REG - AEW UK REIT PLC - Annual Financial Report <Origin Href="QuoteRef">AEWU.L</Origin> - Part 3
10/07/2017 07:05
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longer than portfolio level WAULT. 3. Well located a short distance from the M60 Manchester Ring Motorway.
Rent Low passing rent of £2.50 per sq ft.
40 Queen Square, Bristol
Prime Bristol Office Location, refurbishment potential
Property characteristics Adding value
Property type Office 1. Active asset management program to refurbish and relet vacant space has repositioned the asset and taken occupancy levels from 54% at purchase to 94%. 2. Improvements undertaken on the common facilities will continue to drive rental growth.
Area 38,326 sq ft
Purchase price
£7.20m
Purchase yield 8.70%
Vendor Fund
Lease Investment summary
Tenants Multi-let to 8 tenants with 6% ERV vacancy. WAULT of 3.0 years to break and 4.9 years to expiry. 1. Prime office location in central Bristol. 2. Increasing levels of occupier demand is driving rental growth.
Rent Average passing rent of £20.30 per sq ft (on let space).
Bath Street, Glasgow
City centre location, attractive yield profile
Property characteristics Adding value
Property type Office 1. The current low passing rents make the building well placed to benefit from future rental growth. 2. Requires minimal capex going forward e.g. improvement of tenant amenity space on the ground floor.
Area 88,159 sq ft
Purchase price
£12.20m
Purchase yield 10.00%
Constructed 1980s
Vendor Fund
Lease Investment summary
Tenants Let to 4 tenants providing a WAULT of 3.2 years to break and 5.9 years to expiry. 1. Multi-let city centre office building. 2. Comprehensively refurbished in 2008. 3. Shortage of competing stock for this size of floor plate.
Rent Average passing rent of £14.68 per sq ft.
Eastpoint Business Park, Oxford
Major south east city, improving occupier demand
Property characteristics Adding value
Property type Office 1. 12,700 sq ft under offer to an existing tenant for a new 10 year term. 2. Capital expenditure of £160,000 spent refreshing common parts.
Area 74,266 sq ft
Purchase price
£8.20m
Purchase yield 9.40%
Constructed 1980s
Vendor Property Company
Lease Investment summary
Tenants 5 tenants providing a WAULT of 6.5 years to break and 9.5 years to expiry. 1. Majority refurbished office park with good road links. 2. Constrained supply and improving occupier demand in a key south east location. 3. Low capital value per sq ft.
Rent Average passing rent of £10.30 per sq ft.
Pearl House, Wheeler Gate, Nottingham
Major city centre location, high passing footfall
Property characteristics Adding value
Property type Retail with office uppers 1. Complete office lease renewals. Various tenants have renewal leases in solicitors hands. 2. Change of use of the larger floor plate office accommodation to a gym, subject to planning. 3. Potential to sell of the office floors for change of use in the longer term, subject to planning.
Area 71,260 sq ft
Purchase price
£8.15m
Purchase yield 9.0%
Vendor Property Company
Lease Investment summary
Tenants Multi let to 16 tenants with aWAULT of 5.1 years to break and 5.6 years to expiry. 50% of the income from nationalretailers including Poundland, Costa Coffee and Lakeland. 1. Major city centre retail pitch with high footfall. 2. Well configured retail units. 3. Office upper floors providing potential for a range of alternative uses. Prior approval consent received for change of use for 36 residential flats.
Rent Office c.£12 per sq ft. Wheeler Gate Retail c.£100 ITZA.
Sandford House, Solihull
Prime office location, tenant wedded to the location
Property characteristics Adding value
Property type Office 1. Potential to regear the lease with the current tenant. 2016 break option was not operated. 2. Refurbishment potential in the short term could increase rental value. 3. Ability to extend the building, subject to planning.
Area 34,418 sq ft
Purchase price
£5.40m
Purchase yield 10.90%
Constructed 1988
Vendor Fund
Lease Investment summary
Tenants Government tenant with 2.7 years to break and to expiry. 1. Prime Birmingham office location. 2. Significant improvement in occupier demand over the past two years. 3. Government tenant is strongly wedded to the location - Border Force have disclosed a new requirement but are very unlikely to move before break date. 4. Potential to refurbish in the short to medium term to increase rental value.
Rent Average passing rent of £14.90 per sq ft.
