AEW UK REIT plc (AEWU) AEW UK REIT plc: Half Yearly Results 17-Nov-2021 / 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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17 November 2021

AEW UK REIT PLC

Interim Report and Financial Statements

for the six months ended 30 September 2021

AEW UK REIT PLC ("AEW UK REIT" or the "Company"), , which holds a diversified portfolio of 35 commercial investment properties throughout the UK, is pleased to publish its Interim Report and Financial Statements for the six months ended 30 September 2021.

Mark Burton, Chairman of AEW UK REIT,?commented: "We are very pleased with the strong performance over the period with the Company's NAV increasing by 10.96% and a total shareholder return of 28.37%. . The valuation of the Company's property portfolio rose by 9.81% on a like-for-like basis, chiefly driven by its industrial assets. The sales of Langthwaite Industrial Estate, South Kirkby for GBP10.84 million and Wella Warehouse, Basingstoke for GBP5.86 million post period end were well above both purchase prices and book values.

The Company continues to see a number of attractive investment opportunities as it seeks to deliver further attractive returns to shareholders and support the 8p annual dividend. The Company made two acquisitions during the period, and one after half-year end, that are aligned with AEWU's strategy of adding value through active asset management by renewing current tenancies and securing new tenants. "

Financial Highlights

              Net Asset Value ('NAV') of GBP174.29 million and of 110.01 pence per share ('pps') as at 30 September 2021 
   --             (31 March 2021: GBP157.08 million and 99.15 pps). 
 
              Operating profit before fair value changes of GBP5.88 million for the period (six months ended 30 September 
   --             2020: GBP5.93 million). 
 
              Profit Before Tax ('PBT') of GBP23.55 million and earnings per share ('EPS') of 14.86 pps for the period 
              (six months ended 30 September 2020: GBP5.72 million and 3.61 pps). PBT includes a GBP16.60 million gain 
   --             arising from changes to the fair values of investment properties in the period (six months ended 30 
              September 2020: loss of GBP3.33 million). This change explains the significant rise in PBT for the period. 
 
              EPRA Earnings Per Share ('EPRA EPS') for the period of 3.45 pps (six months ended 30 September 2020: 3.41 
        --        pps). 
 
   --             Total dividends of 4.00 pps declared in relation to the period (six months ended 30 September 2020: 4.00 
              pps). 
              Shareholder Total Return for the period of 28.37% (six months ended 30 September 2020: 16.13%). 
   -- 
 
              The price of the Company's Ordinary Shares on the London Stock Exchange was 102.80 pps as at 30 September 
   --             2021 (31 March 2021: 83.20 pps). 
 
              As at 30 September 2021, the Company had a balance of GBP50.50 million drawn down (31 March 2021: GBP39.50 
              million) of its GBP60.00 million (31 March 2021: GBP60.00 million) term credit facility with the Royal Bank 
              of Scotland International Limited ('RBSi') and was geared to 28.97% of NAV (31 March 2021: 25.15%). The 
   --             Company can draw GBP9.50 million of the remaining facility up to the maximum 35% Loan to NAV at drawdown 
              (see note 13 below for further details). 
 
   --             The Company held cash balances totalling GBP15.16 million as at 30 September 2021 (31 March 2021: GBP17.45 
              million). 

Property Highlights

              As at 30 September 2021, the Company's property portfolio had a valuation of GBP206.69 million across 35 
   --             properties (31 March 2021: GBP179.00 million across 34 properties) as assessed by the valuer1 and a 
              historical cost of GBP197.69 million (31 March 2021: GBP173.28 million). 
              The Company acquired two properties during the period for a total purchase price of GBP18.54 million, 
              excluding acquisition costs (year ended 31 March 2021: one property for GBP5.40 million). Post period-end, 
   --             in November 2021, the Company acquired a retail park asset 
              in Coventry for a purchase price of GBP16.41 million, excluding acquisition costs. 
 
              The Company made one disposal during the period, Langthwaite Industrial Estate, South Kirkby for gross 
              sale proceeds of GBP10.84 million (year ended 31 March 2021: two properties for gross sale proceeds of 
              GBP29.30 million). Post period-end, in October 2021, the 
   -- 
              Company disposed of Wella Warehouse, Basingstoke, for gross proceeds of GBP5.86 million. 
 
              The portfolio had an EPRA vacancy rate of 8.59% as at 30 September 2021 (31 March 2021: 8.96%). Excluding 
              vacancy contributed by Bath Street, Glasgow, which was exchanged to be sold with the condition of vacant 
   --             possession, the vacancy rate was 5.43% (31 March 2021: 5.58%). 
 
              Rental income generated during the period was GBP7.87 million (six months ended 30 September 2020: GBP8.12 
   --             million). 
 
              EPRA Net Initial Yield ('EPRA NIY') of 6.45% as at 30 September 2021 (31 March 2021: 7.37%). 
   -- 
 
              Weighted Average Unexpired Lease Term ('WAULT') of 4.00 years to break and 6.20 years to expiry (31 March 
   --             2021: 4.43 years to break and 6.71 years to expiry). 
 
              As at the date of this report, 87% of the rent due for the September 2021 quarter had been collected, 99% 
   --             for the June 2021 quarter and 99% for the March 2021 quarter. 
 

1 The valuation figure is reconciled to the fair value under IFRS in note 10.

Chairman's Statement

Overview

I am pleased to report the unaudited interim results of the Company for the six months ended 30 September 2021 (the 'period'). The Company held a diversified portfolio of 35 commercial investment properties located throughout the UK with a value of GBP206.69 million as at 30 September 2021.

The Company's NAV has performed well over the period, having increased by 10.96%. The valuation of the Company's property portfolio rose by 9.81% on a like-for-like basis over the period, chiefly driven by its industrial assets. The sales of Langthwaite Industrial Estate, South Kirkby for GBP10.84 million and Wella Warehouse, Basingstoke for GBP5.86 million post period end were undertaken at 1.9x and 1.7x the purchase prices, respectively. The resulting profits achieved on disposal were GBP2.25 million and GBP1.93 million above book values, respectively, providing a boost to the Company's NAV. The Company closed the period in a position to take advantage of attractive opportunities to reinvest as a result of its cash position and debt covenant headroom. The Company has maintained a conservative Loan to NAV ratio, which stood at 29.00% at 30 September 2021, and had a healthy cash balance of GBP15.16 million.

Following the disposal of the Corby and Solihull sites in the prior period, the Company reinvested the sales proceeds to make two acquisitions during the period. Arrow Point Retail Park in Shrewsbury was acquired in May 2021 for GBP8.35 million and is a fully-let, purpose-built retail park prominently located on a busy estate and providing a Net Initial Yield ('NIY') of 8.7%. The second, 15-33 Union Street, Bristol, is a prime retail site located on a busy pedestrian thoroughfare in Bristol city centre and was purchased for GBP10.19 million, equating to a low capital value of GBP161 per sq ft and reflecting a NIY of 8.0%. Both of these assets provide opportunity for value growth in the medium to long term, and also have strong and stable income streams from their tenancy profiles.

The ongoing remedial works in Blackpool, along with the vacancy costs at Glasgow where we have sold an asset conditional on obtaining vacant possession, have constrained the portfolio's overall EPRA EPS, which was 3.45 pence for the period, providing a dividend cover of 86.10%. Following the planned sale of Glasgow, currently anticipated in December 2021, and completion of the works at Blackpool in early 2022, we expect this cost overhead to fall, leading to an increase in the EPRA EPS. The Company has made one acquisition post period-end of a retail park in Coventry for a purchase price of GBP16.41 million. This presents opportunities to add value through active asset management by renewing current tenancies and securing new tenants, which will further add to the recent strong income return and NAV growth achieved by the Company. The acquisition is accretive to EPRA EPS and takes the Company close to full investment.

The Company continues to work with its tenants in order to manage the difficulties posed by the pandemic. To date, the tenancy profile of the Company has proved to be resilient, demonstrated by the Company's low underlying vacancy rate of 5.43%* by Estimated Rental Value ('ERV') as at 30 September 2021. Rent collection rates have remained high for the March and June 2021 quarters, being 99% for both and 87% has been collected to date for the September 2021 rent quarter. These collection rates are high in comparison with the averages seen in the wider market and we expect that ultimate rates of collection, following the expiry of longer-term payment plans, should result in collection rates in excess of 98%. There are a small number of tenants who continue to face challenges in the current environment, and in a small number of cases the Company has agreed a longer-term payment plan to recover rental income in full over an extended period. A prudent assessment has been made of the recoverability of the Company's outstanding debts and a provision has been made in the financial statements for

potential debt write-offs.

The office park at Oxford continues to perform well with its transition to life sciences/medical use, a sector which is seeing particularly strong investor demand at present. Moreover, after a tumultuous period for the retail sector, we have seen valuations stabilise this period, with our valuations increasing by 1.36% on a like-for-like basis, particularly driven by our new retail warehousing holding in Shrewsbury. Stock selection and active asset management continue to be key features of the Company's strategy and drivers of performance. During the period, the Company completed a number of lettings and lease renewals, the most notable of which was two new lettings at our office holding in Bristol, both of which were 15% above ERV. These are noted in more detail below in the 'Asset Management' section of the Investment Manager's Report.

The Company's share price was 102.80 pence per share as at 30 September 2021, representing a 6.56% discount to NAV (31 March 2021: 83.20 pence per share, representing a 16.1% discount to NAV). Subsequent to the period-end, the Company's share price has experienced additional growth, causing a further reduction in the discount to NAV.

* Including vacancy contributed by Bath Street, Glasgow, which has been sold with the condition of vacant possession, the vacancy rate was 8.59%.

Financial Results

 
 
                                          Six months ended 30                              Six months ended 30 
                                          September 2021               Year ended 31 March September 2020 
                                                                       2021 
 
Operating Profit before fair value        5,879                        10,735              5,934 
changes (GBP'000) 
Operating Profit (GBP'000)                  23,919                       23,102              6,276 
Profit Before Tax (GBP'000)                 23,547                       22,172              5,724 
Earnings Per Share (basic and diluted)    14.86                        13.98               3.61 
(pence)* 
EPRA Earnings Per Share (basic and        3.45                         6.19                3.41 
diluted) (pence)* 
Ongoing Charges (%)                       1.31                         1.36                1.31 
Net Asset Value per share (pence)         110.01                       99.15               92.73 
EPRA Net Asset Value per share (pence)    109.94                       99.11               92.70 

* see note 8 of the Financial Statements for the corresponding calculations.

Financing

The Company has a GBP60.00 million loan facility, of which it had drawn a balance of GBP50.50 million as at 30 September 2021 (31 March 2021: GBP60.00 million facility; GBP39.50 million drawn), producing a Loan to NAV ratio of 28.97% (31 March 2021: 25.15%).

The unexpired term of the facility was 2.1 years as at 30 September 2021 (31 March 2021: 2.6 years). The loan incurs interest at 3-month SONIA +1.4%, which equated to an all-in rate of 1.47% as at 30 September 2021 (31 March 2021: 3-month LIBOR + 1.4% equating to an all-in rate of 1.44%).

The Company is protected from a significant rise in interest rates as it has interest rate caps in place. Throughout the period and up to the date of this report, the Company had in effect interest rate caps on a notional value of GBP51.50 million of the loan, capped at 1.00%, which resulted in the loan balance being 102.0% hedged as at 30 September 2021.

As noted in the KPIs, the Company targets long-term gearing of 35% Loan to NAV, which is the maximum gearing on drawdown of the RBSi facility. The Board and Investment Manager continue to monitor the level of gearing and have the ability to adjust the target gearing according to the Company's circumstances and perceived risk levels.

The Company passed its Interest Cover Ratio ('ICR') tests for April, July and October 2021 with significant headroom.

Dividends

The Company has continued to deliver on its target of paying dividends of 8.00 pence per share per annum. During the period, the Company declared and paid two quarterly dividends of 2.00 pence per Ordinary Share, in line with its target. Dividends for the period were 86.00% covered by EPRA EPS.

It remains the Company's intention to continue to pay dividends in line with its dividend policy, and the existing portfolio and investment opportunities support this policy. However, the outlook remains unclear in the wake of the COVID-19 pandemic and 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.

Outlook

The easing of most of the remaining COVID-19 restrictions, combined with the continued rollout of the vaccination programme, has lifted most economists' outlook for the post COVID-19 rebound in the second half of 2021. In light of this, the property market has experienced a gradual recovery, with rent collection levels greatly improving, as cash flow pressures on tenants ease. With its strong cash position and borrowing covenant headroom, the Company is well positioned to take advantage of attractive opportunities coming to the market. During the period, the Company has displayed strong NAV performance, reflecting the geographical diversity of the portfolio, its circa 50% exposure to the industrial sector and the fact that many of its assets benefit from viable alternative use potential, limiting downside risk and volatility.

In the near term, the Board and Investment Manager will continue to focus on minimising the legacy impact of COVID-19 on its stakeholders and, as more attractive opportunities arise in the investment market, will aim to find suitable assets to build earnings back to a fully covered dividend. The developing economic conditions will be monitored closely and the Company's strategy adjusted accordingly. It is hoped that the start of 2022 will build upon the economic recovery of the second half of 2021, providing conditions to enable further growth of the Company

Mark Burton

Chairman

16 November 2021

Key Performance Indicators

KPI AND DEFINITION                   RELEVANCE TO STRATEGY 
                                                                                          TARGET       PERFORMANCE 
 
1. EPRA NIY 
 
A representation to investors of                                                                       6.45% 
what their initial net yield would   The Company's EPRA NIY demonstrates the ability to 
be at a predetermined purchase price generate income from its portfolio in the short-term              at 30 September 
after taking account of all          in order to meet its target dividend.                7.50 -       2021 (31 March 
associated costs, e.g. void costs                                                         10.00%       2021: 7.37%). 
and rent free periods. 
 
