TIDMAEWL
RNS Number : 9544U
AEW UK Long Lease REIT PLC
18 July 2018
AEW UK Long Lease REIT plc ("AEWL" or "the Group")
LEI: 213800MPBIJS12Q88F71
18 July 2018
NAV Update and Dividend Declaration for the quarter ended 30
June 2018
AEW UK Long Lease REIT plc (LSE: AEWL) (the "Group"), which
directly owns a diversified portfolio of 16 regional UK commercial
property assets, announces its unaudited Net Asset Value ('NAV')
and interim dividend for the quarter ended 30 June 2018.
Alex Short, portfolio manager, said: "With an inflation linked
income stream and valuation gains we feel good progress is being
made by the Group as evidenced by a 4.56% or 4.15 pence per share
increase in the NAV this quarter. In all cases, the price paid for
our assets has been well underpinned by our assessment of
alternative use or vacant possession value, in line with our view
that financial security for our investors must be derived from the
fundamental strength of each property, as well as long inflation
linked income streams. We are targeting dividends totalling 5.5
pence per share for the year ending 30 June 2019."
Highlights
-- EPRA earnings per share ("EPRA EPS") for the quarter of 1.25
pence per share (quarter to 31 March 2018: 1.01 pence per
share).
-- The Group today declares an interim dividend of 1.25 pence
per share for the quarter ended 30 June 2018 bringing the total
since IPO to 3.25 pence per share. This dividend is to be paid on
31 August 2018 to shareholders on the register on 27 July 2018.
-- At 30 June 2018, the fair value independent valuation of the
property portfolio was GBP99.09 million (31 March 2018: GBP93.46
million), following one acquisition during the quarter which cost
GBP2.2 million (see below). On a like-for-like basis, the valuation
of the property portfolio increased by GBP3.43 million (3.67%) over
the quarter (quarter to 31 March 2018: GBP0.03 million or
0.04%)
-- Unaudited NAV increased to GBP76.42 million or 94.94 pence
per share (31 March 2018: GBP73.09 million or 90.79 pence per
share), an increase of 4.56%
-- A total of GBP6.48 million of property acquisition costs have
been incurred since the inception of the Group. The main element of
these acquisition costs relate to stamp duty, and together with
agents, legal and other fees, have led to a total reduction in NAV
since IPO of 8.05 pence per share. These costs are standard for
direct property transactions. This reduction in NAV has now been
partly offset by the valuation gains arising since the IPO of
GBP3.59 million (4.47 pence per share).
-- Utilisation of GBP28.64 million of the GBP30 million loan
facility with Canada Life Investments. The facility has a fixed
cost of 3.05% per annum and is repayable on 20 October 2025.
-- Portfolio activity during the period included the acquisition
of 500 Chiswick High Road, Chiswick for GBP2.2 million on 3 April
2018. This gymnasium is leased to Snap Fitness for a term of 15
years to expiry with no breaks and provides 5 yearly RPI inflation
linked reviews. The transaction reflects a net initial yield of
5.5%.
-- The Investment Manager is currently monitoring a strong
pipeline of investment opportunities in excess of GBP50m. As
announced in April, two assets totalling GBP3.5 million are under
offer for acquisition and these are now expected to complete within
the next few weeks following a prolonged due diligence process.
These new acquisitions will provide further diversification to the
portfolio.
Portfolio Manager's comment
At the end of our first full year we have paid dividends in line
with guidance given at IPO and have now seen some significant
valuation gains of 3.67% during Q2 2018. The drop in NAV from the
IPO, whilst disappointing, is due to the standard costs of
investing in direct property and the set up costs of the Group. All
of our underlying properties have either maintained their value or
increased in value since purchase given the attraction of long
inflation linked leases. Our stated objective remains the provision
of an inflation linked income stream along with long term capital
growth in line with inflation. We are confident that our careful
asset selection and rigorous approval process will continue to
provide that security to our shareholders against a backdrop of a
conservative risk profile. Property fundamentals remain a critical
part of our investment process to ensure both security of income
and long term capital value preservation.
