REG-AEW UK REIT plc AEW UK REIT plc: NAV Update and Dividend Declaration
20/01/2022 07:05
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AEW UK REIT plc (AEWU)
AEW UK REIT plc: NAV Update and Dividend Declaration
20-Jan-2022 / 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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20 January 2022
AEW UK REIT Plc
NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) (the "Company"), which directly owns a
diversified portfolio of 35 regional UK commercial property assets,
announces its unaudited Net Asset Value ("NAV") and interim dividend for
the three-month period ended 31 December 2021.
Highlights
• NAV of £180.94 million or 114.21 pence per share as at 31 December
2021 (30 September 2021: £174.29 million or 110.01 pence per share).
• NAV total return of 5.63% for the quarter (30 September 2021 quarter:
4.58%).
• 3.49% like-for-like valuation increase for the quarter (30 September
2021 quarter: 3.11%), driven by retail warehousing (like-for-like
increase of 6.73%) and industrial (like-for-like increase of 5.16%)
sectors.
• EPRA earnings per share ("EPRA EPS") for the quarter of 1.80 pence (30
September 2021 quarter: 1.30 pence).
• Interim dividend of 2.00 pence per share for the three months ended 31
December 2021, in line with the targeted annual dividend of 8.00 pence
per share.
• Disposal of Wella Warehouse, Basingstoke, for gross proceeds of £5.86
million, which was 1.7x its purchase price.
• Purchase of Central Six Retail Park in Coventry for a purchase price
of £16.41 million / £110 per sq ft. The purchase price reflects a net
initial yield of circa 11%, with an anticipated reversionary yield of
12.5%.
• The Company remains conservatively geared with a loan to NAV ratio of
29.84% (30 September 2021: 28.97%). At the quarter end, the Company
had a cash balance of £7.39 million and £6.0 million of its loan
facility available to draw up to the maximum 35% Loan to NAV at
drawdown.
• For the rental quarter commencing on 25 December 2021, approximately
98% of rent has been collected or is expected to be received prior to
quarter end. The remainder of rents owed will continue to be pursued.
• We remain encouraged by the consistent rent collection levels, which
stand at over 98% for each quarter since the onset of the pandemic
(excluding current quarter).
• The continued improvement in economic conditions has brought about the
return of a share price premium to NAV. We hope the Company will be in
a position to take advantage of continued strong demand for its shares
to grow our capital base in due course.
Alex Short, Portfolio Manager, AEW UK REIT, commented:
"The portfolio continues to generate strong capital growth, largely driven
by yield compression of the industrial assets and strong performance of
our retail warehousing assets. We have also seen our ERVs move on as a
result of continued strong occupier demand, supported by a compelling
asset management story. We are pleased to be paying a dividend of 2p for
the 25th consecutive quarter.
Following the sale of the two strongly performing industrial assets in Q3,
we invested a significant portion of the proceeds in a multi let retail
warehouse park purchased at Central Six, Coventry. At the point of
purchase this acquisition is accretive to EPS with an expectation of
further growth to come in 2022 as the asset's business plan is
implemented.
The expected sale of our Glasgow office, which has a high level of
vacancy, and the completion of ongoing works at our Blackpool asset in the
coming months will support a reduction in costs and the rebuilding of our
EPS in line with expectations."
Portfolio Manager's report
The portfolio continues to generate strong capital growth, with valuations
increasing by 3.49% on a like-for-like basis (30 September 2021 quarter:
3.11%). As with the previous quarter, this was largely driven by the
performance of the industrial assets in the portfolio which saw a
like-for-like increase of 5.16% and make up 51.1% of the portfolio as at
31 December 2021.
Although valuations have again partly been driven by yield compression, we
have also seen our ERVs move on as a result of continued strong occupier
demand, supported by a strong asset management story. We have again seen
good performance at our office holding in Bristol, with recent lettings at
above ERV moving the valuation higher. We are likely to implement a
programme of refurbishment works at this asset in the expectation of
achieving further rental growth in an ever-improving market. Our office
park at Oxford has also continued to perform well with its transition to
life sciences/medical use, a sector which is proving particularly popular
with both tenants and investors.
