REG - AEW UK REIT PLC - NAV Update and Dividend Declaration
25/07/2024 07:00
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RNS Number : 6991X AEW UK REIT PLC 25 July 2024
25 July 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 32 UK commercial property assets, announces its
unaudited Net Asset Value ("NAV") as at 30 June 2024 and interim dividend for
the three-month period ending 30 June 2024.
Highlights
· NAV of £167.79 million or 105.91 pence per share as at 30
June 2024 (31 March 2024: £162.75 million or 102.73 pence per share).
· NAV total return of 5.04% for the quarter (31 March 2024
quarter: 1.16%).
· 2.41% like-for-like valuation increase for the quarter (31 March
2024 quarter: 0.41% increase).
· EPRA earnings per share ("EPRA EPS") for the quarter of 2.26
pence (31 March 2024 quarter: 1.88 pence).
· Interim dividend of 2.00 pence per share for the three months
ended 30 June 2024, paid for 35 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 25.66% (31 March 2024:
26.21%). 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 Oak Park, Droitwich, for £6.30 million, reflecting
a 33% premium to the 31 March 2024 valuation.
· New letting and RPI rent review increasing annual contracted rent
by £220,462.
Henry Butt, AEW UK REIT, commented:
"We are pleased to report higher earnings for a second consecutive quarter and
a return to growth in NAV per share, as the Company's programme of ongoing
asset management initiatives continue to generate income growth and mitigate
void costs. Since the June 2023 quarter, quarterly earnings have grown from
1.75 to 1.92 pence on an underlying basis, illustrating the Company's progress
towards full dividend cover and evidencing the quality and sustainability of
the portfolio. The Company has committed to pay its quarterly dividend of 2.00
pence per share, which has been fully funded by EPRA earnings this quarter and
has now been paid for 35 consecutive quarters.
Headline quarterly earnings have been boosted by the invoicing of The Original
Bowling Company Limited's (trading as Hollywood Bowl) annual turnover rent at
London East Leisure Park, Dagenham, and the reversal of previously recognised
void service charge write-offs at Union Street, Bristol. Notwithstanding the
earnings enhancement caused by these events, underlying earnings are still
higher than the previous quarter. Notable underlying earnings-accretive events
completed in the quarter were the letting to Salvation Army at Central Six
Retail Park, Coventry, and the settlement of Walstead Peterborough Limited's
three-yearly RPI rent review at Storey's Bar Road, Peterborough, which have
collectively increased the portfolio's annual contracted rent by £220,462 per
annum.
The Company continues to monitor macroeconomic headwinds and their cumulative
effect on occupational performance. As a result, the Company continues to
retain ample cash, amounting to £9.23 million at quarter end, much of which
is held in an interest-bearing bank account. These funds, together with sales
proceeds from the post quarter-end disposal of Oak Park, Droitwich, have been
committed to future asset management initiatives. These continue to progress
well and are advancing their related property valuations, as is evidenced by
the current quarter's 2.41% like-for-like valuation increase. 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."
Valuation Movement
As at 30 June 2024, the Company owned investment properties with a total fair
value of £215.77 million, as assessed by the Company's independent valuer,
Knight Frank. The like-for-like valuation increase for the quarter of £5.08
million (2.41%) is broken down as follows by sector:
Sector Valuation 30 June 2024 Like-for-like valuation movement for the quarter
£ million % of portfolio £ million %
Industrial 80.50 37.31 1.78 2.26
Retail Warehouses 49.30 22.85 2.50 5.34
High Street Retail 31.70 14.69 - -
Other 29.07 13.47 0.65 2.29
Office 25.20 11.68 0.15 0.60
Total 215.77 100.00 5.08 2.41*
* 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 2.41% for
the quarter, building on the 0.41% increase recorded for the previous quarter.
The valuation increase was partly driven by asset management gains at the
Company's retail warehouse parks in Coventry, Dewsbury and Barnstaple, where
the sector's like-for-like valuation was up 5.34%. This was further amplified
by the exchange of an unconditional sale of the Company's multi-let industrial
holding in Droitwich, at a price circa 33% ahead of the 31 March 2024
valuation.
