REG - AEW UK REIT PLC - NAV Update and Dividend Declaration
20/07/2023 07:00
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RNS Number : 5700G AEW UK REIT PLC 20 July 2023
20 July 2023
AEW UK REIT plc
NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) ("AEWU" or the "Company"), which directly owns a
value-focused portfolio of 33 UK commercial property assets, announces its
unaudited Net Asset Value ("NAV") as at 30 June 2023 and interim dividend for
the three-month period ended 30 June 2023.
Highlights
· NAV of £169.56 million or 107.03 pence per share as at 30 June
2023 (31 March 2023: £167.10 million or 105.48 pence per share).
· NAV total return of 3.36% for the quarter (31 March 2023 quarter:
2.42%).
· 0.74% like-for-like valuation increase for the quarter (31 March
2023 quarter decrease: 0.77%).
· EPRA earnings per share ("EPRA EPS") for the quarter of 1.75
pence (31 March 2023 quarter: 1.77 pence).
· Interim dividend of 2.00 pence per share for the three months
ended 30 June 2023, paid for 31 consecutive quarters and in line with the
targeted annual dividend of 8.00 pence per share.
· Loan to NAV ratio at the quarter end was 35.39% (31 March 2023:
35.91%). Loan to GAV ratio at the quarter end was 30.54% (31 March 2023:
28.06%). Significant headroom remains on all loan covenants.
· Company continues to benefit from a low fixed cost of debt of
2.959% until May 2027.
· Disposal of an industrial holding at Deeside Industrial Estate
for £4.75 million, reflecting an 8.0% premium to the 31 March 2023
valuation.
· Disposal of an industrial holding at Lockwood Court, Leeds,
for £9.65 million, reflecting a 5.9% NIY and a 3.8% premium to the 31 March
2023 valuation.
· Disposal of an industrial holding at Euroway Trading Estate,
Bradford, for £6.45 million, reflecting a 6.8% NIY and a 26.5% premium to
the 31 March 2023 valuation.
· Post quarter end, purchase of a car park asset in central York for
£10.02m, reflecting a NIY of 9.3%.
· Cash available for deployment as at 30 June 2023 of £25.0m,
reduced to circa £15.0m following the post quarter end acquisition of York.
· 14 asset management transactions completed during the quarter.
· 99% of rental income collected, excluding the current rent quarter,
consistent with each quarter since the onset of the COVID pandemic in March
2020.
Laura Elkin, Portfolio Manager, AEW UK REIT, commented:
"We are pleased to report continued NAV growth this quarter, demonstrating the
resilience of the Company's strategy, even during times of prolonged economic
uncertainty. This has been driven by a like-for-like valuation uplift of 0.74%
in the Company's portfolio, following the completion of key asset management
transactions and the profitable sale of three industrial assets at prices
exceeding prior quarter-end valuations. These sales are also expected to be
accretive to earnings, once the capital is redeployed, as yields achieved are
notably lower than those observed in the Company's investment pipeline.
The Company continues to make progress in our aim to return towards full
dividend cover. Earnings were however, negatively impacted by 0.09 pence per
share during the quarter due to an increase in bad debt provision for arrears
relating to Wilko Retail at Union Street in Bristol after the tenant appointed
CBRE to advise on its portfolio restructuring in June. Despite the route
forward being as yet unclear, we have taken the prudent decision to provide
for a majority of the outstanding arrears in the quarter but will continue to
pursue the tenant's arrears using all appropriate means.
The Company has now committed to pay its market-leading dividend of 2.00 pence
per share per quarter for 31 consecutive quarters, with EPS cover from EPRA
earnings since IPO amounting to 94%. The remainder of the Company's dividend
payments have been funded by the significant sum of profit generated on the
NAV accretive sale of assets. Further gains in EPS are expected in the coming
quarters as high yielding purchases are completed and the ongoing programme of
new lettings provides a boost to income streams."
