We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Aew Uk Reit Plc | LSE:AEWU | London | Ordinary Share | GB00BWD24154 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.90 | -2.23% | 83.20 | 83.20 | 83.90 | 84.20 | 83.00 | 84.20 | 309,363 | 16:35:15 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 20.72M | -11.33M | -0.0715 | -11.61 | 131.49M |
Dow Jones received a payment from EQS/DGAP to publish this press release.
Hot Features
Premium
AEW UK REIT plc (AEWU)
Annual Financial Report
11-Jun-2018 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
AEW UK REIT PLC
The Board of AEW UK REIT plc (the 'Company') is pleased to announce results
for the 11 month period from 1 May 2017 to 31 March 2018.
The following text is copied from the Annual Report and Financial Statements
for the period ended 31 March 2018:
Strategic Report
Financial Highlights
- Net Asset Value ('NAV') of GBP146.03 million and of 96.36 pence
per share as at 31 March 2018 (30 April 2017: GBP118.67 million
and 95.98 pence per share).
- Operating profit before fair value changes of GBP9.60 million
for the period (year ended 30 April 2017: GBP9.81 million).
- Unadjusted profit before tax ('PBT') of GBP9.82 million and of
7.17 pence per share for the period (year ended 30 April 2017:
GBP6.10 million and of 5.04 pence per share).
- EPRA Earnings Per Share ('EPRA EPS')* for the period of 6.56
pence (year ended 30 April 2017: 7.57 pence).
- Total dividends of 7.33 pence per share have been declared for
the period (year ended 30 April 2017: 8.00 pence per share).
- Total shareholder return* for the period was 3.65% (year ended
30 April 2017: 8.22%).
- The Company raised gross capital proceeds of GBP28.05 million
for the period (year ended 30 April 2017: GBP6.00 million).
- The price of the Company's Ordinary Shares on the Main Market
of the London Stock Exchange was 95.60 pence per share as at
31 March 2018 (30 April 2017: 99.56 pence per share).
- As at 31 March 2018, the Company had a GBP60.00 million (30
April 2017: GBP40.00 million) term credit facility with the
Royal Bank of Scotland International Limited ('RBSi') and was
geared to 26.00% of the Gross Asset Value ('GAV') (30 April
2017: 19.31%).
- The Company held cash balances totalling GBP4.71 million as at
31 March 2018 (30 April 2017: GBP3.65 million), of which GBP3.57
million (30 April 2017: GBP1.31 million) was held for the
purposes of capital acquisitions.
*see Glossary below for definition of alternative performance measures
Property Highlights
- The Company acquired ten properties during the period for a
combined purchase price of GBP60.11 million, excluding
acquisition costs (year ended 30 April 2017: five properties
for GBP24.70 million), and disposed of one property for gross
sales proceeds of GBP11.05 million (year ended 30 April 2017:
one property for gross sales proceeds of GBP2.05 million).
- As at 31 March 2018, the Company's property portfolio had a
fair value of GBP192.34 million (30 April 2017: GBP137.82 million)
and a historical cost of GBP196.64 million (30 April 2017:
GBP140.19 million).
- The majority of assets that have been acquired are fully let
and the portfolio has a vacancy rate of 7.10% (30 April 2017:
7.22%).
- Rental income generated in the period under review was GBP12.33
million (year ended 30 April 2017: GBP12.15 million). The number
of tenants as at 31 March 2018 was 104 (30 April 2017: 79).
- Portfolio net initial yield ('NIY') of 7.74% as at 31 March
2018 (30 April 2017: 7.63%).
- Weighted average unexpired lease term ('WAULT') of 5.08 years
(30 April 2017: 5.22 years) to break and 6.16 years (30 April
2017: 6.37 years) to expiry.
The current period being reported is for the 11 months from 1 May 2017 to 31
March 2018. The prior period ended 30 April 2017 was a 12 month period and
so cannot be used as a direct comparator.
Chairman's Statement
Overview
I am pleased to present the audited results of AEW UK REIT plc (the
'Company') for the period from 1 May 2017 to 31 March 2018. This Annual
Report covers a period of 11 months following a change in year end from 30
April to 31 March, which was made in order to align the Company's reporting
dates with those of its peers in the UK commercial property sector. As at 31
March 2018, the Company had
established a diversified portfolio of 36 commercial investment properties
throughout the UK with a portfolio value of GBP192.34 million. On a
like-for-like basis (like-for-like being the movement in the valuation
provided by the valuer of those properties which have been held for the
duration of the period in question), the Company's property portfolio
valuation increased by 3.95% over the 11 month period.
The Company's focus during the period remained on growth in a way that is
beneficial to its shareholders and this was achieved through the issue of
27.91 million new Ordinary Shares in October 2017. The shares were issued at
100.50 pence per share, raising gross proceeds of GBP28.05 million. In a
climate of continued Brexit related uncertainty, this was a positive result
and has allowed the Investment Manager to continue to strengthen and
diversify the portfolio of assets. It has also contributed to the fall in
the ongoing charges ratio which is 1.24% for the period to 31 March 2018
(year ended 30 April 2017: 1.52%). The Initial Issue price represented a
premium of 3.76% to NAV, enabling the 2% issuance costs to be absorbed
without diluting the NAV.
In addition to growth, the Company has continued to deliver its target
dividend of 8.00 pence per share per annum and the Investment Manager has
remained focussed on sourcing assets which can deliver sustainable income
streams to support this dividend. During the quarter ended 31 July 2017,
preceding the Initial Issue, the Company was fully invested, having utilised
its capital proceeds in full, as well as all of its available loan facility.
This allowed the Company to achieve EPRA EPS of 2.10 pence per share for the
quarter ended 31 July 2017, ahead of the target dividend of 2.00 pence per
share, demonstrating the ability of the portfolio to deliver an income yield
which can sustain the Company's target dividend when fully invested.
To supplement the high yielding profile of the portfolio, the Investment
Manager also continues to add value through active asset management. In
September 2017, the Company realised a valuation uplift on Valley Retail
Park, Belfast, selling the asset for GBP11.05 million. The property was
acquired in August 2015 for GBP7.15 million and following extensive asset
management and repositioning of the asset, the business plan had been fully
implemented and the Investment Manager took the opportunity to realise a
gain on historical cost of over GBP3 million.
This disposal, together with the share issue in October 2017, had a
temporary dilutive effect on EPRA EPS until the funds had been fully
invested in new acquisitions. During the period of investment following the
Initial Issue and up to the period end 31 March 2018, the Company made seven
further acquisitions totalling GBP49.49 million, fully utilising the capital
raised as well as an additional GBP17.50 million of debt, bringing the gearing
level up to 26.00% as at 31 March 2018. As at the period end, the Company
was again in the position of being fully invested, which should enable it to
cover its quarterly dividend target of 2.00 pence per share.
The Company's shares traded at a premium to NAV for the majority of the
period and peaked at a premium of 8.88% in May 2017. In the three months to
31 March 2018, the share price fell by 3.92%, which is a reflection of the
performance of the wider market, as the FTSE EPRA/NAREIT UK Index fell in
value by 4.91% over the same period. As at 31 March 2018, the Company's
share price was 95.60 pps, which is a 0.79% discount to NAV. The fall in
share price over the 11 month period, offset by total dividend payments of
7.33 pence per share, generated a shareholder total return of 3.65%,
compared with a NAV total return (see Glossary below for definition) of
8.70%.
During the period, a resolution was passed to amend the Company's investment
restrictions so that the value of properties, measured at the time of each
investment, in any one of the following sectors: offices; retail warehouses;
high street retail and industrial/warehouses will not exceed 50% of the
Company's GAV, previously this had been measured against NAV. This has
allowed the Company to purchase further properties in the industrial sector,
in which the Investment Manager continues to see significant opportunities.
The Board and the Investment Manager continually review the investment
strategy and investment restrictions in order to maximise potential returns
from an appropriate risk profile. Any material change to the investment
policy of the Company may only be made with the prior approval of the
shareholders.
Financial Results
Period from
1 May 2017 to Year ended
31 March 2018 30 April 2017
(audited) (audited)
Operating Profit before fair value 9,601 9,806
changes (GBP'000)
Operating Profit (GBP'000) 10,472 6,858
Profit after Tax (GBP'000) 9,820 6,099
Earnings Per Share (basic and 7.17 5.04
diluted) (pence)
EPRA Earnings Per Share (basic and 6.56 7.57
diluted) (pence)
Ongoing Charges (%) 1.24 1.52
Net Asset Value per share (pence) 96.36 95.98
EPRA Net Asset Value per share 96.34 95.95
(pence)
Operating profit, profit after tax and earnings per share have all increased
significantly for the 11 months to 31 March 2018, compared with the 12
months to 30 April 2017. This is largely a result of a positive movement in
the fair value of investment properties of GBP1.01 million (year ended 30
April 2017: decrease of GBP3.16 million). These movements can be attributed to
both the positive effect
of asset management initiatives in the current period and positive yield
movement, particularly across our portfolio of industrial assets.
On the other hand, EPRA Earnings per Share, which excludes fair value
movements on investment property, has fallen to 6.56 pence per share or 7.16
pence per share pro-rated over 12 months (year ended 30 April 2017: 7.57
pence per share). This is largely a reflection of the cash drag from the
issue of new equity during the period. During the 11 months ended 31 March
2018, the Company raised gross equity proceeds of GBP28.05 million (year ended
30 April 2017: GBP6.00 million).
The small increases in NAV per share and EPRA NAV per share reflect the
aforementioned valuation increases in the property portfolio.
Financing
The Company increased its credit facility to GBP60.00 million in March 2018,
following the share issue in October 2017.
The Company made three drawdowns during the period, utilising GBP3.49 million
of the facility in July 2017, GBP7.50 million in February 2018 and GBP10.00
million in March 2018. The total balance drawn as at 31 March 2018 was
GBP50.00 million (30 April 2017: GBP29.01 million).
The loan attracts interest at 3 month LIBOR +1.4%, making an all-in rate at
31 March 2018 of 2.11% (30 April 2017: 1.74%). The Company is protected from
a significant rise in interest rates as it has interest rate caps with a
combined notional value of GBP36.50 million (30 April 2017: GBP26.50 million),
resulting in the loan being 73% hedged. A notional value of GBP26.50 million
is capped at 2.50%, and
GBP10.00 million at 2.00% (30 April 2017: GBP26.50 million at 2.50%).
As at 31 March 2018, the unexpired term of the facility was 2.6 years (30
April 2017: 3.5 years) and the gearing was 26.00% (30 April 2017: 19.31%)
(as calculated on the GAV of the investment portfolio).
At the Company's General Meeting on 17 October 2017, a resolution was passed
to increase the Company's maximum borrowing limit to 35% of GAV. The long
term gearing target remains 25% or less of GAV, but the Company can borrow
up to 35% of GAV in advance of an expected capital raise or asset disposal.
The Board and Investment Manager will continue to monitor the level of
gearing and the gearing target may change in future.
Dividends
The Company has continued to deliver on its target of paying annualised
dividends of 8.00 pence per share per annum. During the period, the Company
has declared and paid three quarterly dividends of 2.00 pence per Ordinary
Share and one dividend of 1.33 pence per Ordinary Share, which relates to
the two month period ended December 2017.
On 26 April 2018, the Board declared an interim dividend of 2.00 pence per
Ordinary Share in respect of the period from 1 January 2018 to 31 March
2018. This interim dividend was paid on 31 May 2018 to shareholders on the
register as at 11 May 2018. Including this dividend, the Company has paid
20.83 pence per share since launch.
The Directors will declare dividends taking into account the level of the
Company's net income and the Directors' view on the outlook for sustainable
recurring earnings. As such, the level of dividends paid may increase or
decrease from the current annual dividend of 8.00 pence per share. Based on
current market conditions, the Company expects to pay an annualised dividend
of 8.00 pence per share in respect of the financial year ending 31 March
2019 and for the interim period to 30 September 2018.
Outlook
The Board and the Investment Manager are pleased with the strong income
returns delivered to our shareholders to date through the diversified and
high yielding property portfolio that has been established. Based on
annualised dividend payments of 8.00 pence per share, the Company delivers a
dividend yield of 8.37% as at 31 March 2018.
The Company has now established a stabilised portfolio and as such, we
expect to be able to more frequently deliver a covered dividend, with recent
acquisitions giving a significant boost to the initial yield of the
portfolio, which was 7.74% as at 31 March 2018.
There is also value to be gained through asset management initiatives. The
portfolio had a vacancy rate of 7.10% as at 31 March 2018 and has since
achieved sales comprising 1.9% of total vacancy with a further 1.3% under
offer to let. There is one planned capex project at Eastpoint Business Park,
Oxford, which is expected to increase the ERV and future potential income
from the asset once complete.
In the wider economic environment, prospects continue to be dominated by
Brexit negotiations, although it seems that some progress has been made
towards arriving at a trade deal. The ultimate outcome remains unknown, and
it remains difficult to assess the impact on the UK commercial property
market. For some businesses it seems this lack of clarity is making it
difficult to plan and invest, and it is hoped that negotiations during the
remainder of 2018 should bring about more certainty. Our portfolio is
relatively defensively positioned with regards to Brexit. We have no central
London exposure, where it is anticipated Brexit will have the most
significant impact. The Company's investment is primarily focussed on
strong, regional centres and exposure is well diversified both
geographically and by sector, which serves to mitigate risk.
Looking forward, our focus remains on continuing to grow the Company with
further share issues as part of the 12 month share issuance programme as set
out in the Company's Prospectus, subject to market conditions. The Company
has a strategy to raise funds at intervals in order to minimise cash drag.
Subject to future fund raising, the Investment Manager will focus on finding
further acquisitions which will deliver an attractive return as part of a
well-diversified portfolio.
Mark Burton
Chairman
8 June 2018
Business Model and Strategy
Introduction
AEW UK REIT plc is a real estate investment company listed on the premium
segment of the Official List of the UK Listing Authority and traded on the
London Stock Exchange's Main Market. As part of its business model and
strategy, the Company has and intends to maintain UK REIT status. HM Revenue
and Customs has acknowledged that the Company has met and intends to
continue to meet the necessary qualifying conditions to conduct its affairs
as a UK REIT.
Investment Objective
The investment objective of the Company is to deliver an attractive total
return to shareholders from investing predominantly in a portfolio of
smaller commercial properties in the United Kingdom.
Investment Policy
In order to achieve its investment objective the Company invests in freehold
and leasehold properties across the whole spectrum of the commercial
property sector (office properties, retail warehouses, high street retail
and industrial/warehouse properties) to achieve a balanced portfolio with a
diversified tenant base.
Within the scope of restrictions set out below (under the heading
'Investment restrictions') the Company may invest up to 10% of its Net
Assets (at the time of investment) in the AEW UK Core Property Fund (the
'Core Fund').
The Company did not hold any investment in the Core Fund as at 31 March 2018
and does not intend to reinvest in the Core Fund, but will keep this under
review.
The Company will at all times invest and manage its assets in a way that is
consistent with its objective of spreading investment risk and in accordance
with its published investment policy. The Company will not, at any time,
conduct any trading activity which is significant in the context of the
business of the Company as a whole.
Investment Restrictions
The Company will invest and manage its assets with the objective of
spreading risk through the following investment restrictions:
- the value of no single property, at the time of investment,
will represent more than 15% of GAV;
- the Company may commit up to a maximum of 10% of its NAV
(measured at the commencement of the project) to development
activities;
- the value of properties, measured at the time of each
investment, in any one of the following sectors: office
properties, retail warehouses, high street retail and
industrial/warehouse properties will not exceed 50% of GAV;
- investment in unoccupied and non-income producing assets will,
at the time of investment, not exceed 20% of NAV;
- the Company will not invest in other closed-ended investment
companies; and
- if the Company invests in derivatives for the purposes of
efficient portfolio and cash management, the total notional
value of the derivatives at the time of investment will not
exceed, in aggregate, 35% of GAV.
The Directors currently intend, at all times, to conduct the affairs of the
Company so as to enable the Company to qualify as a REIT for the purposes of
Part 12 of the Corporation Tax Act 2010 (and the regulations made
thereunder).
In the event of a breach of the investment policy or restrictions, the
Investment Manager shall inform the Board upon becoming aware of such a
breach and if the Board considers the breach to be material, notification
will be made to a Regulatory Information Service and the Investment Manager
will look to resolve the breach.
