AEW UK REIT plc (AEWU) NAV Update and Dividend Declaration 31
March 2022 21-Apr-2022 / 07:00 GMT/BST Dissemination of a
Regulatory Announcement, transmitted by EQS Group. The issuer is
solely responsible for the content of this announcement.
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The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 which forms part of
domestic law in the United Kingdom pursuant to The European Union
Withdrawal Act 2018, as amended by The Market Abuse (Amendment) (EU
Exit) Regulations 2019.
21 April 2022
AEW UK REIT Plc
NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) (the "Company"), which directly owns
a diversified portfolio of 36 regional UK commercial property
assets, announces its unaudited Net Asset Value ("NAV") and interim
dividend for the three-month period ended 31 March 2022.
Highlights
-- NAV of GBP191.10 million or 120.63 pence per share as at 31
March 2022 (31 December 2021: GBP180.94 millionor 114.21 pence per
share).
-- NAV total return of 7.37% for the quarter (31 December 2021
quarter: 5.63%).
-- 4.74% like-for-like valuation increase for the quarter (31
December 2021 quarter: 3.49%), driven by theoffice and industrial
sectors (like-for-like increases of 7.32% and 4.65%,
respectively).
-- EPRA earnings per share ("EPRA EPS") for the quarter of 1.55
pence (31 December 2021 quarter: 1.80pence). This is expected to
return to the Company's target level of 2 pence per quarter once
the sale of BathStreet, Glasgow, completes later in the year.
-- Interim dividend of 2.00 pence per share for the three months
ended 31 March 2022, in line with thetargeted annual dividend of
8.00 pence per share.
-- Acquisition of PRYZM nightclub in Cardiff for a purchase
price of GBP3.63 million / GBP92 per sq. ft. Theprice reflects a
net initial yield of circa 8%, with an anticipated reversionary
yield of circa 9%.
-- Loan to NAV ratio at the quarter end was 28.26% (31 December
2021: 29.84%). The Company had a cashbalance of GBP6.77 million and
GBP6.0 million of its loan facility was available to draw up to the
maximum 35% Loan toNAV at drawdown.
-- Robust rental outlook, with portfolio ERV being 20% higher
than current gross income.
Alex Short and Laura Elkin, Portfolio Managers, AEW UK REIT,
commented:
"The portfolio's strong capital performance continues this
quarter with a very pleasing NAV total return of 7.37%. In a change
to recent trends, in which the portfolio's industrial and
warehousing assets have provided the strongest NAV growth, this
quarter's growth comes predominantly from the portfolio's office
assets, which have achieved a valuation uplift of 7.3%. This
largely reflects the ongoing work undertaken by AEW's active asset
management team, where a number of key value accretive business
plans are nearing fruition. Strong performance from the Company's
office assets this quarter further highlights the benefit to
investors of AEWU's flexible mandate and wealth of expertise,
enabling it to take advantage of value opportunities across all
sectors of the property market as they arise. Strong growth this
quarter also comes after 2021 saw AEWU record its highest total
return per annum since launch in 2015. Further ongoing investment
and asset management initiatives show signs of additional growth to
follow later in the year.
With respect to income, EPS this quarter has been temporarily
reduced by implementation of the same asset management initiatives
that have provided significant capital value uplift. A high
proportion of the void costs were incurred at Bath Street, Glasgow,
which is contractually committed for disposal later in the calendar
year, with vacancy being a condition of the sale that, once
completed, will be beneficial to the Company's overall performance.
Vacancy costs this quarter had a negative impact on EPS of 0.21pps.
Once the sale of Glasgow completes and its sale proceeds are
reinvested, EPS is expected to return to a level in line with the
Company's target level of 8p per annum.