2. True Equivalent Yield 
 
The average weighted return a                                                                          7.67% 
property will produce according to   The Company's True Equivalent Yield demonstrates the 
the present income and ERV           Company's ability to generate income, both from its  7.50 -       at 30 September 
assumptions, assuming the income is  existing leases and its ERVs, in order to meet its   10.00%       2021 (31 March 
received quarterly in advance.       target dividend.                                                  2021: 8.15%). 
 
3. Reversionary Yield                                                                                  7.67% 
 
The expected return the property     A Reversionary Yield profile shows a potentially                  at 30 September 
will provide once rack rented.       sustainable income stream that can be used to meet   7.50 -       2021 (31 March 
                                     dividends past the expiry of a property's current    10.00%       2021: 8.18%). 
                                     leasing arrangements. 
 
 
                                     The Investment Manager believes that current market 
4. WAULT to expiry                   conditions present an opportunity whereby assets                  6.20 years 
                                     with a shorter unexpired lease term are often 
The average lease term remaining to  mispriced. It is also the Investment Manager's view               at 30 September 
expiry across the portfolio,         that a shorter WAULT is useful for active asset                   2021 (31 March 
weighted by contracted rent.         management, particularly in certain growth sectors   >3 years     2021: 6.71 
                                     such as warehousing, as it allows the Investment                  years). 
                                     Manager to engage in direct negotiation with tenants 
                                     rather than via rent-review mechanisms. 
 
 
                                     The Investment Manager believes that current market 
                                     conditions present an opportunity whereby assets 
5. WAULT to break                    with a shorter unexpired lease term are often 
                                     mispriced. As such, it is in line with the                        4.00 years 
The average lease term remaining to  Investment Manager's strategy to acquire properties 
break, across the portfolio weighted with a WAULT that is generally shorter than the                   at 30 September 
by contracted rent.                  benchmark. It is also the Investment Manager's view  >3 years     2021 (31 March 
                                     that a shorter WAULT is useful for active asset                   2021: 4.43 
                                     management, particularly in certain growth sectors                years). 
                                     such as warehousing, as it allows the Investment 
                                     Manager to engage in direct negotiation with tenants 
                                     rather than via rent-review mechanisms. 
 
6. NAV                                                                                                 GBP174.29 million 
 
NAV is the value of an entity's      Provides stakeholders with the most relevant                      at 30 September 
assets minus the value of its        information on the fair value of the assets and      Increase     2021 (31 March 
liabilities.                         liabilities of the Company.                          year-on-year 2021: GBP157.08 
                                                                                                       million). 
 
 
                                     The Company has changed the measure of its Leverage 
                                     KPI from 'Loan to Gross Asset Value ('GAV')' to 
                                     'Loan to NAV'. This is in line with the measure used 
7. Leverage (Loan to NAV)            in its banking covenants and so is considered to be 
                                     more relevant to the Company's position.                          28.97% 
The proportion of the Company's net 
assets that is funded by borrowings.                                                                   at 30 September 
                                     The target of 35% Loan to NAV, which is the gearing  35%          2021 (31 March 
                                     limit at drawdown under the RBSi facility,                        2021: 25.15%). 
                                     approximates to the previous target of 25% Loan to 
                                     GAV, which is the measure used in the Company's 
                                     Investment Guidelines. Gearing will continue to be 
                                     monitored using both measures. 
 
                                                                                                       8.59% / 5.43% 
                                                                                                       excluding 
                                                                                                       vacancy 
8. Vacant ERV                                                                                          contributed by 
                                                                                                       Glasgow* 
The space in the property portfolio  The Company's aim is to minimise vacancy of the 
which is currently unlet, as a       properties. A low level of structural vacancy                     at 30 September 
percentage of the total ERV of the   provides an opportunity for the Company to capture                2021 (31 March 
portfolio.                           rental uplifts and manage the mix of tenants within  <10.00%      2021: 8.96%/ 
                                     a property.                                                       5.58% excluding 
                                                                                                       vacancy 
                                                                                                       contributed by 
                                                                                                       Glasgow). 
 
                                                                                                       4.00 pps 
9. Dividend 
                                                                                                       for the six 
Dividends declared in relation to                                                                      months to 30 
the year. The Company targets a                                                                        September 2021. 
dividend of 8.00 pence per Ordinary  The dividend reflects the Company's ability to 
Share per annum. However, given the  deliver a sustainable income stream from its         4.00 pps     This supports an 
current COVID-19 situation, regard   portfolio.                                           (six month   annualised 
will be had to the circumstances                                                          period to 30 target of 8.00 
prevailing at the relevant time in                                                        September)   pps (six months 
determining dividend payments.                                                                         to 30 September 
                                                                                                       2020: 4.00 pps). 
 
 
 
10. Ongoing Charges                                                                                    1.31% 
                                     The Ongoing Charges ratio provides a measure of 
The ratio of annualised              total costs associated with managing and operating                for the six 
administration and operating costs   the Company, which includes the management fees due               months to 30 
expressed as a percentage of average to the Investment Manager. This measure is to        <1.50%       September 2021 
NAV throughout the period.           provide investors with a clear picture of                         (six months to 
                                     operational costs involved in running the Company.                30 September 
                                                                                                       2020: 1.31%). 
 
                                                                                                       GBP23.55 million/ 
                                                                                                       14.86 pps 
11. Profit before Tax ('PBT') 
                                                                                          4.00 pps     for the six 
PBT is a profitability measure which                                                      (six month   months to 30 
considers the Company's profit       The PBT is an indication of the Company's financial  period to    September 2021 
before the payment of income tax.    performance for the period in which its strategy is               (six months to 
                                     exercised.                                           30           30 September 
                                                                                          September)   2020: GBP5.72 
                                                                                                       million/3.61 
                                                                                                       pps). 
 
12. Shareholder Total Return 
                                                                                                       28.37% 
The percentage change in the share 
price assuming dividends are         This reflects the return seen by shareholders on                  for the six 
reinvested to purchase additional    their shareholdings through share price movements    8.00%        months to 30 
Ordinary Shares.                     and dividends received.                                           September 2021 
                                                                                                       (six months to 
                                                                                                       30 September 
                                                                                                       2020: 16.13%). 
13. EPRA EPS 
Earnings from core operational                                                                         3.45 pps 
activities. A key measure of a 
company's underlying operating                                                            4.00 pps     for the six 
results from its property rental     This reflects the Company's ability to generate      (six month   months to 30 
business and an indication of the    earnings from the portfolio which underpins          period to    September 2021 
extent to which current dividend     dividends.                                                        (six months to 
payments are supported by earnings.                                                       30           30 September 
See note 8.                                                                               September)   2020: 3.41 pps). 
 

* Glasgow has exchanged to be sold with condition of vacant possession.

Investment Manager's Report

Economic Outlook

The easing of most of the remaining COVID-19 restrictions has increased market optimism in both the direct and indirect markets. Oxford Economics' latest forecasts published in mid-September 2021 indicate UK GDP growth to be 6.9% for the whole year, compared with the 9.8% contraction in 2020. However, the Bank of England signalled its concerns on inflation being well ahead of its target in mid-October. Due to energy, labour and materials shortages UK inflation is expected to peak near 6% in early 2022. As a result, gilt markets are pricing in interest rate hikes starting in December 2021 followed by further increases in 2022. Despite these interest rate increases, Oxford Economics' latest forecast confirms the continued strong UK economic recovery with GDP growth of 6.7% in 2022.

Although the direct markets are still strongest in the industrial and warehouse sector, the next year is expected to be a year of recovery and growth where some parts of the retail and leisure sectors may be the beneficiaries. The Company is focusing on portfolio adjustments to take advantage of value opportunities, driven more by the specifics of the asset than the sector. This may see the Company realise profits through sales where it believes values have been optimised and where the funds can be recycled into assets with better growth potential going forwards. There is likely to be a slightly reduced weighting to business space and a rotation towards retail warehousing, leisure and a continued focus on assets with viable alternative use value. Assets whose current value is supported by long-term alternative use optionality, irrespective of current use, will be of increasing importance in our stock selection process. Moreover, recent changes to the Use Classes Order are likely to have a significant impact on portfolios in terms of broadening potential use. Finally, in line with market optimism and a period of post pandemic growth, rent collection rates have strongly improved and this trend is expected to continue.

Financial Results

The Company's NAV as at 30 September 2021 was GBP174.29 million or 110.01 pps (31 March 2021: GBP157.08 million or 99.15 pps). This is an increase of 10.86 pps or 10.96% over the period.

EPRA EPS for the period was 3.45 pence which, based on dividends paid of 4.00 pps, reflects a dividend cover of 86.00%. The increase in dividend cover compared to the prior six-month period has largely arisen due to improvements in rent collection levels, along with successful legal outcomes that have recovered significant arrears. Income across the tenancy profile has remained largely intact. Collection rates have reached 99% for both the March and June 2021 quarters respectively, with further payments expected to be received under longer-term payment plans. Of the outstanding arrears, GBP0.61 million has been provided for expected credit losses.

Financing

As at 30 September 2021, the Company has a GBP60.00 million loan facility with RBSi, in place until October 2023, the details of which are presented below:

                                      30 September 2021           31 March 2021 
Facility                              GBP60.00 million              GBP60.00 million 
Drawn                                 GBP50.50 million              GBP39.50 million 
Gearing (Loan to NAV)                 28.97%                      25.15% 
Interest rate                         1.47% all-in (SONIA + 1.4%) 1.44% all-in (LIBOR +1.4%) 
Notional Value of Loan Balance Hedged 102.0%                      130.4% 

Due to GBP LIBOR ending at the end of 2021, the Company transitioned to SONIA on 20 July 2021, with a credit adjustment spread of 0.0981%.

Property Portfolio

During the period, the Company disposed of Langthwaite Industrial Estate, South Kirkby, for net proceeds of GBP10.84 million. The Company made two acquisitions during the period being: Arrow Point Retail Park in Shrewsbury, which was acquired in May 2021 for GBP8.35 million, and 15-33 Union Street, Bristol, which was purchased in June 2021 for a price of GBP10.19 million.

The following tables illustrate the composition of the portfolio in relation to its properties, tenants and income streams:

Summary by Sector as at 30 September 2021

 
 
 
 
 
                                                                 Gross   Gross                       Like-    Like- 
 
                                                                 passing passing                     for like for like 
                                                        WAULT to 
                                                Vacancy          rental  rental               Rental rental   rental 
                  Number of                             break 
                            Valuation Area      by ERV           income  income  ERV   ERV    income growth*  growth* 
Sector            assets                                (years) 
                            (GBPm)      (sq ft)   (%)              (GBPm)    (GBPpsf)  (GBPm)  (GBPpsf) (GBPm)   (GBPm)     % 
 
Industrial        20        114.72    2,428,590 6.45    3.73     8.04    3.31    9.28  3.82   4.20   0.10     2.42 
Offices           5         39.95     251,812   18.73   3.12     2.19    8.71    3.62  14.38  1.16   0.02     1.83 
Standard retail   6         24.62     237,792   10.35   4.60     2.65    11.13   2.36  9.92   1.21   (0.02)   (1.76) 
Retail warehouses 2         14.85     145,912   0.00    1.95     1.32    9.07    1.21  8.29   0.57   (0.02)   (6.93) 
Alternatives      2         12.55     112,355   0.00    6.85     1.50    13.31   1.23  10.99  0.73   (0.04)   (5.01) 
 
Portfolio         35        206.69    3,176,461 8.59    4.00     15.70   4.94    17.70 5.57   7.87   0.04     0.57 

Summary by Geographical Area as at 30 September 2021

 
 
 
 
 
                                                                    Gross   Gross                       Like-   Like- 
 
                                                                    passing passing                     for     for 
                                                            WAULT                                       like    like 
                                                    Vacancy to      rental  rental               Rental 
                       Number                                                                           rental  rental 
                       of       Valuation Area      by ERV  break   income  income  ERV   ERV    income 
Geographical Area                                                                                       growth* growth* 
                       assets   (GBPm)      (sq ft)   (%)     (years) (GBPm)    (GBPpsf)  (GBPm)  (GBPpsf) (GBPm) 
                                                                                                        (GBPm)    % 
 
South West             5        37.69     517,232   12.65   2.85    2.70    5.21    3.40  6.57   1.21   (0.03)  (3.08) 
Yorkshire and          7        34.10     796,951   4.51    2.59    2.43    3.05    3.10  3.89   1.41   (0.20)  (12.34) 
Humberside 
South East             5        30.32     195,545   3.94    3.99    2.03    10.40   2.19  11.19  1.13   (0.01)  (0.41) 
Eastern                5        23.85     344,339   10.23   2.29    1.84    5.33    2.06  5.98   0.91   0.21    29.68 
West Midlands          4        23.22     458,613   3.42    3.46    1.90    4.14    1.83  4.00   0.85   (0.02)  (2.71) 
Wales                  2        18.55     376,138   0.00    7.58    1.25    3.31    1.43  3.82   0.64   (0.03)  (4.97) 
North West             4        18.28     302,061   0.00    4.44    1.56    5.18    1.40  4.64   0.78   0.16    25.32 
Rest of London         1        9.25      71,720    0.00    10.12   0.96    13.40   0.75  10.45  0.47   (0.02)  (4.87) 
Scotland               1        7.50      85,643    51.1    1.38    0.64    7.49    1.16  13.54  0.27   (0.01)  (2.92) 
East Midlands          1        3.93      28,219    0.00    5.16    0.39    13.82   0.38  13.38  0.20   (0.01)  (2.96) 
 
Portfolio              35       206.69    3,176,461 8.59    4.00    15.70   4.94    17.70 5.57   7.87   0.04    0.57 

*like-for-like rental growth is for the six months ended 30 September 2021.