Any material change to the investment policy of the Company may only be made
with the prior approval of shareholders.
Our Strategy
The Company exploits what it believes to be the compelling relative value
opportunities offered by pricing inefficiencies in smaller commercial
properties let on shorter occupational leases. The Company intends to
supplement this core strategy with asset management initiatives to upgrade
buildings and thereby improve the quality of income streams. In the current
market environment the focus will be to invest in properties which:
- typically have a value, on investment, of between GBP2.5 million
and GBP15 million;
- have initial net yields, on investment, of typically between
7.5-10%;
- achieve across the whole Portfolio weighted average lease term
of between three to six years remaining;
- achieve, across the whole Portfolio, a diverse and broad
spread of tenants; and
- have some potential for asset management initiatives to
include refurbishment and re-lettings.
The Company's strategy is focused on delivering enhanced returns from the
smaller end (up to GBP15 million) of the UK commercial property market. The
Company believes that there are currently pricing inefficiencies in smaller
commercial properties relative to the long term pricing resulting in a
significant yield advantage, as demonstrated in the graphs below, which the
Company aims to exploit.
Please refer to Appendix 1 'Investing in smaller assets of <GBP15 million can
result in significant yield advantage', accessible through the link at the
end of this announcement.
How we add value
An Experienced Team
The investment management team average 19 years working together, reflecting
stability and continuity.
Value Investing
The Investment Manager's investment philosophy is based on the principle of
value investing. The Investment Manager looks to acquire assets with an
income profile coupled with underlying characteristics that underpin
long-term capital preservation. As value managers, the Investment Manager
looks for assets where today's pricing may not correspond to long-term
fundamentals.
Active Asset Management
The Investment Manager has an in-house team of dedicated asset managers with
a strong focus on active asset management to enhance income and add value to
commercial properties.
Please refer to Appendix 2 'Our Asset Management Process', accessible
through the link at the end of this announcement.
Strategy in Action
Acquiring a stable income stream on a site with a higher alternative use
value
London East Leisure Park, Dagenham
- Acquired March 2018
- A net initial yield of 5.8%, rising to 8% in September 2018
- WAULT of 13 years to break and potential to increase this in
the short term with asset management
- Acquisition price is underpinned by residential land values
Opportunities to drive rental growth and reduce vacancy
Diamond Business Park, Wakefield
- Acquired February 2018
- Low average passing rent of GBP2.65 per sq ft on let
accommodation creating potential for rental growth
- Reversionary yield of 11% once fully let
Repositioning an asset to maximise income
Pearl Assurance House, Nottingham
- Acquired May 2016
- Consent gained for residential conversion of office
accommodation and onward sale to a developer in April 2018
- Retention of ground floor accommodation providing an ongoing
yield in excess of 9%
Extending income streams to maximise value
Langthwaite Industrial Estate, South Kirkby
- Acquired in November 2015
- Leases renewed in July 2017 with no rent free period
- Valuation increase of 14% since purchase
Acquiring a strong income stream with potential to renew
Geddington Road, Corby
- Acquired February 2018
- Net initial yield of 10%
- Opportunity to extend the current lease to a global logistics
specialist
- Adjoining logistics and residential development creates
alternative use value
Active asset management driving value in prime locations
Queen Square, Bristol
- Acquired December 2015 with c. 50% vacancy
- Fully let as at March 2018
- Valuation increase of 49% since purchase
Key Performance Indicators
KPI AND DEFINITION RELEVANCE TO PERFORMANCE
STRATEGY
1. Net Initial The Net Initial 7.74%
Yield Yield is an
indicator of the
ability of the
Company to meet its at 31 March 2018
A representation to target dividend
the investor of after adjusting for
what their initial the upward impacts
net yield would be of leverage and (30 April 2017:
at a predetermined deducting operating 7.63%)
purchase price costs.
after taking
account of all
associated costs,
e.g. void costs and
rent free periods.
2. True Equivalent An Equivalent Yield 8.20%
Yield profile in line
with the Company's
target dividend
yield shows that, at 31 March 2018
The average after costs, the
weighted return a Company should have
property will the ability to meet
produce according its proposed (30 April 2017:
to the present dividend through 8.50%)
income and property income.
estimated rental
value assumptions,
assuming the income
is received
quarterly in
advance.
3. Reversionary A Reversionary 8.03%
Yield Yield profile that
is in line with an
Initial Yield
profile shows a at 31 March 2018
The expected return potentially
the property will sustainable income
stream that can be
used to meet (30 April 2017:
dividends past the 8.37%)
provide once rack expiry of a
rented. property's current
leasing
arrangements.
4. Weighted Average The Investment 6.16 years
Unexpired Lease Manager believes
Term ('WAULT') to that current market
expiry conditions present
an opportunity at 31 March 2018
whereby assets with
a shorter unexpired
The average lease lease term are
term remaining to often mispriced. It (30 April 2017: 6.37
expiry across the is also the years)
portfolio, weighted Investment
by contracted rent.
Manager's view that
a shorter WAULT is
useful for active
asset management as
it allows the
Investment Manager
to engage in direct
negotiation with
tenants rather than
via rent review
mechanisms.
5. Weighted Average The Investment 5.08 years
Unexpired Lease Manager believes
Term to break that current market
conditions present
an opportunity at 31 March 2018
whereby assets with
The average lease a shorter unexpired
term remaining to lease term are
break, across the often mispriced. As (30 April 2017: 5.22
portfolio weighted such, it is in line years)
by contracted rent. with the Investment
Manager's strategy
to acquire
properties with a
WAULT that is
generally shorter
than the benchmark.
It is also the
Investment
Manager's view that
a shorter WAULT is
useful for active
asset management as
it allows the
Investment Manager
to engage in direct
negotiation with
tenants rather than
via rent review
mechanisms.
6. NAV The NAV reflects GBP146.03 million
the Company's
ability to grow the
portfolio and add
NAV is the value of value to it at 31 March 2018
an entity's assets throughout the life
minus the value of cycle of its
its liabilities. assets.
(30 April 2017:
GBP118.67 million)
7. Leverage (Loan The Company 26.00%
to Gross Asset utilises borrowings
Value) to enhance returns
over the medium
term. Borrowings at 31 March 2018
will not exceed 35%
The proportion of of GAV (measured at
our property drawdown) with a
portfolio that is long term target of (30 April 2017:
funded by 25% or less of GAV. 19.31%)
borrowings.
8. Vacant ERV The Company's aim 7.10%
is to minimise
vacancy of the
properties. A low
The space in the level of structural at 31 March 2018
property portfolio vacancy provides an
which is currently opportunity for the
unlet, as a Company to capture
percentage of the rental uplifts and (30 April 2017:
total ERV of the manage the mix of 7.22%)
portfolio.
tenants within a
property.
9. Dividend The dividend 2.00 pps
reflects the
Company's ability
to deliver a
Dividends declared sustainable income for the quarter ended
in relation to the stream from its 31 March 2018 This
year. The Company portfolio. supports an
targets a dividend annualised dividend
of 8.00 pence per of 8.00 pps
Ordinary Share per
annum.
10. Ongoing Charges The Ongoing Charges 1.24%
ratio provides a
measure of total
costs associated
The ratio of total with managing and for the period ended
administration and operating the 31 March 2018
operating costs Company, which
expressed includes the
management fees due
to the Investment (year ended 30 April
Manager. The 2017: 1.52%)
as a percentage of Investment Manager
average NAV presents this
throughout the measure to provide
period. investors with a
clear picture of
operational costs
involved in running
the Company.
11. Profit before The PBT is an GBP9.82 million
tax indication of the
Company's financial
performance for the
period in which its for the period ended
PBT is a strategy is 31 March 2018
profitability exercised.
measure which
considers the
Company's profit (year ended 30 April
before the payment 2017: GBP6.10 million)
of income tax.
12. Total This reflects the 3.65%
shareholder return return seen by
shareholders on
their
shareholdings. for the period ended
The percentage 31 March 2018
change in the share
price assuming
dividends are
reinvested to (year ended 30 April
purchase additional 2017: 8.22%)
Ordinary Shares.
13. EPRA EPS This reflects the 6.56 pps
Company's ability
to generate
earnings from the
Earnings from core portfolio which for the period ended
operational underpins 31 March 2018
activities. A key dividends.
measure of a
company's
underlying (year ended 30 April
operating results 2017: 7.57 pps)
from its property
rental business and
an indication of
the extent to
which current
dividend payments
are supported by
earnings. See note
8 of the Financial
Statements.
Investment Manager's Report
Market Outlook
UK Economic Outlook
In April 2018, Q1 2018 growth was reported at 0.1% by the Office of National
Statistics ('ONS'), well below the expected 0.3% and the weakest quarterly
growth since 2012. This could trigger a downward revision for the full year
2018 growth forecasts, following on from a weak performance in 2017. UK
growth for 2017 was reported at 1.8% by the ONS, the weakest performance of
the UK economy in five years, due to a sharp rise in inflation squeezing
household spending power.
This left the UK falling behind other major economies, such as the US and
Germany, which grew by 2.3% and 2.5% respectively, as the global recovery
begins to gather pace. The strength of the global economy, and the
competitive value of the pound, should boost growth in export-oriented
sectors. However, consumers continue to be squeezed by high inflation, while
uncertainty surrounding Brexit is deterring business investment.
The 2017 figures demonstrate the impact on household budgets, with spending
growing by 1.7%, which is the slowest rate of annual growth since 2012. This
came as a result of inflation outpacing wage growth, driven by the
post-Brexit fall in Sterling. However for the three months to February 2018,
ONS figures reported wage inflation (including bonuses) of 2.8%, which
exceeded cost inflation as the consumer price index ('CPIH') dipped to 2.5%
in February 2018.
Many thought that this, coupled with low unemployment levels, would allow
the Bank of England ('BoE') to make a second interest rate rise in May 2018,
following a rise of 0.25% in November 2017, which was the first increase in
a decade. However, the recent slowdown in economic growth has delayed any
such increase, although it is anticipated that the BoE could raise interest
rates once or twice during the remainder of 2018 and 2019. It is thought
that the pace of rate rises will remain gradual and, with growth now
slowing, the prospect of higher interest rates and inflation driven by
growth should not be seen as a serious threat. Therefore we anticipate
interest rates to remain stable and supportive of the prospects for UK
growth.
UK Real Estate Outlook
Despite the economic pressures, we think that the property sector is set for
another strong year, primarily due to its relative high yield compared with
other sectors. The property market continues to show healthy spreads over 10
year government bond yields, and is still in the advantageous position of
offering one of the highest yields from traditional asset classes.
All property total returns were 1.7% for the three months ended 31 March
2018 (IPD Quarterly Index for standing investments) and the 12 month return
to 31 March 2018 was 9.3%. Overseas capital was a key feature of the
property market in 2017, with overseas buyers accounting for almost half the
2017 UK investment. It is expected that the weight of money targeting the
sector will remain high in 2018 from overseas private wealth investors
attracted by the relative yield.
One of the main risks to the real estate market outlook will be the
possibility of a 'Hard Brexit'. Although a relatively favourable end trading
relationship is anticipated, with a transition period likely to last until
December 2020 following the UK's exit from the EU in 2019, we still do not
have a comprehensive agreement on the UK's long-term future with the EU and
there remains a risk that the UK could leave without a trade deal. The
outlook should become clearer during the remainder of 2018, but in the event
that the future trading relationship includes barriers to trade, the real
estate occupier market could weaken.
The wider political landscape in the UK also contains risks, both in terms
of political leadership and policy, and specifically for the real estate
sector, which could face increased taxation and regulation. The November
2017 Budget proposed measures to end capital gains tax exemption for
overseas investors in commercial property from 2019, which could lead to
some moderation in overseas investment.
Sector Outlook
Retail
It has been well documented that the retail sector has weakened in many
areas and this has been reflected in financial difficulties for many
well-known high street names such as New Look and Toys R Us. Since
inception, the Company has positioned its retail purchases to take account
of this trend. Our retail assets are located in town and city centres with
large catchment populations and in many cases are supported by strong
alternative use values and asset management options. Indeed, Valley Retail
Park, Belfast, has been one of our strongest performing assets, as detailed
in the 'Portfolio Activity' section. While we remain cautious on the retail
sector, mispriced opportunities can still be found.
Industrial
The industrial sector remains robust and it represents the largest
proportion of our portfolio with 42%. We generally focus on assets with low
capital value in locations with good accessibility from the national
motorway network. In general, with the exception of large regional logistics
units, industrial values have not yet reached levels which support the cost
of new development, creating a tension between supply and demand often
resulting in significant rental growth. Total returns for the industrials
market were 19.6% for 2017 (IPD) and rental growth was 5.3%, more than
double the all-property average.
This has been demonstrated within the Company's portfolio, for example at
Sarus Court Industrial Estate, Runcorn, where new letting deals have moved
rental values from GBP4.50 per sq ft at purchase to GBP5.50 per sq ft today,
which has resulted in a valuation increase of 28% over the 29 months since
acquisition of the initial four units. We therefore believe that the
portfolio's low average passing rent from industrial property of GBP3.92 per
sq ft make it well placed to benefit from further rental growth and we
expect the sector to continue to be an area of opportunity for the Company
over the next year.
Offices
Offices represent the Company's second largest sector holding and in some
areas we have seen significant value growth. Locations with either high
levels of tenant demand or where purchase values are well below that of
surrounding residential uses are the focus of our stock selection process.
The implementation within the planning regime of permitted development
rights ('PDR') allowing for conversion to residential has contributed to a
shortage of office stock in some locations and this in turn has led to
rental growth in areas of robust occupational demand.
This remains an area where we see interesting opportunities to purchase
assets with attractive initial yields. Post purchase, the asset management
team work proactively, often implementing initiatives to drive rental value
at the same time as working on permitted residential consents to improve the
assets residual value ensuring downside protection. For example, the
Company's holding in Queen Square, Bristol, has benefited from rental growth
as a result of our asset management programme of improvement and
refurbishment. The average passing rent at purchase in December 2015 date
was under GBP17 per sq ft, compared to the latest leasing interest at GBP24 per
sq ft. Average rental growth of 44% has contributed to an increase in value
from GBP7.2 million at purchase to GBP10.7 million as at 31 March 2018.
Alternatives
The alternatives holding in the Company's portfolio works to diversify risk
and enhance performance. Alternatives are a growing allocation in most
balanced real estate portfolios and this is an area in which we have
significant expertise and would like to increase our holding. Our strategy
will focus on shorter lease profiles in economically robust areas where
tenants are trading profitably from the location. The assets will often
provide asset management opportunities, such as the ability to agree longer
leases with tenants who often prefer index linked rent reviews. It is a
growing sector of the market and presents opportunities to acquire
interesting assets at attractive prices, such as London East Leisure Park in
Dagenham, which was purchased by the Company in March 2018.
Pipeline
As demonstrated by the weight of the Company's purchases during the first
quarter of 2018, the opportunity persists to purchase assets across all
sectors, with attractive and sustainable yield profiles, along with the
potential for growth. The Company's investment strategy continues to focus
on well located assets, of comparatively small lot size with shorter than
average unexpired lease lengths that can be used to actively drive value as
part of a business plan. Our stock selection process also closely examines
alternative use values for each asset and selects those that provide a
strong recovery rate in a downside scenario.
Our pipeline of opportunities remains supportive of our target dividend of 8
pps per annum and our aim of providing an attractive total return from a
diversified portfolio of assets. In the short term, purchases will continue
to focus on business space and alternatives and will remain opportunistic in
the retail sector.
Financial Results
The Company continues to build on a diversified portfolio of properties and
as at 31 March 2018 held 36 investment properties (30 April 2017: 29
investment properties). Net rental income earned from the portfolio for the
11 months ended 31 March 2018 was GBP11.22 million (year ended 30 April 2017:
GBP11.07 million), contributing to an operating profit before fair value
changes and disposals of GBP9.60 million (year ended 30 April 2017: GBP9.81
million).
The Company disposed of its remaining holding in the Core Fund on 9 May 2017
for total proceeds of GBP7.67 million. The Company had held an ownership in
the Core Fund since May 2015 and saw a total return of 13% over the hold
period. The units were sold at a price in excess of the Core Fund's then
most recent published NAV and generated a profit on disposal of GBP0.07
million.