Our aim is to retain this focused approach whilst growing the
Group at the appropriate time and we are currently seeing a strong
and varied pipeline of opportunities due to the team's extensive
network of investment contacts. As well as providing additional
sources of opportunity and diversity to our portfolio, growth would
allow the Group to achieve economies of scale on its cost base that
will benefit our investors. We remain optimistic about prospects
for growth starting from this initial portfolio of assets which has
been evidenced by the accretive valuation growth that we have seen
from the portfolio this quarter. Particular areas of growth within
the market have been in the residential care home and industrial
sectors where we have seen investment yields moving inward and,
given the attractive pricing levels that the Group's assets were
acquired at, the Group's assets within these sectors have seen the
strongest growth. We firmly consider that the inflation linked
income growth offered by this strategy continues to look attractive
when compared to income growth expectations across the remainder of
most commercial property sectors.
Net Asset Value
The Group's unaudited NAV as at 30 June 2018 was GBP76.42
million, or 94.94 pence per share. This reflects an increase of
4.56% per share compared with the NAV as at 31 March 2018. This
increase is largely due to the valuation uplift during the quarter.
As at 30 June 2018, the Group owned 16 investment properties with a
fair value of GBP99.09 million.
Pence per GBP
share million
NAV at 31 March 2018 90.79 73.09
Portfolio acquisition costs (0.37) (0.29)
Valuation change in property portfolio 4.27 3.43
Income earned for the period 1.98 1.59
Expenses and net finance costs for
the period (0.73) (0.59)
Interim dividend paid (1.00) (0.81)
NAV at 30 June 2018 94.94 76.42
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards as adopted by the
European Union and incorporates the Group's individually valued
property portfolio as at 30 June 2018 and income for the quarter,
but does not include a provision for the interim dividend for the
quarter ended 30 June 2018.
Dividend
The Board has today declared an interim dividend of 1.25 pence
per share for the period from 1 April 2018 to 30 June 2018. The
dividend payment will be made on 31 August 2018 to shareholders on
the register as at 27 July 2018. The ex-dividend date will be 26
July 2018.
The dividend of 1.25 pence per share will all be designated as a
property income distribution ("PID").
The EPRA EPS for the quarter ended 30 June 2018 was 1.25 pence
(quarter ended 31 March 2018: 1.01 pence) and is in line with
target earnings for this quarter of 1.25 pence per share as set out
in the Group's Prospectus.
Based on target dividends as set out within the Group's
Prospectus, the Board is targeting an aggregate dividend of 5.50
pence per share for the year commencing 1 July 2018.
Investors should note that any dividend targets are 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.
Debt
As at 30 June 2018, the Group had utilised a total of GBP28.64
million of its GBP30 million fixed interest loan facility with
Canada Life Investments and at that date was geared at a loan to
Gross Asset Value ('GAV') of 28.1 %. Upon full utilisation of the
loan facility, it is anticipated that the loan to GAV will be
c.30%. The facility has a fixed interest cost of 3.05% per annum
and is repayable on the 20 October 2025.
Given the strength of its current pipeline of acquisition
opportunities, the Investment Manager is currently exploring
possibilities to increase modestly its debt on terms that would be
accretive to the Group's performance. The Group's prospectus
contains maximum exposure to gearing of 40% of GAV.
Portfolio Activity
Snap Fitness, Chiswick
In early April, the Group announced the acquisition of a
gymnasium in Chiswick, West London, for GBP2.2 million. The 5,918
sq ft purpose-built gym is situated over two levels and forms part
of a larger residential based development at 500 Chiswick High
Road. The asset is held on a virtual freehold basis and is leased
to Snap Fitness for a term of 15 years to expiry with no breaks and
provides 5 yearly inflation linked reviews. The transaction
reflects a net initial yield of 5.5%.