Source: Knight Frank/AEW, 30 September 2021.

Individual Property Classifications

                                                                                             Market Value 
                                                                                             Range 
              Property                            Sector            Region 
                                                                                             (GBPm) 
 
 
              Eastpoint Business Park, Oxford     Offices           South East 
1                                                                                            15.0-20.0 
 
              Gresford Industrial Estate, Wrexham Industrial        Wales 
2                                                                                            10.0-15.0 
3             40 Queen Square, Bristol            Offices           South West               10.0-15.0 
4             15-33 Union Street, Bristol         Standard retail   South West               10.0-15.0 
5             Lockwood Court, Leeds               Industrial        Yorkshire and Humberside 7.5-10.0 
 
              London East Leisure Park, Dagenham  Other             Rest of London 
6                                                                                            7.5 -10.0 
 
              Arrow Point Retail Park, Shrewsbury Retail warehouses West Midlands 
7                                                                                            7.5-10.0 
 
              Storey's Bar Road, Peterborough     Industrial        Eastern 
8                                                                                            7.5-10.0 
9             Sarus Court, Runcorn                Industrial        North West               7.5-10.0 
10            225 Bath Street, Glasgow            Offices           Scotland                 7.5-10.0 

The Company's top ten properties listed above comprise 49.2% of the total value of the portfolio.

                                                                                                        Market Value 
                                                                                                        Range 
              Property                                       Sector            Region 
                                                                                                        (GBPm) 
 
11            Euroway Trading Estate, Bradford               Industrial        Yorkshire and Humberside 5.0-7.5 
12            Apollo Business Park, Basildon                 Industrial        Eastern                  5.0-7.5 
13            Brockhurst Crescent, Walsall                   Industrial        West Midlands            5.0-7.5 
14            Westlands Distribution Park, Weston Super Mare Industrial        South West               5.0-7.5 
15            Barnstaple Retail Park, Barnstaple             Retail warehouses South West               5.0-7.5 
16            Walkers Lane, St Helens                        Industrial        North West               5.0-7.5 
17            Deeside Industrial Park, Deeside               Industrial        Wales                    5.0-7.5 
18            Diamond Business Park, Wakefield               Industrial        Yorkshire and Humberside 5.0-7.5 
19            Wella Warehouse, Basingstoke                   Industrial        South East               5.0-7.5 
20            Oak Park, Droitwich                            Industrial        West Midlands            <5.0 
21            Mangham Road, Rotherham                        Industrial        Yorkshire and Humberside <5.0 
22            Pearl House, Nottingham                        Standard retail   East Midlands            <5.0 
23            710 Brightside Lane, Sheffield                 Industrial        Yorkshire and Humberside <5.0 
24            Hall Industrial Estate, Basildon               Industrial        Eastern                  <5.0 
25            Cedar House, Gloucester                        Offices           South West               <5.0 
26            75 Above Bar Street, Southampton               Standard retail   South East               <5.0 
27            Eagle Road, Redditch                           Industrial        West Midlands            <5.0 
28            Odeon Cinema, Southend                         Other             Eastern                  <5.0 
29                                                           Standard retail   South East               <5.0 
              Commercial Road, Portsmouth 
30            Clarke Road, Milton Keynes                     Industrial        South East               <5.0 
31            Bridge House, Bradford                         Industrial        Yorkshire and Humberside <5.0 
32                                                           Standard retail   North West               <5.0 
              Pricebusters Building, Blackpool 
33            Vantage Point, Hemel Hempstead                 Offices           Eastern                  <5.0 
34            Moorside Road, Swinton                         Industrial        North West               <5.0 
35            11/15 Fargate, Sheffield                       Standard retail   Yorkshire and Humberside <5.0 

Sector and Geographical Allocation by Market Value as at 30 September 2021

Sector Allocation

Sector             % 
Standard retail    11.9 
Retail warehouses  7.2 
Offices            19.3 
Industrial         55.5 
Other              6.1 

Geographical Allocation

Location                  % 
Rest of London            4.5 
South East                14.7 
South West                18.2 
Eastern                   11.6 
West Midlands             11.2 
East Midlands             1.9 
North West                8.8 
Yorkshire and Humberside  16.5 
Wales                     9.0 
Scotland                  3.6 

Source: Knight Frank valuation report as at 30 September 2021.

Top Ten Tenants

                                                                                                        % of 
                                                                                                Passing Portfolio 
                                                                                                Rental  Total 
              Tenant                             Sector     Property 
                                                                                                Income  Contracted 
                                                                                                (GBP'000) Rental 
                                                                                                        Income 
1             Plastipak UK Ltd                   Industrial Gresford Industrial Estate, Wrexham 883     5.6 
2             Wyndeham Group                     Industrial Wyndeham, Peterborough              644     4.1 
 
3             Mecca Bingo Ltd                               London East Leisure Park, Dagenham  625     4.0 
                                                 Leisure 
4             Harrogate Spring Water Limited     Industrial Lockwood Court, Leeds               603     3.8 
5             Odeon Cinemas                      Leisure    Odeon Cinema, Southend-on-Sea       535     3.4 
6             Wilko Retail Limited               Retail     15-33 Union Street, Bristol         481     3.1 
7             Advanced Supply Chain (BFD) Ltd    Industrial Euroway Trading Estate, Bradford    467     3.0 
8             HFC Prestige Manufacturing Limited Industrial Cranbourne House, Basingstoke       460     2.9 
9             Charlies Stores                    Retail     Arrow Point Retail Park, Shrewsbury 440     2.8 
10            Poundland Limited                  Retail     Pricebusters Building, Blackpool    414     2.6 

The Company's top ten tenants, listed above, represent 35.4% of the total passing rental income of the portfolio.

Source: Knight Frank valuation report as at 30 September 2021.

Asset Management

The Company completed the following material asset management transactions during the period:

Acquisitions - Arrow Point Retail Park in Shrewsbury was acquired in May 2021 for GBP8.35 million and is a fully-let, purpose-built retail park prominently located on a busy commercial estate, providing a NIY of 8.7%. The second acquisition, 15-33 Union Street, Bristol, is a retail/leisure site located on a busy pedestrian thoroughfare in Bristol city centre and provides a NIY of 8.0%. Both of these assets provide opportunity for value growth in the medium to long term as well as strong and stable income streams from their tenancy profiles.

Disposals - Sales of Langthwaite Industrial Estate, South Kirkby for GBP10.84 million and Wella Warehouse, Basingstoke for GBP5.86 million have now been completed, with the latter completing post period end. The sales prices achieved were 31% and 35% ahead of their March 2021 valuations, and also 1.9x and 1.7x their purchase prices, respectively.

Arrow Point Retail Park, Shrewsbury - We have extended British Heart Foundation's unexpired term to break by moving their November 2021 break option out to December 2024 in return for four months' rent free. The majority of the rent free was used to write off rent arrears predating the Company's ownership. British Heart Foundation's lease expires in November 2028.

Diamond Business Park, Wakefield - We have completed a new five year ex-Act lease at GBP41,866 per annum/GBP3.75 per sq ft on Unit 14, which reflects a rent 25% above the March 2021 ERV. The tenant has provided a rent deposit equivalent to six month's rent. Six months' rent free was given as an incentive.

40 Queen Square, Bristol - We have completed a new five year ex-Act lease to Brewin Dolphin at GBP103,770 per annum/ GBP30 per sq ft versus the previous passing rent of GBP22 per sq ft and the March 2021 ERV of GBP26 per sq ft. A 12 month rent free incentive was given. We have now also completed a lease renewal to Candide Limited until February 2025 at the same rent of GBP30 psf (GBP116,970 per annum). The previous passing rent was GBP22.81 per sq ft and only 1.5 months' rent free incentive was given. These lettings at GBP30 psf have produced an increase in the property's valuation of GBP1.05 million (9.9%) over the past six months.

Vantage Point, Hemel Hempstead - We have completed a new five year ex-Act lease (tenant break option at the end of year three) to Netronix Integration Limited at a rent of GBP33,683 per annum/GBP14.50 per sq ft, which is GBP3 per sq ft above ERV. Four months' rent free incentive was given, with a further two months should the tenant not exercise their tenant break option at the end of the third year.

Above Bar Street, Southampton - We have exchanged on a new straight five year ex-Act lease to Shoe Zone at a gross rent of GBP80,000 per annum, subject to approximately GBP40,000 landlord works. 12 months' rent free incentive was given.

Sarus Court, Runcorn - We have completed a ten year lease renewal with NTT United Kingdom Limited (Dimension Data) at GBP5.75 per sq ft (GBP64,066.50 per annum) versus the previous passing rent of GBP5.25 per sq ft. There is a tenant break option in December 2025. Five months' rent free incentive was given. The valuation of this asset has increased by GBP1.05 million (15.3%) over the past six months to GBP7.9 million.

Vacancy - The portfolio's overall vacancy level is 8.59%. Excluding vacancy contributed by the asset at 225 Bath Street, Glasgow, the vacancy level is 5.43%. This asset has now been exchanged for sale for alternative use redevelopment as student accommodation. As a condition of the sale agreement, full vacancy must be achieved before the sale can be completed. Completion of the sale is expected in Q4 2021 - Q1 2022. The purchaser has submitted a planning application and is awaiting confirmation on a committee date. Regarding achieving vacant possession, only one tenant remains in the building having recently exchanged on the variation of W.A. Fairhurst's lease, bringing their occupation to an end on 31 January 2022, in exchange for an GBP800,000 surrender premium, plus nine months' rent free from 28 February 2021 to 1 December 2021.

Environmental, Social and Governance ('ESG') Update

The Company has maintained its two stars Global Real Estate Sustainability Benchmark ('GRESB') rating for 2021 and maintained its score of 65 (GRESB Average 72). A large portion of the GRESB score relates to performance data coverage where, due to the high percentage of single-let assets with tenant procured utilities, the Company does not score as well as funds with a smaller holding of single-let assets and a higher proportion of multi-let assets where the owner is responsible for the utilities and can therefore gather the relevant data.

We continue to implement our plan to improve overall data coverage and data collection for all utilities through increased tenant engagement at our single-let assets and by installing automated meter readers ('AMR') across the portfolio. So far, we are in the process of installing AMRs in all of our multi-let properties. We are also in discussions with the tenants of our top 10 single-let FRI assets (in terms of floor area) regarding the installation of AMR.

We endeavour, where the opportunity presents itself through a lease event, to include green clauses in leases, covenanting landlord and tenant to collaborate over the environmental performance of the property.

We continue to assess and strengthen our reporting and alignment against the framework set out by the Taskforce on Climate-Related Financial Disclosures ('TCFD') with further disclosure and update to be provided in the 2022 annual report and accounts. We are pleased to report the Company has maintained its EPRA Silver rating for sBPR for ESG disclosure and transparency.

We have an Asset Sustainability Action Plan ('ASAP') initiative, tracking ESG initiatives across the portfolio on an asset by asset basis for targeted/relevant and specific implementation of ESG improvements. In doing so, all managed assets and units have recently been contracted to High Quality Green Tariffs, ensuring that electricity supply is from renewable sources. All void/vacant unit supplies have also been transferred to High Quality Green Tariffs.

All managed assets will be moved to 'Green Gas' supplies in 2022.

We are underway with implementing initiatives such as a new landscaping/biodiversity programme at our retail warehouse in Barnstaple, replacing the existing plants and shrubs with a greater diversity of appropriate species which in turn will attract a wider variety of insects and wildlife to the property.

Lease Expiry Profile

Approximately GBP3.48 million of the Company's current contracted income stream is subject to an expiry or break within the 12 month period commencing 1 October 2021. 12.87% (GBP447,984) of this income (Indigo Lighthouse Solutions and WA Fairhurst) is attributable to our office holding in Glasgow, which has exchanged for sale. A further 9.38% (GBP326,668) of this income relates to a property where we expect the tenants to stay, renewing their leases. 18.31% (GBP637,238) of this income is in the industrial sector, where we anticipate strong occupier demand, low incentives and reversionary rents. Regarding the remainder, we will proactively manage, looking to unlock capital upside, whether that be through lease regears/renewals, or through refurbishment/capex projects and new lettings.

Source: Knight Frank valuation report as at 30 September 2021.

AEW UK Investment Management LLP

16 November 2021

Principal Risks and Uncertainties

The Company's assets consist of UK commercial property. Its principal risks are therefore related to the commercial property market in general, but also to the particular circumstances of the individual properties and the tenants within the properties.

The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is operated by the Investment Manager. The Company's ongoing risk management process is designed to identify, evaluate and mitigate the significant risks the Company faces.

