Aew Uk Reit Share Discussion Threads

[spectoacc] 09/7/2020 06:58

Thanks @nickrl.

[nickrl] 08/7/2020 23:17

Shieldbug recording of meeting worked fine and they will update with full Q&A in due course. Nice platform actually and questions were answered without filtering and much better than the big broker/research firms dominating you get with big propco's. Could have done with a bit more detail on rental collection and whilst selling Corby was good for cash they've got a fair chunk of rent to replace now and need to be careful as everybody's after industrials now so bound to be bid up.

[shieldbug] 08/7/2020 11:57

Thanks gre. Previous meetings on this platform were ok and generally I like it.

[gre] 08/7/2020 11:48

sheildbug - it appears that nobody could enter this meeting online due to a technical problem. Investormeet are recording the meeting and will send out a link to the recording later.

Bit annoying as you say but hey these things happen from time to time. Thanks for the update jombaston

[jombaston] 08/7/2020 11:47

I couldn't get in either but I dialled into the phone line.

Sounds like there is a decent chance that the 2p div will be maintained for the next quarter. It won't be fully covered but close and collections are going well v previous quarter.

[shieldbug] 08/7/2020 11:39

Couldn't get into this meeting. Bit annoying.

[2wild] 03/7/2020 10:39

Nice 4% rise this morning.

[spectoacc] 03/7/2020 09:30

The AIRE-related comments had a certain irony:

"However, she believed the focus on longer-dated income and long leases was misplaced due to the high cost of securing these stable income streams.

‘When we buy our assets they are not at a price that is very inflated like long leases, and a more in line with their fundamental valuation,’ she said."


Before she got sacked from co-running AIRE, one of the features of their purchases were the "strong residual/vacant values", quickly shown to be at odds with reality by the Meridian Metals fiasco.

[gez] 03/7/2020 00:45

Is this UK Reit a bargain on a 12% yield and 26% discount?
By Michelle McGagh, Gavin Lumsden 02 Jul, 2020
6
Comments
Is this UK Reit a bargain on a 12% yield and 26% discount?
Laura Elkin, co-manager of AEW UK (AEWU) real estate investment trust (Reit), has urged investors to consider a flight to good value after a coronavirus slump left its shares looking extraordinary cheap on a 26% discount to net asset value and a 12% dividend yield, the highest in its sector.

The Covid-19 pandemic has heightened a polarisation in UK real estate in recent years that has seen Reits holding long leases and exposed to industrial and logistics properties bid up at the expense of generalist commercial property funds such as AEWU, a ‘flight to security’ Elkin called it in an interview with Investment Trust Insider.

The trust’s annual results published last month suggest a more nuanced approach may be justified. Certainly, three months into the economic and health crisis it is worth asking if AEWU has been oversold, its shares slumping a third this year, from 99.8p to 67.8p, despite a 25% rebound since its 18 March low of 54.2p.

After all 48% of the £107m trust’s assets are in the favoured industrial sector with a relatively low 12% in struggling retail. The results for the year to 31 March revealed a 5.5% fall in net asset value but a 7% increase in earnings per share that meant 8p per share in quarterly dividends were covered.

ADVERTISING

Ads by Teads

Liberum, the trust’s broker, forecasts the dividend for this year will only be 7% uncovered on the basis that rent collection at 84% is resilient given the scale of the disruption from the lockdown.

Of course, the double-digit yield indicates the threat of a potential dividend cut, a point the trust’s board acknowledged given the extreme uncertainty over how long the UK recession will last.

But Liberum analyst Conor Finn points to the self-help AEWU has taken, last month selling a Corby property at a 23% over book value with cash from the disposal reducing net debt to 14%. Since the financial year-end lease renewals and restructurings have added 4% to the net asset value.

Elkin, who runs the Reit with Alex Short, said the discount and the fact Reits in the ‘balanced̵7; category have remained ‘out of favour’ was ‘disappointing’.

‘Most of the [Reits] that we have seen recover quickly have been those that focus on higher income and very specialist sectors,’ she said.

‘That’s been the trend over the past couple of years; a flight to security.’

Long can be wrong
However, she believed the focus on longer-dated income and long leases was misplaced due to the high cost of securing these stable income streams.

‘When we buy our assets they are not at a price that is very inflated like long leases, and a more in line with their fundamental valuation,’ she said.

‘If you are buying a 25-year lease at a very strong yield, that inflates the price [of the asset].’

Although longer leases are seen as safer bets, Elkin pointed to recent problems with Travelodge, which has entered into a ‘company voluntary arrangement’ (CVA), as proof that it is not totally secure.

The CVA has forced Travelodge’s landlords to renegotiate rents and Secure Income Reit (SIR) has had to write off £14.4m of rent from its 123 leases with the budget hotel chain, which accounts for 12.9% of the £924m portfolio’s total rent.

‘When the market experiences volatility, and something like Travelodge, [with longer lease trusts] you have a much longer way to fall before the value is propped up by the fundamental value [of the asset],’ said Elkin.