It continues to be a challenging period for the high street retail sector,
but with valuations in the portfolio stable again this quarter, we are
starting to see cause for selective optimism. We are often seeing
divergence between high street retail and retail warehousing assets, in
terms of both tenant and investor demand, with this being evident in our
retail warehousing valuations, which have seen a 6.73% like-for-like
valuation increase this quarter (30 September 2021 quarter: 5.69%). This
is reflected in our recent purchase of a 94,891 sq ft retail warehouse at
Shrewsbury, offering an 8.7% NIY on purchase, where we are seeing robust
tenant commitment to the scheme at rents in excess of ERVs. This is also
true at our newly purchased asset at Central Six, Coventry, where we
expect tenant demand to support successful asset management deals and, in
time, rental growth. We will continue to appraise buying opportunities and
our existing portfolio with this noticeable divergence in mind.
The proceeds from the sale of two of the Company's strongly performing
industrial holdings during Q3 2021 are now almost fully invested. The
multi-let retail warehouse park purchased at Central Six, Coventry, is
accretive to EPRA EPS at the point of purchase and with the ongoing
implementation of the business plan, there is an expectation of further
growth to come during the course of 2022. Tenants at the Park include
Next, Boots and Burger King and it is located in a prime position near the
city centre, immediately adjacent to the train station. We have one
further asset under offer to buy and the completion of this purchase will
take us back to full investment and gearing in line with our target of a
35% Loan to NAV ratio. It is anticipated that the sale of our office asset
in Glasgow, where we have a high level of vacancy, will complete in the
first half of 2022 (subject to planning consent), and the ongoing service
charge works at our Blackpool asset will also conclude. Each of these
events will lead to the cost overheads falling, supporting the rebuilding
of EPS, with the aim of returning to full dividend cover in due course.
The Company's EPRA EPS was 1.80 pence for the quarter, providing a
dividend cover of 90% (30 September 2021: 1.30 pence and 65%).
Valuation movement
As at 31 December 2021, the Company owned investment properties with a
fair value of £225.84 million. The like-for-like valuation increase for
the quarter of £7.05 million (3.49%) is broken down as follows by sector:
Sector Valuation 31 December Like-for-like valuation movement
2021 for the quarter
£ million % £ million %
Industrial 115.39 51.09 5.66 5.16
Office 40.32 17.86 0.38 0.94
High Street 24.63 10.90 0.01 0.04
Retail
Retail Warehouses 32.95 14.59 1.00 6.73
Other 12.55 5.56 0.00 0.00
Total 225.84 100.00 7.05 3.49*
* This is the overall weighted average like-for-like valuation increase of
the portfolio.
Net Asset Value
The Company's unaudited NAV at 31 December 2021 was £180.94 million, or
114.21 pence per share. This reflects an increase of 3.82% compared with
the NAV per share at 30 September 2021. The Company's NAV total return,
which includes the interim dividend of 2.00 pence per share for the period
from 1 July 2021 to 30 September 2021, was 5.63% for the three-month
period ended 31 December 2021.
Pence per share £ million
NAV at 1 October 2021 110.01 174.29
Portfolio acquisition costs (0.70) (1.12)
Profit on sale of investments 0.88 1.40
Capital expenditure (0.37) (0.59)
Valuation change in property portfolio 4.45 7.04
Valuation change in derivatives 0.15 0.23
Income earned for the period 2.91 4.62
Expenses and net finance costs for the period (1.12) (1.76)
Interim dividend paid (2.00) (3.17)
NAV at 31 December 2021 114.21 180.94
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the
independent portfolio valuation at 31 December 2021 and income for the
period, but does not include a provision for the interim dividend for the
three-month period to 31 December 2021.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share
for the period from 1 October 2021 to 31 December 2021. The dividend
payment will be made on 28 February 2022 to shareholders on the register
as at 28 January 2022. The ex-dividend date will be 27 January 2022.
