AEW UK REIT plc (AEWU) AEW UK REIT plc: NAV Update and Dividend Declaration 20-Jan-2022 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.

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20 January 2022

AEW UK REIT Plc

NAV Update and Dividend Declaration

AEW UK REIT plc (LSE: AEWU) (the "Company"), which directly owns a diversified portfolio of 35 regional UK commercial property assets, announces its unaudited Net Asset Value ("NAV") and interim dividend for the three-month period ended 31 December 2021.

Highlights

-- NAV of GBP180.94 million or 114.21 pence per share as at 31 December 2021 (30 September 2021: GBP174.29million or 110.01 pence per share).

-- NAV total return of 5.63% for the quarter (30 September 2021 quarter: 4.58%).

-- 3.49% like-for-like valuation increase for the quarter (30 September 2021 quarter: 3.11%), driven byretail warehousing (like-for-like increase of 6.73%) and industrial (like-for-like increase of 5.16%) sectors.

-- EPRA earnings per share ("EPRA EPS") for the quarter of 1.80 pence (30 September 2021 quarter: 1.30pence).

-- Interim dividend of 2.00 pence per share for the three months ended 31 December 2021, in line with thetargeted annual dividend of 8.00 pence per share.

-- Disposal of Wella Warehouse, Basingstoke, for gross proceeds of GBP5.86 million, which was 1.7x itspurchase price.

-- Purchase of Central Six Retail Park in Coventry for a purchase price of GBP16.41 million / GBP110 per sq ft.The purchase price reflects a net initial yield of circa 11%, with an anticipated reversionary yield of 12.5%.

-- The Company remains conservatively geared with a loan to NAV ratio of 29.84% (30 September 2021: 28.97%).At the quarter end, the Company had a cash balance of GBP7.39 million and GBP6.0 million of its loan facility availableto draw up to the maximum 35% Loan to NAV at drawdown.

-- For the rental quarter commencing on 25 December 2021, approximately 98% of rent has been collected or isexpected to be received prior to quarter end. The remainder of rents owed will continue to be pursued.

-- We remain encouraged by the consistent rent collection levels, which stand at over 98% for each quartersince the onset of the pandemic (excluding current quarter).

-- The continued improvement in economic conditions has brought about the return of a share price premium toNAV. We hope the Company will be in a position to take advantage of continued strong demand for its shares to growour capital base in due course.

Alex Short, Portfolio Manager, AEW UK REIT, commented:

"The portfolio continues to generate strong capital growth, largely driven by yield compression of the industrial assets and strong performance of our retail warehousing assets. We have also seen our ERVs move on as a result of continued strong occupier demand, supported by a compelling asset management story. We are pleased to be paying a dividend of 2p for the 25th consecutive quarter.

Following the sale of the two strongly performing industrial assets in Q3, we invested a significant portion of the proceeds in a multi let retail warehouse park purchased at Central Six, Coventry. At the point of purchase this acquisition is accretive to EPS with an expectation of further growth to come in 2022 as the asset's business plan is implemented.

The expected sale of our Glasgow office, which has a high level of vacancy, and the completion of ongoing works at our Blackpool asset in the coming months will support a reduction in costs and the rebuilding of our EPS in line with expectations."

Portfolio Manager's report

The portfolio continues to generate strong capital growth, with valuations increasing by 3.49% on a like-for-like basis (30 September 2021 quarter: 3.11%). As with the previous quarter, this was largely driven by the performance of the industrial assets in the portfolio which saw a like-for-like increase of 5.16% and make up 51.1% of the portfolio as at 31 December 2021.

Although valuations have again partly been driven by yield compression, we have also seen our ERVs move on as a result of continued strong occupier demand, supported by a strong asset management story. We have again seen good performance at our office holding in Bristol, with recent lettings at above ERV moving the valuation higher. We are likely to implement a programme of refurbishment works at this asset in the expectation of achieving further rental growth in an ever-improving market. Our office park at Oxford has also continued to perform well with its transition to life sciences/medical use, a sector which is proving particularly popular with both tenants and investors.

