158,774,746 158,774,746 158,774,746 158,774,746
NAV per share 92.70p 99.82p 92.73p 92.70p 92.73p
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.
1 EPRA Net Tangible Assets ('EPRA NTA') and EPRA Net Disposal Value ('EPRA NDV') are calculated using
property values in line with IFRS, where values are net of Real Estate Transfer Tax ('RETT') and other
purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA Net Reinstatement
Value ('EPRA NRV') and have been estimated at 6.6% of the net valuation provided by Knight Frank.
Current measures Previous measures
EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NAV NNNAV
As at 31 March 2021
£'000 £'000 £'000 £'000 £'000
IFRS NAV attributable to shareholders 157,079 157,079 157,079 157,079 157,079
Mark-to-market adjustment of derivatives (61) (61) - (61) -
Real estate transfer tax and other - 11,814 - - -
purchasers' costs1
At 31 March 2021 157,018 168,832 157,079 157,018 157,079
Number of Ordinary Shares 158,424,746 158,424,746 158,424,746 158,424,746 158,424,746
NAV Per share 99.11p 106.57p 99.15p 99.11p 99.15p
1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of
RETT and other purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA NRV
and have been estimated at 6.6% of the net valuation provided by Knight Frank.
9. Dividends paid
Period from Period from
1 April 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
Dividends paid during the period £'000 £'000 £'000
Represents two/two/four interim dividends of 2.00 pps each 6,351
6,337 12,691
Period from Period from
1 April 2021 to 1 April 2020 to Year ended
30 September 30 September 31 March
2021 2020 2021
Dividends relating to the period £'000 £'000 £'000
Represents two/two/four interim dividends of 2.00 pps each 6,351
6,337 12,684
Dividends paid relate to Ordinary Shares.
10. Investments
10.a) Investment property
Period from 1 April 2021 to
30 September 2021 (unaudited)
Period from
1 April 2020 Year ended
Investment Investment
to 30 September 31 March
properties properties Total
2020 2021
freehold leasehold £'000
(unaudited) (audited)
£'000 £'000
Total Total
£'000 £'000
UK Investment property
As at beginning of period 160,750 18,250 179,000 189,300 189,300
Purchases and capital expenditure in the
period
8,948 10,588 19,536 106 5,983
Disposals in the period (8,208) - (8,208) (15,006) (22,006)
Revaluation of investment property
15,060 1,302 16,362 (3,045) 5,723
Valuation provided by Knight Frank
176,550 30,140 206,690 171,355 179,000
Adjustment to carrying value for lease
incentive debtor
(3,106) (3,225) (3,340)
Adjustment for lease obligations*
683 683 683
Total Investment property
204,267 168,813 176,343
Classified as:
Investment property held for sale**
12,931 8,212 7,251
Investment property 191,336 160,601 169,092
204,267 168,813 176,343
Change in fair value of investment property
Change in fair value before adjustments for
lease incentives
16,362 (3,045) 5,723
Adjustment for movement in the period:
in value of lease incentive debtor
234 (283) (399)
16,596 (3,328) 5,324
Gains realised on disposal of investment
property
Net proceeds from disposals of investment
property during the period
10,481 18,676 29,049
Fair value at beginning of period
(8,208) (15,006) (22,006)
Gains realised on disposal of investment
property
2,273 3,670 7,043
Realised loss on disposal of investment
property held for sale
829 - -
* 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 and Wella Warehouse, Basingstoke, have been classified as held-for-sale as at 30
September 2021. Contracts to sell 225 Bath Street were exchanged in October 2020 and its expected that the
transaction will be completed within the next 12 months. Contracts to sell Wella Warehouse were exchanged
in August 2021, with the transaction completed post period-end, in October 2021.
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.
