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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.60 | -0.60% | 100.00 | 100.00 | 100.20 | 101.00 | 100.00 | 101.00 | 319,886 | 16:24:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 24.35M | 9.05M | 0.0571 | 17.51 | 159.38M |
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AEW UK REIT plc (AEWU)
Half Yearly Results
18-Nov-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
18 November 2020
AEW UK REIT PLC (the "Company")
Interim Report and Financial Statements
for the six months ended 30 September 2020
Financial Highlights
? Net Asset Value ('NAV') of GBP147.24 million and of 92.73 pence
per share ('pps') as at 30 September 2020 (31 March 2020:
GBP147.86 million and 93.13 pps).
? Operating profit before fair value changes of GBP5.93 million
for the period (six months ended 30 September 2019: GBP7.26
million).
? Profit Before Tax ("PBT") of GBP5.72 million and 3.61 pps for
the period (six months ended 30 September 2019: GBP4.16 million
and 2.74 pps).
? Shareholder Total Return for the period of 16.13% (six months
ended 30 September 2019: 5.50%).
? EPRA Earnings Per Share ('EPRA EPS') for the period of 3.41
pps (six months ended 30 September 2019: 4.37 pps). See below
for the calculation of EPRA EPS.
? Total dividends of 4.00 pps declared in relation to the period
(six months ended 30 September 2019: 4.00 pps).
? The price of the Company's Ordinary Shares on the London Stock
Exchange was 75.20 pps as at 30 September 2020 (31 March 2020:
68.20 pps).
? As at 30 September 2020, the Company had a balance of GBP39.50
million (31 March 2020: GBP51.50 million) of its GBP60.00 million
(31 March 2020: GBP60.00 million) term credit facility with the
Royal Bank of Scotland International Limited ('RBSi') and was
geared with a Loan to NAV ratio of 26.83% (31 March 2020:
34.83%). The Company can draw GBP12.03 million of the remaining
facility up to the maximum 35% Loan to NAV at drawdown (see
note 13 below for further details).
? The Company held cash balances totalling GBP13.36 million as at
30 September 2020 (31 March 2020: GBP9.87 million).
Property Highlights
? As at 30 September 2020, the Company's property portfolio had
a valuation of GBP171.36 million across 34 properties (31 March
2020: GBP189.30 million across 35 properties) as assessed by the
valuer and a historical cost of GBP184.07 million (31 March
2020: GBP197.12 million).
? The Company made no acquisitions during the period and
disposed of one property, Geddington Road, Corby, for net
proceeds of GBP18.68 million, realising a profit on disposal of
GBP3.67 million.
? The portfolio had an EPRA vacancy rate of 8.21%. Excluding 225
Bath Street, Glasgow, which has been exchanged for sale with a
condition of vacant possession, the vacancy rate was 4.90% (31
March 2020: 3.68%).
? Rental income generated during the period was GBP8.12 million
(six months ended 30 September 2019: GBP8.78 million).
? EPRA Net Initial Yield ('EPRA NIY') of 7.21% as at 30
September 2020 (31 March 2020: 8.26%).
? Weighted Average Unexpired Lease Term ('WAULT') of 4.99 years
to break and 6.48 years to expiry (31 March 2020: 4.26 years
to break and 5.55 years to expiry).
? Post period-end, in November 2020, the Company acquired a
warehouse asset in Weston-Super-Mare for a purchase price of
GBP5.40 million.
? As at the date of this report, rent collection statistics were
as follows for the March, June and September rental quarters:
Current Position as at 12 March 2020 June 2020 September 2020
November 2020
% % %
Received 93 89 72
Monthly Payments Expected - - 15
Prior to Quarter End
93 89 87
Agreed on longer term 4 3 4
payment plans
Under Negotiation 2 4 4
99 96 95
Outstanding 1 4 5
Total 100 100 100
Chairman's Statement
Overview
I am pleased to report the unaudited interim results of AEW UK REIT plc (the 'Company') for the six months
ended 30 September 2020. The Company had a diversified portfolio of 34 commercial investment properties
throughout the UK with a value of GBP171.36 million as at 30 September 2020.
