REG - AEW UK REIT PLC - Shareholder Update and Dividend Declaration
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RNS Number : 8923G AEW UK REIT PLC 01 May 2025
1 May 2025
AEW UK REIT plc
Shareholder Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) ("AEWU" or the "Company"), which directly owns a
value-focused, diversified portfolio of 33 UK commercial property assets,
announces its unaudited Net Asset Value ("NAV") as at 31 March 2025 and
interim dividend for the three-month period ending 31 March 2025.
Highlights
· NAV of £174.44 million or 110.11 pence per share at 31 March
2025 (31 December 2024: £174.30 million or 110.02 pence per share).
· NAV total return of 1.90% for the quarter (31 December 2024
quarter: 2.73%).
· 1.42% like-for-like valuation increase for the quarter (31
December 2024 quarter: 1.22% increase).
· EPRA earnings per share ("EPRA EPS") for the quarter of 1.71
pence (31 December 2024 quarter: 2.35 pence).
· Interim dividend of 2.00 pence per share for the three months
ended 31 March 2025, paid for 38 consecutive quarters and in line with the
targeted annual dividend of 8.00 pence per share, representing a dividend
yield of 7.9% as at quarter-end.
· Loan to GAV ratio at the quarter end was 25.01% (31 December
2024: 25.03%). Significant headroom on all loan covenants.
· Company continues to benefit from a low fixed cost of debt of
2.959% until May 2027.
· Acquisition of a high-street retail asset in Hitchin for £10.00
million, reflecting a NIY of 8.31%.
· £627,530 of new rental income from lettings completed during the
quarter.
Laura Elkin, Portfolio Manager, AEW UK REIT, commented:
"We are pleased with the continued growth in NAV per share, principally driven
by another quarter of like-for-like valuation gain in the Company's portfolio.
This consistent valuation growth, at a time when property markets have been
subdued, continues to reflect the effectiveness of the Company's active asset
management strategy in driving income and capital growth through various
market cycles.
EPRA earnings were subdued due to the disposal proceeds from Units 1-11,
Central Six Retail Park, Coventry, being held as cash for most of the quarter,
albeit the impact of this was partially offset by the funds being held in a
high-interest rate deposit account. Given these disposal proceeds amounted to
circa 11% of GAV, earnings of 1.71 pence per share were robust, highlighting
that the Company's programme of ongoing asset management initiatives, which
delivered annualised new rental income of £627,530 in the quarter, continues
to deliver strong financial performance.
The acquisition of a high-yielding retail asset in Hitchin during the quarter
marks a significant step in redeploying the disposal proceeds from Units 1-11,
Central Six Retail Park, Coventry, into earnings accretive investment
opportunities. The remainder of the proceeds are under exclusive negotiation,
with further purchase announcements expected in the near term.
The Company remains committed to pay its quarterly dividend of 2.00 pence per
share, which has now been paid for 38 consecutive quarters."
Valuation Movement
As at 31 March 2025, the Company owned investment properties with a total fair
value of £204.55 million, as assessed by the Company's independent valuer,
Knight Frank. The like-for-like valuation increase for the quarter of £2.74
million (1.42%) is broken down as follows by sector:
Sector Valuation 31 March 2025 Like-for-like valuation movement for the quarter
£ million % of portfolio £ million %
Industrial 78.60 38.43 1.25 1.62
High Street Retail 43.80 21.41 1.30 3.98
Other 28.90 14.13 - -
Retail Warehouses 28.65 14.00 0.64 2.27
Office 24.60 12.03 (0.45) (1.80)
Total 204.55 100.00 2.74 1.42*
* This is the overall weighted average like-for-like valuation increase of the
portfolio.
In accordance with RICS mandatory rotation cycles, the Company is changing
valuer from Knight Frank to CBRE, with the latter performing their first
valuation for the June 2025 quarter.
Portfolio Manager's Review
The Company's portfolio saw a like-for-like valuation increase of 1.42% for
the quarter, similar to the valuation gains of the previous four quarters.
The like-for-like increase in valuation was primarily driven by effective
asset management across several of the Company's high-street retail and
industrial properties, with increases of 3.98% and 1.62%, respectively. In the
retail sector, the Company successfully completed a five-year lease regear
with Next Holdings Limited ("Next") for its high street store in Bromley,
signifying Next's long-term commitment to the property, where it has traded
strongly in recent years. As part of this agreement, Next has been granted a
nine-month rent-free incentive, contingent upon the refurbishment of the
store.
At another of the portfolio's high-street retail assets, the Company completed
a new letting to Grip-UK Ltd (trading as Climbing Hanger) on the ground and
basement levels at 15-33 Union Street in Bristol, resulting in the former
Wilko unit being fully let, following its division to provide two new leisure
units. The first floor was leased to Roxy Lanes (Bristol) Ltd, an existing
tenant in the building, as announced during the quarter ending 30 September
2024.