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 2021
Investment property - - 204,267 204,267
30 September 2020
Investment property - - 168,813 168,813
31 March 2021
Investment property - - 176,343 176,343
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 discount rate/ 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 2021
ERV £0.50-£75.00
Investment property* Income capitalisation
206,690 Equivalent yield 5.00%-10.89%
30 September 2020
ERV £0.50-£95.00
Investment property* Income capitalisation
171,355 Equivalent yield 6.23%-10.48%
31 March 2021
ERV £0.50-£75.00
Investment property* Income capitalisation
179,000 Equivalent yield 5.76%-10.37%
* 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, where applicable, 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 2021 206,690 216,848 197,385 195,342 213,527
30 September 2020 171,355 176,434 161,957 163,582 179,481
31 March 2021 179,000 183,818 168,394 170,487 187,847
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +10% -10% +10% -10%
30 September 2021 206,690 228,192 188,975 186,439 222,802
30 September 2020 171,355 183,940 154,933 156,710 188,744
31 March 2021 179,000 191,699 160,864 162,986 197,965
Fair value Change in ERV Change in equivalent yield
£'000 £'000 £'000 £'000 £'000
Sensitivity Analysis +15% -15% +15% -15%
30 September 2021 206,690 240,861 181,295 177,574 232,104
30 September 2020 171,355 191,497 147,893 150,433 199,087
31 March 2021 179,000 199,642 153,345 156,136 209,264
11. Receivables and prepayments
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Receivables
Rent debtor 3,566 3,469 3,252
Allowance for expected credit losses (607) (207) (995)
Rent agent float account 2,212 2,056 724
Other receivables 1,593 368 627
Dilapidations receivables - 69 -
6,764 5,755 3,608
Lease incentive debtor 3,106 3,225 3,340
9,870 8,980 6,948
Property related prepayments 296 29 4
Other prepayments 32 54 25
328 83 29
Total 10,198 9,063 6,977
The aged debtor analysis of receivables as follows:
30 September 30 September 31 March
2021 2020 2021
£'000 £'000 £'000
Less than three months due 6,251 4,206 3,416
Between three and six months due 513 1,549 192
Total 6,764 5,755 3,608
Expected credit losses have been assessed on receivables balances on an individual tenant-by-tenant basis.
The risk of credit loss applied to each tenant is assessed based on information including, but not limited
to: external credit ratings; financial statements; press information; previous experience of losses or late
payment; discussions with the property manager and the tenant.
This assessment identified a number of receivables balances due from tenants known to be in financial
difficulty or having already entered into a Company Voluntary Arrangement ('CVA') or administration. In
these instances, a provision against the full balance of the receivable has been applied.
The assessment also identified receivables balances subject to dispute by tenants who are financially
stable but unwilling to pay. The recoverability of these balances was subject to a decision by the Court,
and as such, an assessment of the probability of a positive decision was made in reassessing the expected
cash flows in relation to these balances and other receivables. Post period-end, these balances were
recovered in full..
The below table presents the exposure to these classes of identified credit risk and the associated
provision made against the receivables balances:
Provision Provision Provision
30 September 30 September 31 March
Receivables Rate 2021 2020 2021
£'000 % £'000 £'000 £'000
Identified financial difficulties 177 100 177 207 415
Subject to Court ruling 717 60 430 - 580
No Identified financial difficulties 9,583 - - - -
Total 10,477 607 207 995
12. Interest rate derivatives
30 September 30 September 31 March
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 61 14 14
Changes in fair value of interest rate derivatives 51 (28) (16)
Interest rate cap premium paid - 63 63
At the end of the period 112 49 61
The Company is protected from a significant rise in interest rates as it currently has interest rate caps
in effect which cap the interest rate at 1.00% on a notional value of £51.50 million. As a result, the loan
was 102% hedged as at 30 September 2021 (31 March 2021: 130%).
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 2021 - 112 - 112
30 September 2020 - 49 - 49
31 March 2021 - 61 - 61
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
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period 39,500 51,500 51,500
Bank borrowings drawn in the period 11,000 - -
Bank borrowings repaid in the period - (12,000) (12,000)
Interest bearing loans and borrowings 50,500 39,500 39,500
Unamortised loan arrangement fees (329) (418) (369)
At the end of the period 50,171 39,082 39,131
Repayable between two and five years 50,500 39,500 39,500
Bank borrowings available but undrawn in the period 20,500
9,500 20,500
Total facility available 60,000 60,000 60,000
The Company has a £60.00 million (31 March 2021: £60.00 million) credit facility with RBSi of which
£50.50 million (31 March 2021: £39.50 million) has been utilised as at 30 September 2021.
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 2021, the Company's gearing was 28.97% Loan to NAV (31 March
2021: 25.15%).
Borrowing costs associated with the credit facility are shown as finance costs in note 6 to these
financial statements.