The portfolio has seen a gain of GBP1.01 million on revaluation of investment
property over the period (year ended 30 April 2017: loss of GBP3.16 million).
Performance was strongly supported by the Company's industrial assets, which
saw the greatest like-for-like increase in valuation over the period of each
sector. The Company's office and retail warehousing portfolios also
increased in valuation during the period on a like-for-like basis.
Geographically, performance was strongest in the South West, North West,
Eastern and West Midlands regions, while Scotland was the only region with a
negative like-for-like valuation movement, highlighting continued
uncertainty in occupational markets in this location. That said, we are
encouraged by signs of improvement that have been seen here during the first
quarter of 2018 and we are hopeful that the current business plan will yield
a more positive outcome during the coming 12 months.
The Company reported a loss on disposal of investment properties of GBP0.22
million (year ended 30 April 2017: gain of GBP0.73 million), which wholly
relates to sales costs for the disposal of Valley Retail Park, Belfast, in
September 2017.
Administrative expenses, which include the Investment Manager's fee and
other costs attributable to the running of the Company, were GBP1.62 million
for the 11 month period (year ended 30 April 2017: GBP1.84 million) and
Ongoing Charges for the period were 1.24% (year ended 30 April 2017: 1.52%).
The Company incurred finance costs of GBP0.65 million during the period (year
ended 30 April 2017: GBP0.76 million).
The total profit before tax for the period of GBP9.82 million (year ended 30
April 2017: GBP6.10 million) equates to a basic earnings per share of 7.17
pence (year ended 30 April 2017: 5.04 pence).
The Company's Net Asset Value as at 31 March 2018 was GBP146.03 million or
96.36 pence per share ("pps") (30 April 2017: GBP118.67 million or 95.98 pps).
This is an increase of 0.38 pps or 0.40%, with the underlying movement in
NAV set out in the table below:
Pence per share GBP million
NAV as at 1 May 2017 95.98 118.67
Change in fair value of investment 1.11 1.01
property
Change in fair value of derivatives (0.02) (0.02)
Loss on disposal of investment (0.17) (0.22)
property
Profit on disposal of investments 0.04 0.07
Income earned for the period 9.07 12.33
Expenses and net finance costs for (2.47) (3.35)
the period
Dividends paid (7.33) (9.99)
Issue of equity (net of costs) 0.15 27.53
NAV as at 31 March 2018 96.36 146.03
EPRA earnings per share for the 11 month period was 6.56 pps which, based on
dividends paid of 7.33 pps, reflects a dividend cover of 89.50%.
Financing
As at 31 March 2018, the Company had utilised GBP50.00 million (30 April 2017:
GBP29.01 million) of an available GBP60.00 million (30 April 2017: GBP40.00
million) credit facility with RBSi, maturing in October 2020. Gearing as at
31 March 2018 was 26.00% (Loan to GAV) (30 April 2017: 19.31%). The loan
attracts interest at LIBOR + 1.4% (30 April 2017: LIBOR + 1.4%). To mitigate
the interest rate risk that arises as a result of entering into a variable
rate linked loan, the Company holds interest rate caps on GBP36.51 million (30
April 2017: GBP26.51 million) of the loan at strike rates of 2.5% on GBP26.51
million and 2.0% on GBP10.00 million (30 April 2017: 2.5% on GBP26.51 million),
meaning that the loan is 73% hedged (30 April 2017: 91%).
Portfolio Activity
The Company's objective is to build a diversified portfolio of commercial
properties throughout the UK. New acquisitions have been selected to provide
a sustainable income return and the potential for growth, whilst also
limiting downside risk. The majority of the Company's assets are fully let
and as at 31 March 2018, the Company had a vacancy rate of 7.10% (30 April
2017: 7.22%). The following significant investment transactions were made
during the period:
- Unit 1005, Sarus Court, Runcorn - In May 2017 the Company
acquired Unit 1005 Sarus Court which completes the Company's
acquisition of the whole of the Sarus Court industrial estate,
where five of the six units were already in the Company's
ownership following acquisitions in 2015. Sarus Court forms
part of the wider Manor Park industrial estate, strategically
located to the west of Runcorn and five kilometres from the
Mersey Gateway Project, a new six lane bridge over the River
Mersey connecting the towns of Runcorn and Widnes and linking
the M56 to M62.
The estate provides well specified, modern industrial units of
between 11,000 and 17,000 sq ft, which are let to a number of
light industrial occupiers providing a WAULT of over three
years to expiry across the estate. Unit 1005, which is let to
Dimension Data until 2020, offers significant reversionary
potential, with a passing rent of GBP4.50 per sq ft which is
more than 15% lower than a 2017 letting at 1003 Sarus Court
secured at GBP5.25 per sq ft. The purchase therefore not only
offers rental upside but brings the whole estate under the
Company's ownership, which will add value from an estate
management perspective. The acquisition pricing reflects a Net
Initial Yield of 7.8% and a capital value of GBP55 per sq ft.
- Deeside Industrial Park - In July 2017 the Company announced
the acquisition of a c. 97,000 sq ft single-let industrial
building in Deeside, North Wales, for GBP4.31 million,
reflecting a Net Initial Yield of 7.9% and a capital value of
GBP45 per sq ft. The asset, which is located within the
established Deeside Industrial Park, is fully let to global
enterprise Magellan Aerospace, for a term of four years to
break and nine years to expiry. The current passing rent of
GBP3.75 per sq ft is significantly below that seen at other
competing centres within the North West, such as in Warrington
and Manchester.
Deeside Industrial Park has been established since the 1970s
and totals in excess of 600 acres, comprising over 5 million
sq ft of industrial and warehouse accommodation attracting a
variety of manufacturing and distribution companies. The
estate benefits from its close proximity to the national
motorway network, being within five miles of both the M56 and
M53.
- Storey's Bar Road, Peterborough - During July 2017 the Company
announced the acquisition of a c.184,000 sq ft single-let
industrial building in Peterborough, for GBP5.70 million,
reflecting a Net Initial Yield of 8.64% and a capital value of
c.GBP31 per sq ft. The asset, which is located within the
Eastern Industrial Estate, is fully let to Walstead
Investments Limited for a term of three years to expiry. The
passing rent of GBP2.88 per sq ft is low in comparison to some
of the recent lettings in the city and the immediate sub
region.
- Core Fund - In May 2017, the Company announced the sale of its
remaining units in the Core Fund for total proceeds of GBP7.67
million.
The Company had held an ownership in the Core Fund since
launch in May 2015 for the purpose of expediting its
investment period and saw a total return of 13% over the hold
period. The units were sold at a price in excess of the Core
Fund's latest published NAV.
- Valley Retail Park, Belfast - In September 2017 the Company
completed the disposal of the Valley Retail Park in Belfast
for GBP11.05 million. The Company originally purchased the
100,189 sq ft property for GBP7.15m in 2015 with a WAULT of only
3 years to break and vacancy in excess of 20%. The Company's
proactive asset management activity has added significant
value with new lettings to Go Outdoors for a 20 year term and
Smyths Toys for a term of 15 years. A surrender premium of GBP1m
was also taken from outgoing tenant Harvey Norman.
After completion of the asset's business plan, it was felt to
be the most beneficial time to dispose in order to maximise
shareholder return.
- Commercial Road Portsmouth - In October 2017 the Company
acquired 208-220 Commercial Road and 7-13 Crasswell Street,
Portsmouth for GBP6.37m, reflecting a net initial yield of 9.6%.
The asset is fully let to seven retail tenants and one office
tenant providing a WAULT of 3.6 years to expiry. The 12,475 sq
ft retail property is situated within the prime pedestrianised
pitch of Commercial Road within Portsmouth's city centre. The
property is also directly opposite the main covered shopping
centre, The Cascades, which is anchored by Primark, H&M and
Next.
As part of the 'Shaping Portsmouth' development initiative,
the city is set to receive GBP1 billion of investment from both
public and private sector organisations over the next 20
years.
- Cedar House, Gloucester - In December 2017 the Company
announced the acquisition of Cedar House, Spa Road, Gloucester
for GBP3.10 million. The five-storey office block, which is
located within the city centre adjacent to Gloucester Park,
was acquired for a price reflecting a low capital value of
only GBP80 per sq ft and an attractive net initial yield of
9.1%. The property is currently let to the Secretary of State
for Communities & Local Government for use as a Job Centre,
with a short unexpired lease term of 0.3 years. However, the
tenant has already served a Section 26 notice to renew the
lease and as such the Investment Manager has already agreed
terms to extend this occupation.
The property is situated within a mixed office and residential
area and as such the Investment Manager believes that it
provides good long-term alternative use potential. Public
transport is easily accessible, with good links to Gloucester
Railway Station and a central bus route. The asset provides a
total floor area of 38,427 sq ft and includes substantial car
parking facilities, with 103 spaces available.
- Knowles Lane, Bradford - In January 2018, the Company
completed the purchase of Knowles Lane, Bradford, for GBP2.10
million. The asset is fully let to one tenant, Pilkington UK
Ltd., who have been in occupation for c.30 years. The property
comprises an industrial warehouse and two storey ancillary
offices and was acquired for a price reflecting a low capital
value of GBP45 per sq ft and net initial yield of 7.2%. The
property is located two miles south of Bradford and eight
miles to the west of Leeds and is well located for the
national motorway network.
- Diamond Business Park, Wakefield - During February 2018, the
Company acquired Diamond Business Park in Wakefield comprising
201,543 sq ft of multi-let industrial and office
accommodation. The property is let to 12 tenants and provides
a WAULT of 2.6 years to break and 5.0 years to expiry. The
transaction of GBP4.18 million reflects a net initial yield of
11.5% and low capital value of GBP22 per sq ft and GBP430,000 per
acre.
The large site of ten acres benefits from being situated in
Wakefield, an established industrial location. The business
park is strategically located at the intersection of the
M1/M62 motorways, providing access to Manchester, Liverpool,
Sheffield and beyond to London. The adjoining sites comprise
recently developed residential accommodation highlighting
potential to add value through change of use in the future.
- 2 Geddington Road, Corby - Also in February 2018 the Company
acquired 2 Geddington Road, Corby, an asset of 35 acres fully
let to GEFCO UK Ltd, a wholly owned subsidiary of GEFCO SA, a
global provider of logistics services to manufacturers, with
3.3 years to expiry. The property comprises a secure fenced
site along with a modern industrial property extending to
52,000 sq ft and is used by the tenant for the storage and
inspection of vehicles. The transaction of GBP12.40 million
reflects an attractive net initial yield of 10.0%.
A mix of commercial and residential development surrounds the
site, including the Eurohub logistics park and a 250-acre
development site being brought to the market by Frogmore and
Mulberry Developments where Eddie Stobart have recently signed
up for a new 844,000 sq ft facility.
- East London Leisure Park, Dagenham - During March 2018 the
Company acquired c. 72,000 sq ft of leisure accommodation
forming the eastern section of the London East Leisure Park, a
purpose built leisure destination, for GBP11.37 million. The
property currently houses Mecca Bingo, McDonalds and Hollywood
Bowl and provides a net initial yield of 5.8%, rising to 8% in
September 2018 upon expiry of a rent free period, with a WAULT
of 12.6 years.
A major attraction of the park is its location, 11 miles east
of Central London and being highly accessible both via public
transport but also with close links to the A13 and M25.
Dagenham is an area due to go through major regeneration over
the next ten years with the Council recently setting out plans
for the development of thousands of new homes as well as a
proposal for the first film studio to be built in London for
25 years. The surrounding area comprises a mix of retail,
industrial and residential property.
- Gresford Industrial Estate, Wrexham - During March 2018 the
Company acquired a single let industrial unit on the Gresford
Industrial Estate, Wrexham for a price of GBP9.98 million
reflecting a low capital value of GBP35 per sq ft. The property
provides 279,541 sq ft leased to Plastipak UK Limited for a
further 14 years and comprises three units within a
self-contained site. The asset benefits from its location in
Gresford Industrial Estate, approximately two miles north of
Wrexham town centre, with key motorway links across the North
West via the A483. A key feature of the building is its large
power supply at 18 megawatts which is rarely seen in buildings
of this nature and could therefore be attractive to future
tenants. The asset provides a net initial yield today of 8.3%
with a fixed rental uplift due in 2022 taking the yield in
excess of 9%.
Acquisitions during the period
Unit 1005, Sarus Court, Runcorn
Purchase Price (GBPm): 0.61
Sector: Industrial
Area (sq ft): 11,097
NIY at acquisition (%): 7.8
WAULT to break as at 31 March 2018 (years): 2.5
Occupancy by ERV (%): 100
Constructed: 2002
Excel 95, Deeside
Purchase Price (GBPm): 4.31
Sector: Industrial
Area (sq ft): 96,597
NIY at acquisition (%): 7.9
WAULT to break as at 31 March 2018 years): 4.0
Occupancy by ERV (%): 100
Constructed: 1990s
Storeys Bar Road, Peterborough
Purchase Price (GBPm): 5.70
Sector: Industrial
Area (sq ft): 184,114
NIY at acquisition (%): 8.6
WAULT to break as at 31 March 2018 years): 3.0
Occupancy by ERV (%): 100
Constructed: 1988
Commercial Road, Portsmouth
Purchase Price (GBPm): 6.37
Sector: Standard Retail
Area (sq ft): 12,475
NIY at acquisition (%): 9.6
WAULT to break as at 31 March 2018 years): 3.3
Occupancy by ERV (%): 100
Constructed: 1980s
Cedar House, Gloucester
Purchase Price (GBPm): 3.10
Sector: Offices
Area (sq ft): 38.427
NIY at acquisition (%): 9.1
WAULT to break as at 31 March 2018 years): 6.0
Occupancy by ERV (%): 100
Constructed: 1970s
Knowles Lane, Bradford
Purchase Price (GBPm): 2.10
Sector: Industrial
Area (sq ft): 51,722
NIY at acquisition (%): 7.2
WAULT to break as at 31 March 2018 years): 6.5
Occupancy by ERV (%): 100
Constructed: 1970s
Diamond Business Park, Wakefield
Purchase Price (GBPm): 4.18
Sector: Industrial
Area (sq ft): 205,203
NIY at acquisition (%): 11.5
WAULT to break as at 31 March 2018 years): 2.6
Occupancy by ERV (%): 82.1
Constructed: 1970s
2 Geddington Road, Corby
Purchase Price (GBPm): 12.40
Sector: Other
Area (sq ft): 52,353
NIY at acquisition (%): 10.0
WAULT to break as at 31 March 2018 years): 3.3
Occupancy by ERV (%): 100
Constructed: 1990s
London East Leisure Park, Dagenham
Purchase Price (GBPm): 11.37
Sector: Other
Area (sq ft): 71,720
NIY at acquisition (%): 8.0
WAULT to break as at 31 March 2018 years): 12.6
Occupancy by ERV (%): 100
Constructed: 1990s
Gresford Industrial Estate, Wrexham
Purchase Price (GBPm): 9.98
Sector: Industrial
Area (sq ft): 279,541
NIY at acquisition (%): 8.3
WAULT to break as at 31 March 2018 years): 14.0
Occupancy by ERV (%): 100
Constructed: 1980s
Asset Management
We undertake active asset management to seek opportunities to achieve rental
growth, let vacant space and enhance value through initiatives such as
refurbishments. During the period, key asset management initiatives have
included:
- Langthwaite Industrial Estate, South Kirkby - In October 2017 the Company
completed the renewal of two leases with its largest tenant, Ardagh Glass,
on two warehouse buildings at the Langthwaite Industrial Estate in South
Kirkby, Yorkshire, located c.4 miles from Junction 38 of the A1M and c.10
miles from Junction 37 of the M1. Ardagh Glass, whose parent group's latest
reported full year figures show annual turnover in excess of EUR6,000
million, use the premises for storage and distribution serving their nearby
factories. The manufacturing group has taken the units for an additional
term with just under 3 years to expiry resulting in a total valuation uplift
for the Company of 14% since acquisition.
- Eastpoint Business Park, Oxford - The Company completed a new letting of
2,800 sq ft of office accommodation to publishing company Capstone at the
Eastpoint Business Park in Oxford. The unit has been let for a term of 5
years with a break option in year 3 at a rent of GBP15.50 per sq ft which is
in excess of ERV.