At least twice a year, the Board undertakes a formal risk review with the assistance of the Audit Committee, to assess the adequacy and effectiveness of the Investment Manager and other service providers' risk management and internal control processes.

The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

An analysis of the principal risks and uncertainties is set out below. The risks below do not purport to be exhaustive as some risks are not yet known and some risks are currently not deemed material but could turn out to be material in the future. Changes to the principal risks since the date of the Annual Report and Financial Statements for the year ended 31 March 2021 are indicated below.

Principal risks and their potential impact           How risk is managed                                   Risk 
                                                                                                           assessment 
REAL ESTATE RISKS 
 
 
1. Property market 
Any property market recession or future                                                                    Probability: 
deterioration in the property market could, inter                                                          Moderate 
alia, (i) cause the Company to realise its           The Company has investment restrictions in place to 
investments at lower valuations; and (ii) delay the  invest and manage its assets with the objective of    Impact: 
timings of the Company's  realisations. These risks  spreading and mitigating risk.                        Moderate to 
could have a material adverse effect on the ability                                                        High 
of the Company to achieve its investment objective. 
                                                                                                           Movement: 
                                                                                                           Decrease 
2. Property valuation 
Property and property-related assets are inherently 
difficult to value due to the individual nature of 
each property.                                                                                             Probability: 
                                                     The Company uses an independent external valuer       Low 
                                                     (Knight Frank LLP) to value the properties at fair 
                                                     value in accordance with accepted RICS appraisal and  Impact: Low 
There may be an adverse effect on the Company's      valuation standards.                                  to Moderate 
profitability, the NAV and the price of Ordinary 
Shares in cases where properties are sold whose                                                            Movement: 
valuations have previously been materially                                                                 Decrease 
overstated. 
 
 
 
                                                     Comprehensive due diligence is undertaken on all new 
                                                     tenants. Tenant covenant checks are carried out on    Probability: 
3. Tenant default                                    all new tenants where a default would have a          Moderate 
                                                     significant impact. 
Failure by tenants to fulfil their rental                                                                  Impact: 
obligations could affect the income that the                                                               Moderate to 
properties earn and the ability of the Company to                                                          High 
pay dividends to its shareholders.                   Asset management team conducts ongoing monitoring and 
                                                     liaison with tenants to manage potential bad debt     Movement: 
                                                     risk.                                                 Decrease 
 
 
4. Asset management initiatives 
                                                                                                           Probability: 
Asset management initiatives, such as refurbishment 
works, may prove to be more extensive, expensive and Costs incurred on asset management initiatives are    Low to 
take longer than anticipated. Cost overruns may have closely monitored against budgets and reviewed in     Moderate 
a material adverse effect on the Company's           regular presentations to the Investment Management 
profitability, the NAV and the share price.          Committee of the Investment Manager.                  Impact: Low 
                                                                                                           to Moderate 
 
                                                                                                           Movement: No 
                                                                                                           change 
5. Due diligence 
 
Due diligence may not identify all the risks and                                                           Probability: 
liabilities in respect of an acquisition (including  The Company's due diligence relies on work (such as   Low 
any environmental, structural or operational         legal reports on title, property valuations, 
defects) that may lead to a material adverse effect  environmental and building surveys) outsourced to     Impact: 
on the Company's profitability, the NAV and the      third parties who have expertise in their areas. Such Moderate 
price of the Company's Ordinary Shares.              third parties have professional indemnity cover in 
                                                     place.                                                Movement: No 
                                                                                                           change 
6. Fall in rental rates 
Rental rates may be adversely affected by general UK 
economic conditions and other factors that depress 
rental rates, including local factors relating to    The Company builds a diversified property and tenant 
particular properties/locations (such as increased   base with subsequent monitoring of concentration to   Probability: 
competition).                                        individual occupiers (top ten tenants) and sectors    Moderate to 
                                                     (geographical and sector exposure).                   High 
 
                                                                                                           Impact: 
Any fall in the rental rates for the Company's                                                             Moderate to 
properties may have a material adverse effect on the The Investment Manager holds quarterly meetings with  High 
Company's profitability, the NAV, the price of the   its Investment Strategy Committee and regularly meets 
Ordinary Shares and the Company's ability to meet    the Board of Directors to assess whether any changes  Movement: No 
interest and capital repayments on any debt          in the market present risks that should be addressed  change 
facilities.                                          in the Company's strategy. 
 
BORROWING RISKS 
 
 
7. Breach of borrowing covenants 
The Company has entered into a term credit facility                                                        Probability: 
with RBSi. 
                                                                                                           Low to 
                                                     The Company monitors the use of borrowings on an      Moderate 
                                                     ongoing basis through weekly cash flow forecasting 
Material adverse changes in valuations and net       and quarterly risk monitoring to monitor financial    Impact: 
income may lead to breaches in the Loan to Value     covenants.                                            Moderate to 
('LTV') and interest cover ratio covenants.                                                                High 
                                                                                                           Movement: 
                                                                                                           Decrease 
 
8. Interest rate rises                               The Company uses interest rate caps on a significant  Probability: 
                                                     notional value of the loan to mitigate the adverse 
The Company's borrowings through a term credit       impact of possible interest rate rises.               Moderate to 
facility are subject to interest rate risk through                                                         High 
changing SONIA rates. Any increases in SONIA rates 
may have an adverse effect on the Company's ability                                                        Impact: Low 
to pay dividends.                                    The Investment Manager and Board of Directors monitor to Moderate 
                                                     the level of hedging and interest rate movements to 
                                                     ensure that the risk is managed appropriately.        Movement: No 
                                                                                                           change 
 
 
                                                     The Company maintains a good relationship with the 
                                                     bank providing the term credit facility. 
9. Availability and cost of debt                                                                           Probability: 
The term credit facility expires in October 2023. In The Company monitors the projected usage and          Moderate 
the event that RBSi does not renew the facility, the covenants of the credit facility on a quarterly 
Company may need to sell assets to repay the         basis.                                                Impact: 
outstanding loan. Any increase in the financing                                                            Moderate to 
costs of the facility on renewal would adversely                                                           High 
impact on the Company's profitability. 
                                                     The Company actively monitors the loan term and       Movement: 
                                                     engages in loan extension negotiations far in advance Increase 
                                                     of expiry. 
 
CORPORATE RISKS 
 
 
10. Dependence on Investment Manager and other third 
party service providers 
The Company has no employees and is reliant upon the 
performance of its Investment Manager and third 
party service providers. Failure by the Investment   The Investment Manager has endeavoured to ensure that Probability: 
Manager and/or any service provider to carry out its the principal members of its management team are      Moderate to 
obligations to the Company in accordance with the    suitably incentivised. The performance of service     High 
terms of its appointment could have a materially     providers in conjunction with their service level 
detrimental impact on the operation of the Company.  agreements is monitored via regular calls and         Impact: 
The future ability of the Company to successfully    face-to-face meetings and the use of key performance  Moderate 
pursue its investment objective and investment       indicators, where relevant. 
policy may, among other things, depend on the                                                              Movement: No 
ability of the Investment Manager to retain its                                                            change 
existing staff and/or to recruit individuals of 
similar experience and calibre. 
 
11. Ability to meet objectives 
 
The Company may not meet its investment objective to 
deliver an attractive total return to shareholders                                                         Probability: 
from investing predominantly in a portfolio of       The Company has an investment policy to achieve a     Moderate to 
smaller commercial properties in the United Kingdom. balanced portfolio with a diversified asset and       High 
                                                     tenant base. The Company also has investment 
                                                     restrictions in place to limit exposure to potential  Impact: 
                                                     risk factors. These factors mitigate the risk of      Moderate to 
Poor relative total return performance may lead to   fluctuations in returns.                              High 
an adverse reputational impact that affects the 
Company's ability to raise new capital.                                                                    Movement: 
                                                                                                           Decrease 
 
 
12. Business interruption                            The Investment Manager and other service providers'   Probability: 
                                                     staff are capable of working remotely for an extended Low to 
Cyber-attacks on the Investment Manager's and/or     time period. The Investment Manager's and other       Moderate 
other service providers' IT systems, could lead to   service providers' IT systems are protected by 
disruption, reputational damage, regulatory          anti-virus software and firewalls that are updated    Impact: 
(including GDPR) or financial loss to the Company.   regularly. Fire protection and access security        Moderate 
                                                     procedures exist at all the Company's managed 
                                                     properties, along with the offices of its Investment  Movement: 
                                                     Manager and other service providers.                  Increase 
TAXATION RISKS 
 
 
13. Company REIT status 
The Company has a UK REIT status that provides a 
tax-efficient corporate structure. 
 
 
                                                                                                           Probability: 
If the Company fails to remain a REIT for UK tax     The Company monitors REIT compliance through the      Low 
purposes, its profits and gains will be subject to   Investment Manager on acquisitions; the Administrator 
UK corporation tax.                                  on asset and distribution levels; the Registrar and   Impact: 
                                                     Broker on shareholdings and the use of third-party    Moderate to 
                                                     tax advisers to monitor REIT compliance requirements. High 
Any change to the tax status or UK tax legislation                                                         Movement: No 
could impact on the Company's ability to achieve its                                                       change 
investment objectives and provide attractive returns 
to shareholders. 
 
POLITICAL/ECONOMIC RISKS 
 
 
14. General political and economic risks 
 
Political and macroeconomic events present risks to                                                        Probability: 
the real estate and financial markets that affect    The Board considers the impact of political and       Moderate to 
the Company and the business of its tenants. The     macroeconomic events when reviewing strategy. The     High 
level of uncertainty that such events bring has been UK's exit from the EU is not considered to generate 
highlighted in recent times, most pertinently the    any risks specific to the Company and is not          Impact: 
effects of the UK's exit from the EU in January      considered to have any material effect on the         Moderate to 
2021.                                                financial statements.                                 High 
                                                                                                           Movement: No 
                                                                                                           change 
15. COVID-19 
The economic disruption arising from the COVID-19                                                          Probability: 
virus could impact rental income receipts from                                                             Low to 
tenants, the ability to access funding at            The Investment Manager is in close contact with       Moderate 
competitive rates, maintain the Company's dividend   tenants. The Investment Manager has put in place 
policy and its adherence to the HMRC REIT regime,    social distancing measures as advised by the UK       Impact: 
particularly if the UK government restrictions are   government. The Investment Manager has maintained a   Moderate to 
in place for a prolonged period.                     close relationship with RBSi to ensure continuing     High 
                                                     dialogue around covenants. 
                                                                                                           Movement: 
                                                                                                           Decrease 
ENVIRONMENTAL RISKS 
 
 
                                                     The Company has engaged specialist environmental 
                                                     consultants to advise the Board on compliance with 
16. Environmental transition risk                    regulatory requirements and adopting best practice 
                                                     where possible. All prospective acquisitions and 
Failure to identify and mitigate the transition risk asset management initiatives are influenced by        Probability: 
for climate change could lead to the Company holding environmental assessments undertaken by the Company,  Moderate 
stranded assets and lead to a negative impact on its such as ensuring they are in conformance with the 
reputation. Failure by the Company to meet required  Minimum Energy Efficiency Standard ('MEES')           Impact: 
regulatory standards could                           Regulations. An Asset Sustainability Action Plan      Moderate 
                                                     ('ASAP') initiative has been introduced by the 
lead to increased stakeholder concern and negative   Company, which tracks ESG initiatives across the      Movement: 
feedback.                                            portfolio on an asset-by-asset basis for targeted,    Increase 
                                                     relevant and specific implementation of ESG 
                                                     improvements. 
 
 
 
17. Physical risk to properties                                                                            Probability: 
                                                     The Company obtains environmental surveys for all     Low 
The risk of physical damage to properties as a       acquisitions, which mitigate the short-term risk of 
result of environmental factors such as flooding and climate related damage to properties owned. The       Impact: 
natural fires. In the long-term, changes in climate  Investment Manager's asset management team perform    Moderate to 
and/or weather systems may mean properties become    regular site visits to the Group's properties in      High 
unviable to tenants.                                 order to continually assess the physical risk posed 
                                                     to them.                                              Movement: 
                                                                                                           Increase 

Interim Management Report and Directors' Responsibility Statement

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining six months of the financial year are set out above.

Responsibility Statement

We confirm that to the best of our knowledge:

-- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim FinancialReporting as adopted by the UK;

-- the interim management report includes a fair review of the information required by: a. DTR 4.2.7R, being an indication of important events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements; and a description of the principalrisks and uncertainties for the remaining six months of the year; and b. DTR 4.2.8R, being related party transactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position or performance of the Company during thatperiod; and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Mark Burton

Chairman

16 November 2021

Independent Review Report to AEW UK REIT PLC

Introduction

We have been engaged by the Company to review the condensed set of Financial Statements in the Interim Report and Financial Statements for the six months ended 30 September 2021 which comprises the Condensed Statement of Comprehensive Income, Condensed Statement of Changes in Equity, Condensed Statement of Financial Position, Condensed Statement of Cash Flows and related notes.