14. Payables and accrued expenses
30 31
30 September
September March
2020
2021 2021
(unaudited)
(unaudited) (audited)
£'000
£'000 £'000
Deferred income 2,990 2,835 2,567
Accruals 835 991 783
Other creditors 768 455 588
Total 4,593 4,281 3,938
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
2021 2020 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Current 48 48 48
Non Current 635 635 635
Lease liabilities included in the Statement of Financial Position at
30 September 2021
683 683 683
16. Issued share capital
There was no change to the issued share capital during the period. The number of ordinary shares allotted,
called up and fully paid remains 158,774,746 of £0.01 each, of which 350,000 ordinary shares are held in
treasury.
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 2021, 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 2021 to 30 September 2021, the Company incurred £732,204 (six months ended
30 September 2020: £578,821) of investment management fees and expenses of which £362,931 was outstanding
at 30 September 2021 (31 March 2021: £315,825).
18. Events after reporting date
Dividend
On 21 October 2021, the Board declared its second interim dividend of 2.00 pps in respect of the period
from 1 July 2021 to 30 September 2021. The dividend payment will be made on 19 November 2021 to
shareholders on the register as at 29 October 2021. The ex-dividend date was 28 October 2021.
Property Sales
The Company completed the sale of Wella Warehouse on 15 October 2021 for gross proceeds of £5.86 million.
Property Acquisition
On 5 November 2021, the Company acquired Central Six Retail Park in Coventry for a purchase price of £16.41
million.
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 www.epra.com.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
A key measure of a company's
1. EPRA Earnings underlying operating results £5.46 million/3.45 pps
and an indication of the extent
Earnings from operational to which current dividend EPRA earnings for the six month period
activities. payments are supported by ended 30 September 2021 (six month
earnings. period ended 30 September 2020: £5.41
million/3.41 pps)
The EPRA NAV set of metrics
2. EPRA Net Tangible Assets ('NTA') make adjustments to the NAV per
the IFRS financial statements
Assumes that entities buy and sell to provide stakeholders with
assets, thereby crystallising the most relevant information £174.18 million/109.94 pps EPRA NTA as
certain levels of unavoidable on the fair value of the assets at 30 September 2021 (At 31 March 2021:
deferred tax. and liabilities of a real £157.02 million/ 99.11 pps)
estate investment company,
under different scenarios.
3. EPRA Net Reinstatement Value
('NRV')
Assumes that entities never sell £187.82 million/118.55 pps EPRA NRV as
assets and aims to represent the at 30 September 2021
value required to rebuild the See above
entity. (At 31 March 2021: £168.83
million/106.57 pps)
4. EPRA Net Disposal Value ('NDV')
Represents the shareholders' value
under a disposal scenario, where
deferred tax, financial instruments
and certain other adjustments are £174.29 million/110.01 pps EPRA NDV as
calculated to the full extent of See above at 30 September 2021 (As at 31 March
their liability, net of any 2021: £157.08 million/99.15pps)
resulting tax.
5. EPRA Net Initial Yield ('NIY)
Annualised rental income based on
the cash rents passing at the A comparable measure for 6.69%
balance sheet date, less portfolio valuations. This
non-recoverable property operating measure should make it easier EPRA NIY
expenses, divided by the market for investors to judge
value of the property, increased themselves, how the valuation as at 30 September 2021
with (estimated) purchasers' costs. of portfolio X compares with
portfolio Y. (At 31 March 2021: 7.37%)
6. EPRA 'Topped-Up' NIY
A comparable measure for
This measure incorporates an portfolio valuations. This 7.07%
adjustment to the EPRA NIY in measure should make it easier
respect of the expiration of for investors to judge EPRA 'Topped-Up' NIY
rent-free periods (or other themselves, how the valuation
unexpired lease incentives such as of portfolio X compares with as at 30 September 2021
discounted rent periods and step portfolio Y.