- Queen Square, Bristol - In late summer 2017 the Company announced that it
had let 1,986 sq ft to Kingston Barnes, a construction recruitment firm, at
its office building at 40 Queen Square in central Bristol meaning that the
38,301 sq ft Grade-A building is now fully let. We have implemented a
significant refurbishment programme at 40 Queen Square which was acquired by
the Company with c 50% vacancy. In line with the Company's strategy of
driving rental growth and adding value through active asset management the
asset has seen a valuation increase of 49% since purchase. This latest
transaction concludes six lettings totalling c 25,000 sq ft within the last
12 months.
- Pearl Assurance House, Nottingham - After the period end, on 5 April 2018,
the Company completed the part sale of Pearl Assurance House, which was
purchased by the Company in 2016 for GBP8.15 million. The sale of GBP3.65
million comprises the first to the ninth floors of the building as well as a
ground floor reception and car parking spaces, providing a total area of
41,262 sq ft. The transaction reflected a net initial yield of 6.9% and
significantly reduces the overall vacancy level in the portfolio.
The Company will retain the fully let ground floor accommodation in this
busy city centre location, totalling 28,432 sq ft, let to national retail
operators including Costa Coffee, Poundland and Lakeland. The retained
element will provide the Company with an ongoing yield of 9.5% based on its
component value of GBP5.26 million.
Property Portfolio
Please refer to Appendix 3 'Since Inception', accessible through the link at
the end of this announcement.
Please refer to Appendix 4 'UK property locations as at 31 March 2018',
accessible through the link at the end of this announcement.
Summary by Sector as at 31 March 2018
Gross
Passi
ng
Renta
l
Incom
e
(GBPm)
Area Occupancy WAULT
by ERV to
break
Number Valuation ('000
of sq (%)
Propert ft) (years)
ies
(GBPm) ERV
(GBPm)
Sector
Standard 4 23.9 147 96.3 3.9 2.5 1.9
Retail
Retail 2 9.5 68 100.0 5.4 0.8 0.8
Warehouse
Office 7 48.4 357 79.3 4.0 3.8 5.2
Industrial 20 81.2 2,161 98.4 5.4 7.3 7.5
Other 3 29.4 165 100.0 6.1 2.6 2.3
Total 36 192.4 2,898 92.9 5.1 17.0 17.7
Summary by Geographical Area as at 31 March 2018
Gross
Passi
ng
Renta
l
Incom
e
(GBPm)
Area Occupancy WAULT
by ERV to
break
Geographical Number Valuation ('000 ERV
Area of sq (%) (GBPm)
Proper ft) (years)
ties
(GBPm)
Greater 1 11.4 72 100.0 12.6 0.7 0.8
London
South East 5 28.7 195 89.3 3.6 2.7 2.4
South West 3 21.4 126 100.0 4.8 1.6 1.7
Eastern 5 20.9 345 100.0 4.2 1.8 1.9
West 4 16.9 397 100.0 4.3 1.8 1.8
Midlands
East 2 21.3 122 86.0 3.9 2.0 1.9
Midlands
North West 5 16.8 315 99.8 5.2 1.5 1.4
Yorkshire 8 30.5 864 94.1 3.8 2.9 3.2
and
Humberside
Wales 2 14.5 376 100.0 11.1 1.3 1.3
Scotland 1 10.0 86 57.1 3.3 0.7 1.3
Total 36 192.4 2,898 92.9 5.1 17.0 17.7
Please refer to Appendix 5 'Properties by Market Value', accessible through
the link at the end of this announcement.
Property Sector Region Market Value
Range (GBPm)
Top ten:
2 Geddington Road, Other (Sui East Midlands 10.0 - 15.0
Corby Generis)
London East Other (Leisure) Greater London 10.0 - 15.0
Leisure Park,
Dagenham
40 Queen Square, Offices South West 10.0 - 15.0
Bristol
225 Bath Street, Offices Scotland 10.0 - 15.0
Glasgow
Gresford Industrial Wales 7.5 - 10
Industrial Estate,
Wrexham
Pearl Assurance Offices East Midlands 7.5 - 10
House, Nottingham
Eastpoint Business Offices South East 7.5 - 10
Park, Oxford
Above Bar Street, Standard Retail South East 7.5 - 10
Southampton
Barnstaple Retail Retail Warehouse South West 5.0 - 7.5
Park
Langthwaite Grange Industrial Yorkshire and 5.0 - 7.5
Industrial Estate, Humberside
South Kirby
The Company's top ten properties listed above comprise 49.1% of the total
value of the portfolio.
Property Sector Region Market Value
Range (GBPm)*
Commercial Road, Standard Retail South East 5.0 - 7.5
Portsmouth
Sarus Court Industrial North West 5.0 - 7.5
Industrial
Estate, Runcorn
Storeys Bar Road, Industrial Eastern 5.0 - 7.5
Peterborough
Odeon Cinema, Other (Leisure) Eastern 5.0 - 7.5
Southend
Oak Park, Industrial West Midlands 5.0 - 7.5
Droitwich
Euroway Trading Industrial Yorkshire and 5.0 - 7.5
Estate, Bradford Humberside
Apollo Business Industrial Eastern <5.0
Park, Basildon
Bank Hey Street, Standard Retail North West <5.0
Blackpool
Sandford House, Offices West Midlands <5.0
Solihull
Excel 95, Deeside Industrial Wales <5.0
Fargate and Standard Retail Yorkshire and <5.0
Chapel Walk, Humberside
Sheffield
Brockhurst Industrial West Midlands <5.0
Crescent, Walsall
Diamond Business Industrial Yorkshire and <5.0
Park, Wakefield Humberside
Walkers Lane, St. Industrial North West <5.0
Helens
Brightside Lane, Industrial Yorkshire and <5.0
Sheffield Humberside
Wella Warehouse, Industrial South East <5.0
Basingstoke
Cedar House, Offices South West <5.0
Gloucester
Eagle Road, Industrial West Midlands <5.0
Redditch
Pipps Hill Industrial Eastern <5.0
Industrial
Estate, Basildon
Vantage Point, Offices Eastern <5.0
Hemel Hempstead
Magham Road, Industrial Yorkshire and <5.0
Rotherham Humberside
Knowles Lane, Industrial Yorkshire and <5.0
Bradford Humberside
Stoneferry Retail Retail Warehouse Yorkshire and <5.0
Park, Hull Humberside
Clarke Road, Industrial South East <5.0
Milton Keynes
Moorside Road, Industrial North West <5.0
Salford
Waggon Road, Industrial North West <5.0
Mossley
Source: Valuation provided by Knight Frank LLP as at 31 March 2018.
Top Ten Tenants
Tenant Property Passing Rental % of
Income (GBP'000) Portfolio
Total
Passing
Rental
Income
GEFCO UK Limited 2 Geddington Road, 1,320 7.7
Corby
Plastipak UK Gresford 883 5.2
Limited Industrial Estate,
Wrexham
The Secretary of Sandford House, 811 4.8
State Solihull and Cedar
House,
Gloucester
Ardagh Glass Langthwaite 676 4.0
Limited Industrial Estate,
South Kirkby
Mecca Bingo London East 625 3.7
Limited Leisure Park,
Dagenham
Egbert H Taylor & Oak Park, 620 3.6
Company Limited Droitwich
Odeon Cinemas Odeon Cinema, 535 3.1
Southend
Sports Direct Barnstaple Retail 525 3.1
Park and Bank Hey
Street,
Blackpool
Wyndeham Storeys Bar Road, 525 3.1
Peterborough Peterborough
Limited
Advance Supply Euroway Trading 428 2.5
Chain (BFD) Estate, Bradford
Limited
The Company's top ten tenants, listed above, represent 40.8% of the total
passing rental income of the portfolio.
Please refer to Appendix 6 'Lease Expiry Profile', accessible through the
link at the end of this announcement.
Alternative Investment Fund Manager ('AIFM')
AEW UK Investment Management LLP is authorised and regulated by the
Financial Conduct Authority as a full-scope AIFM and provides its services
to the Company.
The Company has appointed Langham Hall UK Depositary LLP ('Langham Hall') to
act as the depositary to the Company, responsible for cash monitoring, asset
verification and oversight of the Company.
Information Disclosures under the AIFM Directive
Under the AIFM Directive, the Company is required to make disclosures in
relation to its leverage under the prescribed methodology of the Directive.
Leverage
The AIFM Directive prescribes two methods for evaluating leverage, namely
the 'Gross Method' and the 'Commitment Method'. The Company's maximum and
actual leverage levels are as per below:
31 March 2018 30 April 2017
Leverage Gross Commitment Gross Commitment
Exposure Method Method Method Method
Maximum 140% 140% 140% 140%
Limit
Actual 131% 134% 118% 124%
In accordance with the AIFM Directive, leverage is expressed as a percentage
of the Company's exposure to its NAV and adjusted in line with the
prescribed 'Gross' and 'Commitment' methods. The Gross method is
representative of the sum of the Company's positions after deducting cash
balances and without taking into account any hedging and netting
arrangements. The Commitment method is representative of the sum of the
Company's positions without deducting cash balances and taking into account
any hedging and netting arrangements. For the purposes of evaluating the
methods above, the Company's positions primarily reflect its current
borrowings and NAV.
Remuneration
The AIFM has adopted a Remuneration Policy which accords with the principles
established by AIFMD.
AIFMD Remuneration Code Staff includes the members of the AIFM's Management
Committee, those performing Control Functions, Department Heads, Risk Takers
and other members of staff that exert material influence on the AIFM's risk
profile or the AIFs it manages.
Staff are remunerated in accordance with the key principles of the firm's
remuneration policy, which include (1) promoting sound risk management; (2)
supporting sustainable business plans; (3) remuneration being linked to
non-financial criteria for Control Function staff; (4) incentivise staff
performance over longer periods of time; (5) award guaranteed variable
remuneration only in exceptional circumstances; and (6) having an
appropriate balance between fixed and variable remuneration.
As required under section 'Fund 3.3.5.R(5)' of the Investment Fund
Sourcebook, the following information is provided in respect of remuneration
paid by the AIFM to its staff. The information provided below is provided
for the year from 1 January 2017 to 31 December 2017, which is in line with
the most recent financial reporting period of the AIFM, and relates to the
total remuneration
of the entire staff of the AIFM.
Year ended
31 December 2017
Total remuneration paid to employees during
financial year:
a) remuneration, including, where relevant, any GBP2,342,893
carried interest paid by the AIFM
b) the number of beneficiaries 26
The aggregate amount of remuneration, broken
down by:
a) senior management GBP604,938
b) members of staff GBP1,737,955
Fixed Variable Total
remuneration remuneration remuneration
Senior management GBP604,938 - GBP604,938
Staff GBP1,458,955 GBP279,000 GBP1,737,955
Total GBP2,063,893 GBP279,000 GBP2,342,893
AEW UK Investment Management LLP
8 June 2018
Principal Risks and Uncertainties
The Company's assets consist primarily of UK commercial property. Its
principal risks are therefore related to the commercial property market in
general, but also to the particular circumstances of the individual
properties and the tenants within the properties.
The Board has carried out a robust assessment of the principal risks facing
the Company, including those that would threaten its business model, future
performance, solvency or liquidity. Twice a year, the Audit Committee
reviews the adequacy and effectiveness of the Company's risk management
system. Some risks are not yet known and some that are currently not deemed
material, could turn out to be material in the future. All principal risks
are the same as detailed in the 2017 Annual Report. Financial risk
management and objectives and policies are further detailed in Note 20 of
the Financial Statements.
An analysis of the principal risks and uncertainties is set out below:
Principal risks and their How risk is managed
potential impact
REAL ESTATE RISKS
Property market
Any property market recession The Company has investment
or future deterioration in the restrictions in place to invest
property market could, inter and manage its assets with the
alia, (i) cause the Company to objective of spreading and
realise its investments at mitigating risk.
lower valuations; and (ii)
delay the timings of the
Company's realisations. These
risks could have a material
adverse effect on the ability
of the Company to achieve its
investment
objective.
Property valuation
Property and property-related The Company uses an independent
assets are inherently difficult valuer (Knight Frank) to value
to value due to the individual the properties at fair value in
nature of each property. accordance with accepted RICS
appraisal and valuation
standards.
There may be an adverse effect
on the Company's profitability,
the NAV and the price of
Ordinary Shares in cases where
properties are
sold whose valuations have
previously been materially
overstated.
Tenant default
Failure by tenants to comply Tenant covenant checks are
with their rental obligations carried out on new tenants where
could affect the income that there are concerns as to their
the properties earn and the creditworthiness.
ability of the Company to pay
dividends to its shareholders.
Asset management team conducts
ongoing monitoring and liaison
with tenants to manage potential
bad debt risk.
Asset management initiatives
Asset management initiatives, Costs incurred on asset
such as refurbishment works, management initiatives are
may prove to be more extensive, closely monitored against
expensive and take longer than budgets and reviewed in regular
anticipated. Cost overruns may presentations to the Investment
have a material adverse effect Management Committee of the
on the Company's profitability, Investment Manager.
the NAV and the share price.
Due diligence
Due diligence may not identify The Company's due diligence
all the risks and liabilities relies on the work (such as
in respect of an acquisition legal reports on title, property
(including any environmental, valuations, environmental,
structural or operational building surveys) outsourced to
defects) that may lead to a third parties who have expertise
material adverse effect on the in their areas. Such third
Company's profitability, the parties have Professional
Net Asset Value and the price Indemnity cover in place.
of the Company's Ordinary
Shares.
Fall in rental rates
Rental rates may be adversely The Company mitigates this risk
affected by general UK economic through building a diversified
conditions and other factors property and tenant base with
that depress rental rates, subsequent monitoring of
including local factors concentration to individual
relating to particular occupiers (top 10 tenants) and
properties/locations (such as sectors (geographical and sector
increased competition). exposure).
Any fall in the rental rates The Investment Manager holds
for the Company's properties quarterly meetings with its
may have a material adverse Investment Strategy Committee
effect on the Company's and regularly meets the Board of
profitability, the NAV, the Directors to assess whether any
price of the Ordinary Shares changes in the market present
and the Company's ability to risks that should be addressed
meet interest and capital in our strategy.
repayments on any debt
facilities.
FINANCIAL RISKS
Breach of borrowing covenants
The Company has entered into a The Company monitors the use of
term credit facility. borrowings on an ongoing basis
through weekly cash flow
forecasting and quarterly risk
monitoring to monitor financial
covenants.
Material adverse changes in
valuations and net income may
lead to breaches in the LTV and
interest cover ratio covenants.
Interest rate rises
The Company's borrowings The Company uses interest caps
through a term credit facility on a significant notional value
are subject to interest rate of the loan to mitigate the
risk through changing LIBOR adverse impact of possible
rates. Any increases in LIBOR interest rate rises.
rates may have an adverse
effect on the Company's ability
to pay dividends.
The Investment Manager and Board
of Directors monitor the level
of hedging and interest rate
movements to ensure that the
risk is managed appropriately.
Availability and cost of the
credit facility
The Company maintains a good
The term credit facility relationship with the bank
expires in October 2020. In the providing the term credit
event that RBSi does not renew facility.
the facility the Company may
need to sell assets to repay
the outstanding loan. Any
increase in the financing costs
of the facility on renewal
would adversely impact on the
Company's profitability.
The Company monitors the
projected usage and covenants of
the credit facility on a
quarterly basis.
CORPORATE RISKS
Use of service providers
The Company has no employees The performance of service
and is reliant upon the providers in conjunction with
performance of third party their service level agreements
service providers. is monitored via regular calls
and face to face meetings and
the use of Key Performance
Indicators, where relevant.
Failure by any service provider
to carry out its obligations to
the Company in accordance with
the terms of its appointment
could have a materially
detrimental impact on the
operation of the Company.
Dependence on the Investment
Manager
The Investment Manager has
The Investment Manager is endeavoured to ensure that the
responsible for providing principal members of its
investment management services management team are suitably
to the Company. incentivised.
The future ability of the
Company to successfully pursue
its investment objective and
investment policy may, among
other things, depend on the
ability of the Investment
Manager to retain its existing
staff and/or to recruit
individuals of similar
experience and calibre.