We have read the other information contained in the Interim Report and Financial Statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The Interim Report and Financial Statements is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the Interim Report and Financial Statements in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Company will be prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this Interim Report and Financial Statements has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the Interim Report and Financial Statements based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the Interim Report and Financial Statements for the six months ended 30 September 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

BDO LLP

Chartered Accountants

London

United Kingdom

16 November 2021

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Financial Statements

Condensed Statement of Comprehensive Income

for the six months ended 30 September 2021

                                                                     Period from        Period from 
                                                                     1 April 2021 to  1 April 2020 to  Year ended 
                                                                     30 September     30 September     31 March 
 
                                                                     2021             2020             2021 
                                                                     (unaudited)      (unaudited)      (audited) 
                                                               Notes GBP'000            GBP'000            GBP'000 
Income 
Rental and other income                                        3     8,630            8,838            17,491 
Property operating expenses                                    4     (1,760)          (1,777)          (3,754) 
Impairment loss on trade receivables                                 188              (156)            (944) 
Net rental and other income                                          7,058            6,905            12,793 
 
Other operating expenses                                       5     (1,179)          (971)            (2,058) 
 
Operating profit before fair value changes                           5,879            5,934            10,735 
 
Change in fair value of investment properties                  10    16,596           (3,328)          5,324 
Realised gains on disposal of investment properties            10    2,273            3,670            7,043 
Realised loss on disposal of investment property held for sale 10    (829)            -                - 
 
Operating profit                                                     23,919           6,276            23,102 
 
Finance expense                                                6     (372)            (552)            (930) 
 
Profit before tax                                                    23,547           5,724            22,172 
Taxation                                                       7     -                -                - 
 
Profit after tax                                                     23,547           5,724            22,172 
Other comprehensive income                                           -                -                - 
 
Total comprehensive income for the period                            23,547           5,724            22,172 
 
Earnings per share (pence) (basic and diluted)                 8     14.86            3.61             13.98 
 

The notes below form an integral part of these condensed financial statements.

Condensed Statement of Changes in Equity

for the six months ended 30 September 2021

 
                                                                            Total capital 
                                                       Capital              and reserves 
                                              Share    reserve and          attributable to 
                                      Share   premium  retained     Buyback owners of 
For the period 1 April 2021 to        capital account  earnings     reserve the Company 
30 September 2021 (unaudited)   Notes GBP'000   GBP'000    GBP'000*       GBP'000   GBP'000 
 
Balance as at 1 April 2021            1,587   56,578   99,179       (265)   157,079 
 
Total comprehensive income            -       -        23,547       -       23,547 
Dividends paid                  9     -       -        (6,337)      -       (6,337) 
Balance as at 30 September 2021       1,587   56,578   116,389      (265)   174,289 
 
 
                                                                            Total capital 
                                                       Capital              and reserves 
                                              Share    reserve and          attributable to 
                                      Share   premium  retained     Buyback owners of 
For the period 1 April 2020 to        capital account  earnings*    reserve the Company 
30 September 2020 (unaudited)   Notes GBP'000   GBP'000    GBP'000        GBP'000   GBP'000 
Balance at 1 April 2020               1,587   56,578   89,698       -       147,863 
 
Total comprehensive income            -       -        5,724        -       5,724 
Dividends paid                  9     -       -        (6,351)      -       (6,351) 
Balance as at 30 September 2020       1,587   56,578   89,071       -       147,236 
                                                                                       Total capital 
 
                                                                  Capital              and reserves 
 
                                                         Share    reserve and          attributable to 
 
                                                 Share   premium  retained     Buyback owners of 
 
                                                 capital account  earnings*    reserve the Company 
For the year ended 31 March 2021 (audited) 
                                           Notes GBP'000   GBP'000    GBP'000        GBP'000   GBP'000 
 
Balance at 1 April 2020                          1,587   56,578   89,698       -       147,863 
 
Total comprehensive income                       -       -        22,172       -       22,172 
Ordinary shares bought back                      -       -        -            (263)   (263) 
Share buyback costs                              -       -        -            (2)     (2) 
Dividends paid                             9     -       -        (12,691)     -       (12,691) 
Balance as at 31 March 2021                      1,587   56,578   99,179       (265)   157,079 

* The capital reserve has arisen from the cancellation of part of the Company's share premium account and is a distributable reserve.

The notes below form an integral part of these condensed financial statements.

Condensed Statement of Financial Position

as at 30 September 2021

 
                                                                                         As at 
                                                                        As at                             As at 
                                                                                         30 September 
                                                                        30 September     2020             31 March 2021 
                                                                        2021 
                                                                                         (unaudited) 
                                                                        (unaudited)                       (audited) 
                                                                  Notes                  GBP'000 
                                                                        GBP'000                             GBP'000 
Assets 
Non-Current Assets 
Investment property                                               10    191,336          160,601          169,092 
                                                                        191,336          160,601          169,092 
 
Current Assets 
Investment property held for sale                                 10    12,931           8,212            7,251 
Receivables and prepayments                                       11    10,198           9,063            6,977 
Cash and cash equivalents                                               15,159           13,357           17,450 
Other financial assets held at fair value                         12    112              49               61 
                                                                        38,400           30,681           31,739 
Total assets                                                            229,736          191,282          200,831 
Non-Current Liabilities 
Interest bearing loans and borrowings                             13    (50,171)         (39,082)         (39,131) 
Lease obligations                                                 15    (635)            (635)            (635) 
                                                                        (50,806)         (39,717)         (39,766) 
 
Current Liabilities 
Payables and accrued expenses                                     14    (4,593)          (4,281)          (3,938) 
Lease obligations                                                 15    (48)             (48)             (48) 
                                                                        (4,641)          (4,329)          (3,986) 
 
Total Liabilities                                                       (55,447)         (44,046)         (43,752) 
 
Net Assets                                                              174,289          147,236          157,079 
 
Equity 
Share capital                                                           1,587            1,587            1,587 
Buyback reserve                                                         (265)            -                (265) 
Share premium account                                                   56,578           56,578           56,578 
Capital reserve and retained earnings                                   116,389          89,071           99,179 
 
Total capital and reserves attributable to equity holders of the        174,289          147,236          157,079 
Company 
 
Net Asset Value per share (pence)                                 8     110.01           92.73            99.15 
EPRA Net Tangible Assets per share (pence)                        8     109.94           92.70            99.11 

The financial statements were approved by the Board of Directors on 16 November 2021 and were signed on its behalf by:

Mark Burton

Chairman

AEW UK REIT plc

Company number: 09522515

The notes below form an integral part of these condensed financial statements.

Condensed Statement of Cash Flows

for the six months ended 30 September 2021

                                                               Period from 
                                                                                Period from 
                                                               1 April 2021 to                     Year ended 
                                                                                1 April 2020 to 
                                                               30 September                        31 March 
                                                                                30 September 2020 
                                                               2021                                2021 
                                                                                (unaudited) 
                                                               (unaudited)                         (audited) 
                                                                                GBP'000 
                                                               GBP'000                               GBP'000 
 
Cash flows from operating activities 
Profit before tax                                              23,547           5,724              22,172 
 
Adjustment for: 
Finance expenses                                               372              552                930 
(Gain)/loss from change in fair value of investment property   (16,596)         3,328              (5,324) 
Realised gains on disposal of investment property              (2,273)          (3,670)            (7,043) 
Realised loss on disposal of investment property held for sale 829              -                  - 
(Increase)/decrease in other receivables and prepayments       (3,419)          (1,573)            374 
Increase/(decrease) in other payables and accrued expenses     537              (463)              (647) 
Net cash generated from operating activities                   2,997            3,898              10,462 
 
Cash flows from investing activities 
Purchase of and additions to investment property               (19,539)         (106)              (5,983) 
Disposal of investment property                                10,796           18,676             29,049 
 
Costs in respect of investment property held for sale 
                                                               (829)            -                  - 
Net cash (used in)/generated from investing activities         (9,572)          18,570             23,066 
 
Cash flows from financing activities 
Share buyback cash paid                                        -                -                  (263) 
Share buyback costs                                            -                -                  (2) 
Loan drawdown/(repayment)                                      11,000           (12,000)           (12,000) 
Arrangement loan facility fee paid                             -                (13)               (13) 
Premium for interest rate caps                                 -                (63)               (63) 
Finance costs                                                  (379)            (557)              (919) 
Dividends paid                                                 (6,337)          (6,351)            (12,691) 
 
Net cash flow generated from/(used in) financing activities    4,284            (18,984)           (25,951) 
 
Net (decrease)/increase in cash and cash equivalents           (2,291)          3,484              7,577 
Cash and cash equivalents at start of the period/year          17,450           9,873              9,873 
 
Cash and cash equivalents at end of the period/year                             13,357             17,450 
                                                               15,159 
 

The notes below form an integral part of these condensed financial statements.

Notes to the Condensed Financial Statements

for the six months ended 30 September 2021

1. Corporate information

AEW UK REIT plc (the 'Company') is a closed ended Real Estate Investment Trust ('REIT') incorporated on 1 April 2015 and domiciled in the UK.

2. Accounting policies

2.1 Basis of preparation

These interim condensed unaudited financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the UK, and should be read in conjunction with the Company's last financial statements for the year ended 31 March 2021. These condensed unaudited financial statements do not include all information required for a complete set of financial statements proposed in accordance with IFRS as adopted by the UK ('IFRS'). However, selected explanatory notes have been included to explain events and transactions that are significant in understanding changes in the Company's financial position and performance since the last financial statements.

The financial information contained in this Interim Report and Financial Statements for the six months

ended 30 September 2021 and the comparative information for the year ended 31 March 2021 does not constitute statutory accounts as defined in sections 435(1) and (2) of the Companies Act 2006. Statutory accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies. The Auditor reported on those accounts. Its report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

A review of the interim financial information has been performed by the Auditor of the Company for issue on 16 November 2021.The comparative figures disclosed in the condensed unaudited financial statements and related notes have been presented for both the six month period ended 30 September 2020 and year ended 31 March 2021 and as at 30 September 2020 and 31 March 2021.

These condensed unaudited financial statements have been prepared under the historical-cost convention, except for investment property and interest rate derivatives that have been measured at fair value. The condensed unaudited financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (GBP'000), except when otherwise indicated.

The Company is exempt by virtue of section 402 of the Companies Act 2006 from the requirement to prepare group financial statements. These financial statements present information solely about the Company as an individual undertaking.

New standards, amendments and interpretations

The Company has considered and applied the following new standards and amendments to existing standards which are required for the accounting period beginning on 1 April 2021:

* Amendments to IFRS 16 Covid-19 Related Rent Concessions beyond 30 June 2021; and

* Interest Rate Bench Reform - Phase 2 (Amendments to various standards: IFRS 9 'Financial Instruments', IAS 39 'Financial Instruments: Recognition and Measurement, IFRS 7 'Financial Instruments: Disclosures', IFRS 4 'Insurance Contracts' and IFRS 16 'Leases').

The Company has applied the new standards and there has been no significant impact on the financial statements.

There are a number of new standards and amendments to existing standards which have been published and are mandatory for the Company's accounting periods beginning on or after 1 April 2022 or later. The Company has not early adopted any of these new or amended standards.

2.2 Significant accounting judgements and estimates

The preparation of financial statements in accordance with IAS 34 requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

i) Valuation of investment property

The Company's investment property is held at fair value as determined by the independent valuer on the basis of fair value in accordance with the internationally accepted Royal Institution of Chartered Surveyors ('RICS') Appraisal and Valuation Standards.

2.3 Segmental information

The Board of Directors retains overall control of the Company but the Investment Manager (AEW UK Investment Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing the performance of the Company's operating segments and is therefore considered to be the Chief Operating Decision Maker ('CODM'). In accordance with IFRS 8, the Company considers each of its properties to be an individual operating segment. The CODM allocates resources, and reviews the performance of, the Company's portfolio on a property-by-property basis and discrete financial information is available for each individual property.

These operating segments have similar economic characteristics and, as such, are aggregated into one reporting segment, being investment in property and property-related investments in the UK.

2.4 Going concern

The Directors assessed the Company's ability to continue as a going concern, which takes into consideration the uncertainty surrounding the outbreak of COVID-19, as well as the Company's cash

flows, financial position, liquidity and borrowing facilities.

In that assessment the Directors' considered that the Company benefits from a diversified income stream from numerous tenants and sectors, which reduces risk. They also noted that:

* The Company's rent collection has been strong, with 99% of contracted rent collected for the March and June 2021 quarters. At least 87% of contracted rent has either been collected, or payment plans agreed, for the September 2021 quarter. Based on the contracted rent as at 30 September 2021, a reduction of 66% in total rents could be accommodated before breaching the ICR covenant in the Company's debt arrangements;

* Based on the property valuation at 30 September 2021, the Company had room for a GBP62.10 million fall in NAV before reaching the maximum LTV covenant in the Company's debt arrangements. If certain conditions are met, such as providing security, a further GBP20.40 million fall in NAV could be accommodated.

Finally, the Directors' note that the Company's cash flow can also be significantly managed through the

adjustment of dividend payments.

Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months, including a severe but plausible downside scenario which makes the following assumptions:

* A reduction in rental income of 30%;

* No new lettings or renewals, other than those where terms have already been agreed; and

* A 10% fall in property valuations.

Given the Company's financial position and headroom on covenants, the Directors do not consider that

there are any material uncertainties in relation to the Company's ability to meets its liabilities as they fall due and continue in operation for a period of 12 months from the date of approval of these financial statements. They therefore consider the going concern basis adopted in the preparation of the interim financial statements is appropriate.

2.5 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are consistent with those applied within the Company's Annual Report and Financial Statements for the year ended 31 March 2021 except for the changes as detailed in note 2.1.

