Aew Uk Reit Share Discussion Threads

[nickrl] 20/10/2022 10:14

There is a reflection of hard times ahead but that AEWU has defensive elements because its

"As yields re-adjust to the current market conditions, it is those assets at the most prime end of the spectrum that have suffered more acutely to date. With higher "starting" yields, the portfolio's current book values are closer to long term value fundamentals, such as vacant possession values, alternative use values and replacement cost"

is reasonable assertion but won't hold water if we have a deep recession of course.

Also the fact they state this

"The Company's prudent accounting provision for doubtful debtors has also been increased this quarter, given the deteriorating economic outlook"

is hardlt a surprise but points to the covid situation emerging and dividends being frozen or cut

Industrials down 6.35% will be a negative read across for others although they do show that industrial has potential still with the Rotherham letting

As specto points out divi is now poorly covered but they have £30m+ cash on the books to fund it for many qtrs so i would stick 50% in a 12mth account so at least tehy neutralise some of teh cash drag if they want to maintain the divi.

[spectoacc] 20/10/2022 10:07

Ah OK. They've said they'd reinvest all of it.

They've been spending a bit on CapEx lately, not sure how much more of that they plan to do, nor if any new purchase will need it.

[stemis] 20/10/2022 09:50

The V is the value of properties, or at least it was in my analysis. I assumed they'd only reinvest £30m of the £38m. The remaining £8m would cover dividends for 18 months (i.e till Q2 2024).

[spectoacc] 20/10/2022 09:43

The covered divis don't - they're paid out of earnings - but the uncovered ones do, they'll reduce the assets ie cash ie the "V".

3p a guess based on them saying the expect the divi to be covered again in Q3 2023.

[stemis] 20/10/2022 09:37

Have you included the c.3p in capital going out in uncovered divis.

Doesn't affect LTV.

[skyship] 20/10/2022 09:10

On offer at 89.3p

[spectoacc] 20/10/2022 09:08

What are the covenants set at?

Have you included the c.3p in capital going out in uncovered divis.

Will they buy after a 40% drop, or well before then, say at -10%?

If I'm right (if), the recession will also hit tenants badly. Takes very few voids & empty rates bills to create a problem.

I think the market's not caught up yet, or else it's (rightly) ascribing only a % chance to my reasonable worst-case.

[stemis] 20/10/2022 08:48

Even a 40% drop in the valuation of current properties would only take LTV to 37.8%. Under those circumstances NAV/share would be 67.8p so clearly the market isn't expecting anything like that...

I don't think LTV is the risk here.

[spectoacc] 20/10/2022 08:46

What is the LTV covenant set at? I admit I've no idea.

Yes, valid point - LTNAV, not LTV, so better than it looks, particularly if they're waiting until into the falls before deploying the £38m.

Personally I'm expecting a much bigger drop than 25% - but horses for courses. I think we've a deep recession coming as both consumer and govnt retrench simultaneously. Can't think that's happened since the early 90's, & don't see how it can be avoided. (Or rather - consumer, govnt, & no BoE ZIRP).

[stemis] 20/10/2022 08:44

I think the risk of a breach of LTV covenant is less than you seem to be suggesting. The 31.07% quoted in the update is loan to net asset value not LTV. The LTV is actually 28.0%. If they invest, say, £30m of the funds they have available, that would drop to 24.6%. Even if there was a (pretty dramatic) 25% fall in valuation of current properties (which would take NAV/share to 88.1p so clearly not expected by the market), LTV would only be 31.5%. Although dividend is uncovered by 0.92p a share, the cost of that is only £1.5 million, so well within their ability to stand until they can reinvest the cash they have.

[spectoacc] 20/10/2022 08:35

Yes, and them saying next year gives some time for the prices to go lower first. And it depends what they actually buy.

But - I think this is the end of the ZIRP era, 14 years of ever-reducing interest rates, QE, and asset price appreciation. If it is, values could easily fall 40-50%. That's the point to buy :)

(What does that do to a 31% & rising LTV, & banking covenants).

Clearly I may be wrong - interest rates peak sooner, come back down, and ZIRP resumes. The world's debt load suggests that could happen.

Calling the top of the property market been a mug's game for years, this might just be yet another "buy the dip". But if it isn't, there's going to be fireworks.

