AEW UK REIT plc: NAV Update and Dividend Declaration

AEW UK REIT plc (AEWU) 
AEW UK REIT plc: NAV Update and Dividend Declaration 
22-Apr-2021 / 07:00 GMT/BST 
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22 April 2021 
 
AEW UK REIT Plc (the "Company") 
 
NAV Update and Dividend Declaration 
 
AEW UK REIT plc (LSE: AEWU) (the "Company"), which, as at 22 April 2021, directly owns a diversified portfolio of 34 
regional UK commercial property assets, announces its unaudited Net Asset Value ("NAV") and interim dividend for the 
three month period ended 31 March 2021. 
 
Highlights 
 
  ? Interim dividend of 2.00 pence per share for the three months ended 31 March 2021, in line with the targeted annual 
    dividend of 8.00 pence per share. 
  ? EPRA earnings per share ("EPRA EPS") for the quarter of 1.10 pence (31 December 2020 quarter: 1.68 pence). 
  ? NAV of GBP157.08 million or 99.15 pence per share as at 31 March 2021 (31 December 2020: GBP151.88 million or 95.87 
    pence per share). 
  ? NAV total return of 5.51% for the quarter (31 December 2020: 5.53%). 
  ? During the quarter the Company completed the sale of Sandford House, Solihull at a price of GBP10.5 million. The 
    asset was acquired in August 2015 for GBP5.4 million and the Company invested no further capital in the asset during 
    its hold period. 
  ? The Company remains conservatively geared with a loan to NAV ratio of 25.15% (31 December 2020: 26.01%). As at 31 
    March 2021, the Company had a cash balance of GBP17.45 million and has GBP15.48 million of its loan facility available 
    to draw up to the maximum 35% Loan to NAV at drawdown. 
  ? Having sold two properties in the past 12 months, the Company is currently in the process of acquiring new assets. 
 
  ? For the rental quarter commencing on 25 March 2021, 84% of rent has been collected or is expected to be received 
    under monthly payment plans prior to quarter end. The remainder of rents owed will continue to be pursued. 
 
Alex Short, Portfolio Manager, AEW UK REIT, commented: 
"We are pleased to see continued NAV recovery during the quarter, driven by the strong performance of the Company's 
industrial properties which saw a like-for-like valuation increase of 5.78%. Changing consumer habits and the resulting 
improved sentiment towards the industrial sector have been accelerated somewhat by the pandemic and, as the general 
economic outlook begins to improve with the effective rollout of vaccines and the easing of lockdown measures, we are 
beginning to see this reflected in valuations. In this respect, the Company benefits from its high weighting towards 
industrials, which was 60.8% of the portfolio valuation (excluding cash) as at 31 March 2021. Weightings in the retail 
and leisure sectors, which have been most negatively affected by the pandemic, remain low at 11.6% and 7.0% 
respectively. 
The Company also saw a steep like-for-like valuation increase of its business park in Oxford, increasing 19% to a value 
of GBP13.15 million. This reflects the investment market's strong appetite for properties and locations associated with 
life sciences and the medical industry. 
Stock selection and active asset management continue to be key features of the Company's strategy and drivers of 
performance. During the quarter, the Company completed the sale of Sandford House, Solihull, for gross proceeds of 
GBP10.5 million. The asset was acquired in August 2015 for GBP5.4 million and the Company invested no further capital in 
the asset during its hold period. Significant value was gained from the completion of a 15-year lease agreement in July 
2020 with the existing tenant, the Secretary of State for Communities and Local Government, and the asset delivered an 
IRR in excess of 20% over the hold period. This demonstrates how shorter income assets in strong locations can be used 
to create value for shareholders. 
The Company's EPRA EPS was 1.10 pps for the quarter, providing dividend cover of 55.0% (31 December 2020: 1.68 pence 
and 84.0%). This fall in earnings is partly due to the Company's prudent doubtful debt provision policy, which reduced 
EPRA EPS by GBP0.52 million or 0.33 pps this quarter. While rent collection rates have remained high throughout the 
pandemic, there remain certain tenants who appear able, but unwilling, to pay. These tenants are being pursued and the 
ability to recover their rent arrears will be subject to a decision by the Court imminently. 
The Company's income also fell following the disposal of Sandford House, Solihull, on 1 February 2021, amounting to a 
loss of income of c. GBP0.11 million (0.07 pps) during the quarter. As at 31 March 2021, the Company had a cash balance 
of GBP17.45 million and has GBP15.53 million of its loan facility available to draw up to the maximum 35% Loan to NAV at 
drawdown. As the economic backdrop improves, this spending power puts the Company in a good position to take advantage 
of attractive opportunities coming to the market and it is our aim over the coming months to return the Company to a 
position of being fully invested and increase EPRA EPS to its target of 8 pps per annum. 
Ongoing remedial works at the Company's property in Blackpool, which amounted to 0.13 pps for the quarter,  and a high 
level of vacancy at its property in Glasgow, which has exchanged to be sold subject to achieving planning for student 
accommodation and vacant possession, are also temporarily restricting the Company's earnings potential. Both are 
expected to be complete by early 2022. 
We are encouraged that the Company's defensive strategy and diversification has allowed it to manage its risk profile 
during this turbulent economic period, while maintaining its target dividend of 8 pps per share per annum and 
increasing its NAV per share in comparison with the pre-pandemic level. As lockdown measures begin to ease, and the 
economic outlook improves, we believe the Company is well positioned to take advantage of opportunities in the market 
and our short term focus will be to optimise shareholder value from the deployment of available cash and debt, with a 
view to restoring earnings to target levels." 
Valuation movement 
As at 31 March 2021, the Company owned investment properties with a fair value of GBP179.00 million. The like-for-like 
valuation increase for the quarter of GBP6.85 million (3.98%) is broken down as follows by sector: 
Sector        Valuation 31 March 2021 Like-for-like valuation movement for the quarter 
              GBP million       %       GBP million                      % 
Industrial    108.85          60.81   5.95                           5.78 
Office        36.80           20.56   1.75                           4.99 
Retail        20.80           11.62   (0.85)                         (3.93) 
Other         12.55           7.01    0.00                           0.00 
Total         179.00          100.0   6.85                           3.98 