3. Revenue

                              Period from      Period from 
                              1 April 2021 to  1 April 2020 to  Year ended 
                              30 September     30 September     31 March 
 
                              2021             2020             2021 
                              (unaudited)      (unaudited)      (audited) 
                              GBP'000            GBP'000            GBP'000 
 
Rental income                 7,866            8,124            15,714 
Service charge income         485              674              1,535 
Dilapidation income received  272              40               197 
Other property income         7                -                - 
Surrender premium received    -                -                45 
Total rental and other income 8,630            8,838            17,491 
 

4. Property operating expenses

                                       Period from      Period from 
                                       1 April 2021 to  1 April 2020 to  Year ended 
                                       30 September     30 September     31 March 
 
                                       2021             2020             2021 
                                       (unaudited)      (unaudited)      (audited) 
                                       GBP'000            GBP'000            GBP'000 
 
Non-recoverable service charge expense 644*             601              1,166 
Recoverable service charge expense     485              674              1,535 
Other property expenses                631              502              1,053 
 
Total property operating expenses      1,760            1,777            3,754 
 

* Of the c. GBP644,000 non-recoverable service charge expenditure (30 September 2020: GBP601,000) c. GBP552,000 relates to Bank Hey Street, Blackpool (30 September 2020: GBP394,000) which includes costs relating to the remedial works as detailed in the Investment Manager's Report.

5. Other operating expenses

                                      Period from      Period from 
                                      1 April 2021 to  1 April 2020 to  Year ended 
                                      30 September     30 September     31 March 
 
                                      2021             2020             2021 
                                      (unaudited)      (unaudited)      (audited) 
                                      GBP'000            GBP'000            GBP'000 
 
Investment management fee             732              579              1,229 
Operating costs                       289              289              594 
Audit fee                             82               30               110 
ISRE 2410 review (interim review fee) 28               25               25 
Directors' remuneration               48               48               100 
 
Total other operating expenses        1,179            971              2,058 

6. Finance expense

                                                  Period from   Period from 
                                                  1 April 2021  1 April 2020  Year 
                                                  to            to            ended 
                                                  30 September  30 September  31 March 
                                                  2021          2020          2021 
                                                  (unaudited)   (unaudited)   (audited) 
                                                  GBP'000         GBP'000         GBP'000 
 
Interest payable on loan borrowings               344           438           722 
Amortisation of loan arrangement fee              41            49            97 
Commitment fee payable on loan borrowings         38            37            95 
                                                  423           524           914 
Change in fair value of interest rate derivatives (51)          28            16 
Total                                             372           552           930 
 

7. Taxation

                                                                                  Period from   Period from 
                                                                                                              Year 
                                                                                  1 April 2021  1 April 2020 
                                                                                  to            to            ended 
                                                                                  30 September  30 September  31 March 
                                                                                  2021          2020          2021 
                                                                                  (unaudited)   (unaudited)   (audited) 
                                                                                  GBP'000         GBP'000         GBP'000 
Analysis of charge in the period 
Profit before tax                                                                 23,547        5,724         22,172 
 
 
Theoretical tax at UK corporation tax standard rate of 19% (30 September 2020: 
19%; 31 March 2021: 19%)                                                                        1,088 
                                                                                  4,474                       4,213 
 
Adjusted for: 
Exempt REIT income                                                                (1,046)       (1,023)       (1,863) 
Non taxable investment gains                                                      (3,428)       (65)          (2,350) 
Total                                                                             -             -             - 

8. Earnings per share and NAV per share

                                                               Period from      Period from 
                                                               1 April 2021 to  1 April 2020 to  Year ended 
                                                               30 September     30 September     31 March 
                                                               2021             2020             2021 
                                                               (unaudited)       (unaudited)     (audited) 
Earnings per share: 
Total comprehensive income (GBP'000)                             23,547           5,724            22,172 
Weighted average number of shares                              158,424,746      158,774,746      158,620,910 
Earnings Per Share (basic and diluted) (pence)                 14.86            3.61             13.98 
 
 
EPRA earnings per share: 
                                                                                5,724 
Total comprehensive income (GBP'000)                             23,547                            22,172 
Adjustment to total comprehensive income: 
 
Change in fair value of investment property (GBP'000)                             3,328 
                                                               (16,596)                          (5,324) 
 
Realised gain on disposal of investment property (GBP'000)                        (3,670) 
                                                               (2,273)                           (7,043) 
 
Realised loss on disposal of investment property held for sale                  - 
                                                               829                               - 
 
Change in fair value of interest rate derivatives (GBP'000)                       28 
                                                               (51)                              16 
Total EPRA Earnings (GBP'000)                                    5,456            5,410            9,821 
 
EPRA earnings per share (basic and diluted) (pence) 
                                                               3.45             3.41             6.19 
 
NAV per share: 
Net assets (GBP'000)                                             174,289          147,236          157,079 
Ordinary Shares                                                158,424,746      158,774,746      158,424,746 
NAV per share (pence)                                          110.01           92.73            99.15 

Earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period.

                                         Current measures                       Previous measures 
 
 
 
 
                                         EPRA         EPRA         EPRA         EPRA         EPRA 
 
                                         NTA          NRV          NDV          NAV          NNNAV 
As at 30 September 2021 
                                         GBP'000        GBP'000         GBP'000       GBP'000        GBP'000 
IFRS NAV attributable to shareholders    174,289      174,289      174,289      174,289      174,289 
Mark-to-market adjustment of derivatives (112)        (112)        -            (112)        - 
Real estate transfer tax1                -            13,642       -            -            - 
At 30 September 2021                     174,177      187,819      174,289      174,177      174,289 
Number of Ordinary Shares                158,424,746  158,424,746  158,424,746  158,424,746  158,424,746 
NAV per share                            109.94p      118.55p      110.01p      109.94p      110.01p 
                                                      Current measures                      Previous measures 
 
 
 
 
                                                      EPRA         EPRA         EPRA        EPRA         EPRA 
 
                                                      NTA          NRV          NDV         NAV          NNNAV 
As at 30 September 2020 
                                                      GBP'000        GBP'000         GBP'000      GBP'000        GBP'000 
IFRS NAV attributable to shareholders                 147,236      147,236      147,236     147,236      147,236 
Mark-to-market adjustment of derivatives              (49)         (49)         -           (49)         - 
Real estate transfer tax and other purchasers' costs1 -            11,309       -           -            - 
At 30 September 2020                                  147,187      158,496      147,236     147,187      147,236 
Number of Ordinary Shares                             158,774,746  158,774,746  158,774,746 158,774,746  158,774,746 
NAV per share                                         92.70p       99.82p       92.73p      92.70p       92.73p 

Earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period.

1 EPRA Net Tangible Assets ('EPRA NTA') and EPRA Net Disposal Value ('EPRA NDV') are calculated using property values in line with IFRS, where values are net of Real Estate Transfer Tax ('RETT') and other purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA Net Reinstatement Value ('EPRA NRV') and have been estimated at 6.6% of the net valuation provided by Knight Frank.

                                                      Current measures                      Previous measures 
 
 
 
 
                                                      EPRA         EPRA         EPRA        EPRA         EPRA 
 
                                                      NTA          NRV          NDV         NAV          NNNAV 
As at 31 March 2021 
                                                      GBP'000        GBP'000         GBP'000      GBP'000        GBP'000 
IFRS NAV attributable to shareholders                 157,079      157,079      157,079     157,079      157,079 
Mark-to-market adjustment of derivatives              (61)         (61)         -           (61)         - 
Real estate transfer tax and other purchasers' costs1 -            11,814       -           -            - 
At 31 March 2021                                      157,018      168,832      157,079     157,018      157,079 
Number of Ordinary Shares                             158,424,746  158,424,746  158,424,746 158,424,746  158,424,746 
NAV Per share                                         99.11p       106.57p      99.15p      99.11p       99.15p 

1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of RETT and other purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA NRV and have been estimated at 6.6% of the net valuation provided by Knight Frank.

9. Dividends paid

                                                           Period from      Period from 
                                                           1 April 2021 to  1 April 2020 to  Year ended 
                                                           30 September     30 September     31 March 
                                                           2021             2020             2021 
Dividends paid during the period                           GBP'000            GBP'000            GBP'000 
 
 
Represents two/two/four interim dividends of 2.00 pps each                  6,351 
                                                           6,337                             12,691 
 
                                                           Period from      Period from 
                                                           1 April 2021 to  1 April 2020 to  Year ended 
                                                           30 September     30 September     31 March 
                                                           2021             2020             2021 
Dividends relating to the period                           GBP'000            GBP'000            GBP'000 
 
 
Represents two/two/four interim dividends of 2.00 pps each                  6,351 
                                                           6,337                             12,684 
 

Dividends paid relate to Ordinary Shares.

10. Investments

10.a) Investment property

                                                              Period from 1 April 2021 to 
 
                                                              30 September 2021 (unaudited) 
                                                                                              Period from 
                                                                                              1 April 2020   Year ended 
                                                              Investment  Investment 
                                                                                              to 30 
                                                              properties  properties  Total   September      31 March 
                                                              freehold    leasehold   GBP'000   2020           2021 
                                                              GBP'000       GBP'000               (unaudited)    (audited) 
                                                                                              Total          Total 
                                                                                              GBP'000          GBP'000 
UK Investment property 
 
As at beginning of period                                     160,750     18,250      179,000 189,300        189,300 
 
Purchases and capital expenditure in the period 
                                                              8,948       10,588      19,536  106            5,983 
Disposals in the period                                       (8,208)     -           (8,208) (15,006)       (22,006) 
 
Revaluation of investment property 
                                                              15,060      1,302       16,362  (3,045)        5,723 
 
 
Valuation provided by Knight Frank 
                                                              176,550     30,140      206,690 171,355        179,000 
 
 
Adjustment to carrying value for lease incentive debtor 
                                                                                      (3,106) (3,225)        (3,340) 
 
Adjustment for lease obligations* 
                                                                                      683     683            683 
 
Total Investment property 
                                                                                      204,267 168,813        176,343 
 
Classified as: 
 
Investment property held for sale** 
                                                                                      12,931  8,212          7,251 
Investment property                                                                   191,336 160,601        169,092 
                                                                                      204,267 168,813        176,343 
 
Change in fair value of investment property 
 
Change in fair value before adjustments for lease incentives 
                                                                                      16,362  (3,045)        5,723 
 
Adjustment for movement in the period: 
 
 
in value of lease incentive debtor 
                                                                                      234     (283)          (399) 
                                                                                      16,596  (3,328)        5,324 
Gains realised on disposal of investment property 
 
Net proceeds from disposals of investment property during the 
period 
 
                                                                                      10,481  18,676         29,049 
 
Fair value at beginning of period 
                                                                                      (8,208) (15,006)       (22,006) 
 
Gains realised on disposal of investment property 
                                                                                      2,273   3,670          7,043 
 
Realised loss on disposal of investment property held for 
sale 
                                                                                      829     -              - 

* Adjustment in respect of minimum payment under head leases separately included as a liability within the Condensed Statement of Financial Position.

**225 Bath Street, Glasgow and Wella Warehouse, Basingstoke, have been classified as held-for-sale as at 30 September 2021. Contracts to sell 225 Bath Street were exchanged in October 2020 and its expected that the transaction will be completed within the next 12 months. Contracts to sell Wella Warehouse were exchanged in August 2021, with the transaction completed post period-end, in October 2021.

Valuation of investment property

Valuation of investment property is performed by Knight Frank LLP, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued.

The valuation of the Company's investment property at fair value is determined by the external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards (incorporating the International Valuation Standards).

The determination of the fair value is based upon the income capitalisation approach. This approach involves applying capitalisation yields to current and future rental streams net of income voids arising from vacancies or rent-free periods and associated running costs. These capitalisation yields and estimated rental values are based on comparable property and leasing transactions in the market using the valuer's professional judgement and market observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details, capital values of fixtures and fittings, environmental matter and the overall repair and condition of the property.

10.b) Fair value measurement hierarchy

The following table provides the fair value measurement hierarchy for non-current assets:

 
                              Quoted prices 
                                            Significant Significant 
                              in active 
                                            observable  unobservable 
                              markets 
                                            inputs      inputs 
                              (Level 1) 
                                            (Level 2)   (Level 3)    Total 
Assets measured at fair value GBP'000 
                                            GBP'000       GBP'000        GBP'000 
 
30 September 2021 
Investment property           -             -           204,267      204,267 
 
30 September 2020 
Investment property           -             -           168,813      168,813 
 
31 March 2021 
Investment property           -             -           176,343      176,343 

Explanation of the fair value hierarchy:

Level 1 - Quoted prices for an identical instrument in active markets;

Level 2 - Prices of recent transactions for identical instruments and valuation techniques using observable market data; and

Level 3 - Valuation techniques using non-observable data.

There have been no transfers between Level 1 and Level 2 during either period, nor have there been any transfers in or out of Level 3.

Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolios of investment properties are: 1. ERV

2) Equivalent yield

Increases/(decreases) in the ERV (per sq ft per annum) in isolation would result in a higher/(lower) fair value measurement. Increases/(decreases) in the discount rate/ yield in isolation would result in a lower/(higher) fair value measurement.