Positive asset management activity and occupational buoyancy on the
high-street bodes well for the Company's recent acquisition in Hitchin. As
noted in previous announcements, the Manager remains excited about the current
buying opportunities in the UK property market, believing that now is an
opportune time to deploy capital into new acquisitions, capitalising on
favourable pricing conditions. The Company has identified an attractive
pipeline of investments available for purchase and is considering available
opportunities to raise additional capital, which may include the issue of new
equity.
In the industrial sector, the Company completed a 10-year lease renewal with
Pilkington United Kingdom Limited at Knowles Lane in Bradford, resulting in a
27% increase in rent. At Sarus Court in Runcorn, the Company completed a new
letting of Unit 1001 following a recent refurbishment. The achieved rent of
£8.50 per sq. ft. marks a significant increase from £6.50 per sq. ft. paid
by the previous tenant before the refurbishment. The Manager intends to
continue driving rental growth at the property, with Units 1002 and 1003
currently being marketed.
The Company's industrial assets, which comprise 38% of the portfolio, have
experienced another quarter of growth in ERVs, particularly in Redditch,
Sheffield and St Helens, leading to improved valuations. This ERV growth
highlights the reversionary potential of the portfolio, with the net initial
yield and reversionary yield for the Company's industrial assets standing at
7.16% and 8.62%, respectively.
The retail warehousing sector, which has seen a notable decrease in its
portfolio weighting following the sale of Central Six Retail Park in Coventry
(declining from 25% in September to 15% in December), experienced a quieter
quarter compared to the previous three. The valuation increase during the
period was primarily attributed to the successful letting of the former Mecca
Bingo unit to Tenpin at The Railway Centre in Dewsbury. Whilst this letting
completed in September, the valuation gain was fully realised this quarter
following the third and final capital contribution being made, coinciding with
the bowling alley opening to the public at the beginning of February.
The office sector, making up the Company's smallest sector exposure at 12%,
had another quiet quarter. The refurbishment of vacant space at 40 Queen
Square, Bristol, is currently underway, with the refurbishment at Cambridge
House, Bath, currently being appraised. Until these projects are nearing
practical completion, and marketing is fully underway, their valuations are
likely to remain muted.
Net Asset Value
The Company's unaudited NAV at 31 March 2025 was £174.44 million, or 110.11
pence per share. This reflects an increase of 0.08% compared with the NAV per
share at 31 December 2024. The Company's NAV total return, which includes the
interim dividend of 2.00 pence per share for the period from 1 October 2024
to 31 December 2024, was 1.90% for the three-month period ended 31 March 2025.
Pence per share £ million
NAV at 1 January 2025 110.02 174.30
Capital expenditure (0.28) (0.44)
Valuation change in property portfolio 0.66 1.04
Income earned for the period 2.89 4.58
Expenses and net finance costs for the period (1.18) (1.87)
Interim dividend paid (2.00) (3.17)
NAV at 31 March 2025 110.11 174.44
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation at 31 March 2025 and income for the period, but does not
include a provision for the interim dividend declared for the three-month
period to 31 March 2025.
Share Price and Discount
The closing ordinary share price at 31 March 2025 was 101.4p, an increase of
1.00% compared with the share price of 100.4p at 31 December 2024. The closing
share price represents a discount to the NAV per share of 7.91%. The Company's
share price total return, which includes the interim dividend of 2.00
pence per share for the period from 1 October 2024 to 31 December 2024, was
2.99% for the three-month period ended 31 March 2025.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 January 2025 to 31 March 2025. The dividend payment will be
made on 30 May 2025 to shareholders on the register as at 9 May 2025. The
ex-dividend date will be 8 May 2025. The Company operates a Dividend
Reinvestment Plan ("DRIP"), which is managed by its registrar, MUFG Corporate
Governance Limited. For shareholders who wish to receive their dividend in the
form of shares, the deadline to elect for the DRIP is 9 May 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 38 consecutive
quarters(1), providing consistently high levels of income 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 March 2025, producing a Loan to GAV ratio of
25.01%.
Headroom on the debt facility's 60% loan to value ("LTV") covenant continues
to be conservative. For those properties secured under the loan, a 41.82% fall
in valuation would be required before the LTV covenant were to be breached.
Investment Update
During the quarter the Company completed the following purchase:
13/13A, 114-119, 121-123 Bancroft and 3-4 Portmill Lane, Hitchin (retail) - In
March, the Company completed the purchase of a freehold, high-street retail
asset at 13/13A, 114-119, 121-123 Bancroft and 3-4 Portmill Lane in the
affluent commuter town of Hitchin for £10,000,000. The purchase price
reflects an attractive net initial yield of 8.31% and a capital value
of £213 per sq. ft.
The property, located in the centre of Hitchin's high-street retail pitch,
provides accommodation totalling 46,905 sq. ft. across 12 retail units and a
standalone office building, as well as car parking and service yards. The
retail elements of the property are fully let to a strong line-up of 12
tenants, with recent leasing activity evidencing the strength of the location.
Major tenants include Marks & Spencer plc, Next Holdings Ltd, Vodafone
Ltd, The White Company and Holland & Barrett. The vacant office element
to the rear provides various asset management options in the short-to-medium
term, including new lettings or residential conversion. Hitchin is a busy
market town located in Hertfordshire with an affluent catchment. The town is
served by rail connections to both London and Cambridge, underpinning its
attractiveness as a commuter location.