rents). (At 31 March 2021: 8.12%)
7. EPRA Vacancy 8.59%/5.43% excluding vacancy rate
contributed by Glasgow* EPRA vacancy as
Estimated Market Rental Value A 'pure' (%) measure of at 30 September 2021 (At 31 March 2021:
('EMRV') of vacant space divided by investment property space that 8.96%/5.58% excluding vacancy
ERV of the whole portfolio. is vacant, based on ERV. contributed by Glasgow)
28.53% EPRA Cost Ratio (including
8. EPRA Cost Ratio direct vacancy costs) as at 30
September 2021 (At 30 September 2020:
Administrative and operating costs 27.15%)
(including and excluding costs of A key measure to enable
direct vacancy) divided by gross meaningful measurement of the
rental income. changes in a company's
operating costs. 14.80% EPRA Cost ratio (excluding
direct vacancy costs) as at 30
September 2021 (At 30 September 2020:
16.70%)
9. EPRA Capital Expenditure
Property which has been held at
both the current and comparative
balance sheet dates for which there A measure used to illustrate £19.54 million for the period ended 30
has been no significant change in comparable capital September 2021 (31 March 2021: £5.98
development. values. million)
10. EPRA like-for-like Rental
Growth
Net income generated by assets
which were held by the Company A measure used to illustrate £0.04 million/0.57% for the period
throughout both the current and change in comparable income ended 30 September 2021 (31 March 2021:
comparable periods which there has values. (£1.08 million)/(6.80%))
been no significant development
which materially impacts upon
income.
* Glasgow has exchanged to be sold with the condition of vacant possession.
Calculation of EPRA NTA, EPRA NRV and EPRA NDV
In October 2019, EPRA issued new Best Practice Recommendations for financial guidelines on its definitions
of NAV measures: EPRA NTA, EPRA NRV and EPRA NDV.
The Company considers EPRA NTA to be the most relevant NAV measure for the Company and we are now reporting
this as our primary NAV measure, replacing our previously reported EPRA NAV and EPRA NNNAV per share
metrics. EPRA NTA excludes the cumulative fair value adjustments for debt-related derivatives which are
unlikely to be realised.
Current measures Previous measures
EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NAV NNNAV
As at 30 September 2021
£'000 £'000 £'000 £'000 £'000
IFRS NAV attributable to shareholders 174,289 174,289 174,289 174,289 174,289
Mark-to-market adjustment of derivatives (112) (112) - (112) -
Real estate transfer tax and other - 13,642 - - -
purchasers' costs1
At 30 September 2021 174,177 187,819 174,289 174,177 174,289
Number of Ordinary Shares 158,424,746 158,424,746 158,424,746 158,424,746 158,424,746
NAV per share 109.94p 118.55p 110.01p 109.94p 110.01p
Current measures Previous measures
EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NAV NNNAV
As at 30 September 2020
£'000 £'000 £'000 £'000 £'000
IFRS NAV attributable to shareholders 147,236 147,236 147,236 147,236 147,236
Mark-to-market adjustment of derivatives (49) (49) - (49) -
Real estate transfer tax and other - 11,309 - - -
purchasers' costs1
At 30 September 2020 147,187 158,496 147,236 147,187 147,236
Number of Ordinary Shares 158,774,746 158,774,746 158,774,746 158,774,746 158,774,746
NAV per share 92.70p 99.82p 92.73p 92.70p 92.73p
1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of
Real Estate Transfer Tax ('RETT') and other purchasers' costs. RETT and other purchasers' costs are added
back when calculating EPRA NRV and have been estimated at 6.6% of the net valuation provided by
Knight Frank.
Current measures Previous measures
EPRA EPRA EPRA EPRA EPRA
NTA NRV NDV NAV NNNAV
As at 31 March 2021
£'000 £'000 £'000 £'000 £'000
IFRS NAV attributable to shareholders 157,079 157,079 157,079 157,079 157,079
Mark-to-market adjustment of derivatives (61) (61) - (61) -
Real estate transfer tax and other - 11,814 - - -
purchasers' costs1
At 31 March 2021 157,018 168,832 157,079 157,018 157,079
Number of Ordinary Shares 158,424,746 158,424,746 158,424,746 158,424,746 158,424,746
NAV per share 99.11p 106.57p 99.15p 99.11p 99.15p
1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of
RETT and other purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA NRV
and have been estimated at 6.6% of the net valuation provided by Knight Frank.
