REG - AEW UK REIT PLC - NAV Update and Dividend Declaration
30/01/2025 07:00
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RNS Number : 1788V AEW UK REIT PLC 30 January 2025
30 January 2025
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, diversified portfolio of 32 UK commercial property assets,
announces its unaudited Net Asset Value ("NAV") at 31 December 2024 and
interim dividend for the three-month period ending 31 December 2024.
Highlights
· NAV of £174.30 million or 110.02 pence per share at 31
December 2024 (30 September 2024: £172.76 million or 109.05 pence per
share).
· NAV total return of 2.73% for the quarter (30 September 2024
quarter: 4.85%).
· 1.22% like-for-like valuation increase for the quarter (30
September 2024 quarter: 2.94% increase).
· EPRA earnings per share ("EPRA EPS") for the quarter of 2.35
pence (30 September 2024 quarter: 2.68 pence).
· Interim dividend of 2.00 pence per share for the three months
ended 31 December 2024, paid for 37 consecutive quarters and in line with the
targeted annual dividend of 8.00 pence per share, representing a dividend
yield of 7.9%.
· Loan to GAV ratio at the quarter end was 25.03% (30 September
2024: 25.04%). Significant headroom on all loan covenants.
· Company continues to benefit from a low fixed cost of debt of
2.959% until May 2027.
· Disposal of Units 1-11 of Central Six Retail Park, Coventry,
for £26,250,000, reflecting a net initial yield of 7.49% and a capital value
of £213 per sq. ft, representing a 60% premium to the purchase price.
Henry Butt, Assistant Portfolio Manager, AEW UK REIT, commented:
"We are pleased with the growth in NAV per share and the dividend being
covered by EPRA earnings for a third consecutive quarter, which continues to
evidence the earnings accretion produced by the Company's programme of ongoing
asset management initiatives through income generation and void cost
mitigation. Rental income has been buoyed by the billing of annual turnover
rent for Next in Bromley, and Poundland in Coventry, while the Company's
'bottom line' continues to benefit from a stabilised portfolio and tenant
base.
The part sale of Central Six Retail Park, Coventry, at a very healthy premium
of 60% to the purchase price, means the Company has capital to deploy on a
pipeline of attractive investment opportunities, a significant amount of which
is already under offer.
The Company has committed to pay its quarterly dividend of 2.00 pence per
share, which has now been paid for 37 consecutive quarters."
Valuation Movement
As at 31 December 2024, the Company owned investment properties with a total
fair value of £191.96 million, as assessed by the Company's independent
valuer, Knight Frank. The like-for-like valuation increase for the quarter
of £2.31 million (1.22%) is broken down as follows by sector:
Sector Valuation 31 December 2024 Like-for-like valuation movement for the quarter
£ million % of portfolio £ million %
Industrial 77.35 40.30 1.52 2.01
High Street Retail 32.65 17.01 0.84 2.62
Other 28.90 15.05 (0.18) (0.60)
Retail Warehouses 28.01 14.59 0.33 1.17
Office 25.05 13.05 (0.20) (0.79)
Total 191.96 100.00 2.31 1.22*
* 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 1.22% for
the quarter, similar to the valuation gains of the previous three quarters.
This consistent valuation growth continues to reflect the effectiveness of the
Company's active asset management strategy in driving income and capital
growth within the portfolio.
The like-for-like increase in the valuation was chiefly driven by ERV growth
and positive news on lease events at several of the Company's industrial
assets. The values of the Company's industrial assets, which account for 40%
of the portfolio, were up 2.01% for the quarter, having delivered a similar
increase of 2.19% in the previous quarter. ERV growth further signifies the
reversionary potential of the portfolio, with the Company's industrial assets'
net initial yield and reversionary yield being 7.23% and 8.77% respectively.
The sector also experienced some mild yield compression in response to a
busier quarter of UK investment activity in comparison to the summer months,
with investment volumes hitting their highest level since the third quarter of
2022.
The Company experienced valuation gains in retail, with the high-street retail
sector up 2.62% on a like-for-like basis, mainly driven by positive sentiment
towards the asset management outlook for two high-street retail assets, being
Northgate House, Bath, and 15-33 Union Street, Bristol. The retail warehousing
assets had a quieter period compared to the previous two quarters, with a
valuation increase of 1.17%. However, during the period, the Company
successfully disposed of its largest retail warehouse in Coventry for a
substantial 60% premium to the purchase price.*
Despite the more positive outlook on interest rates reported in the previous
quarter, with UK gilt yields recently being at their highest level since 2008,
we believe the disposal of Coventry could prove to be timely, with the
following months being an opportune time to have circa £25 million of cash to
deploy on new acquisitions, taking advantage of softening pricing from a
stalling investment market as indicated by our pipeline.
