REG - AEW UK REIT PLC - NAV Update and Dividend Declaration
14/05/2024 07:00
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RNS Number : 2516O AEW UK REIT PLC 14 May 2024
14 May 2024
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 31 March 2024 and interim dividend for
the three-month period ending 31 March 2024.
Highlights
· NAV of £162.75 million or 102.73 pence per share as at 31 March
2024 (31 December 2023: £164.02 million or 103.53 pence per share).
· NAV total return of 1.16% for the quarter (31 December 2023
quarter: -0.44%).
· 0.41% like-for-like valuation increase for the quarter (31
December 2023 quarter: 1.59% decrease).
· EPRA earnings per share ("EPRA EPS") for the quarter of 1.88
pence (31 December 2023 quarter: 1.83 pence).
· Interim dividend of 2.00 pence per share for the three months
ended 31 March 2024, paid for 34 consecutive quarters and in line with the
targeted annual dividend of 8.00 pence per share.
· Loan to GAV ratio at the quarter end was 26.21% (31 December
2023: 26.19%). 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 Pricebusters Building, Blackpool, for £2.20 million,
equivalent to the previous quarter's valuation.
· £535,000 per annum of rental income created from three new
lettings at Central Six Retail Park, Coventry.
Henry Butt, Assistant Portfolio Manager, AEW UK REIT, commented:
"We are pleased to report higher earnings this quarter, buoyed by the
invoicing of Sports Direct's annual turnover rent at Central Six Retail Park,
Coventry. After adjusting for this, earnings are consistent with prior
quarters, demonstrating that the Company's programme of ongoing asset
management initiatives continue to sustain income streams and mitigate void
costs. Earnings have also been bolstered by numerous rent reviews settled
during the quarter, several new lettings and a lease regear, most notably at
the Company's retail warehousing asset in Coventry.
The Company remains cognisant of the fragile economic backdrop and its
cumulative effect on occupational markets and, as a result, retains a cautious
cash holding, amounting to £11.40 million at quarter end, much of which is
held in an interest-bearing bank account. These funds, as well as sales
proceeds from the disposal of the Pricebusters Building, have been committed
to future asset management initiatives, which continue to progress well and
are advancing their related property valuations. In accordance with the
Company's strategy of delivering total return through active asset management,
these initiatives are expected to drive further capital and income growth in
several of the portfolio's assets.
The Company has committed to pay its dividend of 2.00 pence per share this
quarter, which we have now paid for 34 consecutive quarters. This has been
largely funded by EPRA earnings, supplemented when necessary by profit
realised on the NAV accretive sale of assets in prior quarters."
Valuation movement
As at 31 March 2024, the Company owned investment properties with a total fair
value of £210.69 million, as assessed by the Company's independent valuer,
Knight Frank. The like-for-like valuation increase for the quarter of £0.85
million (0.41%) is broken down as follows by sector:
Sector Valuation 31 March 2024 Like-for-like valuation movement for the quarter
£ million % of portfolio £ million %
Industrial 78.72 37.36 1.20 1.55
Retail Warehouses 46.80 22.21 0.85 1.85
High Street Retail 31.70 15.05 0.05 0.16
Other 28.42 13.49 (0.70) (2.40)
Office 25.05 11.89 (0.55) (2.15)
Total 210.69 100.00 0.85 0.41*
* This is the overall weighted average like-for-like valuation increase of the
portfolio.
Portfolio Manager's Review
The Company's portfolio saw a like-for-like valuation increase of 0.41% during
the quarter, in contrast to a -0.61% decline over the same period for the UK
Quarterly MSCI index. Increases in valuation were principally driven by asset
management gains at Central Six Retail Park, Coventry, and ERV growth for
several of the Company's industrial assets. ERV growth has predominantly been
a by-product of a continued lack of affordable competing industrial space for
businesses such as our existing tenants.
Quarterly valuation decline in some of the portfolio's assets has primarily
been driven by shortening lease lengths and some tenants vacating. Given the
Company's investment philosophy of adding value through active asset
management, shortening lease lengths and vacancies present opportunities, as
lease renewals and new lettings are a means of driving income and
adding value. This is particularly relevant for our office holdings in Bath
and Bristol where yield softening because of negative sentiment towards the
office sector has stabilised somewhat. We continue to have conviction in these
two assets, given they are strongly positioned in terms of location and
specification for their respective office markets. The Company's nightclub
holding in Cardiff saw a more severe valuation decline this quarter following
the tenant, CC STIM UK Tradeco 5 Ltd, trading as Circuit, entering
administration on 1 February. The tenant is still in occupation, with the
administrator paying the same level of rent, while negotiations for an
assignment of the lease to a new tenant progress.