Net Asset Value

The Company's unaudited NAV as at 31 March 2021 was GBP157.08 million, or 99.15 pence per share. This reflects an increase of 3.43% compared with the NAV per share as at 31 December 2020. The Company's NAV total return, which includes the interim dividend of 2.00 pence per share for the period from 1 October 2020 to 31 December 2020, was 5.51% for the three-month period ended 31 March 2021.

                                                     Pence per share  GBP million 
NAV at 1 January 2021                                95.87            151.88 
Loss on sale of investment property (disposal costs) (0.08)           (0.13) 
Valuation change in property portfolio               4.24             6.72 
Valuation change in derivatives                      0.02             0.04 
Income earned for the period                         2.30             3.64 
Expenses and net finance costs for the period        (1.20)           (1.90) 
Interim dividend paid                                (2.00)           (3.17) 
NAV at 31 March 2021                                 99.15            157.08 

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

Dividend

Dividend declaration

The Company today announces an interim dividend of 2.00 pence per share for the period from 1 January 2021 to 31 March 2021. The dividend payment will be made on 28 May 2021 to shareholders on the register as at 30 April 2021. The ex-dividend date will be 29 April 2021.

The dividend of 2.00 pence per share will be designated 2.00 pence per share as an interim property income distribution ("PID").

The EPRA EPS for the three-month period to 31 March 2021 was 1.10 pence (31 December 2020: 1.68 pence).

Dividend outlook

It remains the Company's intention to continue to pay dividends in line with its dividend policy and this will be kept under review given the current COVID-19 situation. In determining future dividend payments, regard will be given to the circumstances prevailing at the relevant time, as well as the Company's requirement, as a UK REIT, to distribute at least 90% of its distributable income annually, which will remain a key consideration.

Financing

Equity

The Company's share capital consists of 158,774,746 Ordinary Shares, of which 350,000 are currently held by the Company as treasury shares.

Debt

The Company had borrowings of GBP39.50 million as at 31 March 2021, producing a Loan to NAV ratio of 25.15% and had a total undrawn facility of GBP20.50 million of which GBP15.48 million was available as at 31 March 2021 up to the maximum 35% Loan to NAV at drawdown.

The loan continues to attract interest at LIBOR + 1.4% and the Company's all-in interest rate as at 31 March 2021 was 1.44%.

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