AEW UK Long Lease REIT PLC NAV Update and Dividend Declaration (7302O)

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RNS Number : 7302O

AEW UK Long Lease REIT PLC

31 January 2019

AEW UK Long Lease REIT plc ("AEWL" or "the Group")

LEI: 213800MPBIJS12Q88F71

31 January 2019

NAV Update and Dividend Declaration for the quarter ended 31 December 2018

AEW UK Long Lease REIT plc (LSE: AEWL) (the "Group"), which owns a diversified portfolio of 18 regional UK commercial property assets, announces its unaudited Net Asset Value ('NAV') and interim dividend for the quarter ended 31 December 2018.

Highlights

-- EPRA earnings per share ("EPRA EPS") for the quarter increased by 12% to 1.42 pence per share (quarter to 30 September 2018: 1.27 pence per share), which represents dividend cover for the quarter of 103%.

-- The Group today declares an interim dividend of 1.375 pence per share for the quarter ended 31 December 2018 thus making the aggregate dividends paid and declared for the half year ended on that date 2.75 pence per share (in line with the targeted annual dividend at IPO) and total dividends since IPO to 6.00 pence per share. The dividend is to be paid on 28 February 2019 to shareholders on the register on 8 February 2019.

-- For the first half of the Company's current financial year, EPRA earnings were 2.70 pence per share reflecting dividend cover for the half year of 98.18 %. The EPRA earnings per share include an accrual to reflect the minimum contracted uplifts under the Group's leases, without this accrual, the cash earnings were 2.31 pence per share reflecting 84.18% cash dividend cover for the half year.

-- At 31 December 2018, the independent fair valuation of the property portfolio was GBP112.23 million (30 September 2018: GBP103.98 million), a like-for-like increase of GBP1.60 million (1.54%) over the quarter (quarter to 30 September 2018: GBP0.95 million or 0.96%). The fair valuation of the property portfolio includes the GBP6.65 million (excluding purchase costs) of a Care Home in Nailsea, Bristol which exchanged unconditionally on 21 December 2018 and completed on 11 January 2019.

-- Unaudited NAV increased to GBP78.46 million, 97.46 pence per share (30 September 2018: GBP76.94 million, 95.58 pence per share), an increase of 1.97%.

-- An GBP11 million increase to the loan facility with Canada Life Investments was drawn down on 11 January 2019 which funded the acquisition of Nailsea, Bristol, reflecting a net initial yield of 5.8% on a 30 year lease.

Alex Short, Portfolio Manager, AEW UK Long Lease REIT, commented

The Group's performance during the quarter was strong; we have seen capital growth from our properties of 1.54% and a NAV increase of 1.97%. In addition to this, following the Group's ramp up period, its dividend going forward should be fully covered by EPRA earnings and will be further enhanced in future periods by income received from further acquisitions using the additional debt. We continue to see reliable performance and prompt rent payments from our tenants, which is key to our strategy with its target of providing our shareholders with a stable income stream, growing in line with inflation.

The decision has been taken by the Board to increase the Group's debt levels from 28% to 35% loan to gross asset value, in order to achieve increased diversification of income and exposure to our pipeline of attractively priced assets as well as being accretive to dividend cover.

Our aim is to grow the Group at the appropriate time to achieve economies of scale that will benefit our investors and enhance earnings per share. We are currently seeing a strong and varied pipeline of attractively priced assets across the range of our target sectors.

Net Asset Value

The Group's unaudited NAV as at 31 December 2018 was GBP78.46 million, 97.46 pence per share, reflecting an increase of 1.97% per share compared with the NAV as at 30 September 2018 due to the valuation uplift during the quarter and, for the first time since IPO, EPRA earnings per share exceeding the dividend paid during the quarter. As at 31 December 2018, the Group owned 18 investment properties with a fair value of GBP112.23 million.

 
 Movement during the Quarter               Pence per        GBP 
                                               share    million 
 NAV at 30 September 2018                     95.581      76.94 
 Net portfolio acquisition costs             (0.158)     (0.13) 
 Valuation change in property portfolio        1.994       1.61 
 Income earned for the period                  2.171       1.75 
 Expenses and net finance costs for 
  the period                                 (0.749)     (0.60) 
 Interim dividend paid                       (1.375)     (1.11) 
 NAV at 31 December 2018                      97.464      78.46 
 

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the European Union and incorporates the Group's individually valued property portfolio as at 31 December 2018 and income for the quarter, but does not include a provision for the interim dividend for the quarter ended 31 December 2018.