The Company's NAV has remained resilient over the period, having fallen by only 0.43% despite the uncertain
economic backdrop caused by the ongoing COVID-19 pandemic. Although the valuation of the Company's property
portfolio has fallen by 1.69% on a like-for-like basis over the period, the sale of 2 Geddington Road,
Corby, at a price significantly ahead of its prevailing valuation, realised a profit on disposal of GBP3.67
million. This not only provided a boost to the Company's NAV, but improved the Company's position in terms
of its cash and debt covenants, thus making the Company robustly positioned to deal with uncertainty
resulting from the pandemic. The Company repaid GBP12.00 million of its debt facility in July 2020, resulting
in a Loan to NAV ratio of 26.83% while maintaining a healthy cash balance of GBP13.36 million, both as at 30
September 2020.
The sale of Corby and the resulting loss of the Company's largest tenant at the time has contributed to a
fall in rental income and therefore a fall in EPRA EPS, which was 3.41 pence for the period. Proceeds from
the sale of Corby have now begun to be reinvested as our Investment Manager (AEW UK Investment Management
LLP) is starting to see more attractive opportunities in the investment pipeline that should prove to be
accretive to both NAV and earnings. The Company made one acquisition post period-end, acquiring a warehouse
asset in Weston-Super-Mare for a purchase price of GBP5.40 million. The property shows strong potential for
medium and long term value growth due to neighbouring land sales for residential development as well as
offering an attractive income yield in the meantime. We hope that further opportunities such as this will
allow the Company to increase its earnings over the coming quarters.
The Investment Manager continues to work with the Company's tenants in order to manage the difficulties
posed by the pandemic. To date, the tenancy profile of the Company has remained largely intact, as the
vacancy rate by ERV was just 4.9% as at 30 September 2020 (this excludes vacancy at the Company's property
in Glasgow, which has exchanged to be sold with a condition of vacant possession. Portfolio level vacancy
increases to 8.2% with this asset included). Rent collection rates have remained high for the March 2020,
June 2020 and September 2020 rent quarters in comparison with the averages seen in the wider market and we
expect that ultimate rates of collection, following the expiry of longer-term payment plans, should result
in collection rates in excess of 90%. There are tenants who continue to face difficulties in the current
environment and in such instances the Investment Manager has agreed a longer-term payment plan where rental
income can be recovered in full over coming periods. A prudent assessment has been made of the
recoverability of the Company's outstanding receivables, taking into account the uncertain economic climate,
and a provision has been made in the financial statements for expected credit losses.
The active asset management approach of the Investment Manager has continued to add value and limit the
downside in the current market. During the period, the Company has completed a number of lettings and lease
renewals which are noted in more detail in the 'Asset Management' section of the Investment Manager's
report. The most notable of these has been the 15-year lease renewal with the Secretary of State for
Housing, Communities and Local Government at the Company's office asset, Sandford House, Solihull, which
resulted in a 30% increase in rental income. In addition to its letting activity, the Company has begun to
undertake remedial works to its property at Bank Hey Street, Blackpool, which include the overhaul and
reinstatement of its cathodic protection system, and comprehensive repairs to faience elevations and
windows. The nature of these repair works means that as the costs are incurred, they will be expensed to the
Company's profit or loss, with a corresponding increase expected to be seen in the revaluation of the
property.
The Company's share price was 75.20 pps as at 30 September 2020, representing an 18.90% discount to NAV.
This reflects the declines experienced in equity markets in general and specifically in the real estate
sector as a result of the COVID-19 pandemic. In light of the discount in share price to NAV and cash
reserves available, post period-end the Company has bought back 350,000 of its own shares for gross
consideration of GBP262,995, which will have a positive impact on the Company's NAV per share.
