AEW UK REIT plc (AEWU)
NAV Update and Dividend Declaration
22-Oct-2020 / 07:00 GMT/BST
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22 October 2020
AEW UK REIT Plc (the "Company")
NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) (the "Company"), which, as at 21 October 2020,
directly owns a diversified portfolio of 34 regional UK commercial property
assets, announces its unaudited Net Asset Value ("NAV") and interim dividend
for the three month period ended 30 September 2020.
· Interim dividend of 2.00 pence per share for the three months ended 30
September 2020, in line with the targeted annual dividend of 8.00 pence
· EPRA earnings per share ("EPRA EPS") for the quarter of 1.60 pence (30
June 2020: 1.81 pence).
· NAV of GBP147.24 million or 92.73 pence per share as at 30 September 2020
(30 June 2020: GBP148.24 million or 93.37 pence per share).
· NAV total return of 1.46% for the quarter (30 June 2020: 2.40%).
· For the rental quarter commencing on 29 September 2020, 88% of rent has
been collected or is expected to be received under monthly payment plans
prior to quarter end. A further 3% of income is expected to be received
under agreed, longer term payment plans.
· The Company remains conservatively geared with a loan to NAV ratio of
26.83% (30 June 2020: 34.74%). As at 30 September 2020, the Company had a
cash balance of GBP13.36 million and during the quarter, the Company repaid
GBP12.00 million of the GBP60.00 million loan facility. The Company has GBP12.03
million of the facility available to draw up to the maximum 35% Loan to
NAV at drawdown.
Alex Short and Laura Elkin, Portfolio Managers, AEW UK REIT, commented:
"We are pleased to report robust NAV performance for the Company again this
quarter and to announce an interim dividend of 2 pence per share for the
quarter, especially given the backdrop of the ongoing pandemic. This
demonstrates the strong fundamentals underlying the Company's portfolio
including its high industrial weighting and focus on locations with a depth
of tenant demand. Due to the Company's NAV resilience, high cash weighting
and conservative debt exposure, during the quarter we decided to utilise
some of the Company's available cash to increase EPS in order to build back
towards full dividend cover following the profitable sale of Corby in May
for GBP18.8 million. Post quarter end, the Company bought back 200,000 of its
own Ordinary Shares for gross consideration of GBP153,000. In addition, we
have identified a pipeline of both NAV and earnings accretive direct
purchase opportunities, some of which are well advanced and we expect to
make further announcements in this respect during the coming quarter.
The Company's relatively stable NAV performance reflects the fact that many
of the portfolio assets benefit from viable alternative use potential which
acts as a value stabiliser limiting downside risk and volatility. Seeking
asset purchases where pricing is supported by either a higher or equal
alternative use value has always been a feature of our stock selection
process, and we expect to see an increasing number of opportunities such as
these due to newly introduced changes to the national planning regime which
increase flexibility of use. These changes include the introduction of Use
Class E which groups together a number of previously disparately classified
commercial property uses such as retail, office, light industrial and gyms,
to allow greater ease of movement between them.
Elsewhere in the portfolio, it is encouraging to see our Asset Management
team continue to drive value and income growth, having completed further new
lettings this quarter, often securing income streams ahead of our
independent valuer's estimate of rental value. Amongst these is a new 5 year
lease to existing tenant Vink Holdings at the Apollo Business Park in
Basildon, where rental income has been secured 4% ahead of the valuer's
previous estimates, and 30% ahead of the previous rental level. The 6 new
lettings completed in the portfolio since the start of UK wide lockdowns in
March have secured rental income at a weighted average of 5% ahead of
previous estimates. This can be attributed in part to both the portfolio's
high weighting to the industrial and warehousing sector which has continued
to provide opportunities to grow income, as well as the proactive approach
taken by our team. Further new lettings and lease renewals are currently
under offer which look set to continue this positive trend into future
In terms of rent collection in the portfolio, payment speed for the
September quarter has increased from both the June and March quarters'
collection rate. This is another encouraging sign for coming quarters and
proves that, on the whole, our tenants wish to return to normality as much
as they can, including the usual payment of rent."