The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair value hierarchy of the portfolio of investment property are:

                                                      Significant 
                     Fair value Valuation             unobservable 
Class                GBP'000      technique             inputs           Range 
 
30 September 2021 
                                                      ERV              GBP0.50-GBP75.00 
Investment property*            Income capitalisation 
                     206,690                          Equivalent yield 5.00%-10.89% 
 
30 September 2020 
                                                      ERV              GBP0.50-GBP95.00 
Investment property*            Income capitalisation 
                     171,355                          Equivalent yield 6.23%-10.48% 
 
31 March 2021 
                                                      ERV              GBP0.50-GBP75.00 
Investment property*            Income capitalisation 
                     179,000                          Equivalent yield 5.76%-10.37% 
 

* Fair value per Knight Frank LLP.

Where possible, sensitivity of the fair values of Level 3 assets are tested to changes in unobservable inputs to reasonable alternatives.

Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property and investments held at the end of the reporting period.

With regards to both investment property and investments, gains and losses for recurring fair value measurements categorised within Level 3 of the fair value hierarchy, prior to adjustment for rent free debtor and rent guarantee debtor, where applicable, are recorded in profit and loss.

The tables below set out a sensitivity analysis for each of the key sources of estimation uncertainty with the resulting increase/(decrease) in the fair value of investment property.

                     Fair value Change in ERV   Change in equivalent yield 
                     GBP'000      GBP'000   GBP'000   GBP'000         GBP'000 
 
Sensitivity Analysis            +5%     -5%     +5%           -5% 
 
30 September 2021    206,690    216,848 197,385 195,342       213,527 
 
30 September 2020    171,355    176,434 161,957 163,582       179,481 
 
31 March 2021        179,000    183,818 168,394 170,487       187,847 
                     Fair value Change in ERV   Change in equivalent yield 
                     GBP'000      GBP'000   GBP'000   GBP'000         GBP'000 
 
Sensitivity Analysis            +10%    -10%    +10%          -10% 
 
30 September 2021    206,690    228,192 188,975 186,439       222,802 
 
30 September 2020    171,355    183,940 154,933 156,710       188,744 
 
31 March 2021        179,000    191,699 160,864 162,986       197,965 
                     Fair value Change in ERV   Change in equivalent yield 
                     GBP'000      GBP'000   GBP'000   GBP'000         GBP'000 
 
Sensitivity Analysis            +15%    -15%    +15%          -15% 
 
30 September 2021    206,690    240,861 181,295 177,574       232,104 
 
30 September 2020    171,355    191,497 147,893 150,433       199,087 
 
31 March 2021        179,000    199,642 153,345 156,136       209,264 

11. Receivables and prepayments

                                     30 September  30 September  31 March 
                                     2021          2020          2021 
 
                                     (unaudited)   (unaudited)   (audited) 
                                     GBP'000         GBP'000         GBP'000 
Receivables 
Rent debtor                          3,566         3,469         3,252 
Allowance for expected credit losses (607)         (207)         (995) 
Rent agent float account             2,212         2,056         724 
Other receivables                    1,593         368           627 
Dilapidations receivables            -             69            - 
                                     6,764         5,755         3,608 
 
Lease incentive debtor               3,106         3,225         3,340 
                                     9,870         8,980         6,948 
 
Property related prepayments         296           29            4 
Other prepayments                    32            54            25 
                                     328           83            29 
Total                                10,198        9,063         6,977 

The aged debtor analysis of receivables as follows:

                                  30 September 30 September 31 March 
                                  2021         2020         2021 
                                  GBP'000        GBP'000        GBP'000 
 
Less than three months due        6,251        4,206        3,416 
Between three and six months due  513          1,549        192 
 
Total                             6,764        5,755        3,608 

Expected credit losses have been assessed on receivables balances on an individual tenant-by-tenant basis. The risk of credit loss applied to each tenant is assessed based on information including, but not limited to: external credit ratings; financial statements; press information; previous experience of losses or late payment; discussions with the property manager and the tenant.

This assessment identified a number of receivables balances due from tenants known to be in financial difficulty or having already entered into a Company Voluntary Arrangement ('CVA') or administration. In these instances, a provision against the full balance of the receivable has been applied.

The assessment also identified receivables balances subject to dispute by tenants who are financially stable but unwilling to pay. The recoverability of these balances was subject to a decision by the Court, and as such, an assessment of the probability of a positive decision was made in reassessing the expected cash flows in relation to these balances and other receivables. Post period-end, these balances were recovered in full..

The below table presents the exposure to these classes of identified credit risk and the associated provision made against the receivables balances:

 
                                                      Provision    Provision    Provision 
                                                      30 September 30 September 31 March 
                                     Receivables Rate 2021         2020         2021 
                                     GBP'000       %    GBP'000        GBP'000        GBP'000 
 
Identified financial difficulties    177         100  177          207          415 
Subject to Court ruling              717         60   430          -            580 
No Identified financial difficulties 9,583       -    -            -            - 
Total                                10,477           607          207          995 

12. Interest rate derivatives

                                                   30 September 30 September  31 March 
                                                   2021         2020          2021 
 
                                                   (unaudited)  (unaudited)   (audited) 
                                                   GBP'000        GBP'000         GBP'000 
 
At the beginning of the period                     61           14            14 
Changes in fair value of interest rate derivatives 51           (28)          (16) 
Interest rate cap premium paid                     -            63            63 
 
At the end of the period                           112          49            61 

The Company is protected from a significant rise in interest rates as it currently has interest rate caps in effect which cap the interest rate at 1.00% on a notional value of GBP51.50 million. As a result, the loan was 102% hedged as at 30 September 2021 (31 March 2021: 130%).

Fair Value hierarchy

The following table provides the fair value measurement hierarchy for interest rate derivatives:

Assets measured at fair value 
 
                   Quoted prices  Significant  Significant 
                   in active      observable   unobservable 
                   markets        input        inputs 
                   (Level 1)      (Level 2)    (Level 3)     Total 
Valuation date     GBP'000          GBP'000        GBP'000         GBP'000 
30 September 2021  -              112          -             112 
30 September 2020  -              49           -             49 
31 March 2021      -              61           -             61 
 

The fair value of these contracts is recorded in the Condensed Statement of Financial Position as at the period end.

There have been no transfers between Level 1 and Level 2 during the period, nor have there been any transfers between Level 2 and Level 3 during the period.

13. Interest bearing loans and borrowings

                                                    Bank borrowings drawn 
                                                    30 September  30 September 31 March 
                                                    2021          2020         2021 
                                                    (unaudited)   (unaudited)  (audited) 
                                                    GBP'000         GBP'000        GBP'000 
At the beginning of the period                      39,500        51,500       51,500 
Bank borrowings drawn in the period                 11,000        -            - 
Bank borrowings repaid in the period                -             (12,000)     (12,000) 
Interest bearing loans and borrowings               50,500        39,500       39,500 
 
Unamortised loan arrangement fees                   (329)         (418)        (369) 
At the end of the period                            50,171        39,082       39,131 
 
Repayable between two and five years                50,500        39,500       39,500 
 
Bank borrowings available but undrawn in the period               20,500 
                                                    9,500                      20,500 
 
Total facility available                            60,000        60,000       60,000 
 
 

The Company has a GBP60.00 million (31 March 2021: GBP60.00 million) credit facility with RBSi of which GBP50.50 million (31 March 2021: GBP39.50 million) has been utilised as at 30 September 2021.

The Company has a target gearing of 35% Loan to NAV, which is the maximum gearing on drawdown under the terms of the facility. As at 30 September 2021, the Company's gearing was 28.97% Loan to NAV (31 March 2021: 25.15%).

Borrowing costs associated with the credit facility are shown as finance costs in note 6 to these financial statements.

14. Payables and accrued expenses

                 30                       31 
                             30 September 
                 September                March 
                             2020 
                 2021                     2021 
                             (unaudited) 
                 (unaudited)              (audited) 
                             GBP'000 
                 GBP'000                    GBP'000 
 
Deferred income  2,990       2,835        2,567 
Accruals         835         991          783 
Other creditors  768         455          588 
 
Total            4,593       4,281        3,938 
 

15. Lease obligation as lessee

Leases as lessee are capitalised at the lease's commencement at the present value of the minimum lease payments. The present value of the corresponding rental obligations are included as liabilities.

The following table analyses the present value of the minimum lease payments under non-cancellable finance leases:

                                                                                   30 September  30 September  31 March 
                                                                                   2021          2020          2021 
 
                                                                                   (unaudited)   (unaudited)   (audited) 
                                                                                   GBP'000         GBP'000         GBP'000 
Current                                                                            48            48            48 
Non Current                                                                        635           635           635 
 
Lease liabilities included in the Statement of Financial Position at 30 September 
2021 
                                                                                   683           683           683 

16. Issued share capital

There was no change to the issued share capital during the period. The number of ordinary shares allotted, called up and fully paid remains 158,774,746 of GBP0.01 each, of which 350,000 ordinary shares are held in treasury.

17. Transactions with related parties

As defined by IAS 24 Related Party Disclosures, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

For the six months ended 30 September 2021, the Directors of the Company are considered to be the key management personnel. Directors' remuneration is disclosed in note 5.

The Company is party to an Investment Management Agreement with the Investment Manager, pursuant to which the Company has appointed the Investment Manager to provide investment management services relating to the respective assets on a day-to-day basis in accordance with their respective investment objectives and policies, subject to the overall supervision and direction of the Board of Directors.

Under the Investment Management Agreement, the Investment Manager receives a quarterly management fee which is calculated and accrued monthly at a rate equivalent to 0.9% per annum of NAV (excluding uninvested proceeds from fundraising).

During the period from 1 April 2021 to 30 September 2021, the Company incurred GBP732,204 (six months ended 30 September 2020: GBP578,821) of investment management fees and expenses of which GBP362,931 was outstanding at 30 September 2021 (31 March 2021: GBP315,825).

18. Events after reporting date

Dividend

On 21 October 2021, the Board declared its second interim dividend of 2.00 pps in respect of the period from 1 July 2021 to 30 September 2021. The dividend payment will be made on 19 November 2021 to shareholders on the register as at 29 October 2021. The ex-dividend date was 28 October 2021.

Property Sales

The Company completed the sale of Wella Warehouse on 15 October 2021 for gross proceeds of GBP5.86 million.

Property Acquisition

On 5 November 2021, the Company acquired Central Six Retail Park in Coventry for a purchase price of GBP16.41 million.

EPRA Performance Measures

Detailed below is a summary table showing the EPRA performance measures of the Company.

All EPRA performance measures have been calculated in line with EPRA Best Practices Recommendations Guidelines which can be found at www.epra.com.

MEASURE AND DEFINITION                   PURPOSE                                      PERFORMANCE 
 
 
                                         A key measure of a company's underlying      GBP5.46 million/3.45 pps 
1. EPRA Earnings                         operating results and an indication of the 
                                         extent to which current dividend payments    EPRA earnings for the six month 
Earnings from operational activities.    are supported by earnings.                   period ended 30 September 2021 
                                                                                      (six month period ended 30 
                                                                                      September 2020: GBP5.41 million/ 
                                                                                      3.41 pps) 
 
                                         The EPRA NAV set of metrics make adjustments 
2. EPRA Net Tangible Assets ('NTA')      to the NAV per the IFRS financial statements 
                                         to provide stakeholders with the most        GBP174.18 million/109.94 pps EPRA 
Assumes that entities buy and sell       relevant information on the fair value of    NTA as at 30 September 2021 (At 
assets, thereby crystallising certain    the assets and liabilities of a real estate  31 March 2021: GBP157.02 million/ 
levels of unavoidable deferred tax.      investment company, under different          99.11 pps) 
                                         scenarios. 
 
3. EPRA Net Reinstatement Value ('NRV') 
Assumes that entities never sell assets                                               GBP187.82 million/118.55 pps EPRA 
and aims to represent the value required                                              NRV as at 30 September 2021 
to rebuild the entity.                   See above 
                                                                                      (At 31 March 2021: GBP168.83 
                                                                                      million/106.57 pps) 
4. EPRA Net Disposal Value ('NDV') 
Represents the shareholders' value under 
a disposal scenario, where deferred tax, 
financial instruments and certain other                                                GBP174.29 million/110.01 pps EPRA 
adjustments are calculated to the full   See above                                    NDV as at 30 September 2021 (As 
extent of their liability, net of any                                                 at 31 March 2021: GBP157.08 million 
resulting tax.                                                                        /99.15pps) 
 
5. EPRA Net Initial Yield ('NIY) 
 
Annualised rental income based on the                                                 6.69% 
cash rents passing at the balance sheet   A comparable measure for portfolio 
date, less non-recoverable property      valuations. This measure should make it      EPRA NIY 
operating expenses, divided by the       easier for investors to judge themselves, 
market value of the property, increased  how the valuation of portfolio X compares    as at 30 September 2021 
with (estimated) purchasers' costs.      with portfolio Y. 
                                                                                      (At 31 March 2021: 7.37%) 
 
 
6. EPRA 'Topped-Up' NIY 
                                         A comparable measure for portfolio           7.07% 
This measure incorporates an adjustment  valuations. This measure should make it 
to the EPRA NIY in respect of the        easier for investors to judge themselves,    EPRA 'Topped-Up' NIY 
expiration of rent-free periods (or      how the valuation of portfolio X compares 
other unexpired lease incentives such as with portfolio Y.                            as at 30 September 2021 
discounted rent periods and step rents). 
                                                                                      (At 31 March 2021: 8.12%) 
 
7. EPRA Vacancy                                                                       8.59%/5.43% excluding vacancy 
                                                                                      rate contributed by Glasgow* EPRA 
Estimated Market Rental Value ('EMRV')                                                vacancy as at 30 September 2021 
of vacant space divided by ERV of the    A 'pure' (%) measure of investment property  (At 31 March 2021: 8.96%/5.58% 
whole portfolio.                         space that is vacant, based on ERV.          excluding vacancy contributed by 
                                                                                      Glasgow) 
 
 
                                                                                      28.53% EPRA Cost Ratio (including 
                                                                                      direct vacancy costs) as at 30 
8. EPRA Cost Ratio                                                                    September 2021 (At 30 September 
                                                                                      2020: 27.15%) 
Administrative and operating costs 
(including and excluding costs of direct A key measure to enable meaningful 
vacancy) divided by gross rental income. measurement of the changes in a company's 
                                         operating costs.                             14.80% EPRA Cost ratio (excluding 
                                                                                      direct vacancy costs) as at 30 
                                                                                      September 2021 (At 30 September 
                                                                                      2020: 16.70%) 
 
9. EPRA Capital Expenditure 
 
Property which has been held at both the 
current and comparative balance sheet                                                 GBP19.54 million for the period 
dates for which there has been no        A measure used to illustrate change in       ended 30 September 2021 (31 March 
significant development.                 comparable capital values.                   2021: GBP5.98 million) 
 
10. EPRA like-for-like Rental Growth 
 
Net income generated by assets which 
were held by the Company throughout both                                              GBP0.04 million/0.57% for the 
the current and comparable periods which A measure used to illustrate change in       period ended 30 September 2021 
there has been no significant            comparable income values.                    (31 March 2021: (GBP1.08 million)/ 
development which materially impacts                                                  (6.80%)) 
upon income. 