We are delighted to announce that the Company has received four awards during the year; EPRA Gold medal for
Financial Reporting, EPRA Silver medal for Sustainability Reporting and EPRA Most Improved award for
Sustainability Reporting. The Company has also been named Best UK Real Estate Investment Trust in the
Citywire Investment Trust Awards based upon its strong three year track record. These awards are a
reflection of much hard work committed to the Company by the Investment Manager and the Board would like to
thank the team at AEW and express its positivity and confidence in the Investment Manager's ongoing ability
to implement the Company's strategy.
Financial Results
6 month period 6 month period 12 month period
from from from
1 April 2020 to 1 April 2019 to 1 April 2019 to
30 September 30 September 31 March 2020
2020 2019
(unaudited) (unaudited)
(audited)
Operating 5,934 7,264 14,472
Profit before
fair value
changes
(GBP'000)
Operating 6,276 4,901 5,072
Profit (GBP'000)
PBT (GBP'000) 5,724 4,159 3,652
Earnings Per 3.61 2.74 2.40
Share (basic
&diluted)
(pence)
EPRA EPS 3.41 4.37 8.67
(basic and
diluted)
(pence)
Ongoing 1.31 1.34 1.34
Charges (%)
NAV per share 92.73 97.36 93.13
(pence)
EPRA NAV per 92.70 97.32 93.12
share (pence)
Financing
The Company has a GBP60.00 million loan facility, of which it had drawn a balance of GBP39.50 million as at 30
September 2020 (31 March 2020: GBP60.00 million facility; GBP51.50 million drawn), producing a Loan to NAV ratio
of 26.83% (31 March 2020: 34.83%). During the period, the Company amended the facility to allow the
flexibility to make repayments and re-draw these amounts, akin to a revolving credit facility.
The unexpired term of the facility was 3.1 years as at 30 September 2020 (31 March 2020: 3.6 years). The
loan incurs interest at 3-month LIBOR +1.4%, which equated to an all-in rate of 1.47% as at 30 September
2020 (31 March 2020: 2.10%).
The Company is protected from a significant rise in interest rates as it has in place interest rate caps.
Throughout the period and up to 19 October 2020, the Company had in effect interest rate caps on a notional
value of GBP36.51 million of the loan, with GBP26.51 million capped at 2.50% and GBP10.00 million capped at 2.00%,
which resulted in the loan balance being 92.4% hedged as at 30 September 2020. During the period, the
Company paid a premium of GBP62,968 to enter into new interest rate caps effective from 20 October 2020 and
for the remaining term of the loan, which cap the LIBOR rate at 1.00% on a notional value of GBP51.50 million.
As noted in the KPIs, the Company targets a long-term gearing of 35% Loan to NAV, which is the maximum
gearing on drawdown of the RBSi loan facility. The Board and Investment Manager will continue to monitor the
level of gearing and may adjust the gearing according to the Company's circumstances and perceived risk
levels.
During the period, the Company obtained consent from its lender, RBSi, to waive the interest cover ratio
('ICR') tests within its loan agreement for July and October 2020, with the next proposed test being in
January 2021, which was considered to be a prudent action given the economic environment. Irrespective of
these waivers the Company would have passed its ICR tests for both July and October 2020.
Dividends
The Company has continued to deliver on its target of paying dividends of 8.00 pps per annum. During the
period, the Company declared and paid two quarterly dividends of 2.00 pps, in line with its target.
Dividends for the period were 85.25% covered by EPRA EPS.
It remains the Company's intention to continue to pay dividends in line with its dividend policy, however
the outlook remains very uncertain given the current COVID-19 pandemic. In determining future dividend
payments, regard will be had to the circumstances prevailing at the relevant time, as well as the Company's
requirement, as a UK REIT, to distribute at least 90% of its distributable income annually, which will
remain a key consideration.