Vantage Point, Hemel Hempstead
Low capital value per sq ft, strong and improving occupier market
Property characteristics Adding value
Property type Office 1. Refurbishment potential if the first floor tenant breaks their lease and in the medium term ERV could increase to £15 per sq ft on refurbished accommodation.
Area 18,466 sq ft
Purchase price
£2.18m
Purchase yield 8.40%
Constructed 1980
Vendor Private vendor
Lease Investment summary
Tenants Fully let to 2 tenants providing a WAULT of 5.4 years to break and 7.4 years to expiry. 1. Established south east business park location. 2. Strong south east office occupational market. 3. Low passing rent. 4. Low capital value per sq ft.
Rent Average passing rent of £10.49 per sq ft
Barnstaple Retail Park, Station Road, Barnstaple
Fully let on rebased rents, established location
Property characteristics Adding value
Property type Retail warehouse 1. Low base rents could create potential for future rental growth.
Area 51,021 sq ft
Purchase price
£6.79m
Purchase yield 8.50%
Constructed 1988
Vendor Charity
Lease Investment summary
Tenants B&Q, Sports Direct and Poundland. WAULT of 6.9 years to expiry. 1. Retail warehousing scheme located within an established destination area. 2. Fully let to national occupiers on rebased rents. 3. Average weighted unexpired term of 6.9 years. 4. Attractive and stable yield profile.
Rent Average passing rent of £11.97 per sq ft.
Stoneferry Retail Park, Hull
Prominent location, attractive yield
Property characteristics Adding value
Property type Retail warehouse 1. Potential to agree a surrender with Wren Kitchens if an alternative tenant can be found. 2. Improve signage and access.
Area 17,656 sq ft
Purchase price
£2.16m
Purchase yield 10.00%
Constructed 1994
Vendor Fund
Lease Investment summary
Tenants Fully let to 3 tenants providing a WAULT of 4.8 years to expiry. 1. Good prominence to a major roundabout junction. 2. Established retail warehousing location. 3. Attractive and stable yield profile in medium to long term.
Rent Average passing rent of £12.95 per sq ft.
Valley Retail Park, Newtownabbey, Belfast
Modern scheme, attractive yield profile
Property characteristics Adding value
Property type Retail warehouse 1. Agreed surrender with Harvey Norman. 2. Let vacant units. 3. Potential addition of leisure and coffee pod.
Area 100,189 sq ft
Purchase price
£7.15m
Purchase yield 14.00%
Constructed 2003
Vendor Asset Manager
Lease Investment summary
Tenants Let to 5 tenants providing a WAULT of 10.5 years to break and 13.1 years to expiry. 1. Modern scheme. 2. Attractive yield profile. 3. Low vacancy level within the surrounding area. 4. Ability to offer space at a discount to surrounding schemes. 5. Halfords trading strongly. 6. Wider interpretation of bulky goods planning consent than rest of UK.
Rent Average passing rent of £9.75 per sq ft.
11/15 Fargate, 18/36 Chapel Walk, Sheffield
Prime retailing location, attractive yield profile
Property characteristics Adding value
Property type Retail 1. Sale of vacant upper parts to a student housing developer has been completed. 2. Potential for future rental growth.
Area 34,362 sq ft
Purchase price
£5.30m
Purchase yield 8.90%
Vendor Fund
Lease Investment summary
Tenants Multi-let to 7 tenants providing a WAULT of 4.3 years to break and 7.0 years to expiry. 1. Prime retail location within Top 25 retailing city. 2. Low passing rent on the prime units. 3. Further retail development nearby will help to draw more footfall into the city centre.
Rent Passing rent of £135 per sq ft on the prime units.
69 - 75 Above Bar Street, Southampton
Top 20 retailing centre, improving occupier demand
Property characteristics Adding value
Property type Retail 1. Potential to increase rental value in the medium term due to rental growth within the wider area.
Area 21,936 sq ft
Purchase price
£9.25m
Purchase yield 8.75%
Constructed 1993
Vendor Fund
Lease Investment summary
Tenants Fully let to 3 tenants providing a WAULT of 4.2 years to expiry. 1. Top 20 retail centre. 2. Property located just a short walk from the prime pitch and between the two main covered centres. 3. Improving occupier demand and potential for rental growth going forward.
Rent Average passing rent of £197.00 per sq ft In Terms of Zone A ('ITZA').