Ability to meet objectives
The Company may not meet its The Company has an investment
investment objective to deliver policy to achieve a balanced
an attractive total return to portfolio with a diversified
shareholders from investing tenant base. The Company also
predominantly in a portfolio of has investment restrictions in
smaller commercial properties place to limit exposure to
in the United Kingdom. potential
risk factors. These factors
mitigate the risk of
fluctuations in returns.
Poor relative total return
performance may lead to an
adverse reputational impact
that affects the Company's
ability to raise new capital.
TAXATION RISKS
Company REIT status
The Company has a UK REIT The Company monitors REIT
status that provides a compliance through the
tax-efficient corporate Investment Manager on
structure. acquisitions; the Administrator
on asset and distribution
levels; the Registrar and Broker
on shareholdings and the use of
third-party tax advisers to
monitor REIT compliance
requirements.
If the Company fails to remain
a REIT for UK tax purposes, its
profits and gains will be
subject to UK corporation tax.
Any change to the tax status or
UK tax legislation could impact
on the Company's ability to
achieve its investment
objectives and provide
attractive returns to
shareholders.
POLITICAL/ECONOMIC RISKS
Political and macroeconomic The Board considers the impact
events present risks to the of political and
real estate and financial
markets that affect the Company
and the business of our
tenants. The level of macroeconomic events when
uncertainty that such events reviewing strategy.
bring has been highlighted in
recent times, most pertinently
following the EU referendum
vote (Brexit) in June 2016.
Statement of Directors' Responsibilities in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial period. Under that law they are required to prepare the financial
statements in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and applicable
law.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state
of affairs of the Company and of its profit or loss for that period. In
preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable, relevant and
reliable;
· state whether they have been prepared in accordance with IFRSs as
adopted by the EU;
· assess the Company's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the Annual Report
and the Financial Statements
We confirm that to the best of our knowledge:
* the Financial Statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
* the Strategic Report includes a fair review of the development and
performance of the business and the position of the UK Company, together
with a description of the principal risks and uncertainties that it faces.
We consider the Annual Report and the Financial Statements, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
On behalf of the Board
Mark Burton
Chairman
8 June 2018
Non-statutory Accounts
The financial information set out below does not constitute the Company's
statutory accounts for the period ended 31 March 2018 but is derived from
those accounts. Statutory accounts for the period ended 31 March 2018 will
be delivered to the Registrar of Companies in due course. The Independent
Auditor has reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the Independent
Auditor drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006. The text of the Independent Auditors' Report can be
found in the Company's full Annual Report and the Financial Statements on
the Company's website.
Financial Statements
Statement of Comprehensive Income
for the period 1 May 2017 to 31 March 2018
Notes For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Income
Rental and other income 3 12,330 12,503
Property operating expenses 4 (1,106) (1,434)
Net rental and other income 11,224 11,069
Dividend income 3 - 576
Net rental and dividend 11,224 11,645
income
Other operating expenses 4 (1,539) (1,768)
Directors' remuneration 5 (84) (71)
Operating profit before fair 9,601 9,806
value changes
Change in fair value of 10 1,014 (3,159)
investment properties
(Loss)/profit on disposal of 10 (216) 731
investment properties
Change in fair value of 10 - (407)
investments
Profit/(loss) on disposal of 10 73 (113)
investments
Operating profit 10,472 6,858
Finance expense 6 (652) (759)
Profit before tax 9,820 6,099
Taxation 7 - -
Profit after tax 9,820 6,099
Other comprehensive income - -
Total comprehensive income 9,820 6,099
for the period/year
Earnings per share (pence per 8 7.17 5.04
share) (basic and diluted)
The notes below form an integral part of these financial statements.
Statement of Changes in Equity
for the period 1 May 2017 to 31 March 2018
For the Notes Share Share Capital Total capital
period 1 May capital
2017 to 31
March 2018
premium reserve and reserves
GBP'000 and
account attributable
retained to
GBP'000
earnings owners of the
GBP'000 Company
GBP'000
Balance at 1 1,236 22,514 94,924 118,674
May 2017
Total - - 9,820 9,820
comprehensive
income
Ordinary 18/19 279 27,771 - 28,050
Shares issued
Share issue 19 - (517) - (517)
costs
Dividends 9 - - (9,993) (9,993)
paid
Balance at 31 1,515 49,768 94,751 146,034
March 2018
Year ended 30 Notes Share Share Capital Total capital
April 2017 capital
premium reserve and reserves
GBP'000 and
account attributable
retained to
GBP'000
earnings owners of the
GBP'000 Company
GBP'000
Balance at 1 1,175 16,729 98,471 116,375
May 2016
Total - - 6,099 6,099
comprehensive
income
Ordinary 18/19 61 5,938 - 5,999
Shares issued
Share issue 19 - (153) - (153)
costs
Dividends 9 - - (9,646) (9,646)
paid
Balance at 30 1,236 22,514 94,924 118,674
April 2017
The notes below form an integral part of these financial statements.
Statement of Financial Position
as at 31 March 2018
Notes 31 March 2018 30 April 2017
GBP'000 GBP'000
Assets
Non-Current Assets
Investment property 10 187,751 135,570
187,751 135,570
Current Assets
Investment property held for 10 3,650 -
sale
Investments held for sale - 7,594
Receivables and prepayments 11 2,938 3,382
Other financial assets held at 12 26 31
fair value
Cash and cash equivalents 4,711 3,653
11,325 14,660
Total Assets 199,076 150,230
Non-Current Liabilities
Interest bearing loans and 13 (49,643) (28,740)
borrowings
Finance lease obligations 15 (573) (55)
(50,216) (28,795)
Current Liabilities
Payables and accrued expenses 14 (2,779) (2,756)
Finance lease obligations 15 (47) (5)
(2,826) (2,761)
Total Liabilities (53,042) (31,556)
Net Assets 146,034 118,674
Equity
Share capital 18 1,515 1,236
Share premium account 19 49,768 22,514
Capital reserve and retained 94,751 94,924
earnings
Total capital and reserves 146,034 118,674
attributable to equity holders
of the Company
Net Asset Value per share 8 96.36 pps 95.98 pps
(pence per share)
The financial statements were approved by the Board on 8 June 2018 and
signed on its behalf by:
Mark Burton
Chairman
AEW UK REIT plc (Company number: 09522515)
The notes below form an integral part of these financial statements.
Statement of Cash Flows
for the period 1 May 2017 to 31 March 2018
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Cash flows from operating
activities
Operating profit 10,472 6,858
Adjustment for non-cash items:
Change in fair value of investment (1,014) 3,159
properties
Change in fair value of investments - 407
Loss/(profit) on disposal of 216 (731)
investment properties
(Profit)/loss on disposal of (73) 113
investments
Increase in other receivables and (701) (438)
prepayments
Decrease in other payables and (410) (283)
accrued expenses
Net cash flow generated from 8,491 9,085
operating activities
Cash flows from investing
activities
Purchase of investment properties (63,896) (28,062)
Disposal of investment properties 10,856 2,681
Disposal of investments 7,667 1,995
Net cash used in investing (45,373) (23,386)
activities
Cash flows from financing
activities
Proceeds from issue of ordinary 28,050 5,999
share capital
Share issue costs (483) (153)
Loan draw down 20,990 14,760
Loan arrangement fees (165) -
Finance costs (458) (969)
Dividends paid (9,993) (9,646)
Net cash flow generated from 37,940 9,991
financing activities
Net increase/(decrease) in cash and 1,058 (4,310)
cash equivalents
Cash and cash equivalents at start 3,653 7,963
of the period/year
Cash and cash equivalents at end of 4,711 3,653
the period/year
Notes to the Financial Statements
for the period 1 May 2017 to 31 March 2018
1. Corporate information
AEW UK REIT plc (the 'Company') is a closed ended Real Estate Investment
Trust ('REIT') incorporated on 1 April 2015 and domiciled in the UK. The
registered office of the Company is 6th Floor, 65 Gresham Street, London,
EC2V 7NQ.
The Company's Ordinary Shares were listed on the Official List of the UK
Listing Authority and admitted to trading on the Main Market of the London
Stock Exchange on 12 May 2015.
The nature of the Company's operations and its principal activities are set
out in the Strategic Report above.
2. Accounting policies
2.1 Basis of preparation
These financial statements are prepared and approved by the Directors in
accordance with International Financial Reporting Standards ('IFRS') and
interpretations issued by the International Accounting Standards Board
('IASB') as adopted by the European Union ('EU IFRS').
The current period is for a period of 11 months, due to a change of the year
end of the Company from 30 April to 31 March. As a result the comparative
information disclosed is not directly comparable.
These financial statements have been prepared under the historical-cost
convention, except for investment property, investments and interest rate
derivatives that have been measured at fair value.
The financial statements are presented in Sterling and all values are
rounded to the nearest thousand pounds (GBP'000), except when otherwise
indicated.
The Company is exempt by virtue of Section 402 of the Companies Act 2006
from the requirement to prepare group financial statements. These financial
statements present information solely about the Company as an individual
undertaking.
New standards, amendments and interpretations
There are a number of new standards and amendments to existing standards
which have been published and are mandatory for the Company's accounting
periods beginning after 31 March 2018 or later periods. The following are
the most relevant to the Company and their impact on the financial
statements:
* IFRS 7 (Financial Instruments: Disclosures) amendments regarding
additional hedge accounting disclosures (applied when IFRS 9 is applied);
* IFRS 9 Financial Instruments. The standard will replace IAS 39 Financial
Instruments and contains two primary measurement categories for financial
assets (effective for annual periods beginning on or after 1 January 2018);
* IFRS 15 (Revenue from Contracts with Customers) issued in May 2014 and
applies to an annual reporting period beginning on or after 1 January 2018;
* IFRS 16 (Leases): issued in January 2016 and is effective for annual
periods beginning on or after 1 January 2019; and
* IAS 40 Investment Property: effective for annual periods beginning on or
after 1 July 2018.
The adoption of new accounting standards issued and effective is not
expected to have a significant impact on the financial statements. The IFRS
16 disclosure requirements will be considered in due course.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with EU IFRS requires
the Directors of the Company to make judgements, estimates and assumptions
that affect the reported amounts recognised in the financial statements.
However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the
asset or liability in the future.
i) Valuation of investment property
The Company's investment property is held at fair value as determined by the
independent valuer on the basis of fair value in accordance with the
internationally accepted Royal Institution of Chartered Surveyors ('RICS')
Appraisal and Valuation Standards.
ii) Valuation of investments
Investments in collective investment schemes are stated at NAV with any
resulting gain or loss recognised in profit or loss. The NAV value is
considered by the Directors to be the best reflection of fair value
available to the Company.
iii) Segmental information
In accordance with IFRS 8, the Company is organised into one main operating
segment being investment in property and property related investments in the
UK.
2.3 Going concern
The Directors have made an assessment of the Company's ability to continue
as a going concern and are satisfied that the Company has the resources to
continue in business for at least 12 months. Furthermore, the Directors are
not aware of any material uncertainties that may cast significant doubt upon
the Company's ability to continue as a going concern. Therefore, the
financial statements have been prepared on the going concern basis.
2.4 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below.
a) Presentation currency
These financial statements are presented in Sterling, which is the
functional and presentational currency of the Company. The functional
currency of the Company is principally determined by the primary economic
environment in which it operates. The Company did not enter into any
transactions in foreign currencies during the year.
b) Revenue recognition
i) Rental income
Rental income receivable under operating leases is recognised on a
straight-line basis over the term of the lease, except for contingent rental
income, which is recognised when it arises. Incentives for lessees to enter
into lease agreements are spread evenly over the lease term, even if the
payments are not made on such a basis. The lease term is the non-cancellable
period of the lease together with any further term for which the tenant has
the option to continue the lease, where, at the inception of the lease, the
Directors are reasonably certain that the tenant will exercise that option.
ii) Deferred income
Deferred income is rental income received in advance during the accounting
period.
c) Dividend income
Dividend income is recognised in profit or loss on the date the entity's
right to receive a dividend is established.
d) Financing income and expenses
Financing income comprises interest receivable on funds invested. Financing
expenses comprise interest and other costs incurred in connection with the
borrowing of funds. Interest income and interest payable are recognised in
profit or loss as they accrue, using the effective interest method.
e) Investment property
Property is classified as investment property when it is held to earn
rentals or for capital appreciation or both. Investment property is measured
initially at cost including transaction costs. Transaction costs include
transfer taxes and professional fees to bring the property to the condition
necessary for it to be capable of operating. The carrying amount also
includes the cost of replacing part of an existing investment property at
the time that cost is incurred if the recognition criteria are met.
Subsequent to initial recognition, investment property is stated at fair
value. Gains or losses arising from changes in the fair values are included
in profit or loss.
Investment properties are valued by the independent valuer on the basis of a
full valuation with physical inspection at least once a year. Any valuation
of an Immovable by the independent valuer must be undertaken in accordance
with the current issue of RICS Valuation - Professional Standards (the 'Red
Book').
The determination of the fair value of investment property requires the use
of estimates such as future cash flows from assets (such as lettings,
tenants' profiles, future revenue streams, capital values of fixtures and
fittings, plant and machinery, any environmental matters and the overall
repair and condition of the property) and discount rates applicable to those
cash flows.
For the purposes of these financial statements, the assessed fair value is:
· reduced by the carrying amount of any accrued income resulting from the
spreading of lease incentives; and
· increased by the carrying amount of leasehold obligations.
Investment property is derecognised when it has been disposed of or
permanently withdrawn from use and no future economic benefit is expected
after its disposal or withdrawal.
Gains or losses on the disposal of investment property are determined as the
difference between net disposal proceeds and the carrying value of the asset
at the date of disposal.
Any gains or losses on the retirement or disposal of investment property are
recognised in the profit or loss in the year of retirement or disposal.
f) Investments in collective investment schemes
Investments in collective investment schemes are stated at fair value with
any resulting gain or loss recognised in profit or loss.
Investments are derecognised when they have been disposed of or the rights
to receive cash flow from the investments have expired or the Company has
transferred substantially all risks and rewards of ownership.
g) Investments in subsidiaries
AEW UK REIT 2015 Limited is the subsidiary of the Company. The subsidiary
was dormant during the reporting period. The investment in the subsidiary is
stated at cost less impairment and shown in note 17.
As permitted by Section 405 of the Companies Act 2006, the subsidiary is not
consolidated as its inclusion is not material for the purposes of giving a
true and fair view.
h) Investment property and investments held for sale
Investment property and investments are classified as held for sale when it
is being actively marketed at year end and it is highly probable that the
carrying amount will be recovered principally through a sale transaction
within 12 months.
Investment property and investments classified as held for sale are included
within current assets within the Statement of Financial Position and
measured at the fair value.
i) Derivative financial instruments
Derivative financial instruments, comprising interest rate caps for hedging
purposes, are initially recognised at fair value and are subsequently
measured at fair value, being the estimated amount that the Company would
receive or pay to terminate the agreement at the period end date, taking
into account current interest rate expectations and the current credit
rating of the Company and its counterparties. Premiums payable under such
arrangements are initially capitalised into the Statement of Financial
Position.
The Company uses valuation techniques that are appropriate in the
circumstances and for which sufficient data is available to measure fair
value, maximising the use of relevant observable inputs and minimising the
use of unobservable inputs significant to the fair value measurement as a
whole. Changes in fair value of interest rate derivatives are recognised
within finance expenses in profit or loss in the period in which they occur.
j) Cash and cash equivalents
Cash and short-term deposits in the Statement of Financial Position comprise
cash at bank and shortterm deposits with an original maturity of three
months or less.
k) Receivables and prepayments
Rent and other receivables are initially recognised at fair value and
subsequently at amortised cost. Provision is made when there is objective
evidence that the Company will not be able to recover balances in full.
l) Capital prepayments
Capital prepayments are made for the purpose of acquiring future property
assets, and held as receivables within the Statement of Financial Position.
