Aew Uk Reit Share Discussion Threads

[spectoacc] 13/11/2018 11:53

Agreed - someone dumping. This is historic but:

Coutts & Co. 15,762,994 10.4%
Schroder & Co. Ltd. 14,981,358 9.88%
Close Asset Management Ltd. 13,448,090 8.87%
Quilter Cheviot Ltd. 11,157,173 7.36%
Merian Global Investors (UK) Ltd. 11,087,801 7.32%
Ostrum Asset Management 7,000,000 4.62%
Premier Fund Managers Ltd. 4,835,085 3.19%
Investec Wealth & Investment Ltd. 4,813,400 3.18%
Hargreaves Lansdown Stockbrokers Ltd. 4,176,000 2.76%
Hawksmoor Investment Management Ltd. 3,350,000 2.21%

[eeza] 13/11/2018 11:48

Plenty of retail buying but the offer is steadily dropping, so seller (or large unreported sell) in the background?.

[eeza] 09/11/2018 17:29

500,000 late reported trade timed 1505hrs @ 93.50p.
Obviously been absorbed by the Market.

[a0002577] 22/10/2018 15:27

Hi Jonwig: totally agreed that for the PI it doesn't make sense to buy the C shares it's why I gave that ridiculous example to highlight it. BUT remember this is a placing aimed at institutions. I am sure the board will not launch it unless they have already established a lot of interest. Institutions dance to another tune.

As to VCTs - the boot is on the other foot here. Existing investors have funded the lemons and the new investors get the pickings (hopefully) from the ripening plums - much to my annoyance as an existing investor - they are being given my money by allowing then a share of my ripening portfolio.

[jonwig] 22/10/2018 13:27

A000... - ask yourself, if the current assets are worth 5% more than their shares (ords), why would the fully-invested C share assets (at, say, 95p) be worth more than the C shares? Their share price should fall immediately. And when conversion occurs on a nav basis, the C shares would turn into ords on a 0.95:1 basis, so a C share holder would end up with a 5p loss.

If AEWU's shares stood at a premium, new ordinary shares could be issued at a slightly smaller premium.

VCTs aren't comparable, as any new shares get a 30% tax rebate.

[chucko1] 22/10/2018 13:19

A000 - this is my understanding and precisely what we see when entities like GABI issue GABC shares. The only difference is that the proceeds from the C shares need be “substantially invested”. Tends to take a few months, and then gets converted into the current shares at some conversion factor that entirely eliminates dilution effects.

[a0002577] 22/10/2018 12:23

Hi Jonwig

If they introduce a new share class (C Shares) - very common in VCTs for example - the assets bought in that share pool are separate from the assets in the ORDs pool and will have their own separate NAV. Later, when the C Share pool is fully invested the C share class can be morphed into ORDs where the relative NAVs are used to work out what % of an ORD share each C share is worth. A silly example would be : C Share NAV 50 pence : ORD share NAV 100 pence so each share C Share is worth only 0.5 of an ORD.

So they would initially have no effect on the current investments/management except to increase the time required by buy and manage a whole lot more sites.

In my view a major fund raising should always be done this way as it is fair to both sets of investors - the old and the new.

[chucko1] 22/10/2018 11:46

Spectoacc, I do not disagree, although I am not so negative on a bad Brexit (that is to say that a “bad” Brexit, whatever that is, is not as bad as the more aggressive scenarios outlined by the BoE and others).

In any event, I am only talking about the medium and long term. If we look at the better-managed REITs, they can indeed tank in a recession, but recover thereafter so that the long term returns stay intact. Of course, that is dependent on NOT being too leveraged, which is what killed some in the 2007 debacle. In my opinion, over-leveraged is north of about 55% gearing. Risky is north of about 40%.

But for those who believe Brexit may be existentially bad, and I respect that, then some longer lasting damage is likely. But that would apply to everything, so my comments on AEWU could be considered “relative̶1; to other things.

[spectoacc] 22/10/2018 11:18

@Chucko1 - I see it slightly differently. Biggest risk is recession/Brexit fiasco, leading to bust tenants & slowly sinking NAV. A while since we've had a recession..

Biggest plus of AEWU is that they've got past the "hump" of purchase costs, which are considerable - 5% SDRT on everything commercial over £250k.

As you say, their focus is a plus, as is the low gearing (compared to eg 40% at RGL).

Missed NRR from my list of 8%+ yielders above.

[chucko1] 22/10/2018 11:07

Skinny, join the gang!

For some time, AEW has been doing a lot of good things (as a property company). This particular fund has been around for 3 years and if purchased then, your annualised total return would be 5.58% if reinvesting dividends, or 5.12% otherwise. I assume reinvestment.

But AEWU, given its low gearing of circa 23% and experienced management, deserves to be trading at a level flat to NAV (100.06p), in which case the returns would have been 7.29% and this is what I think is likely to be the long term outcome.

