TIDMAEWU
RNS Number : 9504O
AEW UK REIT PLC
25 August 2017
25 August 2017
NAV Update and Dividend Declaration for the three months to 31
July 2017
AEW UK REIT plc (LSE: AEWU) ("the Company"), which, as at 25
August 2017, directly owns a diversified portfolio of 32 regional
UK commercial property assets, announces its quarterly unaudited
Net Asset Value ("NAV") and interim dividend for the three month
period ended 31 July 2017.
Highlights
-- The Company is now fully invested, having utilised the total
available loan facility and reinvested the proceeds from selling
its remaining investment in the AEW UK Core Property Fund (the
"Core Fund") during the quarter.
-- Fair value independent valuation of the property portfolio
increased to GBP150.38 million (30 April 2017: GBP137.82 million),
primarily as a result of three new acquisitions totalling GBP10.62
million. On a like-for-like basis the valuation of the property
portfolio increased by GBP1.94 million (1.41%) (30 April 2017:
GBP1.10 million and 0.85%) over the quarter.
-- NAV of GBP119.76 million or 96.86 pence per share (30 April
2017: GBP118.68 million or 95.98 pence per share).
-- EPRA earnings per share for the period of 2.10 pence per
share (30 April 2017: 1.84 pence per share).
-- Interim dividend of 2.0 pence per share announced for the quarter ended 31 July 2017.
-- The Company remains conservatively geared with a gross loan
to value ratio of 21.6% (30 April 2017: 19.9%) and net loan to
value ratio of 19.4% (30 April 2017: 17.4%).[i]
-- Ongoing portfolio and asset management activity during the period included:
o Acquisition of an industrial asset in Runcorn for GBP0.61
million completing the Company's ownership of the entire Sarus
Court industrial estate. The acquisition pricing reflects a Net
Initial Yield of 7.8% and a capital value of GBP55 per sq ft.
o Acquisition of a 97,000 sq ft single-let industrial building
located on the established Deeside Industrial Park, North Wales,
for GBP4.30 million, reflecting a Net Initial Yield of 7.9% and a
capital value of GBP45 per sq ft. The low passing rent is
significantly below that seen at other competing centres within the
North West.
o Acquisition of a 182,000 sq ft single-let industrial building
in Peterborough, for GBP5.70 million, reflecting a Net Initial
Yield of 8.64% and a capital value of GBP31 per sq ft.
o Disposal of the Company's remaining units in the Core Fund for
total proceeds of GBP7.62 million. The Company had held an
ownership in the Core Fund since launch in May 2015 for the purpose
of expediting its investment period. The units have now been sold
at a price in excess of the Core Fund's latest published NAV, and
the proceeds have been used for direct investment.
o Post period end, final letting completed at 40 Queen Square,
Bristol, achieving six lettings totalling just less than 25,000 sq
ft within the last 12 months.
Alex Short, Portfolio Manager, AEW UK REIT, commented:
"Despite some uncertainty caused by the General Election, the
performance of the Company's assets has continued strongly over the
past quarter with like-for-like valuation growth of 1.4% recorded.
This compares favourably to MSCI data which shows that the market
as a whole delivered growth of 1.1% over the quarter to 30 June
2017 on a "standing investment" basis (excluding transactions and
developments). We are particularly pleased with the capital
appreciation delivered by the Company's industrial assets which
have seen the strongest growth of all of the sectors in which the
Company is invested, at an average of 2.8% within the quarter.
The portfolio has been particularly well placed to benefit from
this movement with its high weighting towards the industrial sector
where many of our recent acquisitions have been focused. Following
the three industrial acquisitions in the quarter, the Company is
now fully invested, including utilisation of the proceeds from the
sale of the Core Fund units. The new acquisitions in Runcorn,
Deeside and Peterborough are all in locations which exhibit low
levels of supply alongside robust tenant demand and a low level of
passing rent.
Occupier markets have also shown resilience over the period as
evidenced by the Company having completed its final letting at 40
Queen Square in Bristol. Further to this, we have seen significant
progress in other key occupational transactions over the quarter
for which further announcements are expected to be made in due
course. These successes will help to secure and lengthen the
Company's income stream and ensure its sustainability for future
performance. This quarter sees the dividend return to being fully
covered. The increase in earnings is partly attributable to
non-recurring items of 0.14 pence per share in the quarter.
In addition to the performance of the portfolio itself we are
also pleased by the resilient performance of the Company's share
price which has maintained a robust premium to NAV for over 6
months now. We are confident this will assist in growing the
Company to provide enhanced liquidity to the Company's
shareholders. As such, we highlight that we continue to see a
strong pipeline of available stock at yields which would be
accretive to the current portfolio. Over recent weeks we have seen
an increased number of attractive opportunities in the retail and
office sectors and we therefore expect that future acquisitions
will represent a more balanced spread of property sectors, rather
than being concentrated in the industrial sector as we have seen
over past quarters. In line with our strategy we continue to focus
on finding future acquisitions which will deliver an attractive
return from a well-diversified regional portfolio."