The property benefits from its location in Chiswick, an affluent
London suburb approximately 6 miles west of central London. It is
situated on the corner of Chiswick High Road and Chiswick Road, a 5
minute walk from both Chiswick Park and Gunnersbury stations,
providing access to both the national rail network and London
Underground. The surrounding area comprises a mix of high-end
residential and retail accommodation.
Inflation linked rent reviews
91% of the portfolio's income stream is reviewed periodically,
on an upward only basis, in line with inflation. Of this inflation
linked income, 75% is grown in line with the Retail Price Index and
25% in line with the Consumer Price Index. We consider this to be a
strong position for the Group as the Retail Price Index has shown,
on average, a 1% per annum premium over the Consumer Price Index
over the past 12 months.
Since acquisition, 21% of the Group's current gross income
stream has been reviewed upward in line with inflation according to
the lease. Over the coming 12 month period 36% of the Group's gross
income will be reviewed upward in line with inflation, with a
further 58% benefitting from inflation linked growth within a 5
year period.
The sector weighting, by value, of the property portfolio as at
30 June 2018 was: Hotels 24.0%; Industrial 20.2%; Car showrooms
14.7%; Student accommodation 11.4%; Residential care homes 11.1%;
Leisure 9.6%; Power stations 5.0%; and Petrol stations 4.0%.
The Investment Manager has a further 2 assets under offer
totalling GBP3.5 million and therefore expects to make further
announcements about these in the coming weeks. Following these
transactions, the Equity raised at IPO will be fully invested and
the Group will have utilised the entirety of its GBP30m debt
facility.
Future publications
The Group's June 2018 Quarterly Investment Report will be
available on the Group's website on 27 July 2018.
The Group expects to announce its year-end results for the
period ending 30 June 2018 in early September 2018.
About AEW UK Long Lease REIT
AEW UK Long Lease REIT plc (LSE: AEWL) aims to generate secure
and predictable income return in sustainable real terms, whilst at
least maintaining capital values in real terms. AEWL invests in a
diversified portfolio of UK properties, with an attractive entry
yield, predominately in alternative and specialist sectors. It
invests in a diverse range of sectors that are underrepresented in
institutional portfolios including leisure, healthcare, education,
hotels, student accommodation, supported living and automotive. At
its IPO on June 6 2017, AEWL raised GBP80.5m from institutional and
retail investors. At least 85% of the gross passing rent from the
portfolio's leases contain inflation linked rent reviews, and
average initial unexpired leases in excess of 18 years at the time
of investment. AEWL's investment manager is AEW UK Investment
Management LLP. Further information on the AEWL is available at:
www.aewukllreit.com
About AEW UK Investment Management LLP
AEW UK Investment Management LLP employs a well-resourced team
comprising 24 individuals covering investment, asset management,
operations and strategy. The team have a range of funds and
segregated accounts for different UK real estate strategies. It is
part of AEW Group, one of the world's largest real estate managers,
with EUR59.3 billion of assets under management as at 31 March
2018. AEW Group comprises AEW SA and AEW Capital Management L.P., a
U.S. registered investment manager and their respective
subsidiaries. In Europe, as at 31 March 2018, AEW Group managed
EUR29.4 billion in value in properties of all types located in 15
countries, with over 390 staff.
For further information contact:
AEW UK
Alex Short alex.short@eu.aew.com
+44(0) 207 016 4880
Laura Elkin laura.elkin@eu.aew.com
+44(0) 207 016 4869
Nicki Gladstone nicki.gladstone-ext@eu.aew.com
+44(0) 771 140 1021
Cenkos Securities plc
Tom Scrivens +44(0) 207 397 1915
Sapna Shah +44(0) 207 397 1922
aewl-cosec@linkgroup.co.uk
Company Secretary +44(0) 139 247 7509
Link Company Matters Limited
TB Cardew aew@tbcardew.com
Ed Orlebar +44(0) 7738 724 630
Tom Allison +44(0) 7789 998 020
Lucy Featherstone +44(0) 7789 374 663
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END
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