There is, of course, the risk of either some unfortunate property purchase or a revaluation lower on account of higher 10yr Gilt yields, but in the long run it seems they are highly confident of maintaining the income they presently collect. This bodes well for a small increase in the share price as they do appear to cover the dividend with EPRA earnings (again, in the long run) without having to borrow any of it.

As previously stated by others, it is encouraging to see they have got to this position without being exposed to London offices or retail in any meaningful respect - underpinning ones faith in this experienced management.

I already have some, but would happily buy a few more given this update.

[jonwig] 22/10/2018 10:57

A000... - the problem is the discount, currently about 5%. New C shares would need to be issued at a premium to cash of at least 2% (to absorb fees).

[a0002577] 22/10/2018 10:48

Totally agreed Jonwig & SpectoAcc. Good hold this one and the share price should rise. But to the cognoscenti is this important? Thought they were considering a C share issue - possibly a sizeable one. If so, do they have sufficient management skills to manage a much larger portfolio as intensively and well as they manage the current one?

[eeza] 22/10/2018 10:14

Well done Skinny.

[skinny] 22/10/2018 09:50

I've just bought my first holding here.

[lord gnome] 22/10/2018 07:58

Yes, I think we are all agreed.I hold this and RGL and I am rather pleased with both of them.

[killing_time] 22/10/2018 07:52

Agreed, nice update.

[spectoacc] 22/10/2018 07:42

@Jonwig - I admit that bit had me briefly worried (ie implying a share issue) but they've got c.£7m to invest after recent sales, with intention to put it all into one new asset it seems, so am reassured :)

As an aside - what a market we're in at the moment. 8% yields to be had on property ITs like AEWU, RGL, but also 8%'s (less secure I'd suggest) on giants like VOD, IMB. Nothing risk-free, but these are yields from when interest rates were 5%, not 1%.

[jonwig] 22/10/2018 07:30

Spec - we seem to agree there.

[jonwig] 22/10/2018 07:29

They've just produced a quite bullish update:



I like this bit: "Looking forward, the Company has a strong pipeline of assets that we would like to purchase. Please buy our shares so they reach a premium to NAV which, as you see, has risen nicely. We can then issue new shares." (I invented part of that.)

Seriously, the shares deserve to rise on the back of this.

[spectoacc] 22/10/2018 07:24

Well worth reading all of today's NAV announcement - pretty bullish. NAV finally back over £1 issue price, though of course been paying 8% yield as well, and that's after absorbing eg 5% stamp duty on purchases. 97% occupancy, divi covered, c.25% gearing, little retail exposure - lots of choice of cheap property ITs out there, but I rather like AEWU.

"Alex Short, Portfolio Manager, AEW UK REIT, commented: "This has been
another quarter of strong performance for the Company, both in terms of
income and capital growth. The Company continues to consolidate its position
of having the highest dividend yield in the peer group, in excess of 8%,
whilst also providing capital growth, a proportionate level of risk, and is
managed by a very experienced team. Looking forward, the Company has a
strong pipeline of assets that we would like to purchase in order to grow
this strategy." "

[skyship] 14/10/2018 12:25

That C share issue surely totally bizarre! Sure, institutions do bizarre things like buying CREI constantly at huge premiums, but buying a new class of AEWU at a premium versus the AEWU at a discount does sound rather unlikely.

Smacks of management spending too much time looking to measures which will quantum leap their FUM and hence their fees! AEWL a case in point...

[jonwig] 14/10/2018 11:33

I last looked at this in January and didn't want to add another propco to my portfolio. Also, AEWL was a bit of a disaster.

Anyway, I can't find much wrong with it, except maybe that exposure to retail (12%) is 12% more than I'd like, voids maybe a bit high, and WAULT is about 5 years - a bit short. Will the share issuance programme work out? (Asking for new 'C' shares at a premium when the ords are at a discount.)

[eeza] 14/10/2018 11:02

Only negatives that I can see that may be marking down the share price are Short trading record, Short leases, business mix (retail, office, industrial etc) but so far can't fault anything they have done.
Topped up on Friday at 93.02p.

[a0002577] 14/10/2018 10:40

Well, Killing_time, this is a quote from their July announcement

"-- At 30 June, the fair value independent valuation of the property portfolio was GBP191.95 million (31 March 2018: GBP192.34 million), following the part sale of Pearl Assurance House, Nottingham, during the quarter. On a like-for-like basis the valuation of the property portfolio increased by GBP3.26 million (1.73%) over the quarter (31 March 2018: GBP0.74 million and 0.48%).

-- NAV of GBP149.14 million or 98.40 pence per share (31 March 2018: GBP146.03 million or 96.36 pence per share)." Your yield is about right but the discount to NAV is only about 4%

They are due to declare the next dividend shortly which should go ex-div early in Nov and paid at the end of that month.

It seems to be a well managed company with a good income yield. I am slightly overweight in this one.

[killing_time] 14/10/2018 10:09

Last actual NAV on 31/07/2018 = 98.19p

Div now 8.55%