As at 30 September 2020, the Company owned investment properties with a fair
value of GBP171.36 million. The like-for-like valuation decrease for the
quarter of GBP0.14 million (0.08%) is broken down as follows by sector:
Sector Valuation 30 September Valuation movement for the
GBP million % GBP million %
Industrial 90.61 52.9 1.00 1.12
Office 45.85 26.7 (0.40) (0.86)
Retail 21.90 12.8 (0.59) (2.60)
Other 13.00 7.6 (0.15) (1.14)
Total 171.36 100.0 (0.14) (0.08)
Net Asset Value
The Company's unaudited NAV as at 30 September 2020 was GBP147.24 million, or
92.73 pence per share. This reflects a decrease of 0.68% compared with the
NAV per share as at 30 June 2020. The Company's NAV total return, which
includes the interim dividend of 2.00 pence per share for the period from 1
April 2020 to 30 June 2020, was 1.46% for the three-month period ended 30
Pence per share GBP million
NAV at 1 July 2020 93.37 148.24
Capital expenditure (0.04) (0.05)
Valuation change in property (0.19) (0.30)
Valuation change in derivatives (0.01) (0.02)
Income earned for the period 2.43 3.86
Expenses and net finance costs for (0.83) (1.32)
Interim dividend paid (2.00) (3.17)
NAV at 30 September 2020 92.73 147.24
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation as at 30 September 2020 and income for the period, but
does not include a provision for the interim dividend for the three month
period to 30 September 2020.
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 July 2020 to 30 September 2020. The dividend payment will
be made on 30 November 2020 to shareholders on the register as at 30 October
2020. The ex-dividend date will be 29 October 2020.
The dividend of 2.00 pence per share will be designated 2.00 pence per share
as an interim property income distribution ("PID").
The EPRA EPS for the three-month period to 30 September 2020 was 1.60 pence
(30 June 2020: 1.81 pence).
It remains the Company's intention to continue to pay dividends in line with
its dividend policy, however the outlook remains unclear given the current
COVID-19 situation. In determining future dividend payments, regard will be
had 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, which will remain a key consideration.
Equity and share buy-back
The Company's share capital consists of 158,774,746 Ordinary Shares, of
which 200,000 are currently held by the Company as treasury shares. This
reflects 200,000 Ordinary Shares having been bought back since the period
end for gross consideration of GBP153,000.
During the quarter, the Company repaid GBP12.00 million of its loan facility
and had borrowings of GBP39.50 million as at 30 September 2020, producing a
Loan to NAV ratio of 26.83%. The Company is able to re-draw this amount and
has a total undrawn facility of GBP20.50 million of which GBP12.03 million is
available as at 30 September 2020 up to the maximum 35% Loan to NAV at
Whilst the Company passed its banking covenant tests in April and in order
to be prudent in the current market environment, the Company obtained
consent from its lender, RBS International, to waive the interest cover
tests within its loan agreement for July and October with the next proposed
test date being January 2021. Irrespective of these waivers, the Company
would have passed its interest cover tests for July and October. The lender
also conveyed a willingness to review the position again in December based
on circumstances then prevailing. The Company is not required to place funds
on account or to comply with additional terms in order to qualify for the
waiver and, during the period of the waiver, the Company will maintain its
usual interest payments on the loan.
The loan continues to attract interest at LIBOR + 1.4% and as a result is
currently benefitting from the reduction in LIBOR rates. The Company's all
in interest rate as at 30 September 2020 was 1.47%.
To mitigate the risk of interest rates rising, the Company has interest rate
caps effective for the remaining term of the loan, capping LIBOR at 1.0% on
a notional value of GBP51.50 million.
The Company is pleased to report that the speed of payment for rent
collection seen in the first 10 days of the September rent quarter exceeded
that seen in the June and March quarters' collection by some 5%. As at the
date of this announcement, the Company had collected the following rental
payments for the rental quarter commencing 29 September 2020, expressed as a
percentage of the quarter's total rental income:
Current Position as at 21 October 2020 Q1 2020 Q2 2020 Q3 2020
Received 90% 89% 67%
Monthly Payments Expected Prior to - - 21%
90% 89% 88%
Agreed on longer term payment plans 6% 3% 3%
Under Negotiation 2% 4% 4%
99% 96% 95%
Outstanding 1% 4% 5%
Total 100% 100% 100%
It should be noted that this is an evolving picture with further payments
being received each day.
Asset Management Update
During the quarter the Company completed the following asset management
Bessemer Road, Basingstoke - During July, the Company completed a 5 year
lease renewal at its 58,000 sq ft industrial premises in Basingstoke. The
lease has been granted with no rent free incentive given to the tenant and
secures a rental income to the Company 6% ahead of independent valuer's
estimated levels. The tenant has the benefit of a break option in year 3.
Langthwaite Grange Industrial Estate, South Kirkby - During August, a lease
renewal was signed with the Company's third largest tenant, Ardagh Glass.
Rent payable under the new lease has been agreed 13% ahead of both
independent valuer's estimated levels and the previous level of passing
rent. The lease is for a five year term and the tenant will benefit from
four months' rent free and a tenant break option after three years.
Apollo Business Park, Basildon - During September, the Company completed a 5
year lease renewal on 35,300 sq ft of these multi-let industrial premises in
Basildon. The lease secures a rental income to the Company 4% ahead of
independent valuer's estimated levels and 30% ahead of the previous rental
level. The tenant will benefit from 6 months' rent free.