Valuation movement
As at 30 June 2023, the Company owned investment properties with a fair value
of £196.47 million. The like-for-like valuation increase for the quarter
of £1.45 million (0.74%) is broken down as follows by sector:
Sector Valuation 30 June 2023 Like-for-like valuation movement for the quarter
£ million % of portfolio £ million %
Industrial 77.29 39.34 1.49 1.97
Retail Warehouses 44.60 22.70 0.70 1.59
High Street Retail 39.32 20.01 (0.58) (1.45)
Other 20.00 10.18 (0.12) (0.62)
Office 15.26 7.77 (0.04) (0.26)
Total 196.47 100.00 1.45 0.74*
* This is the overall weighted average like-for-like valuation increase of the
portfolio.
Portfolio Manager's Review
This quarter has seen the culmination of a number of asset management
initiatives, highlighting the robust nature of the Company's assets and our
ability to actively manage them throughout market cycles. Asset management
transactions were completed across all major property sectors, but with a
higher concentration in retail, a sector that we have favoured for a number of
recent purchases. We completed transactions during the quarter in high street
retail, with lettings to Specsavers and Dimension Vintage, and in retail
warehousing, with lettings to B&Q, Boots, Oak Furnitureland and Universal
Consumer Products.
At the Company's office asset at Queen Square, Bristol, rental growth was
achieved during the quarter following the settlement of the 2021 rent review
with tenant, Turley. The completion of this review follows the recent
settlement of two other outstanding rent reviews at the building, the outcomes
of which were not previously announced, so as not to compromise ongoing
negotiations. The combined outcome of this activity sees rental income from
these tenants increase by 32%.
Our ability to drive performance through asset management is particularly
pertinent in trying times. During the quarter, the Company's tenant Mecca
Bingo at the Railway Station Retail Park in Dewsbury announced the closure of
the hall, despite having been well progressed in a lease renewal discussion
with the Company. Although this is disappointing, we are buoyed by the strong
level of interest we have received in the unit from various well-known
national retail and leisure occupiers. The lease to Mecca Bingo will end on 25
December 2023. We hope to be able to agree terms for a new letting prior to
expiry.
The Company also sold three industrial assets at a premium to their latest
valuations. Our portfolio has gradually been reducing its industrial exposure
over the past 18 months, and although this may not continue at the same rate
going forward, it has allowed us to crystallise profits made in the sector and
concurrently recycle the resulting capital into high yielding assets in our
pipeline, mostly within other market sectors. We believe that this ability to
move nimbly between property sectors in order to extract maximum value from
our portfolio is a key strength of our strategy.
With this in mind, we were pleased to demonstrate in our recent Annual Report
that, over the 12-month period to 31 March 2023, the AEWU portfolio had
delivered outperformance against the MSCI index in all of the main property
sectors. This again demonstrates the varied abilities of our team and we
continue to make progress in our business plans across all property sectors.
Net Asset Value
The Company's unaudited NAV at 30 June 2023 was £169.56 million, or 107.03
pence per share. This reflects an increase of 1.47% compared with the NAV per
share at 31 March 2023. The Company's NAV total return, which includes the
interim dividend of 2.00 pence per share for the period from 1 January 2023
to 31 March 2023, was 3.36% for the three-month period ended 30 June 2023.
Pence per share £ million
NAV at 1 April 2023 105.48 167.10
Gain on sale of investments 1.04 1.65
Portfolio acquisition costs (0.02) (0.03)
Capital expenditure (0.21) (0.33)
Valuation change in property portfolio 0.99 1.57
Income earned for the period 3.05 4.83
Expenses and net finance costs for the period (1.30) (2.06)
Interim dividend paid (2.00) (3.17)
NAV at 30 June 2023 107.03 169.56
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation at 30 June 2023 and income for the period, but does not
include a provision for the interim dividend declared for the three-month
period to 30 June 2023.
Share price and Discount
The closing ordinary share price at 30 June 2023 was 92.7p. This represents a
discount to the NAV per share of 13.39% and an increase of 0.65% compared with
the share price of 92.1p at 31 March 2023. The Company's share price total
return, which includes the interim dividend of 2.00 pence per share for the
period from 1 January 2023 to 31 March 2023, was 2.82% for the three-month
period ended 30 June 2023.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 April 2023 to 30 June 2023. The dividend payment will be
made on 31 August 2023 to shareholders on the register as at 28 July 2023.