Outlook
At the time of writing this report, the UK faces unprecedented economic uncertainty and it appears likely
that the economy will continue to struggle for the remainder of 2020 and beyond. While we expect that this
will continue to impact the property market, the Company remains well positioned to withstand these
conditions as a result of its healthy cash position and borrowing covenant headroom. Since the onset of the
pandemic, the Company has displayed stable NAV performance, reflecting the diversity of the portfolio, its
low exposure to the retail sector and the fact that many of its assets benefit from viable alternative use
potential, which limits downside risk and volatility. We are also encouraged by strong and improving rent
collection levels to date.
In the near term, the Board and Investment Manager will continue to focus on minimising the impact of
COVID-19 on its stakeholders and, as more attractive opportunities arise in the investment market, will aim
to find suitable assets to build earnings back towards a fully covered dividend, following the sale of the
Company's Corby asset. The developing economic conditions will be monitored closely and the Company's
strategy adjusted accordingly. There has recently been some positive news regarding the development of a
vaccine and it is hoped that its implementation will kick-start economic recovery and provide the conditions
to enable growth of the Company to resume.
Mark Burton
Chairman
17 November 2020
Key Performance Indicators
KPI AND RELEVANCE TO TARGET PERFORMANCE
DEFINITION STRATEGY
1. EPRA NIY
7.21%
A An EPRA NIY 7.50 - 10.00%
representation profile in line at 30 September
to the investor with the 2020 (31 March
of what their Company's 2020: 8.26%).
initial net target dividend
yield would be yield shows
at a that, after
predetermined costs, the
purchase price Company should
after taking have the
account of all ability to meet
associated its target
costs, e.g. dividend
void costs and through
rent free property
periods. income.
2. True
Equivalent A True 8.30%
Yield Equivalent
Yield profile
in line with 7.50 - 10.00%
the Company's at 30 September
The average target dividend 2020 (31 March
weighted return yield shows 2020: 8.04%).
a property will that, after
produce costs, the
according to Company should
the present have the
income and ability to meet
estimated its proposed
rental value dividend
assumptions, through
assuming the property
income is income.
received
quarterly in
advance.
3. Reversionary
Yield 8.27%
A Reversionary 7.50 - 10.00%
The expected Yield profile at 30 September
return the that is in line 2020 (31 March
property will with an Initial 2020: 7.90%).
provide once Yield profile
rack rented. shows a
potentially
sustainable
income stream
that can be
used to meet
dividends past
the expiry of a
property's
current leasing
arrangements.
4. WAULT to
expiry 6.48 years
The Investment >3 years
The average Manager at 30 September
lease term believes that 2020 (31 March
remaining to current market 2020: 5.55
expiry across conditions years).
the portfolio, present an
weighted by opportunity
contracted whereby assets
rent. with a shorter
unexpired lease
term are often
mispriced. It
is also the
Investment
Manager's view
that a shorter
WAULT is useful
for active
asset
management,
particularly in
certain growth
sectors such as
warehousing, as
it allows the
Investment
Manager to
engage in
direct
negotiation
with tenants
rather than via
rent-review
mechanisms.
5. WAULT to
break 4.99 years
The Investment >3 years
The average Manager at 30 September
lease term believes that 2020 (31 March
remaining to current market 2020: 4.26
break, across conditions years).
the portfolio present an
weighted by opportunity
contracted whereby assets
rent. with a shorter
unexpired lease
term are often
mispriced. As
such, it is in
line 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,
particularly in
certain growth
sectors such as
warehousing, as
it allows the
Investment
Manager to
engage in
direct
negotiation
with tenants
rather than via
rent-review
mechanisms.
6. NAV
Increase GBP147.24 million
year-on-year
NAV is the Provides
value of an stakeholders at 30 September
entity's assets with the most 2020 (31 March
minus the value relevant 2020: GBP147.86
of its information on million).
liabilities. the fair value
of the assets
and liabilities
of the Company.