The office sector had another quiet quarter. The refurbishment of vacant space
at the Company's office in Bristol is currently underway, with the
refurbishment at Cambridge House, Bath, due to commence shortly. Until these
projects are nearing practical completion, and marketing fully underway, their
valuations are likely to remain muted.
The Company won the 'Property' category at the Investment Company of the Year
awards for the second consecutive year, adding to the Citywire and MSCI awards
won earlier in the financial year. This award, voted on by an independent
panel of investment industry experts, is testament to the consistent
performance delivered by the Company.
* The freehold of Units 1-11 Central Six Retail Park, Coventry, were sold.
The long leasehold of Units 12, A(1), A(2) and B, known as the 'triangle
site', remain in the Company's ownership. Please refer to the Investment
Update for full details.
Net Asset Value
The Company's unaudited NAV at 31 December 2024 was £174.30 million,
or 110.02 pence per share. This reflects an increase of 0.89% compared with
the NAV per share at 30 September 2024. The Company's NAV total return, which
includes the interim dividend of 2.00 pence per share for the period from 1
July 2024 to 30 September 2024, was 2.73% for the three-month period ended 31
December 2024.
Pence per share £ million
NAV at 1 October 2024 109.05 172.76
Loss on sale of investments (1.35) (2.12)
Capital expenditure (0.21) (0.34)
Valuation change in property portfolio 2.18 3.45
Income earned for the period 3.33 5.27
Expenses and net finance costs for the period (0.98) (1.55)
Interim dividend paid (2.00) (3.17)
NAV at 31 December 2024 110.02 174.30
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation at 31 December 2024 and income for the period, but does
not include a provision for the interim dividend declared for the three-month
period to 31 December 2024.
Share Price and Discount
The closing ordinary share price at 31 December 2024 was 100.4p, an increase
of 2.03% compared with the share price of 98.4p at 30 September 2024. The
closing share price represents a discount to the NAV per share of 8.75%. The
Company's share price total return, which includes the interim dividend
of 2.00 pence per share for the period from 1 July 2024 to 30 September
2024, was 4.07% for the three-month period ended 31 December 2024.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 October 2024 to 31 December 2024. The dividend payment will
be made on 7 March 2025 to shareholders on the register as at 7 February
2025. The ex-dividend date will be 6 February 2025. 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 14 February 2025.
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 37 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. 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 158,424,746 Ordinary Shares in issue.
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 December 2024, producing a Loan to GAV ratio of
25.03%.
Headroom on the debt facility's 60% loan to value ("LTV") covenant continues
to be conservative. For those properties secured under the loan, a 40.81% fall
in valuation would be required before the LTV covenant were to be breached.
Investment Update
Units 1-11, Central Six Retail Park, Coventry (retail warehouse) - On 13
December 2024, the Company completed the sale of Units 1-11 of Central Six
Retail Park for £26,250,000, reflecting a net initial yield of 7.49% and a
capital value of £213 per sq. ft. This sale price represents a 60% premium
to the purchase price of the entire property which was acquired in November
2021 for £16,411,000 (£110 per sq. ft.), and a 6.7% premium to the 30
June 2024 valuation, being the latest valuation date prior to agreeing Heads
of Terms. Excluding the remaining part of the retail park (Units 12, A(1),
A(2) and B), known as the 'triangle site', which the Company will retain, the
sale delivered an IRR in excess of 16%.
The sale price will be paid in two tranches; the first instalment
of £25,900,000 was paid on sale completion. The second instalment,
amounting to £350,000, which is currently held in escrow, will be paid on
the completion of a new lease of Unit 10 to Superdrug Stores Plc, where an
agreement for lease has already exchanged (see Asset Management Update below).
The purchaser is also contracted to pay a third instalment of £500,000 to
the Company, should it complete a letting to an electric vehicle charging
operator within the first 18 months of ownership.
Following the completion of three new lettings to Aldi Stores Limited, Iceland
Foods Limited and Whitecross Dental Care Limited, which added £668,000 of
annual rental income, the property is now fully let, having had circa 24%
vacancy (% of ERV) at the time of acquisition. These three lettings, coupled
with lease renewals and regears to Next Group plc, Boots UK Ltd and
TJX UK (TK Maxx), have maximised both income and the value of the asset.
In June 2023, the Company completed the acquisition of the freehold interest
of Units 1-11, which had previously been held by way of a restrictive long
leasehold title from Friargate JV Projects Limited (Friargate). The remainder,
known as the 'triangle site', still held on a long leasehold, can be acquired
by Friargate at any time for a five-year period from July 2025. This, as well
as the completion of the occupational transactions mentioned above, prompted
the decision to market the asset for sale. Furthermore, having increased the
net operating income by circa 54% since acquisition, the property is no longer
considered reversionary, with two of the ten units, where lease renewals are
anticipated in 2025, being considered 'over-rented' with a forecast
reversionary yield of 6.88%.