Clarke Road, Milton Keynes and Moorside Road, Swinton - Tenant Nationwide
Crash Repair Centres Limited, making up 2% of the Company's rental income,
appointed administrators on 3 September although subsequently, on 4
September, the business was acquired by Redde Northgate Plc. Redde Northgate
have confirmed that they intend to operate the Milton Keynes branch, the
larger of the two within AEWU ownership, and negotiations are currently
underway to extend the terms of this lease which should prove to be value
accretive to the Company. Redde Northgate is a substantial and well
capitalised business reporting profit before tax of over GBP60m for the year
ending April 2019. The former Swinton branch of Nationwide Crash Repair
Centres, representing 0.8% of the Company's rental income, will not be
operated by Redde Northgate on an ongoing basis, however interest has
already been received from a prospective new tenant.
Wheeler Gate, Nottingham - In September, a 5 year renewal lease was
completed with Costa Coffee on a 1,400 sq ft retail unit located in central
Nottingham. The reversionary lease documents the rebasing of Costa's rent
from GBP110,000 to GBP52,000 per annum in line with its estimated rental value.
The tenant benefits from 9 months' rent free.
Bank Hey Street, Blackpool - The Company has begun to undertake remedial
works to its property in Blackpool, which include the overhaul and
reinstatement of its cathodic protection system, and comprehensive repairs
to faience elevations and windows. Works have been budgeted at a total cost
to the Company of c. GBP1.7 million over two years. The nature of these repair
works means that as the costs are incurred, they will be expensed to the
Company's profit or loss, with a corresponding increase expected to be seen
in the revaluation of the property, all else being equal.
Bath Street, Glasgow - Post quarter end the Company exchanged contracts to
sell its 85,000 sq ft office holding at 225 Bath Street in Glasgow City
Centre to a subsidiary company of IQ Student Accommodation. The transaction
is conditional upon various matters including the grant of planning
permission for the development of a 480 bedroom student housing development.
Sale pricing will be determined following the approval of all conditions
according to an agreed matrix ranging from GBP8.55 to GBP9.30 million.
Transaction pricing reflects 98% of pricing levels being discussed by the
parties prior to the onset on the Coronavirus pandemic.
Vacancy - The portfolio's vacancy level now sits at 4.9% (30 June 2020:
4.7%), excluding vacancy contributed by the asset at 225 Bath Street Glasgow
(the overall level is 8.2% including this asset). As set out above, this
asset has now been exchanged for sale for alternative use redevelopment. As
a condition of the sale agreement, full vacancy must be achieved in the
building before the sale can be completed. Additional vacancy this quarter
arises from an industrial unit in Basildon where an agreement was made to
surrender the lease of existing tenant Fulfilment Logistics in exchange for
full payment of arrears as well as a surrender premium contributing to
dilapidations. The unit is felt to have some reversionary potential and
viewings have already been conducted with possible replacement tenants.
Vacancy also increased due to the departure of H Samuel at 15 Fargate in
Sheffield. Again, tenant interest has been seen in this unit but, being in
the retail sector, faces obvious head winds. The portfolio vacancy level (ex
Bath St Glasgow) is in line with the Company's target vacancy level of below
Alex Short email@example.com
+44(0) 20 7016 4848
Laura Elkin Laura.firstname.lastname@example.org
+44(0) 20 7016 4869
Nicki Gladstone email@example.com
+44(0) 7711 401 021
Link Company Matters Limited firstname.lastname@example.org
+44(0) 1392 477 500
TB Cardew AEW@tbcardew.com
Ed Orlebar +44 (0) 7738 724 630
Lucas Bramwell +44 (0) 7939 694 437
Gillian Martin/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 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, raising GBP100.5m.
Since IPO it has raised a further GBP58m.
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 the income stream.
AEWU is currently paying an annualised dividend of 8p per share.
www.aewukreit.com  
About AEW UK Investment Management LLP
AEW UK Investment Management LLP employs a well-resourced team comprising 26
individuals covering investment, asset management, operations and strategy.
It is part of AEW Group, one of the world's largest real estate managers,
with &euro70.2bn of assets under management as at 30 June 2020. 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 30
June 2020, AEW Group managed &euro33.6bn of real estate assets on behalf of
a number of funds and separate accounts with over 420 staff located in 9
offices. The Investment Manager is a 50:50 joint venture between the
principals of the Investment Manager and AEW. In May 2019, AEW UK Investment
Management LLP was awarded Property Manager of the Year at the Pensions and
Investment Provider Awards.
Category Code: MSCH
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 86342
EQS News ID: 1142252
End of Announcement EQS News Service
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