The dividend of 2.00 pence per share will be designated 2.00 pence per
share as an interim property income distribution ("PID") and 0.00 pence
per share as an interim ordinary dividend ("non-PID").
The Company has now paid a 2.00 pence quarterly dividend for 25
consecutive quarters1, demonstrating consistency to our investors.
1For the period 1 November 2017 to 31 December 2017, a pro rata dividend
of 1.33 pence per share was paid for this two month period, following a
change in the accounting period end.
The EPRA EPS for the three-month period to 31 December 2021 was 1.80 pence
(30 September 2021: 1.30 pence).
Dividend outlook
It remains the Company's intention to continue to pay dividends in line
with its dividend policy and this will be kept under review given the
current COVID-19 situation. In determining future dividend payments,
regard will be given to the circumstances prevailing at the relevant time,
as well as the Company's requirement, as a UK REIT, to distribute at least
90% of its distributable income annually.
Financing
Equity
The Company's share capital consists of 158,774,746 Ordinary Shares, of
which 350,000 are currently held by the Company as treasury shares.
Debt
The Company had borrowings of £54.0 million at 31 December 2021, producing
a Loan to NAV ratio of 29.84% and allowing a further £6.0 million of the
remaining facility to be drawn up to the maximum 35% Loan to Value at
drawdown.
The loan attracts interest at SONIA + 1.4% and the Company's all-in
interest rate as at 31 December 2021 was 1.48%.
To mitigate the risk of interest rates rising, the Company has interest
rate caps effective for the remaining term of the loan to 23 October 2023,
capping SONIA interest rate costs at 1.0% on a notional value of £51.50
million. The interest rate caps transitioned to SONIA on 31 December 2021.
Rent Collection
As at 17 January 2022, the Company had collected the following rental
payments for the rental quarter commencing 25 December 2021 and for
previous quarters since the onset of the COVID-19 pandemic, expressed as a
percentage of the quarter's total rental income:
Current Position as at 17 Q1 2020 Q2 Q3 Q4 Q1 Q2 Q3 Q4
January 2022 2020 2020 2020 2021 2021 2021 2021
Received 100% 99% 99% 99% 99% 99% 98% 73%
Monthly Payments Expected Prior
to Quarter End - - - - - -
- 20%
100% 99% 99% 99% 99% 99% 98% 93%
Under Negotiation
- - -
- - - - -
100% 99% 99% 99% 99% 99% 98% 93%
Outstanding - 1% 1% 1% 1% 1% 2% 7%
Total 100% 100% 100% 100% 100% 100% 100% 100%
It should be noted that this is an evolving picture with further payments
being received each week. For any amounts that remain outstanding that are
owed by tenant companies who are known to have the ability to pay, the
Company is pursuing these tenants.
Asset Management Update
During the quarter the Company completed the following asset management
transactions in addition to the aforementioned acquisition and disposal,
as well as the ongoing service change works at Blackpool:
15-33 Union Street, Bristol (high street retail) - We have completed a new
15-year lease to Roxy Leisure Limited, a "competitive social" leisure
occupier, at a rent of £181,000 pa / £10 psf with five yearly RPI reviews,
collared and capped at 1.5% and 4% respectively. We granted the tenant a
12-month rent free incentive and made a £300,000 capital contribution to
the tenant's fit out. On acquisition (June 2021), the 18,122 sq ft of
upper-floor space was vacant, with the Company benefiting from a 12-month
rental guarantee of £190,000.
Pearl House, Nottingham (high street retail) - Having held over since
April 2021, we have completed the renewal of Cancer Research's lease on a
5-year term with a tenant break in year three, subject to a break penalty
equivalent to three months' rent. The rent agreed is £21,000 pa. Three
months' rent-free incentive was given. This letting secures an established
and financially robust high street retailer for a minimum of three years.