Inevitably, implementing accretive asset management initiatives,
realising profits through sales and reinvesting the proceeds into
attractive new purchases, while providing strong capital returns,
will create some short-term volatility in the Company's earnings
and we have seen this in recent quarters. Nonetheless, the total
returns generated by AEWU have been the strongest in the UK
diversified REIT peer group over a one, three and five-year time
horizon. This has been recognised by Citywire which has for the
past two years awarded AEWU its award for Best UK Property Trust
(diversified) based on returns over a three-year period.
We are very pleased to announce that for the 26th consecutive
quarter, a dividend of 2.00p per share will be paid. During this
time, dividends have been covered by the Company's EPRA earnings by
over 98% on average and total property value generation has been in
the order of 18 pence per share. We are pleased to be the only REIT
in the UK diversified peer group not to have reduced or suspended
our dividend payment during the pandemic, demonstrating the
resilience of our strategy.
Looking forward, the portfolio's future income generation
prospects appear strong as assessed independently by Knight Frank,
the Company's valuer. As at 31st March 2022, despite strong rental
growth performance recorded to date, the portfolio's total
estimated market rental value remained 20% higher than its current
gross income, demonstrating their belief in the portfolio's
inherent ability to grow income receipts over the medium term. This
seems particularly topical in today's inflationary environment
where leases with inflation-linked rent reviews, which are often
seen as protective in such markets, generally have inflation caps
and can only track inflationary growth so far, commonly only up to
3% or 4% pa. The reality may be that in a high inflation
environment, better income protection may arise from selectively
chosen assets with an open market rent review structure than from
leases that have capped levels of inflationary growth built in. For
example, the rent review settled this quarter for the Company's
asset in Bradford resulted in a 14% increase in income over a
three-year period. This is just one example where such levels of
growth have been achieved.
We are pleased to see that the Company's strong performance has
been recognised in the rating of its shares, where demand has
continued to deliver a share price premium to NAV. With an
attractive pipeline of opportunities, we hope the Company will be
in a position to take advantage of continued strong demand for its
shares to grow its capital base."
Portfolio Manager's report
The Company's office asset at Eastpoint Business Park in Oxford
saw capital growth in excess of 20% this quarter as a result of
initiatives to move the accommodation's use into the burgeoning
life sciences sector. The asset has been earmarked for sale due to
the high cost of completing this conversion, which should allow the
Company to crystallise the benefit of excellent capital performance
seen since the asset's purchase in 2015. In addition, the
confirmation of planning consent being received at the office on
Bath Street in Glasgow, which was reported to the market in
February, pushed this asset's valuation up by 13%. This consent for
the development of 527 student beds paves the way for the sale of
Bath Street to IQ Student Housing, which is expected to complete
later in the summer.
The remainder of the portfolio's value uplift seen this quarter
was driven by the now familiar theme of expansion in global
warehousing markets and also by demand within the retail
warehousing sector, providing 4.65% and 3.95% valuation uplifts,
respectively. In particular, the Company's industrial asset in
Basildon, Apollo Business Park, saw valuation growth of 22.5%
during the quarter following the signing of a new five-year lease
at a rent 15% ahead of valuer's previously estimated levels. In
Bradford, at the industrial asset occupied by Pilkington UK Ltd,
the September 2021 open market rent review was settled during the
quarter bringing a 14% increase in income and an 11.7% uplift in
capital value. In Rotherham, terms were finalised with a new tenant
to take the 80,000 sq ft space vacated by Hydro Components in
December 2021. As terms stand, once the 10-year lease has been
completed later this year, rental income is set to significantly
exceed previous passing levels of GBP3.35 per sq ft. The value of
the asset increased by 20% on this news.
At the Company's recently acquired retail warehousing park in
Coventry, terms have been agreed with a major national retailer
which should assist in providing significant income and capital
growth from this asset in future periods. The asset was acquired in
November 2021, highlighting the speed at which some business plan
elements can be achieved with the benefit of our well researched
plans and asset management expertise.
