TIDMAEWU
RNS Number : 5239X
AEW UK REIT PLC
26 April 2023
26 April 2023
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 36 UK commercial
property assets, announces its unaudited Net Asset Value ("NAV") as
at 31 March 2023 and interim dividend for the three-month period
ended 31 March 2023.
Highlights
-- NAV of GBP167.10 million or 105.48 pence per share as at 31
March 2023 (31 December 2022: GBP166.24 million or 104.93 pence per
share).
-- NAV total return of 2.42% for the quarter (31 December 2022 quarter: -12.26%).
-- 0.77% like-for-like valuation increase for the quarter (31
December 2022 quarter decrease: -10.82%).
-- EPRA earnings per share ("EPRA EPS") for the quarter of 1.77
pence (31 December 2022 quarter: 1.34 pence).
-- Interim dividend of 2.00 pence per share for the three months
ended 31 March 2023, paid for 30 consecutive quarters and in line
with the targeted annual dividend of 8.00 pence per share.
-- Loan to NAV ratio at the quarter end was 35.91% (31 December
2022: 36.09%). Significant headroom remains on all loan
covenants.
-- Company continues to benefit from a low fixed cost of debt until May 2027.
-- Acquisition of a freehold retail warehousing unit in Bamber
Bridge, Preston for GBP6.45 million, providing an attractive net
initial yield of 9.5%.
-- Disposal of an industrial holding at Clarke Road, Milton
Keynes, for GBP2.75 million, reflecting a 6.6% premium to the
December 2022 valuation.
-- Disposal of an office holding on Mark Road, Hemel Hempstead,
for GBP1.65 million, reflecting a 66% premium to the December 2022
valuation.
-- 99% of rental income collected, excluding the current rent
quarter, consistent with each quarter since the onset of the COVID
pandemic in March 2020.
Laura Elkin, Portfolio Manager, AEW UK REIT, commented:
" Following significant asset repricing during Q4 2022 in the
UK, it is pleasing to see values hold firm across AEWU's portfolio
during Q1 2023. Overall, the portfolio has seen a like-for-like
increase of 0.77%. We have seen isolated value movement this
quarter as a result of specific asset management initiatives,
rather than as a result of any material market or sector movements.
Transaction volumes remain below average across the commercial
property market, with a lower level of competition and pricing
transparency. In this environment, AEWU has been able to find
accretive assets that complement its value investment style . An
excellent example of this is the Matalan store the Company acquired
in Preston during the quarter for a net initial yield of 9.5%. This
income yield is in stark contrast to our largest sale during the
quarter, where a single-let industrial asset in Milton Keynes
achieved a net initial yield of 6.3% and a 6.6% premium to December
2022's valuation.
Transactions of this nature will prove to be accretive to the
Company's income stream as demonstrated by an improvement in
earnings per share during the quarter. We will continue to pursue
this strategy and look to recycle assets from the portfolio that
are deemed to have limited further scope for income or capital
return, in comparison to those we see in our pipeline. This
strategy is designed to maximise both shareholder value and support
the payment of our dividend and we are pleased that this is the
30(th) consecutive quarter where the Company will have paid 2p per
share."
Valuation movement
As at 31 March 2023, the Company owned investment properties
with a fair value of GBP213.83 million. The like-for-like valuation
increase for the quarter of GBP1.58 million (0.77%) is broken down
as follows by sector:
Sector Valuation 31 March Like-for-like valuation
2023 movement for the
quarter
GBP million % GBP million %
------------ ------- ---------------- --------
Industrial 94.60 44.24 1.30 1.39
------------ ------- ---------------- --------
Retail
Warehouses 43.90 20.53 0.15 0.40
------------ ------- ---------------- --------
High
Street
Retail 39.90 18.66 (0.30) (0.75)
------------ ------- ---------------- --------
Other 20.13 9.41 0.23 1.13
------------ ------- ---------------- --------
Office 15.30 7.16 0.20 1.32
------------ ------- ---------------- --------
Total 213.83 100.00 1.58 0.77*
------------ ------- ---------------- --------
* This is the overall weighted average like-for-like valuation
increase of the portfolio.