When the asset is acquired, the prepayments are capitalized as a cost of
purchase. Where a purchase is not successful, these costs are expensed
within profit or loss as abortive costs in the period.
m) Other payables and accrued expenses
Other payables and accrued expenses are initially recognised at fair value
and subsequently held at amortised cost.
n) Rent deposits
Rent deposits represents cash received from tenants at inception of a lease
and are consequently transferred to the rent agent to hold on behalf of the
Company. These balances are held as creditors in the Statement of Financial
Position.
o) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less
directly attributable transaction costs. After initial recognition, interest
bearing loans and borrowings are subsequently measured at amortised cost
using the effective interest method. Borrowing costs are amortised over the
lifetime of the facilities through profit or loss.
p) Impairment of financial assets
A financial asset not carried at fair value through profit or loss is
assessed at each reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial
recognition of the asset, and that the loss event had a negative effect on
the estimated future cash flows of that asset that can be estimated
reliably.
q) Provisions
A provision is recognised in the Statement of Financial Position when the
Company has a present legal or constructive obligation as a result of a past
event, that can be reliably measured and is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate
that reflects risks specific to the liability.
r) Dividend payable to shareholders
Equity dividends are recognised when they become legally payable.
s) Share issue costs
The costs of issuing or reacquiring equity instruments (other than in a
business combination) are accounted for as a deduction from equity.
t) Finance leases
Finance leases are capitalised at the lease commencement, at the lower of
fair value of the property and present value of the minimum lease payments,
and held as a liability within the Statement of Financial Position.
u) Taxes
Corporation tax is recognised in profit or loss except to the extent that it
relates to items recognised directly in equity, in which case it is
recognised in equity.
As a REIT, the Company is exempt from corporation tax on the profits and
gains from its investments, provided it continues to meet certain conditions
as per REIT regulations.
Taxation on the profit or loss for the period not exempt under UK REIT
regulations comprises current and deferred tax. Current tax is expected tax
payable on any non-REIT taxable income for the period, using tax rates
applicable in the period.
Deferred tax is provided on temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax that is
provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or
substantially enacted at the period end date.
v) European Public Real Estate Association
The Company has adopted European Public Real Estate Association ('EPRA')
best practice recommendations, which it expects to broaden the range of
potential institutional investors able to invest in the Company's Ordinary
Shares. For the 11 month period to 31 March 2018, audited EPS and NAV
calculations under EPRA's methodology are included in note 8 and further
unaudited measures are included below.
3) Revenue
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Gross rental income received 12,330 12,147
Dilapidation income received - 301
Other property income - 55
Total rental and other income 12,330 12,503
Dividend income:
Property income distribution* - 552
Dividend distribution - 24
- 576
Total Revenue 12,330 13,079
*Property income distribution (PID) arose on the investment in the AEW UK
Core Property Fund which holds property directly.
Rent receivable under the terms of the leases is adjusted for the effect of
any incentives agreed.
4) Expenses
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Property operating expenses 1,106 1,434
Other operating expenses
Investment management fee 989 1,034
Auditor remuneration 88 88
Operating costs 462 646
Total other operating expenses 1,539 1,768
Total operating expenses 2,645 3,202
For the period
1 May 2017 to Year ended
31 March 2018 30 April 2017
Audit
Statutory audit of Annual Report GBP65,000 GBP66,000
and Accounts
GBP65,000 GBP66,000
Non-audit
Review of Interim Report GBP23,000 GBP22,000
Renewal of Company's Prospectus* GBP30,000 GBP20,500
GBP53,000 GBP42,500
Total fees paid to KPMG LLP GBP118,000 GBP108,500
Percentage of total fees attributed 45% 39%
to non-audit services
* Charged to share premium account.
5) Directors' remuneration
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Directors' fees 80 68
Tax and social security 4 3
Total remuneration 84 71
A summary of the Directors' remuneration is set out in the Directors'
Remuneration Report in the full Annual Report and Financial Statements. The
Company had no employees in either period.
6) Finance expense
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Interest payable on loan borrowings 540 483
Amortisation of loan arrangement 79 78
fee
Agency fee payable on loan (11) 21
borrowings
Commitment fees payable on loan 20 60
borrowings
628 642
Charge in fair value of interest 24 117
rate derivatives
Total 652 759
7) Taxation
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Total tax charge - -
Analysis of tax charge in the
period/year
Profit before tax 9,820 6,099
Theoretical tax at UK corporation 1,866 1,215
tax standard rate of 19.00% (2017:
19.92%)1
Adjusted for:
Exempt REIT income (1,700) (1,798)
UK dividends that are not taxable - (5)
Non deductible investment (166) 588
(profit)/losses
Total tax charge - -
1Standard rate of corporation tax was 19% to 31 March 2018. The corporation
tax rate is to reduce to 17% with effect from 1 April 2020.
Factors that may affect future tax charges
At 31 March 2018 the Company has unrelieved management expenses of GBP8,056
(30 April 2017: GBP6,826). It is unlikely that the Company will generate
sufficient taxable income in the future to use these expenses to reduce
future tax charges and therefore no deferred tax asset has been recognised.
Due to the Company's status as a REIT and the intention to continue meeting
the conditions required to obtain approval as a REIT in the foreseeable
future, the Company has not provided deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
8) Earnings per share and NAV per share
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018
Earnings per share:
Total comprehensive income (GBP'000) 9,820 6,099
Weighted average number of shares 136,894,561 121,084,416
Earnings per share (basic and 7.17 5.04
diluted) (pence)
EPRA earnings per share:
Total comprehensive income (GBP'000) 9,820 6,099
Adjustment to total comprehensive
income:
Change in fair value of investment (1,014) 3,159
property (GBP'000)
Loss/(profit) on disposal of 216 (731)
investment property (GBP'000)
Change in fair value of investment - 407
(GBP'000)
(Profit)/loss on disposal of (73) 113
investments (GBP'000)
Change in fair value of interest 24 117
rate derivatives (GBP'000)
Total EPRA Earnings (GBP'000) 8,973 9,164
EPRA earnings per share (basic and 6.56 7.57
diluted) (pence)
NAV per share:
Net assets (GBP'000) 146,034 118,674
Ordinary Shares 151,558,251 123,647,250
NAV per share (pence) 96.36 95.98
EPRA NAV per share:
Net assets (GBP'000) 146,034 118,674
Adjustments to net assets:
Other financial assets held at fair (26) (31)
value (GBP'000)
EPRA NAV (GBP'000) 146,008 118,643
EPRA NAV per share (pence) 96.34 95.95
Earnings per share (EPS) amounts are calculated by dividing profit for the
period attributable to ordinary equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the period. As at
31 March 2018, EPRA NNNAV was equal to IFRS NAV and as such a reconciliation
between the two measures has not been performed.
9) Dividends paid
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Fourth interim dividend paid in 2,473 -
respect of the period 1 February
2017 to 30 April 2017 at 2.00p per
Ordinary Share
First interim dividend paid in 2,473 -
respect of the period 1 May 2017 to
31 July 2017 at 2.00p per Ordinary
Share
Second interim dividend paid in 3,031 -
respect of the period 1 August 2017
to 31 October 2017 at 2.00p per
Ordinary Share
Third interim dividend paid in 2,016 -
respect of the period 1 November
2017 to 31 December 2017 at 1.33p
per Ordinary Share
Fourth interim dividend paid in - 2,350
respect of the period 1 February
2016 to 30 April 2016 at 2.00p per
Ordinary Share
First interim dividend paid in - 2,350
respect of the period 1 May 2016 to
31 July 2016 at 2.00p per Ordinary
Share
Second interim dividend paid in - 2,473
respect of the period 1 August 2016
to 31 October 2016 at 2.00p per
Ordinary Share
Third interim dividend paid in - 2,473
respect of the period 1 November
2016 to 31 January 2017 at 2.00p
per Ordinary Share
Total dividends paid during the 9,993 9,646
period/year
Fourth interim dividend declared in 3,031 -
respect of the period 1 January
2018 to 31 March 2018 at 2.00p per
Ordinary Share*
Fourth interim dividend declared in (2,473) -
respect of the period 1 February
2017 to 30 April 2017 at 2.00p per
Ordinary Share
Fourth interim dividend declared in - 2,473
respect of the period 1 February
2017 to 30 April 2017 at 2.00p per
Ordinary Share**
Fourth interim dividend declared in - (2,350)
respect of the period 1 February
2016 to 30 April 2016 at 2.00p per
Ordinary Share
Total dividends in respect of the 10,551 9,769
period/year
* The fourth interim dividend declared is not included in the accounts as a
liability as at period ended 31 March 2018.
** The fourth interim dividend declared is not included in the accounts as a
liability as at year ended 30 April 2017.
10) Investments
10.a) Investment property
Investment 31 March 2018 Total 30
April
property Investment GBP'000
property 2017
leasehold
freehold
Total
GBP'000
GBP'000
GBP'000
UK investment
property
As at beginning of 115,845 21,975 137,820 114,340
the period/year
Purchases in the 51,005 13,181 64,186 28,146
period/year
Disposals in the (11,050) - (11,050) (1,950)
period/year
Revaluation of (283) 1,669 1,386 (2,716)
investment property
Valuation provided 155,517 36,825 192,342 137,820
by Knight Frank
Adjustment for rent (1,561) (2,230)
free debtor
Adjustment for rent - (80)
guarantee debtor
Adjustment for 620 60
finance lease
obligations
Total investment 191,401 135,570
property
Classified as:
Investment 187,751 135,570
properties
Investment 3,650 -
properties held for
sale
191,401 135,570
(Loss)/profit on
disposal of
investment property
Net proceeds from 10,856 2,681
disposals of
investment property
during the
period/year
Cost of disposal (11,050) (1,950)
Lease incentives (22) -
amortised in
current period/year
(Loss)/profit on (216) 731
disposal of
investment property
Change in fair
value of investment
property
Change in fair 1,386 (2,716)
value before
adjustments for
lease incentives
Adjustment for
movement in the
period/year:
in fair value for (452) (1,148)
rent free debtor
in fair value for 80 705
rent guarantee
debtor
1,014 (3,159)
Valuation of investment property
Valuation of investment property is performed by Knight Frank LLP, an
accredited external valuer with recognised and relevant professional
qualifications and recent experience of the location and category of the
investment property being valued.
The valuation of the Company's investment property at fair value is
determined by the external valuer on the basis of market value in accordance
with the internationally accepted RICS Valuation - Professional Standards
(incorporating the International Valuation Standards).
The determination of the fair value of investment property requires the use
of estimates, such as future cash flows from assets (based on lettings,
tenants' profiles, future revenue streams, capital values of fixtures and
fittings, plant and machinery, any environmental matters and the overall
repair and condition of the property) and discount rates applicable to those
flows.
10.b) Investment
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 Total GBP'000
Total GBP'000
Investment in AEW UK Core Property
Fund
As at beginning of the period/year 7,594 10,109
Disposals in the period/year (7,594) (2,108)
Loss from change in fair value - (407)
Total Investment in AEW UK Core - 7,594
Property Fund
Loss on disposal of the investment
in AEW UK Core Property Fund
Proceeds from disposals of 7,667 1,995
investments during the period/year
Cost of disposal (7,594) (2,108)
Profit/(loss) on disposal of 73 (113)
investments
Valuation of investment
Investments in collective investment schemes were stated at NAV with any
resulting gain or loss recognised in profit or loss. Fair value is assessed
by the Directors based on the best available information.
As at 31 March 2018, the Company had no investment in the Core Fund.
10.c) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for
investments:
31 March 2018
Significant Significant
Quoted observable unobservable
prices
in
inputs inputs
active
markets
(Level 2) (Level 3) Total
(Level
1) GBP'000 GBP'000 GBP'000
GBP'000
Assets
measured at
fair value
Investment - - 191,401 191,40
property 1
- - 191,401 191,40
1
30 April 2017
Significant Significant
Quoted observable unobservable
prices
in
inputs inputs
active
markets
(Level 2) (Level 3) Total
(Level
1) GBP'000 GBP'000 GBP'000
GBP'000
Assets
measured at
fair value
Investment - - 135,570 135,57
property 0
Investment - - 7,594 7,594
in AEW UK
Core
Property
Fund
- - 143,164 143,16
4
Explanation of the fair value hierarchy:
Level 1 - Quoted prices for an identical instrument in active markets;
Level 2 - Prices of recent transactions for identical instruments and
valuation techniques using observable market data; and
Level 3 - Valuation techniques using non-observable data.
Sensitivity analysis to significant changes in unobservable inputs within
Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of the entity's
portfolio of investment property and investments are:
1) Estimated Rental Value ('ERV')
2) Equivalent yield
Increases/(decreases) in the ERV (per sq ft per annum) in isolation would
result in a higher/(lower) fair value measurement. Increases/(decreases) in
the discount rate/yield in isolation would result in a lower/(higher) fair
value measurement.
The significant unobservable input used in the fair value measurement
categorised within Level 3 of the fair value hierarchy of the entity's
investment is:
1) NAV
Increases/(decreases) in the NAV would result in a higher/(lower) fair value
measurement.
The significant unobservable inputs used in the fair value measurement,
categorised within Level 3 of the fair value hierarchy of the portfolio of
investment property and investments are:
Class Fair Value Valuation Significant Range
GBP'000 Technique Unobservable
Inputs
31 March 2018
Investment 192,342 Income ERV GBP1.00 -
property* capitalisat GBP145.00
ion
Equivalent
yield 3.14% -
10.72%
30 April 2017
Investment 137,820 Income ERV GBP2.00 -
property* capitalisat GBP160.00
ion
Equivalent
yield 6.94% -
10.27%
Investments 7,594 NAV NAV GBP1.1942
*Valuation per Knight Frank LLP.
Where possible, sensitivity of the fair values of Level 3 assets are tested
to changes in unobservable inputs against reasonable alternatives.
Gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to investment
property and investments held at the end of the reporting period.
With regards to both investment property and investments, gains and losses
for recurring fair value measurements categorised within Level 3 of the fair
value hierarchy, prior to adjustment for rent free debtor and rent guarantee
debtor where applicable, are recorded in profit and loss.
The carrying amount of the assets and liabilities, detailed within the
Statement of Financial Position, is considered to be the same as their fair
value.
31 March
2018
Change in ERV Change in equivalent
yield
Sensitivity GBP'000 GBP'000 GBP'000 GBP'000
analysis
+5% -5% +5% -5%
Resulting 203,903 188,297 185,985 206,943
fair value
of
investment
property
30 April
2017
Change in Single Change in ERV Change in
Swinging Price equivalent
yield
Sensitivity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
analysis
+5% -5% +5% -5% +5% -5%
Resulting - - 143,606 131,979 129,906 145,906
fair value
of
investment
property
Resulting 7,974 7,214 - - - -
fair value
of
investment
11) Receivables and prepayments
31 March 2018 30 April 2017
GBP'000 GBP'000
Receivables
Rent debtor 1,074 461
Dividend receivable - 110
Other income debtors - 192
Rent agent float account 81 57
Other receivables 179 213
1,334 1,033
Rent free debtor 1,561 2,230
Rent guarantee debtor - 80
2,895 3,343
Prepayments
Property related prepayments 13 10
Capital prepayments - 1
Depositary services - 8
Listing fees 16 8
Other prepayments 14 12
43 39
2,938 3,382
The aged debtor analysis of receivables which are past due is as follows:
31 March 2018 30 April 2017
GBP'000 GBP'000
Less than three months 1,334 910
Between three and six months - 1
Between six and twelve months - 122
Total 1,334 1,033
12) Interest rate derivatives
31 March 2018 30 April 2017
GBP'000 GBP'000
At the beginning of the period/year 31 77
Interest rate cap premium paid 19 71
Changes in fair value of interest (24) (117)
rate derivatives
At the end of the period/year 26 31
To mitigate the interest rate risk that arises as a result of entering into
variable rate linked loans, the Company entered into interest rate caps. The
facilities have a combined notional value of GBP36.51 million with GBP10.00
million at a strike rate of 2.0% and GBP26.51 million at a strike rate of 2.5%
(30 April 2017: GBP26.51 million at a strike rate of 2.5%) for the relevant
period in line with the life of the loan.
Fair value hierarchy
The following table provides the fair value measurement hierarchy for
interest rate derivatives:
Quoted prices Significant Significant Total
in
observable unobservable GBP'000
active markets input
inputs
(Level 1) (Level 2)
(Level 3)
GBP'000 GBP'000
Valuation GBP'000
31 March 2018 - 26 - 26
30 April 2017 - 31 - 31
The fair value of these contracts are recorded in the Statement of Financial
Position as at the period end.
There have been no transfers between level 1 and level 2 during the period,
nor have there been any transfers between level 2 and level 3 during the
period.
The carrying amount of all assets and liabilities, detailed within the
Statement of Financial Position, is
considered to be the same as their fair value.