Bank Hey Street, Blackpool
Strong tenant covenants, asset management opportunities
Property characteristics Adding value
Property type Retail with vacant uppers 1. Potential sale of upper parts (no rates liability) on a long-leasehold basis. 2. Sports Direct are also interested in expanding within the building.
Area 100,079 sq ft
Purchase price
£5.05m
Purchase yield 9.5%
Vendor Property Company
Lease Investment summary
Tenants Multi-let to national occupiersJD Wetherspoon, Poundland andSports Direct. WAULT of 6.7 years to break and 9.2 years to expiry. 1. Iconic location directly adjacent to the Blackpool Tower. 2. Blackpool has seen a resurgence in visitor numbers to 13 million in 2014. 3. Attractive net initial yield. 4. Tenants reporting very strong trade.
Rent £5.80 per sq ft.
Odeon Cinema, Victoria Circus, Southend on Sea
Prominent south east town centre location, strong underlying trade
Property characteristics Adding value
Property type Leisure 1. Outstanding 2012 rent review now settled at an uplift of £30,000 pa. 2. 2017 rent review commenced which could yield further uplift. 3. Negotiate lease extension with the tenant. Potential to negotiate future lease extensions to add significant value through indexation.
Area 40,635 sq ft
Purchase price
£5.70m
Purchase yield 8.40%
Vendor Institution
Lease Investment summary
Tenants Fully let to Odeon Cinemas Ltd providing a WAULT of 5.4 years to expiry. 1. Prominently located on the High Street and a short distance from the train station. 2. Only cinema within 25 minute drive time. 3. 5A1 covenant strength (Dun & Bradstreet). 4. Tenant trading strongly. 5. Attractive yield and stable income steam.
Rent Average passing rent of £13.16 per sq ft.
Diversity, Social and Environmental Matters
Diversity
In 2016, the Board approved and adopted a diversity policy. The policy acknowledges the importance of diversity, including
gender diversity, for the Company.
The Board has established the following objectives for achieving diversity on the Board:
· All Board appointments will be made on merit, in the context of the skills, knowledge and experience that are needed
for the Board to be effective.
· Any long lists of potential directors to include diverse candidates of appropriate merit.
· When engaging with executive search firms, the Company will only engage with those firms who have signed up to the
voluntary Code of Conduct on gender diversity and best practice.
When selecting a new non-executive Director, the Board reviewed a list of candidates from diverse backgrounds and after
meeting with several of them, selected Katrina Hart as she was the most qualified candidate.
The Directors do not have service contracts. There are three male Directors and one female Director.
Social, Community and Employee Responsibility
The Company has no direct social, community or employee responsibilities. The Company has no employees and accordingly no
requirement to separately report in this area as the management of the portfolio has been delegated to the Investment
Manager.
The Investment Manager is an equal opportunities employer who respects and seeks to empower each individual and the diverse
cultures, perspectives, skills and experiences within its workforce.
The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and
is therefore not obliged to make a slavery and human trafficking statement. The Directors are satisfied that, to the best
of their knowledge, the Company's principal suppliers, which are listed below, comply with the provisions of the UK Modern
Slavery Act 2015.
Environmental Policy
The Investment Manager acquires and manages properties on behalf of the Company. It is recognised that these activities
have both direct and indirect environmental impacts.
The Investment Manager has a Sustainable and Responsible Investment ('SRI') policy. This can be found on the Investment
Manager's website www.aewuk.com.
The Investment Manager believes environmentally responsible fund management means being active, on the ground every day. As
part of this process, the Investment Manager submits disclosures to GRESB, the Global Real Estate Sustainability Benchmark.
GRESB is an industry driven organisation committed to assessing the sustainability of real estate portfolios (public,
private and direct) around the globe.
The Investment Manager is in the process of submitting the Company's GRESB assessment for the period from 1 May 2016 to 30
April 2017 and will receive the results of this assessment in September 2017 when it which will be made available on the
Company's website.
As an investment company, the Company's own direct environmental impact is minimal and greenhouse gas ('GHG') emissions are
therefore negligible. Information on the GHG emissions in relation to the Company's property portfolio are disclosed on
pages 61 and 62 of the Directors' Report in the full Annual Report and Financial Statements.