Portfolio Manager's Review
Rent collection from our tenants remains strong, with collection
levels in excess of 99% having been achieved for the previous
quarter. On the whole, we are very happy with ongoing tenant
engagement levels with examples this quarter of our tenants not
actioning break clauses, as evidenced by The Secretary of State for
Communities and Local Government at Cedar House in Gloucester . In
addition, tenants committing to our properties by way of lease
renewal include Subway at Union Street in Bristol, other
prospective tenants are seeking terms to take vacant space in our
portfolio.
The retail sector continues to be an area of particular tenant
activity, both on the high street and on retail warehousing parks.
Following announcements made last quarter in respect of potential
new lettings in Coventry, these business plans continue to progress
in line with our expectations. A further demonstration of this is a
vacant high street retail asset in Sheffield which had been under
offer for sale to an owner occupier due to our uncertainty over
future occupational demand. We have, in recent weeks, taken the
decision to withdraw the sale due to improved occupational interest
and the retail units are now under offer to two tenants. Once let,
we expect the asset to achieve an income yield against current
valuation of circa 13%.
As highlighted by our transactional activity this quarter, we
will look to recycle capital, if accretive, into attractive assets
that we currently see in our pipeline. We will consider isolated
asset sales where we feel that their potential to contribute to
AEWU's performance is limited or uncertain. An example of this is
the sale of Mark Road in Hemel Hempstead, which completed this
quarter. The asset was chosen for disposal due to the risk of
significant future capital expenditure and loss of income if the
tenant, who had previously not been forthcoming in negotiations,
were to leave. The sale achieved a price exceeding the asset's
December 2022 valuation by 66%.
Net Asset Value
The Company's unaudited NAV at 31 March 2023 was GBP167.10
million, or 105.48 pence per share. This reflects an increase of
0.52% compared with the NAV per share at 31 December 2022. The
Company's NAV total return, which includes the interim dividend of
2.00 pence per share for the period from 1 October 2022 to 31
December 2022, was 2.42% for the three-month period ended 31 March
2023.
Pence per GBP million
share
NAV at 1 January 2023 104.93 166.24
Gain on sale of investments 0.45 0.72
Portfolio acquisition costs (0.31) (0.49)
Capital expenditure (0.26) (0.42)
Valuation change in property portfolio 0.89 1.41
Income earned for the period 3.06 4.84
Expenses and net finance costs for
the period (1.28) (2.03)
Interim dividend paid (2.00) (3.17)
NAV at 31 March 2023 105.48 167.10
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards. It incorporates
the independent portfolio valuation at 31 March 2023 and income for
the period, but does not include a provision for the interim
dividend declared for the three-month period to 31 March 2023.
Share price and Discount
The closing ordinary share price at 31 March 2023 was 92.1p,
representing a discount to the NAV per share of 12.68%. This
reflects a decrease of 9.35% compared with the share price of
101.6p at 31 December 2022. The Company's share price total return,
which includes the interim dividend of 2.00 pence per share for the
period from 1 October 2022 to 31 December 2022, was -7.38% for the
three-month period ended 31 March 2023.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence
per share for the period from 1 January 2023 to 31 March 2023. The
dividend payment will be made on 7 June 2023 to shareholders on the
register as at 5 May 2023. The ex-dividend date will be 4 May 2023.
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 17 May 2023.
The dividend of 2.00 pence per share will be designated 1.50
pence per share as an interim property income distribution ("PID")
and 0.50 pence per share as an interim ordinary dividend
("non-PID").
The Company has now paid a 2.00 pence quarterly dividend for 30
consecutive quarters (1) , providing 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 GBP60.00 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%.
The loan was fully drawn at 31 March 2023, producing a Loan to
NAV ratio of 35.91%.
Headroom on the debt facility's loan to value ("LTV") covenant
continues to be conservative. For those properties secured under
the loan, a 45.45% fall in valuation would be required before the
LTV covenant were breached.