The ex-dividend date will be 27 July 2023. The Company operates a Dividend
Reinvestment Plan ("DRIP"), which is managed by its registrar, Link Group. For
shareholders who wish to receive their dividend in the form of shares, the
deadline to elect for the DRIP is 10 August 2023.
The dividend of 2.00 pence per share will be designated 2.00 pence per
share as an interim property income distribution ("PID") and 0.00 pence per
share as an interim ordinary dividend ("non-PID").
The Company has now paid a 2.00 pence quarterly dividend for 31 consecutive
quarters(1), providing high levels of income consistency to our shareholders.
(1)For the period 1 November 2017 to 31 December 2017, a pro rata dividend
of 1.33 pence per share was paid for this two-month period, following a
change in the accounting period end.
Dividend outlook
It remains the Company's intention to continue to pay dividends in line with
its dividend policy and this will be kept under review. In determining future
dividend payments, regard will be given to the circumstances prevailing at the
relevant time, as well as the Company's requirement, as a UK REIT, to
distribute at least 90% of its distributable income annually.
Financing
Equity:
The Company's share capital consists of 158,774,746 Ordinary Shares, of which
350,000 are currently held by the Company as treasury shares.
Debt:
The Company has a £60.00 million, five-year term loan facility with AgFe, a
leading independent asset manager specialising in debt-based investments. The
loan is priced as a fixed rate loan with a total interest cost of 2.959% until
May 2027.
The loan was fully drawn at 30 June 2023, producing a Loan to NAV ratio of
35.39%.
Headroom on the debt facility's loan to value ("LTV") covenant continues to be
conservative. For those properties secured under the loan, a 36.06% fall in
valuation would be required before the LTV covenant were breached.
Investment Update
During the quarter the Company completed the following disposals.
Excel 95, Deeside Industrial Estate (industrial) - the Company has
completed the sale of its industrial holding in Deeside for £4,750,000,
reflecting a capital value of circa £49 per sq ft. The 96,597 sq ft
industrial unit, known as Excel 95, was acquired in July 2017
for £4,310,000, reflecting a 7.9% net initial yield. The property was let to
Magellan Aerospace until they vacated in July 2022, paying
a £250,000 dilapidations settlement. The Company has disposed of the vacant
asset to an owner-occupier, with the price reflecting an 8.0% premium to the
31 March 2023 valuation. By disposing of the asset, the Company has also
avoided a speculative refurbishment project costing
approximately £1,000,0000.
Euroway Trading Estate, Bradford and Lockwood Court, Leeds (both
industrial) - during June, the Company completed the sale of two industrial
assets, being Euroway Trading Estate, Bradford and Lockwood Court, Leeds,
for combined proceeds of £16,100,000. This reflects a blended net initial
yield (NIY) of 6.2% and a weighted average premium to acquisition price of
31.2%.
Euroway Trading Estate was acquired in November 2016 for £4,950,000,
reflecting an 8.1% NIY. At acquisition, the property benefitted from a new
eight-year lease to Advanced Supply Chain (BFD) Ltd. In December 2019, the
Company completed a rent review which resulted in a 9.1% annual rental uplift.
Lockwood Court was acquired in February 2019 for £7,320,000, reflecting a
7.7% NIY. The property was acquired with the benefit of a new 10-year lease to
LWS, guaranteed by Harrogate Spring Water. In December 2019, AEWU secured a
new 10-year lease to Harrogate Spring Water, following L.W.S. entering into
liquidation.
Both sales realise significant profit for AEWU's shareholders. For Euroway
Trading Estate and Lockwood Court respectively, their sales prices exceeded
their 31 March 2023 valuations by 26.5% and 3.8%, as well as their acquisition
prices by 30.3% and 31.8%. Reinvestment of the sales proceeds into
comparatively higher yielding pipeline assets will be accretive to the
Company's earnings.
No purchases were made during the quarter. Post quarter end, the Company
completed the following purchase:
Tanner Row, York (car park) - in July, the Company completed the acquisition
of a mixed use asset within York city centre for £10,020,000, reflecting an
attractive net initial yield of 9.3%. The site totals 0.8 acres and is well
located inside the York City Wall, bounding the historic centre of the city,
within the "Micklegate Quarter".