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:
Units 1-11, Central Six Retail Park, Coventry (retail warehouse) - On
9 December 2024, the Company simultaneously exchanged an agreement for
surrender with TUI UK Retail Limited (TUI) and an agreement for lease with
Superdrug Stores Plc (Superdrug) for Unit 10. The agreement for surrender with
TUI is conditional on the tenant carrying out works to Unit 10 in line with a
pre-agreed specification in preparation of the new letting to Superdrug. The
agreement for lease with Superdrug is conditional on the works being carried
out by TUI, vacant possession and a capital contribution of £31,000 by the
Company. Once the conditions have been satisfied, Superdrug will enter into a
new 10-year lease, with a tenant only break option in year five, at a rent
of £158,760 per annum (£18 per sq. ft.). The letting includes a 12-month
rent-free incentive.
Following a protracted exchange of correspondence with Poundland, three years
of turnover rent has been billed for 2022, 2023 and 2024, equating
to £57,862 in total.
Units 12, A(1), A(2) and B, (known as the 'triangle site'), Central Six Retail
Park, Coventry (retail warehouse) - On 17 December, the Company completed a
new lease with TUI UK Retail Limited (TUI) for part of Unit A(2) on a
five-year term, with a tenant only break option at the end of year three, at a
rent of £75,000 per annum (£43.55 per sq. ft.). The letting includes a
six-month rent-free incentive effective from 1 July 2025 and a tenant break
option penalty equivalent to 12 months' rent. The Company provided a £174,000
capital contribution, £44,000 for strip-out works of the former American Golf
unit and a further £130,000 for subdivision works, creating two units.
Cambridge House, Bath (mixed-use) - The Company has exchanged an agreement for
lease with premium gym operator, Marchon Bath Ltd (Marchon). The tenant will
enter a new straight 10-year lease paying a rent of £70,000 per annum subject
to the completion of circa £90,000 landlord strip-out works (including
professional fees). There will be a five-yearly upwards only rent review to
the higher of open market or RPI (2% collar and 4% cap). The tenant has been
granted a 12-month rent free period. This will be Marchon's fourth location,
including White City, Stratford and Harpenden.
Northgate House, Bath (high-street retail) - Having exercised their tenant
break option, bringing their lease to an end on 25 December 2024, Gaff Trading
Co. Ltd have taken a new 10-year lease with a tenant break option at the end
of year five at a rent of £39,000 per annum. There will be an upwards only
open market rent review on the fifth anniversary. No tenant incentive was
given.
Union Street, Bristol (high-street retail) - The Company completed a new
letting of 31 Union Street to RS Food Services Ltd, trading as Subway. The
tenant has taken a 12-year lease with a tenant break option at the end of year
five, at a rent of £32,500 per annum, which is in line with ERV. Four months
rent-free has been granted as an incentive, with a further four months should
the tenant not exercise their break option.
Westlands Distribution Park, Weston-super-Mare (industrial) - The Company
settled North Somerset District Council's outstanding April 2024 open market
rent review at £110,000 per annum (£3.61 per sq. ft.), representing a 14%
increase on the previous passing rent of £96,423 per annum (£3.15 per sq.
ft.) which was agreed in April 2022.
The Company also settled Container Team Limited's outstanding June 2024 open
market rent review at £99,000 per annum, representing a 90% increase on the
previous passing rent of £52,000 per annum. The increase in rent reflects the
current strength of the UK's IOS (industrial outdoor storage) occupational
market.
Circuit Nightclub, Cardiff (leisure) - The Company completed an assignment of
CC Stim UK Tradeco 5 Ltd's (in administration) lease to newco, Neos 13 Ltd. As
a condition of the assignment, there was a simultaneous variation of the
lease, revising the rent from £300,000 per annum to a base rent of £175,000
per annum, together with an additional 'top-up' rent equivalent to 10% of
turnover where turnover exceeds £1.75m per annum, with an aggregate of the
combined base rent and turnover rent to be capped at £300,000 per annum. The
variation also provides a mutual break clause allowing either party to
exercise a break on 1 February or 1 August in any year after August 2026 upon
giving no less than 12 months prior written notice.
Glossary of Commonly Used Terms
Industry specific terms used in the Company's communications are in the
glossary of commonly used terms which can be found on the Company's website:
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)
AEW Investor Relations investor_relations@eu.aew.com
Company Secretary
MUFG Corporate Governance Limited aewu.cosec@cm.mpms.mufg.com
Cardew Group AEW@cardewgroup.com (mailto:AEW@cardewgroup.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 2222
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 €77.4bn
of assets under management as at 30 September 2024. AEW has over 860
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 30 September 2024, AEW managed €37.1bn of real estate assets in Europe
on behalf of a number of strategies and separate accounts. AEW has over 510
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 €19.5bn 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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