69-75 Above Bar Street, Southampton (high street retail) - We have
completed a new 5-year lease to Shoe Zone at a gross rent of £80,000 pa in
exchange for a 12-month rent free period and circa £40,000 landlord works.
The unit has been vacant since Waterstone's lease expired in July 2019, so
we are delighted to have secured this letting to a well-known high street
retailer for a 5-year term with no tenant break option.
Walkers Lane, St Helens (industrial) - After protracted negotiations, we
have settled Kverneland's October 2020 open market rent review at £389,000
pa / £4.16 psf, representing a £89,000 pa increase. Rental evidence
suggested the passing rent was reversionary at review, targeting £4.00
psf. The tenant's lease expires in October 2025.
Westlands Distribution Park, Weston-Super-Mare (industrial) - We have
completed a new letting to North Somerset District Council at £20,000 pa,
rising to £30,000 pa in April 2022. There are five yearly upwards-only
rent reviews to the higher of open market or RPI (capped at 1.5%) in 2027
and 2032. The lease expires in April 2037 with mutual rolling break
options in 2024, 2027 and 2032.
Saurus Court, Runcorn (industrial) - We have completed a new 10-year lease
to KMS (Europe) Ltd at a headline rent of £6 psf (£95,000 pa) vs. the
previous passing rent of £4.83 psf (£76,100 pa). The tenant has the
benefit of a 12-month rent free period spread out over the first three
years of the lease (four months' rent free per annum). In doing so, we
have set a new rental tone at £6 psf for the estate.
Enquiries
AEW UK
Alex Short 1 alex.short@eu.aew.com
+44(0) 20 7016 4848
2 henry.butt@eu.aew.com
Henry Butt
+44(0) 20 7016 4855
Nicki Gladstone 3 nicki.gladstone-ext@eu.aew.com
+44(0) 7711 401 021
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
TB Cardew 4 AEW@tbcardew.com
Ed Orlebar +44 (0) 7738 724 630
Tania Wild +44 (0) 7425 536 903
Lucas Bramwell +44 (0) 7939 694 437
Liberum Capital
Darren Vickers / Owen Matthews +44 (0) 20 3100 2000
Notes to Editors
About AEW UK REIT
AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total return to
shareholders by investing predominantly in smaller commercial properties
(typically less than £15 million), on shorter occupational leases in
strong commercial locations across the United Kingdom. The Company is
currently invested in office, retail, industrial and leisure assets, with
a focus on active asset management, repositioning the properties and
improving the quality of income streams. AEWU is currently paying an
annualised dividend of 8p per share.
The Company was listed on the Official List of the UK Listing Authority
and admitted to trading on the Main Market of the London Stock Exchange on
12 May 2015. 5 www.aewukreit.com
LEI: 21380073LDXHV2LP5K50
About AEW UK Investment Management LLP
AEW UK Investment Management LLP employs a well-resourced team comprising
27 individuals covering investment, asset management, operations and
strategy. It is part of AEW Group, one of the world's largest real estate
managers, with €77.4bn of assets under management as at 30 September 2021.
AEW Group comprises AEW SA and AEW Capital Management L.P., a U.S.
registered investment manager and their respective subsidiaries. In
Europe, as at 30 September 2021, AEW Group managed €36.9bn of real estate
assets on behalf of a number of funds and separate accounts with over 440
staff located in 12 offices. In May 2019, AEW UK Investment Management LLP
was awarded Property Manager of the Year at the Pensions and Investment
Provider Awards.
6 www.aewuk.co.uk
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ISIN: GB00BWD24154
Category Code: MSCM
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 137652
EQS News ID: 1270490
End of Announcement EQS News Service
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References
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4. mailto:AEW@tbcardew.com
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