The 99,769 sq ft asset is multi-let to five tenants, with 75% of the income
received from National Car Parks Ltd who have a further 9 years remaining. NCP
have occupied the 297-space car park since 2005 and the lease benefits from a
2027 rent review which will increase rent payable in line with uncapped Retail
Price Index, resulting in a forecast reversionary yield in excess of 10%. A
further four tenants occupy ground and first floor retail and office
accommodation fronting onto George Hudson Street.
Asset Management Update
The Company completed the following asset management transactions during the
quarter:
Central Six Retail Park, Coventry (retail warehousing) - in April, the Company
completed a lease renewal with existing tenant, Grahams Baked Potatoes
Limited. The tenant has entered into a new four-year lease with rolling mutual
break options at a rent of £24,500 per annum, equating to £45 per sq ft.
In May, the Company completed a lease renewal with existing tenant, Oak
Furnitureland Group Limited, for Unit 12. The tenant has entered into a new
two-year lease with rolling mutual break options at a rent of £25,000 per
annum, equating to £2.50 per sq ft. This flexible renewal will facilitate a
longer-term transaction to a new tenant, which is currently being negotiated.
In May, the Company also completed a reversionary lease with existing tenant,
Boots UK Limited, for Unit 7. The tenant has entered into a new five-year
lease with effect from 28 February 2024 at a rent of £259,293 per annum,
equating to £14.25 per sq ft. The letting also includes seven and a half
months' rent free taken under the existing lease.
In June, the Company completed the acquisition of the freehold interest in
units 1-11, which had previously been held by way of long leasehold from
Friargate JV Projects Limited. The acquisition of the freehold interest is
expected to increase the liquidity of the asset in case of its future sale and
also removes user restrictions within the long lease which are constrictive to
lettings. In exchange for the freehold interest, the Company has granted to
Friargate JV Projects an option to acquire the Company's long leasehold
interest in units 12 A & B over a five-year period, commencing in two
years' time.
Post quarter end, the Company completed a new 20-year lease to Aldi Stores
Limited, following the completion of the agreement for lease in October 2022.
The lease provides an annual rent of £270,166 per annum,
reflecting £13 per sq ft, to be reviewed every five years based on
compounded annual RPI, collared and capped at 1% and 3% respectively. The
lease provides Aldi with a 12-month rent-free incentive and a tenant break
option at year 15.
Barnstaple Retail Park, Barnstaple (retail warehousing) - the Company has
completed an eight-year reversionary lease with B&Q from 29 September 2024
at the current passing rent of £348,000 per annum (£9.75 per sq ft). In
return, the tenant has been granted a six-month rent-free period.
40 Queens Square, Bristol (office) - after protracted negotiations, the
Company has settled three outstanding rent reviews at the building dating back
to 2021 and 2022 with the following tenants: Leonard Curtis Recovery Limited,
Chapman Taylor LLP, and Turley Associates. The outcome of the reviews will see
the annual rent from the three tenant's increase from £213,812 per annum to
£281,550, reflecting a 32% uplift.
Arrow Point Retail Park, Shrewsbury (retail warehousing) - the Company has
completed a three-year lease to Universal Consumer Products Limited at a rent
of £110,000 per annum (£8 per sq ft). The previous passing rent was £95,844
(£7 per sq ft). No lease incentive was given.
Oak Park, Droitwich (industrial) - the Company has completed a new three-year
ex-Act lease on units 266-270 to Roger Dyson at a stepped rent starting at
£123,000 per annum in year one, £135,000 per annum in year two and £148,000
per annum in year three. There is a mutual break option on the expiry of the
second year. The tenant was granted a one-month rent free period.
The Company has also completed a new three-year ex-Act lease to Adam Hewitt
Ltd at units 263 and 265 at a rent of £70,000 per annum. There is a tenant
break option after the first year. No rent incentive was given.
Diamond Business Park, Wakefield (industrial) - in April, the Company
completed the settlement of an open market rent review with Tasca Tankers,
dating back to June 2022. The review will see the rent received increase
from £209,000 to £229,900 per annum, reflecting an uplift of 9.6%.