No disposals 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:
Cambridge House, Bath (office) - The Company completed a new lease on the
ground and basement floors with premium gym operator, Marchon Bath Ltd
(trading as Marchon). The tenant has entered a straight 10-year lease paying a
rent of £70,000 per annum. Lease completion was subject to the completion of
circa £70,000 of landlord strip-out works, including fees. There will be a
five-yearly upwards only rent review to the higher of open market or annually
compounded 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
and Stratford, as well as Harpenden.
40 Queen Square, Bristol (office) - A circa £200,000 refurbishment project
has commenced on the former Ramboll Whitbybird (Ramboll) space on the first
floor (north). Ramboll's dilapidation liability was settled at £37,888,
therefore net capital expenditure equates to approximately £162,000. A circa
£250,000 refurbishment project in the reception has also commenced alongside
the refurbishment of the first floor (north) and is expected to practically
complete in mid-May. The reception requires refurbishment to assist with the
prospective lettings of the first and third floors. The cost of the works will
be service charge recoverable from the existing tenants.
15-33 Union Street, Bristol (retail) - The Company completed a new lease of
the ground and basement levels to Grip-UK Ltd (trading as Climbing Hanger),
which will operate the space as a climbing and bouldering centre. The tenant
has entered a 12-year lease, with a tenant break option on the expiry of the
tenth year, paying a rent of £300,000 per annum. There will be a five yearly
rent review in line with annually compounded CPI (2% collar and 4% cap). The
tenant has been granted a 12-month rent free period. The unit became available
after the previous tenant, Wilko, went into administration in the second half
of 2023. Following its refurbishment and subdivision, the space is now fully
let with no other vacancy in the building.
148-154 High Street, Bromley (retail) - The Company completed a lease regear
with Next, who will enter a five-year reversionary lease effective from
September 2025 in return for rebasing the rent at a fixed amount of £430,000
per annum with nine months' rent-free, subject to Next completing a
refurbishment of the store. Next will continue to pay the existing base rent
of £350,000 per annum plus a turnover rent equal to 8% of turnover above
£3.5 million until September this year. With the lease regear remaining
outside the 1954 Act, this is advantageous to the Company, with the property
being an attractive opportunity for a residential developer or an owner
occupier.
11-15 Fargate, Sheffield (retail) - The Company completed a new lease to
fashion retailer, Blue Banana Retail Limited. The tenant has entered into a
10-year lease, with a tenant break option on the expiry of the fifth year,
paying a rent of £55,000 per annum. There will be a five yearly-rent review
to RPI compounded annually (1% collar and 3% cap). The tenant has been granted
a seven-month rent free period.
Central Six Retail Park (the Triangle Site), Coventry (retail warehouse) - The
Company completed a new lease of Unit A1 to Costa Limited. The tenant has
entered a lease expiring in November 2032, with a tenant break option on the
expiry of the fifth year, paying a rent of £65,000 per annum. There will be a
five-yearly open market rent review capped at 2.5%, compounded annually. The
tenant has been granted a six-month rent-free period.
Knowles Lane, Bradford (industrial) - The Company completed a lease renewal
with Pilkington United Kingdom Limited at an increased rent of £265,000 per
annum. The previous rent (payable until September 2024) was £208,000 per
annum, representing a 27% increase. On the fifth anniversary of the lease
term, there is an open market rent review, as well as a tenant only break
option. No tenant rent-free or incentive was given.
Sarus Court, Runcorn (industrial) - Following practical completion of a
speculative refurbishment project of Units 1001 and 1003 in October 2024, the
Company has completed a new lease of Unit 1001 to ODL Europe Ltd. The tenant
has entered a straight five-year lease paying a rent of £137,530 per annum
(£8.50 per sq. ft.). The tenant has been granted a three-month rent-free
incentive. The previous passing rent, prior to refurbishment, was £6.50 per
sq. ft. In carrying out roof improvements, respraying of external elevations,
internal strip-out and decoration, and replacing M&E services to improve
the EPC ratings to a B, the Company has crystalised significant rental growth.
Diamond Business Park, Wakefield (industrial) - Following a statutory demand
being served on the last remaining office tenant of Diamond House, AFI-Uplift
Ltd ("AFI"), due to service charge and insurance arrears of £210,967, AFI has
paid all of its arrears and surrendered its lease, which was due to expire in
November 2027. An early surrender will enable demolition of the entire block,
facilitating an industrial open storage letting on the estate.
Westlands Distribution Park, Weston-super-Mare (industrial) - The Company
completed a three-year lease renewal of Unit 3A with Weston & District
Community Transport Ltd at a rent of £12,000 per annum. On the first
anniversary of the lease term, there is a mutual rolling break option.
Glossary of Commonly Used Terms
Industry specific terms used in the Company's communications are defined 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
Laura Elkin laura.elkin@eu.aew.com
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 €79.1bn
of assets under management as at 31 December 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 31 December 2024, AEW managed €36.8bn 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 €14.9bn 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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