Managers AEW have had their own problems with long lease investments. The former AEW Long Lease trust sacked the fund manager and renamed itself Alternative Income Reit (AIRE) following a strategic review prompted by its largest tenant Meridian Metal Trading temporarily falling into administration last year.

Alternative use
Elkin argued that generalist property investors also have the benefit of being able to find ‘alternative use’ for their assets to boost returns.

‘Our property is supported by its fundamental value and its alternative use value,’ she said.

AEW’s sale of the 35-acre car storage in Corby for £18.8m came two years after buying it for £12.4m, with the large mark-up partly due to the managers creating alternative use plans.

Elkin said the asset yielded over 10% a year and the sale price achieved was 25% ahead of the asset’s value immediately prior to sale due to the ability to develop the land that came with the property for both residential or industrial use.

‘New-build residential and logistics would both create more value,’ said Elkin. ‘Because of the work we had done on the business plan we could say we wanted 25% [more]...to reflect the value that could be created.’

Pinpointing alternative uses will continue to be a strong trend for UK commercial property, particularly the development of residential property.

‘We have an industrial asset that we are in discussion about with a national house builder because they want to investigate the site for potential development and we are quite alive to that for the future,’ she said.



Comments

Rob Walker5 hours ago
Whatever the comparative advantage of Industrial vs retail property, I can't see how property values and rental income will return anywhere near to that 99p valuation anytime soon. The real effect on struggling companies has yet to materialise while government support is still active and I suspect the forecast 7% income level will be short-lived.
Reply Report this!
Julian Stevens5 hours ago
But for how long is a yield of 12% p.as. likely to last?
Reply Report this!
Jim Downie4 hours ago
I hold this with quite a few others as I’m retired and to its credit unlike others it has paid full income through the current crisis - still a fair hit on capital but I’m not too worried about that if income can be maintained
Reply Report this!
Ian Marshall3 hours ago
@Julian Stevens IMO dividend yield is not the point if its your own money which is being cannibalised. The reason I bought AEWU is the relatively low cost of each of their portfolio properties, the opportunity for enhancement, the reasonable borrowing level, the trust size and, yes the dividend.
Although I am showing a 30% loss I will stick with it and hope it’s value improves without any risk of liquidation at low value.
Reply Report this!
Tony Taylor3 hours ago
The inevitable rise in inflation warned about by the BoE this week will see property values rise considerably over the next 5 years. I'd rather be in now than late to the table.
Reply Report this!
DWi2 hours ago
Bit confused about the charges for this REIT. Harg Lans's "At a glance" summary doesn't show any TER (strangely), but the KID shows a horrendous 1.42% transaction costs PLUS 3.49 other ongoing costs. AEW's quarterly (Q1 2020) update quotes annual management charge of 0.9% of invested NAV. Which is accurate?
Reply Report this!
Hide all comments

[badtime] 02/7/2020 21:05

Mind sharing some of what it says as it requires registration and I'm not a company :)

[a0002577] 02/7/2020 17:46

Interesting tick up today

[skinny] 29/6/2020 16:19

Added a few more.

[chucko1] 26/6/2020 19:05

Quite impressive all round. Who'da thought?

[redhill9] 26/6/2020 10:36

Well done Skinny! The power of bulletin boards to influence change......

[skinny] 26/6/2020 10:16

We are not alone! - the link in post 902 has been updated! :-)

[badtime] 25/6/2020 12:41

There you go four upticks :)

[skinny] 25/6/2020 12:22

A down tick for reporting a "dead cert" broker recommendation - how odd.

[spectoacc] 25/6/2020 12:20

Ha ha I can't downtick - but I believe @Johnwig may now be paying for a second Premium subscription among his dozen or so fake names - brilliant. :)

[chucko1] 25/6/2020 10:10

@Specto, there's no need to downtick me! Stop it, now.

[skinny] 25/6/2020 09:57

FWIW :- Liberum Capital Buy 71.40 72.00 101.00 83.00 Reiterates

[chucko1] 24/6/2020 13:47

Time will tell - the bargains will show up later this year as the closed-end funds are forced to sell the good stuff as they will find no interest for the stuff they would prefer to sell. Likely a stand-off right now, in part, as fund managers try and assess what the nature of the recovery is likely to be. IMO.

[spectoacc] 24/6/2020 13:32

Agree re the £18.8m, amazing to get that away in this market.

Not yet getting the impression of bargains around to buy tho.

[chucko1] 24/6/2020 13:08

My largest single (listed) holding. Love it. Been adding a few more recently. Purchases they make now will further underpin ability to pay a high dividend - they will have a good choice. The £18.8mn sale was a massive result, and the recent lease renewal indicates (doesn't prove entirely) they have some decent assets. Retail is now really just a minor part of the overall portfolio and is easily accommodated by a 23-5% discount.

Altogether, I expect their ability to keep paying the 8p dividend is fully intact, although they might temporarily cut it in the event of a meaningful second wave.