Northgate House, Bath (retail) - in June, the Manager completed a new
five-year ex-Act lease to Dimension Vintage limited at a rent of £40,000 per
annum. Four months' rent-free has been granted.
Commercial Road, Portsmouth (retail) - in June, a new 10-year lease was
completed to Specsavers at a rent of £60,000 per annum in vacant
accommodation previously let to River Island. An incentive of nine months'
rent free was granted to the tenant, along with a £40,000 capital
contribution to improvement works. There will be a tenant only break option
after six years on six months' notice.
Sarus Court, Runcorn (industrial) - The Manager has completed three lease
renewals with existing tenant CJ Services for their leases at units 1001, 1002
and 1003. The total rent is £276,283 per annum reflecting £6.50 per sq ft,
an increase from the previous average passing rent of £5.25 per sq ft.
Five-year ex-Act leases were granted, with incentives equal to six months'
rent-free.
Glossary of Commonly Used Terms
For assistance with the interpretation of any industry specific terms used in
the Company's communications, please refer to our glossary of commonly used
terms which can be found on the Company's website in the following location:
https://www.aewukreit.com/investors/glossary
AEW UK
Laura Elkin laura.elkin@eu.aew.com (mailto:laura.elkin@eu.aew.com)
+44(0) 20 7016 4869
Henry Butt henry.butt@eu.aew.com (mailto:henry.butt@eu.aew.com)
+44(0) 20 7016 4869
Nicki Gladstone nicki.gladstone-ext@eu.aew.com (mailto:nicki.gladstone-ext@eu.aew.com)
+44(0) 7711 401 021
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
TB Cardew AEW@tbcardew.com (mailto:AEW@tbcardew.com)
Ed Orlebar +44 (0) 7738 724 630
Tania Wild +44 (0) 7425 536 903
Liberum Capital
Darren Vickers / Owen Matthews +44 (0) 20 3100 2000
Notes to Editors
About AEW UK REIT
AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total return to
shareholders by investing predominantly in smaller commercial properties
(typically less than £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 Financial Conduct Authority
and admitted to trading on the Main Market of the London Stock Exchange on 12
May 2015. www.aewukreit.com (http://www.aewukreit.com/)
LEI: 21380073LDXHV2LP5K50
About AEW
AEW is one of the world's largest real estate asset managers,
with €84.3bn of assets under management as at 31 March 2023. AEW has over
880 employees, with its main offices located
in Boston, London, Paris and Hong Kong and offers a wide range of real
estate investment products including comingled funds, separate accounts and
securities mandates across the full spectrum of investment strategies. AEW
represents the real estate asset management platform of Natixis Investment
Managers, one of the largest asset managers in the world.
As at 31 March 2023, AEW managed €39.2bn of real estate assets
in Europe on behalf of a number of funds and separate accounts. AEW has over
480 employees based in 12 locations across Europe and has a long track
record of successfully implementing core, value-add and opportunistic
investment strategies on behalf of its clients. In the last five years, AEW
has invested and divested a total volume of over €22bn of real estate
across European markets.
www.aew.com (http://www.aew.com)
AEW UK Investment Management LLP is the Investment Manager. AEW is a group
of companies which includes AEW Europe SA and its subsidiaries as well as
affiliated company AEW Capital Management, L.P. in North America and its
subsidiaries. AEW Europe SA, together with its subsidiaries AEW UK Investment
Management LLP, AEW S.à.r.l., AEW Invest GmbH and AEW SAS, is a European real
estate investment manager with headquarter offices in Paris and London. AEW
Europe SA and AEW Capital Management, L.P. are owned by Natixis Investment
Managers. Natixis Investment Managers is an international asset management
group based in Paris, France, that is principally owned by Natixis, a French
investment banking and financial services firm. Natixis is principally owned
by BPCE, France's second largest banking group.
Disclaimer
This communication cannot be relied upon as the basis on which to make a
decision to invest in AEWU. This communication does not constitute an
invitation or inducement to subscribe to any particular investment. Issued by
AEW UK Investment Management LLP, 33 Jermyn Street, London, SW1Y 6DN.
Company number : OC367686 England. Authorised and regulated by the Financial
Conduct Authority.
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