In anticipation of a capital receipt from the sale of Glasgow
later this year, we are reviewing an attractive pipeline of retail
warehousing, leisure and office assets across the UK which offer
income levels and capital growth opportunities in line with the
existing portfolio. We are currently in discussions with a number
of vendors and have three assets under exclusive discussions,
including two assets which are expected to deliver an element of
marriage value due to existing adjoining or complementary
holdings.
The Company's EPRA EPS was 1.55 pence for the quarter, providing
a dividend cover of 78% (31 December 2021: 1.80 pence and 90%).
Valuation movement
As at 31 March 2022, the Company owned investment properties
with a fair value of GBP240.18 million. The like-for-like valuation
increase for the quarter of GBP10.72 million (4.74%) is broken down
as follows by sector:
Sector Valuation 31 March 2022 Like-for-like valuation movement for the quarter
GBP million % GBP million %
Industrial 120.75 50.27 5.37 4.65
Office 43.28 18.02 2.95 7.32
High Street Retail 24.98 10.40 0.35 1.42
Retail Warehouses 34.25 14.26 1.30 3.95
Other 16.92 7.05 0.75 0.06
Total 240.18 100.00 10.72 4.74*
* This is the overall weighted average like-for-like valuation
increase of the portfolio.
Net Asset Value
The Company's unaudited NAV at 31 March 2022 was GBP191.11
million, or 120.63 pence per share. This reflects an increase of
5.63% compared with the NAV per share at 31 December 2021. The
Company's NAV total return, which includes the interim dividend of
2.00 pence per share for the period from 1 October 2021 to 31
December 2021, was 7.37% for the three-month period ended 31 March
2022.
Pence per share GBP million
NAV at 1 January 2022 114.21 180.94
Portfolio acquisition costs (0.16) (0.25)
Capital expenditure (0.07) (0.12)
Valuation change in property portfolio 6.79 10.75
Valuation change in derivatives 0.31 0.49
Income earned for the period 2.81 4.46
Expenses and net finance costs for the period (1.26) (2.00)
Interim dividend paid (2.00) (3.17)
NAV at 31 March 2022 120.63 191.10
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards. It incorporates
the independent portfolio valuation at 31 March 2022 and income for
the period, but does not include a provision for the interim
dividend for the three-month period to 31 March 2022.
Rent Collection
The Company has achieved very high rent collection levels, which
stand at over 98% for each quarter since March 2020 (excluding
current quarter where rent continues to be collected).
For the rental quarter commencing on 25 March 2022,
approximately 87% of rent has been collected or is expected to be
received prior to quarter end. The remainder of rents owed will
continue to be pursued.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence
per share for the period from 1 January 2022 to 31 March 2022. The
dividend payment will be made on 31 May 2022 to shareholders on the
register as at 29 April 2022. The ex-dividend date will be 28 April
2022. 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 10 May 2022.
The dividend of 2.00 pence per share will be designated in its
entirety as a 2.00 pence per share interim property income
distribution ("PID").
The Company has now paid a 2.00 pence quarterly dividend for 26
consecutive quarters1, providing income consistency to our
investors.
1For 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 had borrowings of GBP54.0 million at 31 March 2022,
producing a Loan to NAV ratio of 28.26% and allowing a further
GBP6.0 million of the remaining facility to be drawn up to the
maximum 35% Loan to Value at drawdown.
The loan attracts interest at SONIA + 1.4% and the Company's
all-in interest rate as at 31 March 2022 was 2.20%.
To mitigate the risk of interest rates rising, the Company has
interest rate caps effective for the remaining term of the loan to
23 October 2023, capping SONIA interest rate costs at 1.0% on a
notional value of GBP51.50 million.
Investment Update
During the quarter the Company completed the following
investment transaction:
Greyfriars Road, Cardiff - In February, the Company completed
the acquisition of PRYZM nightclub in Cardiff for a purchase price
of GBP3,625,000 / GBP92 per sq ft. The purchase price reflects a
net initial yield of 8%, with an anticipated reversionary yield of
circa 9%. The property is prominently located within the leisure
and late-night district of Cardiff city centre near the
Principality Stadium and St David's Shopping Centre. Cardiff
University and the University of Wales are located approximately
300m from the property, contributing to the total student
population of circa 75,000.