Overall, the Company's valuations have been relatively flat, with yield
softening no longer being a generic theme of the UK commercial property
market. With the General Election concluded, and a rate cut anticipated later
this year, we hope for continued valuation improvements going forward, built
on what has been a successful period of asset management for the Company. The
sale price achieved for Droitwich is encouraging for the Company's other
industrial holdings, where the average book value of £43 per sq. ft. as at 30
June 2024 is relatively low, in comparison to the anticipated replacement cost
of approximately £100 per sq. ft. (excluding the price of the land).
Having acquired Central Six Retail Park, Coventry, with circa 24% vacancy in
November 2021, the property is now fully let, with the final letting to
Salvation Army completed this quarter. Since acquisition, the asset's annual
contracted rent has been grown by circa £478,000 per annum. This is the
product of an extended period of active asset management, which has also
resulted in a further 9.58% valuation increase this quarter. Other asset
management initiatives in the Company's retail warehousing holdings continue
to advance well, with the reletting of the former Sports Direct unit at
Barnstaple progressing and exchanging on a new 25-year agreement for lease to
Tenpin Limited at The Railway Centre, Dewsbury. The billing of Hollywood
Bowl's turnover rent at London East leisure park is testament to the current
popularity of bowling and the corresponding attractiveness of bowling
operators as tenants, with bowling being the market leader for experiential
leisure spend in the post-Covid era. This activity continues to highlight the
significance of ongoing asset management in bolstering the Company's earnings
performance.
Although the high street retail and office sectors have had a quieter quarter,
we continue to progress asset management initiatives. The reletting of the
former Wilko's at Union Street, Bristol, continues to advance, with the space
being subdivided for two incoming leisure tenants. At the Company's office
holding on Queens Square, Bristol, the refurbishment of the reception and
former space leased by Ramboll is due to commence, with the intention of
increasing rents further than reported in previous quarters.
Net Asset Value
The Company's unaudited NAV at 30 June 2024 was £167.79 million, or 105.91
pence per share. This reflects an increase of 3.10% compared with the NAV per
share at 31 March 2024. The Company's NAV total return, which includes the
interim dividend of 2.00 pence per share for the period from 1 January 2024
to 31 March 2024, was 5.04% for the three-month period ended 30 June 2024.
Pence per share £ million
NAV at 1 April 2024 102.73 162.75
Capital expenditure (0.17) (0.28)
Valuation change in property portfolio 3.08 4.90
Income earned for the period 3.30 5.22
Expenses and net finance costs for the period (1.03) (1.63)
Interim dividend paid (2.00) (3.17)
NAV at 30 June 2024 105.91 167.79
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation at 30 June 2024 and income for the period, but does not
include a provision for the interim dividend declared for the three-month
period to 30 June 2024.
Tax Provision Update
As was detailed in the previous NAV update, 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 was therefore included
in shareholder reserves as at 31 March 2024. The Investment Manager has
(without admission of liability) agreed to fully indemnify the Company. It was
detailed in the previous NAV update that the benefit of the indemnity would be
reflected in this quarter's net asset value, however, it is now expected that
the indemnity will be recognised in a subsequent quarter when the amount
payable has been finalised.
Share Price and Discount
The closing ordinary share price at 30 June 2024 was 85.3p, a decrease of
0.81% compared with the share price of 86.0p at 31 March 2024. The closing
share price represents a discount to the NAV per share of 19.46%. The
Company's share price total return, which includes the interim dividend
of 2.00 pence per share for the period from 1 January 2024 to 31 March 2024,
was 1.75% for the three-month period ended 30 June 2024.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 April 2024 to 30 June 2024. The dividend payment will be
made on 23 August 2024 to shareholders on the register as at 2 August
2024. The ex-dividend date will be 1 August 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 9 August 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 35 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 financial 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 2024, producing a Loan to GAV ratio of
25.66%.
Headroom on the debt facility's loan to value ("LTV") covenant continues to be
conservative. For those properties secured under the loan, a 48.05% fall in
valuation would be required before the LTV covenant were to be breached.