13) Interest bearing loans and borrowings
Bank borrowings
31 March 2018 30 April 2017
GBP'000 GBP'000
At the beginning of the period/year 29,010 14,250
Bank borrowings drawn in the 20,990 14,760
period/year
Interest bearing loans and 50,000 29,010
borrowings
Less: loan issue costs incurred (554) (388)
Plus: amortised loan issue costs 197 118
At the end of the period/year 49,643 28,740
Repayable between two and five years 50,000 29,010
Bank borrowings available but 10,000 10,990
undrawn at the period/year end
Total facility available 60,000 40,000
The Company has a GBP60.00 million (30 April 2017: GBP40.00 million) credit
facility with RBSi of which GBP50.00 million (30 April 2017: GBP29.01 million)
has been utilised as at 31 March 2018.
Under the terms of the Prospectus, the Company has a target gearing of 25%
Loan to GAV, but can borrow up to 35% Loan to GAV in advance of a capital
raise or asset disposal. As at 31 March 2018, the Company's gearing was
26.00% Loan to GAV (30 April 2017: 19.31%).
Under the terms of the loan facility, the Company can draw up to 35% Loan to
NAV at drawdown.
Borrowing costs associated with the credit facility are shown as finance
costs in note 6 to these Financial Statements.
Reconciliation to cash flows from financing activities
Bank borrowings
lGBP'000
Balance at 1 May 2017 28,740
Changes from financing cash flows
Loan draw down 20,990
Loan arrangement fees (166)
Total changes from financing cash flows 20,824
Other changes
Amortisation of loan issue costs 79
Total other changes 79
Balance at 31 March 2018 49,643
14) Payables and accrued expenses
31 March 2018 30 April 2017
GBP'000 GBP'000
Deferred income 993 1,513
Accruals 831 534
Other creditors 955 709
Total 2,779 2,756
15) Finance lease obligations
Finance leases are capitalised at the lease's commencement at the lower of
the fair value of the property and the present value of the minimum lease
payments. The present value of the corresponding rental obligations are
included as liabilities.
The following table analyses the minimum lease payments under
non-cancellable finance leases:
31 March 2018 30 April 2017
GBP'000 GBP'000
Within one year 47 5
After one year but not later than 152 15
five years
Later than five years 421 40
573 55
Total 620 60
16. Guarantees and commitments
As at 31 March 2018, there were capital commitments of GBPnil (30 April 2017:
GBP48,628).
Operating lease commitments - as lessor
The Company has entered into commercial property leases on its investment
property portfolio. These noncancellable leases have a remaining term of
between zero and 24 years.
Future minimum rentals receivable under non-cancellable operating leases as
at 31 March 2018 are as follows:
31 March 2018 30 April 2017
GBP'000 GBP'000
Within one year 16,932 11,878
After one year but not more than 47,858 37,936
five years
More than five years 37,574 27,640
Total 102,364 77,454
During the period ended 31 March 2018 there were contingent rents totalling
GBP149,192 (30 April 2017: GBP169,724) recognised as income.
17. Investment in subsidiary
The Company has a wholly owned subsidiary, AEW UK REIT 2015 Limited:
Name and Country of Principal Ordinary Shares
company number registration activity held
and
incorporation
AEW UK REIT England and Dormant 100%
2015 Limited Wales
(Company number
09524699)
AEW UK REIT 2015 Limited is a subsidiary of the Company incorporated in the
UK on 2 April 2015. At 31 March 2018, the Company held one share being 100%
of the issued share capital. AEW UK REIT 2015 Limited is wholly owned by the
Company and is dormant. The cost of the subsidiary is GBP0.01 (30 April 2017:
GBP0.01). The registered office of AEW UK REIT 2015 Limited is 6th Floor, 65
Gresham Street, London, EC2V 7NQ.
18. Issued share capital
31 March 2018 30 April 2017
GBP'000 Number of GBP'000 Number of
Ordinary Shares Ordinary
Shares
Ordinary
Shares
(nominal
value
GBP0.01)
authorised
, issued
and fully
paid
At the 1,236 123,647,250 1,175 117,510,000
beginning
of the
period/yea
r
Issued on - - 24 2,450,000
admission
to trading
on the
London
Stock
Exchange
on 16
September
2016
Issued on - - 37 3,687,250
admission
to trading
on the
London
Stock
Exchange
on 10
October
2016
Issued on 279 27,911,001 - -
admission
to trading
on the
London
Stock
Exchange
on 24
October
2017
At the end 1,515 151,558,251 1,236 123,647,250
of the
year/perio
d
On 24 October 2017, the Company issued 27,911,001 Ordinary Shares at a price
of 100.5 pence per share, pursuant to the Initial Placing, Initial Offer for
Subscription and Intermediaries Offer of the Share Issuance Programme, as
described in the prospectus published by the Company on 28 September 2017.
19. Share premium account
31 March 2018 30 April 2017
GBP'000 GBP'000
The share premium relates to amounts
subscribed for share capital in
excess of nominal value:
Balance at the beginning of the 22,514 16,729
period/year
Share issue costs (paid and accrued) - (23)
Issued on admission to trading on - 2,352
the London Stock Exchange on
16 September 2016
Share issue cost (paid and accrued) - (42)
Issued on admission to trading on - 3,586
the London Stock Exchange on
10 October 2016
Share issue cost (paid and accrued) - (88)
Issued on admission to trading on 27,771 -
the London Stock Exchange on
24 October 2017
Share issue cost (paid and accrued) (517) -
Balance at the end of the 49,768 22,514
period/year
20. Financial risk management and objectives and policies
20.1 Financial assets and liabilities
The Company's principal financial assets and liabilities are those derived
from its operations: receivables and prepayments, cash and cash equivalents
and payables and accrued expenses. The Company's other principal financial
liabilities are interest bearing loans and borrowings, the main purpose of
which is to finance the acquisition and development of the Company's
property portfolio.
Set out below is a comparison by class of the carrying amounts and fair
value of the Company's financial instruments that are carried in the
financial statements.
31 March 2018 30 April 2017
Book Value Fair Value Book Value Fair Value
GBP'000 GBP'000 GBP'000 GBP'000
Financial
Assets
Investment in - - 7,594 7,594
AEW UK Core
Property Fund
Receivables 1,334 1,334 1,033 1,033
and
prepayments1
Cash and cash 4,711 4,711 3,653 3,653
equivalents
Other 26 26 31 31
financial
assets held at
fair value
Financial
Liabilities
Interest 49,643 50,000 28,740 29,010
bearing loans
and borrowings
Payables and 1,683 1,683 643 643
accrued
expenses2
Financial 620 620 60 60
lease
obligations
1 Excludes VAT, certain prepayments and other debtors
2 Excludes tax, VAT liabilities and deferred income
Interest rate derivatives are the only financial instruments classified as
fair value through profit and loss. All other financial assets and financial
liabilities are measured at amortised cost. All financial instruments were
designated in their current categories upon initial recognition.
Fair value measurement hierarchy has not been applied to those classes of
asset and liability stated above which are not measured at fair value in the
financial statements. The difference between the fair value and book value
of these items is not considered to be material.
20.2 Financing management
The Company's activities expose it to a variety of financial risks: market
risk, real estate risk, credit risk and liquidity risk.
The Company's objective in managing risk is the creation and protection of
shareholder value. Risk is inherent in the Company's activities but it is
managed through a process of ongoing identification, measurement and
monitoring, subject to risk limits and other controls.
The principal risks facing the Company in the management of its portfolio
are as follows:
20.3 Market price risk
Market price risk is the risk that future values of investments in direct
property and related property investments will fluctuate due to changes in
market prices. To manage market price risk, the Company diversifies its
portfolio geographically in the United Kingdom and across property sectors.
The disciplined approach to the purchase, sale and asset management ensures
that the value is maintained to its maximum potential. Prior to any property
acquisition or sale, detailed research is undertaken to assess expected
future cash flow. The Investment Management Committee ('IMC') of the
Investment Manager, meets twice monthly and reserves the ultimate decision
with regards to investment purchases or sales. In order to monitor property
valuation fluctuations, the Investment Manager meets with the independent
external valuer on a regular basis. The valuer provides a property portfolio
valuation quarterly, so any movements in the value can be accounted for in a
timely manner and reflected in the NAV every quarter.
20.4 Real estate risk
The Company is exposed to the following risks specific to its investments in
investment property:
Property investments are illiquid assets and can be difficult to sell,
especially if local market conditions are poor. Illiquidity may also result
from the absence of an established market for investments, as well as legal
or contractual restrictions on resale of such investments. In addition,
property valuation is inherently subjective due to the individual
characteristics of each property, and thus, coupled with illiquidity in the
markets, makes the valuation in the scheme property difficult and inexact.
No assurances can be given that the valuations of properties will be
reflected in the actual sale prices
even where such sales occur shortly after the relevant valuation date.
There can be no certainty regarding the future performance of any of the
properties acquired for the Company. The value of any property can go down
as well as up. Property and property-related assets are inherently
subjective as regards value due to the individual nature of each property.
As a result, valuations are subject to uncertainty.
Real property investments are subject to varying degrees of risk. The yields
available from investments in real estate depend on the amount of income
generated and expenses incurred from such investments.
There are additional risks in vacant, part vacant, redevelopment and
refurbishment situations although these are not prospective investments for
the Company.
20.5 Credit risk
Credit risk is the risk that the counterparty (to a financial instrument) or
tenant (of a property) will cause a financial loss to the Company by failing
to meet a commitment it has entered into with the Company.
It is the Company's policy to enter into financial instruments with
reputable counterparties. All cash deposits are placed with an approved
counterparty, The Royal Bank of Scotland International Limited.
In respect of property investments, in the event of a default by a tenant,
the Company will suffer a rental shortfall and additional costs concerning
re-letting the property. The Investment Manager monitors tenant arrears in
order to anticipate and minimise the impact of defaults by occupational
tenants.
The table below shows the Company's exposure to credit risk:
As at As at
31 March 2018 30 April 2017
GBP'000 GBP'000
Debtors (excluding incentives and 1,334 1,033
prepayments)
Cash and cash equivalents 4,711 3,653
Total 6,045 4,686
20.6 Liquidity risk
Liquidity risk arises from the Company's management of working capital and
the finance charges and principal repayments on its borrowings. It is the
risk the Company will encounter difficulty in meeting its financial
obligations as they fall due as the majority of the Company's assets are
investment properties and therefore not readily realisable. The Company's
objective is to ensure it has sufficient available funds for its operations
and to fund its capital expenditure. This is achieved by continuous
monitoring of forecast and actual cash flows by management.
The table below summarises the maturity profile of the Company's financial
liabilities based on contractual undiscounted payments:
31 March 2018 On <3 3-12 1-5 >5 years Total
Demand Months Months Years GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing - - - 50,000 - 50,000
loans and borrowings
Interest payable - 228 678 1,422 - 2,328
Payables and accrued - 1,638 - - - 1,638
expenses
Finance lease - - 51 205 3,128 3,384
obligation
- 1,866 729 51,627 3,128 57,350
30 April 2017 On <3 3-12 1-5 >5 years Total
Demand Months Months Years GBP'000 GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
Interest bearing - - - 29,010 - 29,010
loans and borrowings
Interest payable - 134 395 1,306 - 1,835
Payables and accrued - 643 - - - 643
expenses
Finance lease - - 5 20 425 450
obligation
- 777 400 30,336 425 31,938
21. Capital management
The primary objectives of the Company's capital management are to ensure
that it qualifies for the UK REIT status and complies with its banking
covenants.
To enhance returns over the medium term, the Company utilises borrowings on
a limited recourse basis for each investment or all or part of the total
portfolio. The Company's policy is to target a borrowing level of 25% loan
to GAV and can borrow up to a maximum of 35% loan to GAV in advance of a
capital raise or asset disposal. It is currently anticipated that the level
of total borrowings will typically be at the level of 25% of GAV (measured
at drawdown).
Alongside the Company's borrowing policy, the Directors intend, at all
times, to conduct the affairs of the Company so as to enable the Company to
qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the
regulations made thereunder). The REIT status compliance requirements
include 90% distribution test, interest cover ratio, 75% assets test and the
substantial shareholder rule, all of which the Company remained compliant
with in this reporting period.
The monitoring of the Company's level of borrowing is performed primarily
using a Loan to GAV ratio, which is calculated as the amount of outstanding
debt divided by the total valuation of investment property and property
related investments. The Company Loan to GAV ratio at the period end was
26.00% (30 April 2017: 19.31%).
Breaches in meeting the financial covenants would permit the bank to
immediately call loans and borrowings. During the year under review, the
Company did not breach any of its loan covenants, nor did it default on any
other of its obligations under its loan agreements.
22. Transactions with related parties
As defined by IAS 24 Related Parties Disclosures, parties are considered to
be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial or
operational decisions.
For the period ended 31 March 2018, the Directors of the Company are
considered to be the key management personnel. Details of amounts paid to
Directors for their services can be found within note 5, Directors'
remuneration.
The Company is party to an Investment Management Agreement with the
Investment Manager, pursuant to which the Company has appointed the
Investment Manager to provide investment management services relating to the
respective assets on a day-to-day basis in accordance with their respective
investment objectives and policies, subject to the overall supervision and
direction of the Board of Directors.
Under the Investment Management Agreement the Investment Manager receives a
management fee which is calculated and accrued monthly at a rate equivalent
to 0.9% per annum of NAV (excluding un-invested fund raising proceeds) and
paid quarterly.
During the period, the Company incurred GBP988,612 (30 April 2017: GBP1,033,637)
in respect of investment management fees and expenses of which GBP469,239 (30
April 2017: GBP252,850) was outstanding as at 31 March 2018.
On 1 May 2017, the Company had a holding of 6,359,440 shares in the Core
Fund, which were valued at GBP7,594,443. The investment is deemed to be with a
related party due to the common influence of the Investment Manager over
both parties. On 9 May 2017, the Company sold all of its holding in the Core
Fund for proceeds of GBP7,667,796.
23. Segmental information
Management has considered the requirements of IFRS 8 'operating segments'.
The source of the Company's diversified revenue is from the ownership of
investment properties across the UK. Financial information on a property by
property basis is provided to senior management of the Investment Manager
and Directors, which collectively comprise the chief operating decision
maker. Responsibilities are not defined by type or location, each property
being managed individually and reported on for the Company as a whole
directly to the Board of Directors. Therefore, the Company is considered to
be engaged in a single segment of business, being property investment and in
one geographical area, United Kingdom.
24. Events after reporting date
Dividend
On 27 April 2018, the Board declared its fourth interim dividend of 2.00
pence per share, in respect of the period from 1 January 2018 to 31 March
2018. This was paid on 31 May 2018, to shareholders on the register as at 11
May 2018. The ex-dividend date was 10 May 2018.
Property sales
On 5 April 2018, the Company completed the part disposal of Pearl Assurance
House, Nottingham. The Company sold the first to ninth floors of the
building, as well as a ground floor reception and car park spaces, for gross
proceeds of GBP3.65 million. The Company retains the fully let ground floor
accommodation.
EPRA Unaudited Performance Measures
Detailed below is a summary table showing the EPRA performance measures of
the Company
MEASURE AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings
Earnings from A key measure of GBP8.97 million/6.56
operational activities. a company's pps EPRA earnings
underlying for the 11 month
operating results period to 31 March
and an indication 2018 (30 April 2017:
of the extent to GBP9.16 million/7.57
which current pps)
dividend payments
are supported by
earnings.
2. EPRA NAV
Net asset value adjusted Makes adjustments GBP146.01
to include properties to IFRS NAV to million/96.34 pps
and other investment provide EPRA NAV as at 31
interests at fair value stakeholders with March 2018 (30 April
and to exclude certain the most relevant 2017: GBP118.64
items not expected to information on million/95.95 pps)
crystallise in a the fair value of
long-term investment the assets and
property business. liabilities
within a true
real estate
investment
company with a
long-term
investment
strategy.
3. EPRA NNNAV
EPRA NAV adjusted to Makes adjustments GBP146.03
include the fair values to EPRA NAV to million/96.36 pps
of: provide EPRA NNNAV as at 31
stakeholders with March 2018 (30 April
the most relevant 2017: GBP118.67
information on million/95.98 pps)
(i) financial the current fair
instruments; value of all the
assets and
liabilities
within a real
(ii) debt and; estate
(iii) deferred taxes. company.