The property provides 39,469 sq ft of nightclub and bar
accommodation and is single-let to a subsidiary of Rekom UK
(formerly The Deltic Group), providing over 14 years' unexpired
lease term. Rekom UK is one of the largest specialist late-night
operators in the UK with 46 clubs and bars across a number of
brands. The nightclub trades as "PRYZM" and "Steinbeck &
Shaw".
Asset Management Update
During the quarter the Company completed the following asset
management transactions:
Knowles Lane, Bradford (industrial) - During the quarter, the
Company settled the September 2021 open market rent review with
tenant, Pilkington United Kingdom Ltd, at our industrial unit in
Bradford. The agreed rent is GBP208,000 per annum reflecting
GBP4.50 psf. The previous passing rent was GBP182,500 per annum
reflecting GBP3.95 psf, representing a 14% increase over a
three-year period.
Apollo Business Park, Basildon (industrial) - During March, the
Company completed a new 10-year letting at Unit 1 Apollo Business
Park, Basildon. The lease provides the tenant with a five-year
break option and offers six months' rent free. The letting produces
annual rental income of GBP240,750 and realises a new headline rent
of GBP8 per sq ft versus an expected market rental value of GBP7
per sq ft.
First Avenue, Deeside (industrial) - In Q4 2021, incumbent
tenant, Magellan Aerospace (UK) Ltd, served notice to bring their
lease to an end on 1 April 2022. Discussions have however been
ongoing since the service of the break notice to agree terms for a
short-term lease extension. This agreement has now been signed,
extending the tenant's occupation by six months. Upon completion of
the new lease, the tenant paid to the Company a dilapidations
settlement of GBP250,000, three months' rent up front at a rate of
GBP6 per sq ft (vs market rent value of GBP5.25 per sq ft and
previous passing rent of GBP3.75 per sq ft) and a single lease
premium of GBP50,000. The total capital receipt from the tenant
upon completion was GBP457,400 excluding VAT. The property
continues to be marketed.
Bath Street, Glasgow (office) - During February, the Company
received confirmation that planning consent had been granted for
the demolition and development of a 527-unit student accommodation
scheme at 225 Bath Street in Glasgow city centre. This follows the
exchange of contracts for the sale of the site with a subsidiary
company of IQ Student Accommodation in October 2020. The sale of
225 Bath Street is expected to complete after the standard
three-month judicial review period.
Once the sale has completed, occupancy within the portfolio is
expected to increase by just over 4% with a corresponding decrease
in the Company's costs and associated increase in income once sale
proceeds have been reinvested. Earnings are then expected to
normalise at a level much closer to the Company's long-term
target.
Enquiries
AEW UK
Alex Short alex.short@eu.aew.com
+44(0) 20 7016 4838
laura.elkin@eu.aew.com
Laura Elkin
+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
Lucas Bramwell +44 (0) 7939 694 437
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 UK Investment Management LLP
AEW UK Investment Management LLP employs a well-resourced team
comprising 28 individuals covering investment, asset management,
operations and strategy. It is part of AEW Group, one of the
world's largest real estate managers, with EUR88.2bn of assets
under management as at 31 December 2021. 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
December 2021, AEW Group managed EUR38.5bn of real estate assets on
behalf of a number of funds and separate accounts with over 450
staff located in 12 locations. In May 2019, AEW UK Investment
Management LLP was awarded Property Manager of the Year at the
Pensions and Investment Provider Awards.
www.aewuk.co.uk
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ISIN: GB00BWD24154
Category Code: ACS
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 3.1. Additional regulated information required to be disclosed under the laws of a Member State
Sequence No.: 156587
EQS News ID: 1331371
End of Announcement EQS News Service
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