Investment Update
During the quarter the Company completed the following
investment transactions:
Purchases:
Matalan, Preston (retail warehouse) - in late March, the Company
completed the purchase of a freehold solus retail warehousing unit
in Bamber Bridge, Preston for GBP6,450,000, reflecting a low
capital value of circa GBP110 per sq ft and an attractive net
initial yield of 9.5%. The 58,696 sq ft unit is single-let to
Matalan Retail Limited and has 9.2 years left on the lease. Matalan
is known to trade strongly from the location, with the store being
one of its top 10 performers, as well as being the retailer's first
ever store in the U.K. The lease benefits from a 2027 rent review
to the higher of open market value, or 2.5% per annum compounded,
resulting in a minimum reversionary yield of 10.7%. The site totals
4.39 acres, providing a low site cover of approximately 30%. It is
well located on Cuerden Way which connects to the A6, half a mile
from Junction 1 of the M65. Neighbouring tenants include Aldi and
Sainsburys to the south, with predominantly industrial uses to the
north. There is the potential to repurpose the unit for trade
counter or industrial use, and to extend the accommodation, subject
to planning, if required in future. In January, Matalan announced
the completion of a refinancing, reducing its gross debt by 43%
from GBP593 million to GBP336 million. The new debt facility will
mature in 2027. The refinancing also provides GBP100 million for
business growth over the next three years, with a return to
profitability anticipated by Matalan in FY 2024.
Disposals:
Mark Road, Hemel Hempstead (office) - in late March, the Company
completed the sale of its office holding, Vantage Point, on Mark
Road, Hemel Hempstead for GBP1,650,000 (circa GBP92 per sq ft),
reflecting an 11.5% net initial yield. The valuation as at 31
December 2022 was GBP990,000 (circa GBP55 per sq ft) with the sale
price reflecting a 66.6% premium. Due to a deadlock with the main
tenant, Trinity Property Group Limited, regarding their future
occupation of the building, and the strong likelihood of there
being significant capex for refurbishment if they were to vacate,
as well as the potential for long-term vacancy, the Company took
the decision to mitigate this risk and dispose of the asset.
Clarke Road, Milton Keynes (industrial) - in mid-March, the
Company completed the sale of its industrial holding at Clarke
Road, Milton Keynes, for GBP2,750,000 (circa GBP91 per sq ft),
reflecting a 6.3% net initial yield. The 30,262 sq ft industrial
unit was acquired in October 2015 for GBP1,526,000 (circa GBP50 per
sq ft) at a circa 8.3% net initial yield. Since acquisition, the
property has been re-let to FMG Repair Services Limited, with a
guarantor from Northgate Vehicle Hire, on a 10-year lease, with a
five-year tenant break option. By securing a stronger tenant
covenant on a longer lease, the sale realises significant profit,
exceeding the 31 December 2022 valuation of GBP2,580,000 by
6.6%.
Asset Management Update
During the quarter the Company completed the following asset
management transactions:
Cedar House, Gloucester (office) - The Secretary of State for
Communities and Local Government, who occupy the entire 37,753 sq
ft office property, have not actioned their 1 April 2023 tenant
break option. Consequently, they will remain in occupation for
another five years until 2028. Permitted development rights for
conversion to 45 residential units was approved in December 2022,
meaning there is now the ability to change the use of the building
to residential use, without having to submit a full planning
application, until December 2025.
North Moons Industrial Estate, Redditch (industrial) - the
August 2022 annual uncapped RPI rent review has been settled at
GBP269,963 per annum, reflecting an GBP11,445 per annum / 4.43%
increase. The 37,992 sq ft property is entirely let to Carrs
Coatings Ltd until August 2028.
15-33 Union Street, Bristol (retail) - the Company has completed
a two-year lease renewal with VIRR Ltd, trading as Subway, with a
landlord rolling break option. The new lease is at the same rent of
GBP32,500 per annum and is outside the Landlord and Tenant Act,
with no tenant incentive given. This short-term renewal makes it
possible to let the unit along with the neighbouring unit, let to
Kemps, whose lease expires in September, later this year.
AEW UK
Laura Elkin laura.elkin@eu.aew.com
+44(0) 20 7016 4869
Henry Butt henry.butt@eu.aew.com
+44(0) 20 7016 4869
Nicki Gladstone nicki.gladstone-ext@eu.aew.com
+44(0) 7711 401 021
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
TB Cardew AEW@tbcardew.com
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 GBP15 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
LEI: 21380073LDXHV2LP5K50
About AEW
AEW is one of the world's largest real estate asset managers,
with EUR84.9bn of assets under management as at 31 December 2022.
AEW has over 850 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 2022, AEW managed EUR38.5bn of real estate
assets in Europe on behalf of a number of funds and separate
accounts. AEW has over 470 employees based in 12 locations 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 EUR21bn of real estate across
European markets.
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,
33 Jermyn Street, London, SW1Y 6DN.
Company number : OC367686 England. Authorised and regulated by
the Financial Conduct Authority.
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