The Strategic Report has been approved and signed on behalf of the Board by:
Mark Burton
Chairman
7 July 2017
Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable law.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing
these financial statements, the directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors'
Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those
regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement of the directors in respect of the Annual Report and Financial Statements
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole; and
· the Strategic Report includes a fair review of the development and performance of the business and the position of
the Company, together with a description of the principal risks and uncertainties it faces.
We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
On behalf of the Board
Mark Burton
Chairman
7 July 2017
Non-statutory Accounts
The financial information set out below does not constitute the Company's statutory accounts for the period ended 30 April
2017 but is derived from those accounts. Statutory accounts for the period ended 30 April 2017 will be delivered to the
Registrar of Companies in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their
report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the
Auditors' Report can be found in the Company's full Annual Report and Accounts on the Company's website.
Statement of Comprehensive Income
for the year ended 30 April 2017
For the period
Year ended 1 April 2015 to
30 April 2017 30 April 2016
Notes £'000 £'000
Income
Rental and other income 3 12,503 7,185
Property operating expenses 4 (1,434) (300)
Net rental and other income 11,069 6,885
Dividend income 3 576 653
Net rental and dividend income 11,645 7,538
Investment management fee 4 (1,034) (653)
Auditor remuneration 4 (88) (95)
Operating costs 4 (646) (403)
Directors' remuneration 5 (71) (72)
Operating profit before fair value changes and disposals 9,806 6,315
Change in fair value of investment property 10 (3,159) (1,935)
Gains on disposal of investment property 10 731 -
Change in fair value of investments 10 (407) 482
Loss on disposal of investments 10 (113) -
Operating profit 6,858 4,862
Finance expense 6 (759) (226)
Profit before tax 6,099 4,636
Taxation 7 - -
Profit after tax 6,099 4,636
Other comprehensive income - -
Total comprehensive income for the year/period 6,099 4,636
Earnings per share (pence per share) (basic and diluted) 8 5.04 4.83
The notes below form an integral part of these financial statements.
Statement of Changes in Equity
for the year ended 30 April 2017
Total capital
Capital and reserves
Share reserve and attributable to
premium retained owners of the
For the year ended 30 April 2017 Notes Share capital£'000 account £'000 earnings£'000 Company£'000
Balance at beginning of the year 1,175 16,729 98,471 116,375
Total comprehensive income - - 6,099 6,099
Ordinary Shares issued 18/19 61 5,938 - 5,999
Share issue costs 19 - (153) - (153)
Dividends paid 9 - - (9,646) (9,646)
Balance at 30 April 2017 1,236 22,514 94,924 118,674
Total capital
Capital and reserves
Share reserve and attributable to
premium retained owners of the
For the period 1 April 2015 to 30 April 2016 Notes Share capital£'000 account £'000 earnings£'000 Company£'000
Balance at beginning of the period - - - -
Total comprehensive income - - 4,636 4,636
Ordinary Shares issued 18/19 1,175 116,505 - 117,680
Share issue costs 19 - (2,211) - (2,211)
Cancellation of share premium - (97,565) 97,565 -
Dividends paid 9 - - (3,730) (3,730)
Balance at 30 April 2016 1,175 16,729 98,471 116,375
The notes below form an integral part of these financial statements.
Statement of Financial Position
as at 30 April 2017
30 April 2017 30 April 2016
Notes £'000 £'000
Assets
Non-Current Assets
Investment property 10 135,570 114,387
Investments 10 - 10,109
135,570 124,496
Current Assets
Investments held for sale 10 7,594 -
Receivables and prepayments 11 3,382 2,962
Other financial assets held at fair value 12 31 77
Cash and cash equivalents 3,653 7,963
14,660 11,002
Total assets 150,230 135,498
Non-Current Liabilities
Interest bearing loans and borrowings 13 (28,740) (14,250)
Finance lease obligations 15 (55) (1,791)
(28,795) (16,041)
Current Liabilities
Payables and accrued expenses 14 (2,756) (2,959)
Finance lease obligations 15 (5) (123)
(2,761) (3,082)
Total Liabilities (31,556) (19,123)
Net Assets 118,674 116,375
Equity
Share capital 18 1,236 1,175
Share premium account 19 22,514 16,729
Capital reserve and retained earnings 94,924 98,471
Total capital and reserves attributable to equity holders of the Company 118,674 116,375
Net Asset Value per share (pence per share) 8 95.98 pps 99.03 pps
The financial statements were approved by the Board on 7 July 2017 and signed on its behalf by:
Mark Burton
Chairman
AEW UK REIT plc
Company number: 09522515
The notes below form an integral part of these financial statements.