[cwa1] 20/10/2022 08:26

I dunno Spec, sometimes the time to buy is when there's at least a little "blood on the street". I'm not suggesting for a minute there is much blood there...yet...but there are probably already bargains to be had out there if the management are good enough to sniff them out. In a few years time it's easy to speculate that one might be saying: hey, that was a decent time to make a purchase back in '22 :-)

Who knows?

[spectoacc] 20/10/2022 08:20

Yes, talk a good game, lettings strong, brilliantly timed disposal and debt-fixing.

Negatives - badly uncovered divi, fairly high LTV considering the "V" is going to tank, too early in the recession to make too bullish a call on lettings.

They say they expect to "fully" reinvest the cash in first half of next year, and should have the divi covered again in Q3. Guess they'll be paying out c.3p of capital in the meantime.

They're one of the few who'll be in the market to buy, tho whether that's wise or not, time will tell. Without the pressure of the dividend, wouldn't you be hunkering down?

[cwa1] 20/10/2022 08:14

Obviously not going to make a jot of difference in the current febrile atmosphere-but a fairly solid update with some positive points IMHO

[spectoacc] 20/10/2022 08:05

And they may pick up something great with that. But they may also need a chunk of it to cover the big drop in NAV/big increase in LTV which is (IMO) coming.

Not impossible they find something high-yielding enough to get the divi covered again, whilst still having some left over.

[stemis] 20/10/2022 07:48

Decent update. Holds £38m (27% of market cap) available for investment.

[spectoacc] 20/10/2022 07:34

Seems not bad from AEWU this morning, bull & bear points inc the NAV drop and uncovered divi.

"Loan to NAV ratio at the quarter end was 31.07% (30 June 2022: 29.94%). The Company had capital available for deployment of £38.28 million and its loan facility was fully drawn.

· Cost of debt fixed at 2.959% in May 2022 for the next five years"


That's of more interest IMO, & perhaps the high yields on AEWU properties will shield them a bit. Clearly NAV falls are going to take that LTV higher.

[2wild] 26/9/2022 10:01

From memory AEWU only paid £50k for a big chunk of the how old interest rate hedge.

My UKCM 60p limit order been executed. With discount to nav over 45% and yield above 6.6%, who on Earth is selling these. Not to mention the ultra low LTV below 14%. Phoenix must now be really considering the intention to vote for a continuation.

[rambutan2] 23/9/2022 15:33

Just reminding myself of this May mini masterstroke:

AEW UK REIT plc (LSE: AEWU) ("AEWU" or the "Company") is pleased to announce that the Company has secured a new GBP60 million 5-year term loan facility with AgFe, a leading independent asset manager specialising in debt-based investments. The loan is a fixed rate loan with a total interest cost of 2.959%. The existing GBP54 million RBS International loan facility, which is due to mature in October 2023, will be repaid in full by the new loan facility. Simultaneous to the funding, the Company's interest rate cap will be sold; with its value, as at 30 April 2022, being GBP908,000.

In the current inflationary environment, the Company considers it prudent to fix the loan now, rather than run the risk of further rising rates.

The Company intends to utilise borrowings to enhance returns over the next five years. In anticipation of capital receipts from the sales of both East Point Business Park in Oxford and Bath Street in Glasgow, the Company is currently reviewing an attractive pipeline of assets which offer income levels and capital growth opportunities in line with the existing portfolio.

As was announced in the March 2022 NAV update, the Company had a loan to NAV ratio of 28.26%. With this new loan facility secured, the loan to NAV will be 31.40% (using the NAV as at 31/03/2022), returning the Company to its target loan to NAV ratio of 30-35%.

Laura Elkin, Portfolio Manager of AEW UK REIT said: "This new facility with AgFe, secured against the backdrop of increasing rates, will allow the Company to continue to invest and realise the strong pipeline of interesting opportunities that we are currently pursuing, whilst also continuing to deliver strong returns to the Company's shareholders."

[lord gnome] 21/9/2022 08:12

WTF were you smoking last night?

[danmart2] 20/9/2022 21:22

When will they finish the investigation into the CM punk vs the hardly boys and Twinkle toes mcfinger bang fight?

[smidge21] 20/9/2022 20:46

The froth has gone, issuance is off the table and the strength of the programme always lie in the breadth and depth of the team and the niche in which they operate. Time to re-engage

[strathroyal] 16/9/2022 19:40

I see that according to her Linkedin profile Alex Short is now with Alvarium, don't know anything about them personally but they appear to be, amongst other things, advisors to LXI.