Net Asset Value
The Company's unaudited NAV as at 31 July 2017 was GBP119.76
million, or 96.86 pence per share. This reflects an increase of
0.92% per share compared with the NAV as at 30 April 2017, or a NAV
total return including the interim dividend for the period from 1
February 2017 to 30 April 2017 (of 2.0 pence per share), of 3.06%.
As at 31 July 2017, the Company owned investment properties with a
fair value of GBP150.38 million. The Company disposed of all of its
remaining investment in the Core Fund for proceeds of GBP7.62
million during the quarter.
Pence per GBP million
share
NAV at 1 May 2017 95.98 118.68
Portfolio acquisition costs (0.60) (0.75)
Realised gain on sale of investments 0.04 0.05
Capital expenditure (0.11) (0.13)
Valuation change in property portfolio 1.46 1.80
Valuation change in derivatives (0.01) (0.01)
Income earned for the period 2.67 3.30
Expenses and net finance costs for
the period (0.57) (0.71)
Interim dividend paid (2.00) (2.47)
NAV at 31 July 2017 96.86 119.76
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards and incorporates
the independent portfolio valuation as at 31 July 2017 and income
for the period, but does not include a provision for the interim
dividend for the period to 31 July 2017.
The Company did not receive any dividends during the quarter
from its investment in the Core Fund.
Dividend
The Company today announces an interim dividend of 2.0 pence per
share for the period from 1 May 2017 to 31 July 2017. The dividend
payment will be made on 29 September 2017 to shareholders on the
register as at 8 September 2017. The ex-dividend date will be 7
September 2017.
The dividend of 2.0 pence per share will be designated 2.0 pence
per share as an interim property income distribution ('PID').
The EPRA earnings per share for this period were 2.10 pence (30
April 2017: 1.84 pence). The increase in earnings per share is
partly attributable to non-recurring items of 0.14 pence per share
in the quarter, including business rates credits and back-dated
turnover rent received.
At the time of the Company's IPO, AEW UK Investment Management
LLP (the "Investment Manager") provided guidance that they would
assemble a portfolio supporting a target dividend between 8 to 9
pence per share. The initial portfolio has now been assembled and
the Company has paid a 2 pence per share dividend for each quarter
since January 2016. The Board of Directors are of the view that
over the medium term this level of dividend is supportable from
earnings on the current portfolio; accordingly, the Board has
resolved to pay a 2 pence per share dividend for this quarter, as
with previous periods. With this dividend, the Company will have
paid 15.5 pence per share since launch.
Going forward, it has always been the intention to grow the
Company, which is currently trading strongly in the market.
Accordingly, subject to market conditions, the Company will look to
raise additional capital during 2017. At the time of any
significant fund raise, the Board will review the level of capital
targeted to be raised and the assets likely to be acquired,
together with the existing assets, activity and market prospects at
the time and may issue further dividend guidance at such time, if
appropriate. The Company will continue to focus its investment in
relative value opportunities offered by pricing inefficiencies in
smaller commercial properties let on shorter occupational
leases.
Investors should note that this target is for illustrative
purposes only, based on current market conditions and is not
intended to be, and should not be taken as, a profit forecast or
estimate. Actual returns cannot be predicted and may differ
materially from this illustrative figure. There can be no assurance
that the target will be met or that any dividend or total return
will be achieved.
Financing
Equity
The Company's issued share capital consists of 123,647,250
Ordinary Shares.
Debt
On 20 July 2017, the Company utilised the remaining GBP3.49
million of its loan facility with RBS International, thereby
bringing its drawdowns to GBP32.50 million as at 31 July 2017 and
representing a gross loan to value ratio of 21.6%. The loan
attracts interest at LIBOR + 1.4%. To mitigate the interest rate
risk that arises as a result of entering into a variable rate
linked loan, the Company has entered into interest rate caps on
GBP26.51 million of the total balance of the loan at a strike rate
of 2.5%, resulting in the loan being 82% hedged. The Investment
Manager and the Company will keep the level of gearing under review
and, if appropriate, will look to increase the facility.
Portfolio activity and asset management
Unit 1005, Sarus Court, Runcorn
In May 2017 the Company acquired Unit 1005 Sarus Court which
completes the Company's acquisition of the whole of the Sarus Court
industrial estate, where five of the six units were already in the
Company's ownership following acquisitions in 2015. Sarus Court
forms part of the wider Manor Park industrial estate, strategically
located to the west of Runcorn and five kilometres from the Mersey
Gateway Project, a new six lane bridge over the River Mersey
connecting the towns of Runcorn and Widnes and linking the M56 to
M62. The project is due for completion in Autumn 2017.