Statement of Cash Flows
for the year ended 30 April 2017
For the year ended30 April 2017£'000 For the period1 April 2015 to30 April 2016£'000
Cash flows from operating activities
Operating profit 6,858 4,862
Adjustment for non-cash items:
Loss from change in fair value of investment property 3,159 1,935
Loss/(gain) from change in fair value of investments 407 (482)
Gains on disposal of investment properties (731) -
Loss on disposal of investments 113 -
Change in fair value of interest rate derivatives - (14)
Increase in other receivables and prepayments (438) (2,962)
(Decrease)/increase in other payables and accrued expenses (283) 2,936
Net cash flow generated from operating activities 9,085 6,275
Cash flows from investing activities
Purchase of investment property (28,062) (114,408)
Purchase of investments - (9,627)
Disposal of investment property 2,681 -
Disposal of investments 1,995 -
Net cash used in investing activities (23,386) (124,035)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 5,999 117,680
Share issue costs (153) (2,211)
Loan draw down 14,760 14,250
Finance costs (969) (266)
Dividends paid (9,646) (3,730)
Net cash flow generated from financing activities 9,991 125,723
Net (decrease)/increase in cash and cash equivalents (4,310) 7,963
Cash and cash equivalents at the start of the year/period 7,963 -
Cash and cash equivalents at the end of the year/period 3,653 7,963
The notes below form an integral part of these financial statements.
Notes to the Financial Statements
for the year ended 30 April 2017
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. The registered office of the Company is located at 40 Dukes Place, London, EC3A 7NH.
The Company's Ordinary Shares were 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.
The nature of the Company's operations and its principal activities are set out in the Strategic Report.
2. Accounting policies
2.1 Basis of preparation
These financial statements are prepared and approved by the Directors in accordance with International Financial Reporting
Standards ('IFRS') and interpretations issued by the International Accounting Standards Board ('IASB') as adopted by the
European Union ('EU IFRS').
The prior period is for a period of greater than 12 months, being the first audited period from the date of incorporation.
As a result the comparative information disclosed is not directly comparable.
These financial statements have been prepared under the historical-cost convention, except for investment property,
investments and interest rate derivatives that have been measured at fair value, and the investment in the subsidiary which
is held at cost less impairment.
The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000),
except when otherwise indicated.
The Company is exempt by virtue of Section 402 of the Companies Act 2006 from the requirement to prepare group financial
statements. These financial statements present information solely about the Company as an individual undertaking.
New standards, amendments and interpretations
There 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 after 30 April 2017 or later periods, but the Company has decided not to adopt
them early. The following are the most relevant to the Company and their impact on the financial statements:
· IFRS 9 Financial Instruments. The standard will replace IAS 39 Financial Instruments and contains two primary
measurement categories for financial assets (effective for annual periods beginning on or after 1 January 2018);
· IFRS 12 Disclosure of Interests in Other Entities: amended by annual improvements to IFRS Standards 2014-2016 cycle
(effective for annual periods beginning on or after 1 January 2017);
· IFRS 15 Revenue from contracts. The standard replaces IAS 11 Construction Contracts, IAS 18 Revenue. The standard
introduces a new revenue recognition model that recognises revenue either at a point in time or over time (effective for
annual periods beginning on or after 1 January 2018);
· IFRS 16 Leases: introduction of a single, on-balance sheet accounting model (effective for annual periods beginning
on or after 1 January 2019). The disclosure requirements of IFRS 16 will be considered in due course;
· IAS 7 Statement of Cash Flows: The amendments require disclosures that enable evaluation of changes in liabilities
arising from financing activities, including both changes arising from cash flow and non-cash changes (effective for annual
periods beginning on or after 1 January 2017); and
· IAS 40 Investment Property: Amendments by Transfers of Investment Property (effective for annual periods beginning
on or after 1 July 2018).
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with EU IFRS 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 valuations of the Company's investment property will be 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.
ii) Valuation of investments
Investments in collective investment schemes are stated at fair value with any resulting gain or loss recognised in profit
or loss. Fair value is assessed by the Directors based on the best available
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