Asset management continues to drive earnings performance, with the Company
completing several transactions during the quarter and immediately post
quarter-end, most notably at Central Six Retail Park, Coventry. The Company
has completed leases with three new tenants, namely Whitecross Dental Care
Limited, trading as MyDentist, Iceland Foods Limited, trading as The Food
Warehouse and, post-quarter end, Salvation Army Trading Company Ltd. These
three lettings provide a combined £535,000 of new rental income per annum.
The Company has also concluded a lease regear with existing tenant TJX UK,
trading as TK Maxx, providing a straight ten-year term at
(https://groupebpce.sharepoint.com/sites/UKAML/Shared%20Documents/General/Disposals/Core%20Plus%20Fund%20-%20Chaffinch%20Retail%20Park,%20Sunderland/AML%20(AEW)%20Form/AML%20CFT%20RISK%20ASSESSMENT%20TEMPLATE%20(002).xlsx?web=1)
a rent of £234,527 per annum.
We are pleased to have sold our retail holding, The Pricebusters Building,
Blackpool, for £2.20 million, a price equal to the previous quarter's
valuation. The sales proceeds have been allocated to future asset management
initiatives, which include three of the portfolio's void units, where
prospective lettings at the former Wilko at Union Street, Bristol; the former
Mecca Bingo at The Railway Centre, Dewsbury; and the former Sports Direct at
Barnstaple Retail Park continue to progress. The re-letting of these units is
expected to complete during the second half of this calendar year, further
improving income streams and mitigating the incurrence of void costs, albeit
with associated tenant incentives suppressing earnings potential over the
short term.
Net Asset Value
The Company's unaudited NAV at 31 March 2024 was £162.75 million, or 102.73
pence per share. This reflects a decrease of 0.77% compared with the NAV per
share at 31 December 2023. The Company's NAV total return, which includes the
interim dividend of 2.00 pence per share for the period from 1 October 2023
to 31 December 2023, was 1.16% for the three-month period ended 31 March 2024.
Pence per share £ million
NAV at 1 January 2024 103.53 164.02
Portfolio acquisition and disposal costs (0.04) (0.06)
Loss on sale of investments (0.07) (0.11)
Capital expenditure (0.29) (0.47)
Valuation change in property portfolio 0.18 0.29
Income earned for the period 3.30 5.22
Expenses and net finance costs for the period (1.42) (2.25)
Tax provision (0.46) (0.72)
Interim dividend paid (2.00) (3.17)
NAV at 31 March 2024 102.73 162.75
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation at 31 March 2024 and income for the period, but does not
include a provision for the interim dividend declared for the three-month
period to 31 March 2024.
Tax Provision
During the quarter, the Company identified that certain historic
dividends had been declared as ordinary dividends when they should have
been declared as Property Income Distributions ("PIDs"). A provision for
notional withholding tax has therefore been included in shareholder reserves
for the losses it may suffer as a result which has reduced the NAV of the
Company by £0.72 million (0.46 pps). The Investment Manager has (without
admission of liability) agreed to fully indemnify the Company in return for an
assignment of any claims the Company has against other parties. However, the
benefit of the indemnity is not reflected in this quarter's net asset value,
as it was entered into following the quarter-end and, as such, will be
reflected in next quarter's net asset value. Due to the Investment Manager
agreeing to indemnify the Company, the Company's NAV will not ultimately be
impacted. The Board wishes to thank the Investment Manager for addressing
this matter satisfactorily on the Company's and shareholders' behalf.
Share price and Discount
The closing ordinary share price at 31 March 2024 was 86.0p, a decrease of
14.85% compared with the share price of 101.0p at 31 December 2023. The
closing share price represents a discount to the NAV per share of 16.29%. The
Company's share price total return, which includes the interim dividend
of 2.00 pence per share for the period from 1 October 2023 to 31 December
2023, was -12.87% for the three-month period ended 31 March 2024.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 January 2024 to 31 March 2024. The dividend payment will be
made on 14 June 2024 to shareholders on the register as at 24 May 2024. The
ex-dividend date will be 23 May 2024. 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 24 May 2024.
The dividend of 2.00 pence per share will be designated 2.00 pence per
share as an interim property income distribution ("PID").