* Glasgow has exchanged to be sold with the condition of vacant possession.

Calculation of EPRA NTA, EPRA NRV and EPRA NDV

In October 2019, EPRA issued new Best Practice Recommendations for financial guidelines on its definitions of NAV measures: EPRA NTA, EPRA NRV and EPRA NDV.

The Company considers EPRA NTA to be the most relevant NAV measure for the Company and we are now reporting this as our primary NAV measure, replacing our previously reported EPRA NAV and EPRA NNNAV per share metrics. EPRA NTA excludes the cumulative fair value adjustments for debt-related derivatives which are unlikely to be realised.

                                                      Current measures                       Previous measures 
 
 
 
 
                                                      EPRA         EPRA         EPRA         EPRA         EPRA 
 
                                                      NTA          NRV          NDV          NAV          NNNAV 
As at 30 September 2021 
                                                      GBP'000        GBP'000         GBP'000       GBP'000        GBP'000 
IFRS NAV attributable to shareholders                  174,289     174,289      174,289      174,289      174,289 
Mark-to-market adjustment of derivatives              (112)        (112)        -            (112)        - 
Real estate transfer tax and other purchasers' costs1 -            13,642       -            -            - 
At 30 September 2021                                  174,177      187,819      174,289      174,177      174,289 
Number of Ordinary Shares                             158,424,746  158,424,746  158,424,746  158,424,746  158,424,746 
NAV per share                                         109.94p      118.55p      110.01p      109.94p      110.01p 
                                                      Current measures                      Previous measures 
 
 
 
 
                                                      EPRA         EPRA         EPRA        EPRA         EPRA 
 
                                                      NTA          NRV          NDV         NAV          NNNAV 
As at 30 September 2020 
                                                      GBP'000        GBP'000         GBP'000      GBP'000        GBP'000 
IFRS NAV attributable to shareholders                 147,236      147,236      147,236     147,236      147,236 
Mark-to-market adjustment of derivatives              (49)         (49)         -           (49)         - 
Real estate transfer tax and other purchasers' costs1 -            11,309       -           -            - 
At 30 September 2020                                  147,187      158,496      147,236     147,187      147,236 
Number of Ordinary Shares                             158,774,746  158,774,746  158,774,746 158,774,746  158,774,746 
NAV per share                                         92.70p       99.82p       92.73p      92.70p       92.73p 

1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of Real Estate Transfer Tax ('RETT') and other purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA NRV and have been estimated at 6.6% of the net valuation provided by Knight Frank.

                                                      Current measures                      Previous measures 
 
 
 
 
                                                      EPRA         EPRA         EPRA        EPRA         EPRA 
 
                                                      NTA          NRV          NDV         NAV          NNNAV 
As at 31 March 2021 
                                                      GBP'000        GBP'000         GBP'000      GBP'000        GBP'000 
IFRS NAV attributable to shareholders                 157,079      157,079      157,079     157,079      157,079 
Mark-to-market adjustment of derivatives              (61)         (61)         -           (61)         - 
Real estate transfer tax and other purchasers' costs1 -            11,814       -           -            - 
At 31 March 2021                                      157,018      168,832      157,079     157,018      157,079 
Number of Ordinary Shares                             158,424,746  158,424,746  158,424,746 158,424,746  158,424,746 
NAV per share                                         99.11p       106.57p      99.15p      99.11p       99.15p 

1 EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of RETT and other purchasers' costs. RETT and other purchasers' costs are added back when calculating EPRA NRV and have been estimated at 6.6% of the net valuation provided by Knight Frank.

Calculation of EPRA NIY and 'topped up' NIY

                                                                               30        30        31 
                                                                              September  September March 
 
                                                                              2021       2020      2021 
                                                                              GBP'000      GBP'000     GBP'000 
 
Investment property - wholly-owned                                            206,690    171,355   179,000 
 
Allowance for estimated purchasers' costs at 6.6% 
                                                                              13,642     11,652    11,814 
 
Grossed-up completed property portfolio valuation (B)                         220,332    183,007   190,814 
 
Annualised cash passing rental income                                         15,699     14,144    15,051 
Property outgoings                                                            (958)      (955)     (993) 
 
Annualised net rents (A)                                                      14,741     13,189    14,058 
 
 
Add: notional rent expiration of rent free periods or other lease incentives* 
                                                                              846        2,169     1,439 
 
'Topped-up' net annualised rent (C)                                           15,587     15,358    15,497 
 
EPRA NIY (A/B)                                                                6.69%      7.21%     7.37% 
 
EPRA 'topped-up' NIY (C/B)                                                    7.07%      8.39%     8.12% 
 

* Rent-free periods expire by June 2022.

EPRA NIY basis of calculation

EPRA NIY is calculated as the annualised net rent, divided by the gross value of the completed property portfolio.

The valuation of grossed up completed property portfolio is determined by our external valuers as at 30 September 2021, plus an allowance for estimated purchasers' costs. Estimated purchasers' costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.

In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods and future contracted rental uplifts.

Calculation of EPRA Vacancy Rate

 
                                                                           30 September    30 September 31 March 
 
                                                                           2021            2020         2021 
                                                                           GBP'000           GBP'000        GBP'000 
 
Annualised potential rental value of vacant premises (A) 
                                                                           1,521           1,330        1,482 
 
Annualised potential rental value for the completed property portfolio (B) 
                                                                           17,704          16,211       16,538 
 
EPRA Vacancy Rate (A/B)                                                    8.59%           8.21%        8.96% 
 
 
Calculation of EPRA Cost Ratios 
                                                                           30 September    30 September 31 March 
                                                                           2021            2020         2021 
                                                                           GBP'000           GBP'000        GBP'000 
 
 
Administrative/operating expense per IFRS income statement 
                                                                           2,267           2,230        5,221 
Less: ground rent costs                                                    (33)            (33)         (66) 
EPRA costs (including direct vacancy costs) (A)                            2,234           2,197        5,155 
 
Direct vacancy costs                                                       (1,075)         (846)        (1,622) 
 
 
EPRA costs (excluding direct vacancy costs) (B) 
                                                                           1,159           1,351        3,533 
 
 
Gross rental income less ground rent costs - per IFRS 
                                                                           7,833           8,091        15,648 
 
Gross rental income less ground rent costs (C) 
                                                                           7,833           8,091        15.648 
 
 
EPRA Cost Ratio (including direct vacancy costs) (A/C) 
                                                                           28.53%          27.15%       32.94% 
 
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 
                                                                           14.80%          16.70%       22.58% 

The Company has not capitalised any overhead or operating expenses in the accounting period disclosed above.

Only costs directly associated with the purchase or construction of properties as well as all subsequent value-enhancing capital expenditure are capitalised.

Like-for-like rental growth

The table below sets out the like-for-like rental growth of the portfolio, by sector, in accordance with EPRA Best Practices Recommendations.

 
 
 
 
 
 
                                         Rental income from 
                  Rental income from 
                                         like-for-like 
                  like-for-like 
                                         portfolio for 
                  portfolio for 
                                         period 1 October 2020 
                  period 1 April 2021 to 
                                         to 31 
                  30 September 
                                         March 
                  2021                                                                     Like-for-like 
                                         2021                  Like-for-like rental growth 
                  GBPm                                                                       rental growth 
                                         GBPm                    GBPm 
Sector                                                                                     % 
Industrial        4.20                   4.10                  0.10                        2.42 
Office            1.15                   1.13                  0.02                        1.83 
Alternatives      0.73                   0.77                  (0.04)                      (5.01) 
Standard retail   1.02                   1.04                  (0.02)                      (1.76) 
Retail warehouses 0.29                   0.31                  (0.02)                      (6.93) 
Total             7.39                   7.35                  0.04                        0.57 

The like-for-like rental growth is based on changes in rental income for those properties which have been held for the duration of both the current and comparative reporting. This represents a portfolio valuation, as assessed by the valuer of GBP187.50 million (31 March 2021: GBP179.00 million).

Capital Expenditure

The table below sets out the capital expenditure of the portfolio in accordance with EPRA Best Practice Recommendations.

                                                      30 September 30 September 
 
                                                      2021         2020         31 March 2021 
Sector 
                                                      GBP'000        GBP'000        GBP'000 
Acquisitions                                          19,468       -            5,778 
Investment properties - no incremental lettable space 68           106          205 
Total purchases and capital expenditure               19,536       106          5,983 

Company Information

Shareholder Enquiries

The register for the Ordinary Shares is maintained by Link Group. In the event of queries regarding your holding, please contact the Registrar on +44 (0)371 664 0391 or email: enquiries@linkgroup.co.uk

Changes of name and/or address must be notified in writing to the Registrar, at the address shown below. You can check your shareholding and find practical help on transferring shares or updating your details at www.signalshares.com . Shareholders eligible to receive dividend payments gross of tax may also download declaration forms from that website.

Share Information

Ordinary GBP0.01 Shares 158,424,746

(excluding treasury shares)

SEDOL Number BWD2415

ISIN Number GB00BWD24154

Ticker/TIDM AEWU

The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange.

Annual and Interim Reports

Copies of the Annual and Interim Reports are available from the Company's website: www.aewukreit.com.

Provisional Financial Calendar

31 March 2022     Year end 
June 2022         Announcement of annual results 
September 2022    Annual General Meeting 
30 September 2022 Half-year end 
November 2022     Announcement of interim results 

Dividends

The following table summarises the dividends declared in relation to the period:

                                                                                                          GBP 
Interim dividend for the period 1 April 2021 to 30 June 2021 (payment made on 31 August 2021)             3,168,495 
Interim dividend for the period 1 July 2021 to 30 September 2021 (payment to be made on 19 November 2021) 3,168,495 
Total                                                                                                     6,336,990 

Independent Directors

Mark Burton (Non-executive Chairman)

Bimaljit ('Bim') Sandhu (Non-executive Director and Chairman of the Audit Committee)

Katrina Hart (Non-executive Director)

Registered Office

6th Floor

65 Gresham Street

London

EC2V 7NQ

Investment Manager and AIFM

AEW UK Investment Management LLP

33 Jermyn Street

London

SW1Y 6DN

Tel: 020 7016 4880

Website: www.aewuk.co.uk

Property Manager

Mapp

180 Great Portland Street

London

W1W 5QZ

Corporate Broker

Liberum

Ropemaker Place

25 Ropemaker Street

London

EC2Y 9LY

Legal Adviser

Gowling WLG (UK) LLP

4 More London Riverside

London

SE1 2AU

Depositary

Langham Hall UK LLP

8th Floor

1 Fleet Place

London

EC4M 7RA

Administrator

Link Alternative Fund Administrators Limited

Beaufort House

51 New North Road

Exeter

EX4 4EP

Company Secretary

Link Company Matters Limited

6th Floor

65 Gresham Street

London

EC2V 7NQ

Registrar

Link Group

10th Floor

Central Square

28 Wellington Street

Leeds

LS1 4DL

Auditor

BDO LLP

55 Baker Street

London

W1U 7EU

Valuer

Knight Frank LLP

55 Baker Street

London

W1U 8AN

Frequency of NAV publication:

The Company's NAV is released to the London Stock Exchange on a quarterly basis and is published on the Company's website.

National Storage Mechanism

A copy of the Interim Report will be submitted shortly to the National Storage Mechanism ('NSM') and will be available for inspection at https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/ national-storage-mechanism.

LEI: 21380073LDXHV2LP5K50

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ISIN:           GB00BWD24154 
Category Code:  IR 
TIDM:           AEWU 
LEI Code:       21380073LDXHV2LP5K50 
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited reviews 
Sequence No.:   126970 
EQS News ID:    1249566 
 
End of Announcement  EQS News Service 
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Image link: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=show_t_gif&application_id=1249566&application_name=news

 

(END) Dow Jones Newswires

November 17, 2021 02:02 ET (07:02 GMT)

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