Investment Update
Oak Park Industrial Estate, Droitwich (industrial) - On 21 May 2024, the
Company exchanged on the sale of Oak Park Industrial Estate for £6.30
million, reflecting a net initial yield of 7.95% and a capital value of £33
per sq. ft. Sale completion occurred post quarter-end on 24 July 2024. A sale
at this price represents a circa 33% premium to the 31 March 2024
valuation.
Following three new lettings, which added £272,000 of annual rental income,
the property is fully let. The business plan put in place for the property has
been completed, and the decision was made to sell the asset as we believe that
value over the medium term has been maximised.
The industrial estate was bought in December 2015 for £5,625,000, reflecting
a 10.4% net initial yield and a capital value of £30 per sq. ft. The estate
was originally single let to Egbert H Taylor & Co Limited (trading as
Taylor Bins), a strong tenant covenant with a WAULT to expiry of approximately
seven years. The tenant has since downsized on the estate.
No purchases were made by the Company during the quarter.
Asset Management Update
The Company completed and exchanged on the following asset management
transactions during the quarter:
Central Six Retail Park, Coventry (retail warehousing) - 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.
The Railway Centre, Dewsbury (retail warehouse) - The Company exchanged an
agreement for lease with leisure operator, Tenpin Limited, to take a new
25-year lease of the former Mecca Bingo space. The lease will be guaranteed
for the duration of the term by Tenpin Entertainment Limited, previously Ten
Entertainment Group plc who in February 2024 was acquired by US private equity
firm, Trive Capital, for £287 million. The lease has a tenant break option in
year 17.5, at a rent of £278,470 per annum (£10 per sq. ft.), with
five-yearly compounded CPI reviews (1% collar and 3% cap). A £500,000 capital
contribution was given as a tenant incentive, with the Company carrying out
£590,000 of landlord works (£305,000 net of the Mecca dilapidations
settlement). The agreement for lease is subject to planning, which was granted
in June, as well as a licencing agreement and landlord works, which are due to
complete early in the autumn when the lease should also complete. Tenpin
comprises 53 venues across the UK and provides customers with a diverse range
of activities including bowling, video arcades, escape rooms, karaoke, laser
tag, pool, table tennis, and soft play.
The Company also settled Jysk Limited's August 2021 open market rent review at
an increase of £5,428 per annum. The new rent of £70,000 per annum equates
to £6.50 per sq. ft.
Storey's Bar, Peterborough (industrial) - The Company settled Walstead
Peterborough Limited's three-yearly RPI rent review (2% collar and 4% cap) at
£724,861 per annum (£3.94 per sq. ft.), an £80,462 per annum (12.5%)
increase on the previous passing rent of £644,399 per annum (£3.50 per sq.
ft.). Despite this notable uplift, the single-let industrial unit is still
considered under-rented with an ERV greater than £4.00 per sq. ft.
London East Leisure Park, Dagenham (leisure) - Following a protracted exchange
of correspondence with The Original Bowling Company Limited (trading as
Hollywood Bowl), three years of turnover rent has been billed for 2021, 2022
and 2023 equating to £276,120 (£92,040 per annum).
Pearl House, Nottingham (retail) - The Company completed a lease renewal with
MSR Newsgroup, whose lease expired in December 2023. A five-year lease
extension was agreed with no incentive at £14,000 per annum, versus an ERV of
£12,250 per annum.
Westlands Distribution Park, Weston-Super-Mare (industrial) - The Company
completed a lease renewal with a gym operator, The Hench Fish Ltd, at Unit 3.
A three-year lease extension was agreed with mutual break options in the first
and second year. The new rent agreed is £15,500 per annum, an uplift of
£5,500 per annum (55%) on the previous passing rent of £10,000 per annum.
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
TB Cardew AEW@tbcardew.com (mailto:AEW@tbcardew.com)
Ed Orlebar +44 (0) 7738 724 630
Tania Wild +44 (0) 7425 536 903
Henry Crane +44 (0) 7918 207 157
Panmure Liberum
Darren Vickers +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 €78.8bn
of assets under management as at 31 March 2024. AEW has over 920 employees,
with its main offices located in Boston, London, Paris and Singapore 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 2024, AEW managed €37.2bn of real estate assets in Europe on
behalf of a number of strategies and separate accounts. AEW has over 515
employees based in 11 offices across Europe and has a long track record of
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 €18.5bn 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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