4.1 EPRA Net Initial
Yield (NIY)
Annualised rental income
based on the cash rents
passing at the balance
sheet date, less A comparable 7.73%
non-recoverable property measure for
operating expenses, portfolio
divided by the market valuations. This
value of the property, measure should EPRA NIY
increased with make it easier
(estimated) purchasers' for investors to
costs. judge themselves,
how the valuation as at 31 March 2018
of portfolio X (30 April 2017:
compares with 7.12%)
portfolio Y.
4.2 EPRA 'Topped-Up' NIY
This measure A comparable 8.52%
incorporates an measure for
adjustment to the EPRA portfolio
NIY in respect of the valuations. This
expiration of rent-free measure should EPRA 'Topped-Up' NIY
periods (or other make it easier
unexpired lease for investors to
incentives such as judge themselves,
discounted rent periods how he valuation as at 31 March 2018
and step rents). of portfolio X (30 April 2017:
compares with 8.27%)
portfolio Y.
5. EPRA Vacancy
Estimated Market Rental A 'pure' (%) 7.10%
Value (ERV) of vacant measure of
space divided by ERV of investment
the whole portfolio. property space
that is vacant, EPRA ERV as at 31
based on ERV. March 2018 (30 April
2017: 7.22%)
6. EPRA Cost Ratio
Administrative and A key measure to 21.89%
operating costs enable meaningful
(including and excluding measurement of
costs of direct vacancy) the changes in a
divided by gross rental company's EPRA Cost Ratio
income. operating costs. (including direct
vacancy costs) as at
31 March 2018 (30
April 2017: 24.20%)
14.89%
EPRA Cost Ratio
(excluding direct
vacancy costs) as at
31 March 2018 (30
April 2017: 18.37%)
Calculation of EPRA Net Initial Yield and 'topped-up' Net Initial Yield
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Investment property - wholly-owned 192,342 137,820
Allowance for estimated purchasers' 13,079 8,242
costs
Gross up completed property 205,421 146,062
portfolio valuation
Annualised cash passing rental 17,046 11,283
income
Property outgoings (1,174) (884)
Annualised net rents 15,872 10,399
Rent from expiry of rent-free 1,626 1,685
periods and fixed uplifts
'Topped-up' net annualised rent 17,498 12,084
EPRA Net Initial Yield 7.73% 7.12%
EPRA 'topped-up' Net Initial Yield 8.52% 8.27%
EPRA Net Initial Yield (NIY) basis of calculation
EPRA NIY is calculated as the annualised net rent, divided by the gross
value of the completed property portfolio.
The valuation of grossed up completed property portfolio is determined by
our external valuers as at 31 March 2018, plus an allowance for estimated
purchaser's costs. Estimated purchaser's costs are determined by the
relevant stamp duty liability, plus an estimate by our valuers of agent and
legal fees on notional acquisition. The net rent deduction allowed for
property outgoings is based on our valuers' assumptions on future recurring
non-recoverable revenue expenditure.
In calculating the EPRA 'topped-up' NIY, the annualised net rent is
increased by the total contracted rent from expiry of rent-free period and
future contracted rental uplifts.
Calculation of EPRA Vacancy Rate
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Annualised potential rental value 1,254 951
of vacant premises
Annualised potential rental value 17,677 13,164
for the complete property portfolio
EPRA Vacancy Rate 7.10% 7.22%
Calculation of EPRA Cost Ratios
For the period Year ended
1 May 2017 to 30 April 2017
31 March 2018 GBP'000
GBP'000
Administrative/operating expense 2,729 3,272
per IFRS income statement
Less: Net service charge costs - (335)
Ground rent costs (38) (104)
EPRA Costs (including direct 2,691 2,833
vacancy costs)
Direct vacancy costs (861) (682)
EPRA Costs (excluding direct 1,830 2,151
vacancy costs)
Gross Rental Income less ground 12,292 12,044
rent costs
Less: service charge costs of - (335)
rental income
11,709
Gross Rental Income 12,292
EPRA Cost Ratio (including direct 21.89% 24.20%
vacancy costs)
EPRA Cost Ratio (excluding direct 14.89% 18.37%
vacancy costs)
Company Information
Share Register Enquiries
The register for the Ordinary Shares is maintained by Computershare Investor
Services PLC. In the event of queries regarding your holding, please contact
the Registrar on 0370 889 4069 or email: web.queries@computershare.co.uk
Changes of name and/or address must be notified in writing to the Registrar,
at the address shown below. You can check your shareholding and find
practical help on transferring shares or updating your details at
www.investorcentre.co.uk. Shareholders eligible to receive dividend payments
gross of tax may also download declaration forms from that website.
Share Information
Ordinary GBP0.01 Shares 151,558,251
SEDOL Number BWD2415
ISIN Number GB00BWD24154
Ticker/TIDM AEWU
Share Prices
The Company's Ordinary Shares are traded on the Main Market of the London
Stock Exchange.
Annual and Half-Yearly Reports
Copies of the Annual and Half-Yearly Reports are available from the
Company's website.
Financial Calendar
12 September 2018 Annual General Meeting
30 September 2018 Half-year end
December 2018 Announcement of half-yearly results
31 March 2019 Year end
June 2019 Announcement of annual results
Dividends
The following table summarises the amounts distributed to equity
shareholders in respect of the period:
GBP
Interim dividend for the period 1 May 2017 to 31 July 2,472,945
2017
(payment made on 29 September 2017)
Interim dividend for the period 1 August 2017 to 31 3,031,165
October 2017 (payment made on 29 December 2017)
Interim dividend for the period 1 November 2017 to 31 2,015,725
December 2017
(payment made on 28 February 2018)
Interim dividend for the period 1 January 2018 to 31 3,031,165
March 2018
(payment made on 31 May 2018)
Total 10,551,000
Directors
Mark Burton* (Non-executive Chairman)
James Hyslop (Non-executive Director)
Bimaljit ("Bim") Sandhu* (Non-executive Director)
Katrina Hart* (Non-executive Director)
* independent of the Investment Manager
Registered Office
6th Floor
65 Gresham Street
London
EC2V 7NQ
Investment Manager and AIFM
AEW UK Investment Management LLP
33 Jermyn Street
London
SW1Y 6DN
Tel: 020 7016 4880
Website: www.aewuk.co.uk
Property Manager
MJ Mapp
180 Great Portland Street
London
W1W 5QZ
Corporate Broker
Liberum
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Legal Adviser to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Depositary
Langham Hall UK LLP
5 Old Bailey
London
EC4M 7BA
Administrator
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
EX4 4EP
Company Secretary
Link Company Matters Limited
6th Floor
65 Gresham Street
London
EC2V 7NQ
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Valuer
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Frequency of NAV publication:
The Company's NAV is released to the London Stock Exchange on a quarterly
basis and is published on the Company's website.
Copies of the Annual Report and Financial Statements and the Notice of AGM
Printed copies of the Annual Report and Notice of the 2018 Annual General
Meeting will be sent to shareholders shortly and will be available on the
Company's website.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be submitted
shortly to the National Storage Mechanism ('NSM') and will be available for
inspection at www.morningstar.co.uk/uk/NSM.
Annual General Meeting
The AGM will be held on 12 September 2018 at 12 noon at The Cavendish Hotel,
81 Jermyn Street, St. James', London SW1Y 6JF.
Glossary
AEW UK Core Property Fund
AEW UK Core Property Fund, a property authorised investment fund ('PAIF')
and a sub-fund of the (the 'Core Fund') AEW UK Real Estate Fund, an open
ended investment company.
AIC
Association of Investment Companies. This is the trade body for closed-end
Investment companies (www.theaic.co.uk).
AIFMD
Alternative Investment Fund Managers' Directive.
AIFM
Alternative Investment Fund Manager. The entity that provides portfolio
management and risk management services to the Company and which ensures the
Company complies with the AIFMD. The Company's AIFM is AEW UK Investment
Management LLP.
Company
AEW UK REIT plc.
Company Secretary
Link Company Matters Limited
Company website
www.aewukreit.com
Contracted rent
The annualised rent adjusting for the inclusion of rent subject to rent-free
periods.
Covenant strength
The strength of a tenant's financial status and its ability to perform the
covenants in the lease.
DTR
Disclosure Guidance and Transparency Rules, issued by the UKLA.
Earnings Per Share ('EPS')
Profit for the period attributable to equity shareholders divided by the
weighted average number of Ordinary Shares in issue during the period.
EPC
Energy Performance Certificate.
EPRA
European Public Real Estate Association, the industry body representing
listed companies in the real estate sector.
EPRA cost ratio (including direct vacancy costs)
The ratio of net overheads and operating expenses against gross rental
income (with both amounts excluding ground rents payable). Net overheads and
operating expenses relate to all administrative and operating expenses.
EPRA cost ratio (excluding direct vacancy costs)
The ratio calculated above, but with direct vacancy costs removed from net
overheads and operating expenses balance.
EPRA Earnings Per Share
Recurring earnings from core operational activities. A key measure of a
company's underlying operating results from its property rental business and
an indication of the extent to which current dividend payments are supported
by earnings.
EPRA NAV
Net Asset Value adjusted to include properties and other investment
interests at fair value and to exclude certain items not expected to
crystallise in a long-term investment property business.
EPRA NNNAV
EPRA NAV adjusted to reflect the fair value of debt and derivatives and to
include deferred taxation on revaluations.
EPRA Net Initial Yield ('NIY')
Annualised rental income based on the cash rents passing at the balance
sheet date, less non- recoverable property operating expenses, divided by
the fair value of the property, increased with (estimated) purchasers'
costs.
EPRA Topped-Up Net Initial Yield
This measure incorporates an adjustment to the EPRA NIY in respect of the
expiration of rent-free periods (or other unexpired lease incentives such as
discounted rent periods and step rents).
EPRA Vacancy Rate
Estimated Market Rental Value ('ERV') of vacant space as a percentage of the
ERV of the whole portfolio.
Equivalent Yield
The internal rate of return of the cash flow from the property, assuming a
rise to ERV at the next review or lease expiry. No future growth is allowed
for.
Estimated Rental Value ('ERV')
The external valuers' opinion as to the open market rent which, on the date
of the valuation, could reasonably be expected to be obtained on a new
letting or rent review of a property.
External Valuer
An independent external valuer of a property. The Company's External Valuer
is Knight Frank LLP.
Fair Value
The estimated amount for which a property should exchange on the valuation
date between a willing buyer and a willing seller in an arm's length
transaction after proper marketing and where parties had each acted
knowledgeably, prudently and without compulsion.
Fair value movement
An accounting adjustment to change the book value of an asset or liability
to its fair value.
FCA
The Financial Conduct Authority.
FRI lease
A lease which imposes full repairing and insuring obligations on the tenant,
relieving the landlord from all liability for the cost of insurance and
repairs.
Gross Asset Value ('GAV')
The aggregate value of the total assets of the Company as determined in
accordance with IFRS.
IASB
International Accounting Standards Board.
IFRS
International Financial Reporting Standards, as adopted by the European
Union.
Investment Manager
The Company's Investment Manager is AEW UK Investment Management LLP.
IPD
Investment Property Databank. An organisation supplying independent market
indices and portfolio benchmarks to the property industry.
IPO
The admission to trading on the London Stock Exchange's Main Market of the
share capital of the Company and admission of Ordinary Shares to the premium
listing segment of the Official List on 12 May 2015.
Lease incentives
Incentives offered to occupiers to enter into a lease. Typically this will
be an initial rent-free period, or a cash contribution to fit-out. Under
accounting rules the value of the lease incentive is amortised through the
Statement of Comprehensive Income on a straight-line basis until the lease
expiry.
Lease surrender
An agreement whereby the landlord and tenant bring a lease to an end other
than by contractual expiry or the exercise of a break option. This will
frequently involve the negotiation of a surrender premium by one party to
the other.
LIBOR
The London Interbank Offered Rate, the interest rate charged by one bank to
another for lending money.
Loan to Value ('LTV')
The value of outstanding loans and borrowings (before adjustments for issue
costs) expressed as a percentage of the combined valuation of the property
portfolio (as provided by the valuer) and the fair value of other
investments.
Net Asset Value ('NAV')
Net Asset Value is the equity attributable to shareholders calculated under
IFRS.
Net Asset Value per share
Equity shareholders' funds divided by the number of Ordinary Shares in
issue.
NAV Total Return
The percentage change in NAV, assuming that dividends paid to shareholders
are reinvested at NAV to purchase additional Ordinary Shares
Net equivalent yield
Calculated by the Company's External Valuers, equivalent yield is the
internal rate of return from an investment property, based on the gross
outlays for the purchase of a property (including purchase costs),
reflecting reversions to current market rent and items as voids and
non-recoverable expenditure but ignoring future changes in capital value.
The calculation assumes rent is received annually in arrears.
Net initial yield
The initial net rental income from a property at the date of purchase,
expressed as a percentage of the gross purchase price including the costs of
purchase.
Net rental income
Rental income receivable in the period after payment of ground rents and net
property outgoings.
Non-PID
Non-Property Income Distribution. The dividend received by a shareholder of
the Company arising from any source other than profits and gains of the Tax
Exempt Business of the Company.
Ongoing charges
The ratio of total administration and property operating costs expressed as
a percentage of average net asset value throughout the period.
Ordinary Shares
The main type of equity capital issued by conventional Investment Companies.
Shareholders are entitled to their share of both income, in the form of
dividends paid by the Company, and any capital growth.
Over-rented
Space where the passing rent is above the ERV.
Passing rent
The gross rent, less any ground rent payable under head leases.
PID
Property Income Distribution. A dividend received by a shareholder of the
Company in respect of profits and gains of the tax exempt business of the
Company.
Rack-rented
Space where passing rent is the same as the ERV.
REIT
A Real Estate Investment Trust. A company which complies with Part 12 of the
Corporation tax Act 2010. Subject to the continuing relevant UK REIT
criteria being met, the profits from the property business of a REIT,
arising from both income and capital gains, are exempt from corporation tax.
Reversion
Increase in rent estimated by the Company's External Valuers, where the
passing rent is below the ERV.
Reversionary yield
The anticipated yield, which the initial yield will rise (or fall) to once
the rent reaches the ERV.
Share price
The value of a share at a point in time as quoted on a stock exchange. The
Company's Ordinary Shares are quoted on the Main Market of the London Stock
Exchange.
Share Price Total Return
The percentage change in the share price assuming dividends are reinvested
to purchase additional Ordinary Shares.
Total returns
The returns to shareholders calculated on a per share basis by adding
dividend paid in the period to the increase or decrease in the Share Price
or NAV. The dividends are assumed to have been reinvested in the form of
Ordinary Shares or Net Assets.
Total Shareholder Return
The percentage change in the share price assuming dividends are reinvested
to purchase additional Ordinary Shares.
Under-rented
Space where the passing rent is below the ERV.
UK Corporate Governance Code
A code issued by the Financial Reporting Council which sets out standards of
good practice in relation to board leadership and effectiveness,
remuneration, accountability and relations with shareholders. All companies
with a Premium Listing of equity shares in the UK are required under the
Listing Rules to report on how they have applied the Code in their annual
report and accounts.
Voids
The amount of rent relating to properties which are unoccupied and
generating no rental income. Stated as a percentage of ERV.
Weighted Average Unexpired Lease Term ('WAULT')
The average lease term remaining for first break, or expiry, across the
portfolio weighted by contracted rental income (including rent-frees).
Yield compression
Occurs when the net equivalent yield of a property decreases, measured in
basis points.
The content of the Company's web-pages and the content of any website or
pages which may be accessed through hyperlinks on the Company's web-pages is
neither incorporated into nor forms part of the above announcement.
Attachment
Document title: Appendices
Document: http://n.eqs.com/c/fncls.ssp?u=MKGJVTELWP [1]
ISIN: GB00BWD24154
Category Code: ACS
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 5631
EQS News ID: 693965
End of Announcement EQS News Service
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=0f751c765843906b6e7682ad924d4f08&application_id=693965&site_id=vwd_london&application_name=news
(END) Dow Jones Newswires
June 11, 2018 02:04 ET (06:04 GMT)
1 Year Aew Uk Reit Chart |
1 Month Aew Uk Reit Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