The Company has now paid a 2.00 pence quarterly dividend for 34 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 31 March 2024, producing a Loan to GAV ratio of
26.21%.
Headroom on the debt facility's loan to value ("LTV") covenant continues to be
conservative. For those properties secured under the loan, a 46.69% fall in
valuation would be required before the LTV covenant were to be breached.
Investment Update
During the quarter the Company completed the following disposal:
Pricebusters Building, Blackpool (retail) - On 28 March 2024, the Company
completed the sale of its holding on Bank Hey Street in Blackpool for £2.20
million. The decision to sell the property, which was sold at the previous
quarter's valuation, followed the service of Sports Direct's break notice,
creating approximately 70,000 sq. ft. of vacant space within the building's
upper parts from the beginning of April. In addition, the building's condition
and unconventional layout became challenging for reletting or alternative
uses, especially without significant capital expenditure being incurred. The
carrying value of the asset had been written down in previous quarters.
No purchases were made during the quarter.
Asset Management Update
The Company completed the following asset management transactions during the
quarter:
Northgate House, Bath (retail) - Having held over since June 2022, the Company
completed Oska Ludlow Limited's lease renewal on a 10-year term with a tenant
break in year five. The rent agreed is £40,000 per annum. The renewal
included a three-month rent-free incentive.
Cambridge House, Bath (office) - Post quarter end, the Company completed a
lease with new tenant, ITX UK Ltd, who will utilise the space for retail
storage to support the main Zara store within the nearby Southgate Shopping
Centre. The tenant entered a new lease expiring in August 2038, with tenant
only break options on the expiry of years two, five and eight, at a rent of
£60,000 per annum (£16.22 per sq. ft). The letting includes a six-month
rent-free incentive.
Westlands Distribution Park, Weston-Super-Mare (industrial) - The Company
settled Ford Fuels Ltd's rent review at £27,500 per annum (£46,600 per
acre), representing an increase of £13,600 per annum (circa 41%).
London East Leisure Park, Dagenham (leisure) - The Company completed a rent
review with The Original Bowling Company Limited, trading as Hollywood Bowl,
with effect from September 2022 at £287,922 per annum (£9.38 per sq. ft.),
representing an increase of £27,142 per annum (circa 10%).
Central Six Retail Park, Coventry (retail warehousing) - The Company completed
a lease with new tenant, Whitecross Dental Care Limited, trading as MyDentist,
for vacant Unit 4. The tenant entered a 15-year lease, with a 10-year tenant
break option, at a rent of £145,000 per annum (£14.29 per sq. ft.), to be
reviewed every five years based on open market value (upward only).
Having exchanged on an agreement for lease in December 2022, the Company
subsequently completed the lease with new tenant, Iceland Foods Limited,
trading as The Food Warehouse, for Units 6a & 6b (now combined as one
unit). The tenant entered a new 11-year lease at a rent of £250,000 per
annum, reflecting £16.51 per sq. ft. The letting includes a three-month rent
free period and an £812,500 cash incentive.
The Company completed a lease regear with tenant, TJX UK, trading as TK Maxx,
for Unit 1. The tenant entered a new lease, providing a term certain until
March 2034, at a rent of £234,527 per annum (£16.37 per sq. ft.), which is
to be reviewed in September 2029 at open market value, capped at £269,706 per
annum. The renewal includes a 12-month rent free incentive, effective from
September 2024.
Post quarter end, the Company completed a lease with new tenant, Salvation
Army Trading Company Ltd, for Unit 12. The tenant entered a new lease expiring
in November 2032, with a tenant only break option in year five, at a rent of
£140,000 per annum (£13.97 per sq. ft.). The letting includes a nine-month
rent-free incentive.
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
(https://www.aewukreit.com/investors/glossary)
AEW UK
Henry Butt henry.butt@eu.aew.com (mailto:henry.butt@eu.aew.com)
+44(0) 20 7016 4869
AEW Investor Relations investor_relations@eu.aew.com
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
AEW@tbcardew.com (mailto:AEW@tbcardew.com)
TB Cardew
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 €79.2bn of assets under management as at 31 December 2023. AEW has
over 910 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 December 2023, AEW managed €37.0bn of real estate assets
in Europe on behalf of a number of funds and separate accounts. AEW has over
515 employees based in 11 offices 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 €19.9bn 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, 8 Bishopsgate, London, EC2N 4BQ.
Company number: OC367686 England. Authorised and regulated by the Financial
Conduct Authority.
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