The income earned for the period includes an accrual for the minimum contractual uplifts defined within the index linked leases. In the event that inflation is greater than these minimum contractual uplifts, the income realised will ultimately be greater than that currently accrued.

Dividend

The Board has today declared an interim dividend of 1.375 pence per share for the quarter ended 31 December 2018. The dividend payment will be made on 28 February 2019 to shareholders on the register as at 8 February 2019. The ex-dividend date will be 7 February 2019. All of the dividend of 1.375 pence per share will all be designated as a property income distribution ("PID").

Based on the target dividends set out within the Group's Prospectus, the Board is targeting an aggregate dividend of 5.50 pence per share for the year ending 30 June 2019.

Investors should note that any dividend targets are for illustrative purposes only, based on current market conditions and is not intended to be, and should not be taken as, a profit forecast or estimate. Actual returns cannot be predicted and may differ materially from this illustrative figure. There can be no assurance that the target will be met or that any dividend or total return will be achieved.

Debt

As at 31 December 2018, the Group had utilised all of its GBP30 million fixed interest loan facility with Canada Life Investments and at that date was geared at a loan to Gross Asset Value ('GAV') of 27.7%. On 11 January 2019, the Group increased its loan facility by GBP11 million with its existing lender, Canada Life Investments, taking the total loan drawn down to GBP41 million. The weighted average interest cost of the Group's increased facility is 3.19% and is repayable on the 20 October 2025.

Portfolio Activity

Nailsea, Bristol

On 17 January 2019, the Group announced the completion of the acquisition of a Care Home in Nailsea, Bristol for GBP6.65 million, reflecting a net initial yield of 5.8%, comprising a 62-room, purpose built care home located in an affluent suburb approximately 8 miles south west of Bristol, fully let, on a new 30 year lease, operated by Handsale Ltd, an established national provider of care services for the elderly. A new 30 year fully repairing and insuring lease has been granted by the Group from the date of the acquisition providing the Group with annual rental uplifts in line with the Retail Price Index, with a minimum uplift level of 1% and a cap of 4%.

Inflation linked rent reviews

92% of the portfolio's income stream is reviewed periodically, on an upward only basis, in line with inflation; with 71% and 21% of the portfolio indexed to RPI and CPI respectively.

Sector weightings

The sector weighting, by value, of the property portfolio as at 31 December 2018 was: Hotels 21.6%; Industrial 21.6%; Residential care homes 16.0%; Car showrooms 13.2%; Student accommodation 10.8%; Leisure 8.6%; Power station 4.4%; and Petrol station 3.8%.

Future publications

The Group's December 2018 Quarterly Investment Report will be available on the Group's website on 4 February 2019.

About AEW UK Long Lease REIT (www.aewukllreit.com)

AEW UK Long Lease REIT plc (LSE: AEWL) aims to generate a sustainable, secure and predictable income return, whilst at least maintaining capital values in real terms, by investing in a diversified portfolio of UK properties, with an attractive entry yield, predominately in alternative and specialist sectors. It will invest in a diverse range of sectors that are underrepresented in institutional portfolios including leisure, healthcare, education, hotels, student accommodation, supported living and automotive. At least 85% of the gross passing rent from the portfolio's leases will contain inflation linked rent reviews, and average initial unexpired leases in excess of 18 years at the time of investment.

About AEW UK Investment Management LLP (www.aewuk.co.uk )

AEW UK Investment Management LLP ("AEW UK") is the investment manager of AEWL. It employs a well-resourced team comprising 23 individuals covering investment, asset management, operations and strategy. It is part of AEW Group, one of the world's largest real estate managers, with just over EUR63.5bn of assets under management as at 30 September 2018. AEW Group comprises AEW SA and AEW Capital Management L.P., a U.S. registered investment manager and their respective subsidiaries. In Europe, as at 30 September 2018, AEW Group managed nearly EUR30bn in value in properties of all types located in 9 countries, with close to 400 staff. The Investment Manager is a 50:50 joint venture between the principals of the Investment Manager and AEW.

Enquires

 
 AEW UK 
 Alex Short                 [e-mail] 
 Laura Elkin                [e-mail] 
 Nicki Gladstone            [e-mail] 
                            [phone] 
 
   Cenkos Securities plc 
 Tom Scrivens               [phone] 
  Sapna Shah                 [phone] 
 
 TB Cardew                  [e-mail] 
 Ed Orlebar                 [phone] 
  Tom Allison                [phone] 
  Lucy Featherstone          [phone] 
 

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January 31, 2019 10:30 ET (15:30 GMT)