The estate provides well specified, modern industrial units of
between 11,000 and 17,000 sq ft, which are let to a number of
light-industrial occupiers providing a WAULT (weighted average
unexpired lease term) of over four years across the estate. Unit
1005, which is let to Dimension Data until 2020, offers significant
reversionary potential, with a passing rent of GBP4.50 per sq ft
which is more than 15% lower than a recent letting at 1003 Sarus
Court secured at GBP5.25 per sq ft. The purchase therefore not only
offers rental upside but brings the whole estate under the
Company's ownership, which will add value from an estate management
perspective. The acquisition pricing reflects a Net Initial Yield
of 7.8% and a capital value of GBP55 per sq ft
Deeside Industrial Park
In July 2017 the Company announced the acquisition of a 97,000
sq ft single-let industrial building in Deeside, North Wales, for
c. GBP4.3 million, reflecting a Net Initial Yield of 7.9% and a
capital value of GBP45 per sq ft. The asset, which is located
within the established Deeside Industrial Park, is fully let to
global enterprise Magellan Aerospace, for a term of just under five
years to break and just under ten years to expiry. The current
passing rent of GBP3.75 per sq ft is significantly below that seen
at other competing centres within the North West, such as in
Warrington and Manchester.
Deeside Industrial Park has been established since the 1970s and
totals in excess of 600 acres, comprising over 5 million sq ft of
industrial and warehouse accommodation attracting a variety of
manufacturing and distribution companies. The estate benefits from
its close proximity to the national motorway network, being within
5 miles of both the M56 and M53.
Storey's Bar Road, Peterborough
During July 2017 the Company announced the acquisition of a
c.182,000 sq ft single-let industrial building in Peterborough, for
c.GBP5.7 million, reflecting a Net Initial Yield of 8.64% and a
capital value of c.GBP31 per sq ft. The asset, which is located
within the Eastern Industrial Estate, is fully let to Walstead
Investments Limited for a term of just under four years to expiry.
The passing rent of GBP2.88 per sq ft is low in comparison to some
of the recent lettings in the city and the immediate sub region.
Peterborough has seen robust occupational performance over the past
24 months with overall vacancy levels for properties over 150,000
sq ft falling below 4%.
Core Fund
In May 2017, the Company announced the sale of its remaining
units in the Core Fund for total proceeds of GBP7.62 million.
The Company had held an ownership in the Core Fund since launch
in May 2015 for the purpose of expediting its investment period and
saw a total return of 13% over the hold period. The units have now
been sold at a price in excess of the Core Fund's latest published
NAV, with the proceeds used to fund direct investments in the
portfolio.
Queen Square, Bristol
Post period end, the Company has announced that its 38,000 sq ft
office building located in the prestigious Central Bristol, Queen
Square has now been fully let following lettings to six various
occupiers totalling c. 25,000 sq. ft within the last 12 months. The
building, acquired in December 2015, was 46% vacant at this time,
and has shown strong performance due to the strength of the Bristol
office market and the targeted refurbishment programme undertaken
by the Company.
Enquiries
AEW UK
Alex Short alex.short@aeweurope.com
+44(0) 20 7016 4848
Nicki Gladstone nicki.gladstone-ext@aeweurope.com
+44(0) 20 7016 4880
Company Secretary
Capita Company Secretarial T: 01392 477 653
Services
Temple Bar Advisory
Tom Allison toma@templebaradvisory.com
M: +44 (0) 7789 998
020
Ed Orlebar edo@templebaradvisory.com
T: 020 7002 1080
Lucy Featherstone lucyf@templebaradvisory.com
T: +44 (0) 20 7002 1482
M: +44 (0) 7789 374
663
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 GBP10 million), on
shorter occupational leases, in strong commercial locations across
the United Kingdom. The Company was listed on the Official List of
the UK Listing Authority and admitted to trading on the Main Market
of the London Stock Exchange on 12 May 2015.
Since its IPO in May 2015, the Company has invested over GBP150
million in 32 assets. It 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 the income stream. Whilst occupational demand in strategic
locations remains, securing tenants on shorter leases allows AEWU
to crystallise value through rent reviews and lease re--gears.
AEWU is currently paying a dividend of 8p per share p.a. and
targets a total annual return, over the medium term, in excess of
12% on the IPO issue price, net of all fees.
Real estate investment specialist AEW UK Investment Management
LLP is a joint venture between the management team, which together
has an average of 25 years of real estate experience, and AEW,
which has EUR19.1 billion of real estate assets under management in
Europe. AEW UK Investment Management LLP has a strong and expert
asset management team, with a proven record of identifying and
delivering value from real estate assets across all sectors.
[i] Net loan to value is gross loan to value after consideration
of cash balances as at 31 July 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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