It continues to be a challenging period for the high street retail sector, but with valuations in the portfolio stable again this quarter, we are starting to see cause for selective optimism. We are often seeing divergence between high street retail and retail warehousing assets, in terms of both tenant and investor demand, with this being evident in our retail warehousing valuations, which have seen a 6.73% like-for-like valuation increase this quarter (30 September 2021 quarter: 5.69%). This is reflected in our recent purchase of a 94,891 sq ft retail warehouse at Shrewsbury, offering an 8.7% NIY on purchase, where we are seeing robust tenant commitment to the scheme at rents in excess of ERVs. This is also true at our newly purchased asset at Central Six, Coventry, where we expect tenant demand to support successful asset management deals and, in time, rental growth. We will continue to appraise buying opportunities and our existing portfolio with this noticeable divergence in mind.

The proceeds from the sale of two of the Company's strongly performing industrial holdings during Q3 2021 are now almost fully invested. The multi-let retail warehouse park purchased at Central Six, Coventry, is accretive to EPRA EPS at the point of purchase and with the ongoing implementation of the business plan, there is an expectation of further growth to come during the course of 2022. Tenants at the Park include Next, Boots and Burger King and it is located in a prime position near the city centre, immediately adjacent to the train station. We have one further asset under offer to buy and the completion of this purchase will take us back to full investment and gearing in line with our target of a 35% Loan to NAV ratio. It is anticipated that the sale of our office asset in Glasgow, where we have a high level of vacancy, will complete in the first half of 2022 (subject to planning consent), and the ongoing service charge works at our Blackpool asset will also conclude. Each of these events will lead to the cost overheads falling, supporting the rebuilding of EPS, with the aim of returning to full dividend cover in due course.

The Company's EPRA EPS was 1.80 pence for the quarter, providing a dividend cover of 90% (30 September 2021: 1.30 pence and 65%).

Valuation movement

As at 31 December 2021, the Company owned investment properties with a fair value of GBP225.84 million. The like-for-like valuation increase for the quarter of GBP7.05 million (3.49%) is broken down as follows by sector:

Sector             Valuation 31 December 2021 Like-for-like valuation movement for the quarter 
                   GBP million       %          GBP million                        % 
Industrial         115.39          51.09      5.66                             5.16 
Office             40.32           17.86      0.38                             0.94 
High Street Retail 24.63           10.90      0.01                             0.04 
Retail Warehouses  32.95           14.59      1.00                             6.73 
Other              12.55           5.56       0.00                             0.00 
Total              225.84          100.00     7.05                             3.49* 

* This is the overall weighted average like-for-like valuation increase of the portfolio.

Net Asset Value

The Company's unaudited NAV at 31 December 2021 was GBP180.94 million, or 114.21 pence per share. This reflects an increase of 3.82% compared with the NAV per share at 30 September 2021. The Company's NAV total return, which includes the interim dividend of 2.00 pence per share for the period from 1 July 2021 to 30 September 2021, was 5.63% for the three-month period ended 31 December 2021.

                                              Pence per share 
                                                               GBP million 
NAV at 1 October 2021                         110.01           174.29 
Portfolio acquisition costs                   (0.70)           (1.12) 
Profit on sale of investments                 0.88             1.40 
Capital expenditure                           (0.37)           (0.59) 
Valuation change in property portfolio        4.45             7.04 
Valuation change in derivatives               0.15             0.23 
Income earned for the period                  2.91             4.62 
Expenses and net finance costs for the period (1.12)           (1.76) 
Interim dividend paid                         (2.00)           (3.17) 
NAV at 31 December 2021                       114.21           180.94 

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards. It incorporates the independent portfolio valuation at 31 December 2021 and income for the period, but does not include a provision for the interim dividend for the three-month period to 31 December 2021.

Dividend

Dividend declaration

The Company today announces an interim dividend of 2.00 pence per share for the period from 1 October 2021 to 31 December 2021. The dividend payment will be made on 28 February 2022 to shareholders on the register as at 28 January 2022. The ex-dividend date will be 27 January 2022.

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