Calculation of EPRA NIY and 'topped up' NIY
30 30 31
September September March
2021 2020 2021
£'000 £'000 £'000
Investment property - wholly-owned 206,690 171,355 179,000
Allowance for estimated purchasers' costs at 6.6%
13,642 11,652 11,814
Grossed-up completed property portfolio valuation (B) 220,332 183,007 190,814
Annualised cash passing rental income 15,699 14,144 15,051
Property outgoings (958) (955) (993)
Annualised net rents (A) 14,741 13,189 14,058
Add: notional rent expiration of rent free periods or other lease incentives*
846 2,169 1,439
'Topped-up' net annualised rent (C) 15,587 15,358 15,497
EPRA NIY (A/B) 6.69% 7.21% 7.37%
EPRA 'topped-up' NIY (C/B) 7.07% 8.39% 8.12%
* Rent-free periods expire by June 2022.
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 2021, 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 30 September 31 March
2021 2020 2021
£'000 £'000 £'000
Annualised potential rental value of vacant premises (A)
1,521 1,330 1,482
Annualised potential rental value for the completed property
portfolio (B)
17,704 16,211 16,538
EPRA Vacancy Rate (A/B) 8.59% 8.21% 8.96%
Calculation of EPRA Cost Ratios
30 September 30 September 31 March
2021 2020 2021
£'000 £'000 £'000
Administrative/operating expense per IFRS income statement
2,267 2,230 5,221
Less: ground rent costs (33) (33) (66)
EPRA costs (including direct vacancy costs) (A) 2,234 2,197 5,155
Direct vacancy costs (1,075) (846) (1,622)
EPRA costs (excluding direct vacancy costs) (B)
1,159 1,351 3,533
Gross rental income less ground rent costs - per IFRS
7,833 8,091 15,648
Gross rental income less ground rent costs (C)
7,833 8,091 15.648
EPRA Cost Ratio (including direct vacancy costs) (A/C)
28.53% 27.15% 32.94%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C)
14.80% 16.70% 22.58%
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.
Like-for-like rental growth
The table below sets out the like-for-like rental growth of the portfolio, by sector, in accordance with
EPRA Best Practices Recommendations.
Rental income from
Rental income from
like-for-like
like-for-like
portfolio for
portfolio for
period 1 October 2020
period 1 April 2021 to
to 31
30 September
March
2021
2021 Like-for-like
£m Like-for-like rental growth
£m rental growth
£m
Sector %
Industrial 4.20 4.10 0.10 2.42
Office 1.15 1.13 0.02 1.83
Alternatives 0.73 0.77 (0.04) (5.01)
Standard retail 1.02 1.04 (0.02) (1.76)
Retail warehouses 0.29 0.31 (0.02) (6.93)
Total 7.39 7.35 0.04 0.57
The like-for-like rental growth is based on changes in rental income for those properties which have been
held for the duration of both the current and comparative reporting. This represents a portfolio valuation,
as assessed by the valuer of £187.50 million (31 March 2021: £179.00 million).
Capital Expenditure
The table below sets out the capital expenditure of the portfolio in accordance with EPRA Best Practice
Recommendations.
30 September 30 September
2021 2020 31 March 2021
Sector
£'000 £'000 £'000
Acquisitions 19,468 - 5,778
Investment properties - no incremental lettable space 68 106 205
Total purchases and capital expenditure 19,536 106 5,983
Company Information
Shareholder Enquiries
The register for the Ordinary Shares is maintained by Link Group. In the event of queries regarding your
holding, please contact the Registrar on +44 (0)371 664 0391 or email: enquiries@linkgroup.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
1 www.signalshares.com. Shareholders eligible to receive dividend payments gross of tax may also download
declaration forms from that website.
Share Information
Ordinary £0.01 Shares 158,424,746
(excluding treasury shares)
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: 2 www.aewukreit.com.
Provisional Financial Calendar
31 March 2022 Year end
June 2022 Announcement of annual results
September 2022 Annual General Meeting
30 September 2022 Half-year end
November 2022 Announcement of interim results
Dividends
The following table summarises the dividends declared in relation to the period:
£
Interim dividend for the period 1 April 2021 to 30 June 2021 (payment made on 31 August 2021) 3,168,495
Interim dividend for the period 1 July 2021 to 30 September 2021 (payment to be made on 19 3,168,495
November 2021)
Total 6,336,990
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
Link Group
10th Floor
Central Square
28 Wellington Street
Leeds
LS1 4DL
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
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
3 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.: 126970
EQS News ID: 1249566
End of Announcement EQS News Service
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