7. Leverage
(Loan to NAV) 26.83 %
The Company has 35%
The proportion changed the at 30 September
of the measure of its 2020 (31 March
Leverage KPI 2020: 34.83%).
from 'Loan to
Gross Asset
Company's net Value ('GAV')'
assets that is to 'Loan to
funded by NAV'. This is
borrowings. in line with
the measure
used in its
banking
covenants and
so is
considered to
be more
relevant to the
Company's
position.
The target of
35% Loan to
NAV, which is
the gearing
limit at
drawdown under
the RBSi
facility,
approximates to
the previous
target of 25%
Loan to GAV,
which is the
measure used in
the Company's
Investment
Guidelines.
Gearing will
continue to be
monitored using
both measures.
8. Vacant ERV
8.21% / 4.90%
excluding Glasgow
The space in The Company's <10.00%
the property aim is to
portfolio which minimise at 30 September
is currently vacancy of the 2020 (31 March
unlet, as a properties. A 2020: 3.68%)
percentage of low level of
the total ERV structural
of the vacancy
portfolio. provides an
opportunity for
the Company to
capture rental
uplifts and
manage the mix
of tenants
within a
property.
9. Dividend
4.00 pps
Dividends The dividend 4.00 pps
declared in reflects the (period to 30 for the six
relation to the Company's September) months to 30
year. The ability to September 2020.
Company targets deliver a
a dividend of sustainable
8.00 pence per income stream
Ordinary Share from its This supports an
per annum. portfolio. annualised target
However, given of 8.00 pps (six
the current months to 30
COVID-19 September 2019:
situation, 4.00 pps).
regard will be
had to the
circumstances
prevailing at
the relevant
time in
determining
dividend
payments.
10. Ongoing
Charges 1.31%
The Ongoing <1.50%
The ratio of Charges ratio for the six
annualised provides a months to 30
administration measure of September 2020
and operating total costs (six months to 30
costs expressed associated with September 2019:
as a percentage managing and 1.34%).
of average NAV operating the
throughout the Company, which
period. includes the
management fees
due to the
Investment
Manager. This
measure is to
provide
investors with
a clear picture
of operational
costs involved
in running the
Company.
11. Profit
Before Tax
('PBT')
The PBT is an 4.00 pps GBP5.72
indication of (period to million/3.61 pps
PBT is a the Company's
profitability financial
measure which performance for
considers the the period in 30 September) for the six
Company's which its months to 30
profit before strategy is September 2020
the payment of exercised. (six months to 30
income tax. September 2019:
GBP4.16
million/2.74
pps).
12. Shareholder
Total Return 16.13%
This reflects 8.00%
The percentage the return seen for the six
change in the by shareholders months to 30
share price on their September 2020
assuming shareholdings (six months to 30
dividends are through share September 2019:
reinvested to price movements 5.50%).
purchase and dividends
additional received.
Ordinary
Shares.
13. EPRA EPS
This reflects 3.41 pps
the Company's
ability to
Earnings from generate 4.00 pps
core earnings from (period to for the six
operational the portfolio months to 30
activities. A which underpins September 2020
key measure of dividends. (six months to 30
a company's 30 September) September 2019:
underlying 4.37 pps).
operating
results from
its property
rental business
and an
indication of
the extent to
which current
dividend
payments are
supported by
earnings. See
note 8.
Investment Manager's Report
Economic Outlook
As a second wave of the COVID-19 pandemic leads to increased lockdown restrictions being implemented across
the country, the UK faces continued uncertainty. The economy has already experienced contraction in the
quarter to 30 June 2020 following a nationwide lockdown and KPMG's September 2020 UK Economic Outlook
expects the economy to contract by 10.3% over the year as a whole. When the Government withdraws its job
retention scheme, unemployment will be expected to rise and key indicators of short term economic outlook
will be the extent of the impact of the second wave, the subsequent responses needed to contain the virus
and further progress in the development of a vaccine.
The strength and timing of the economic recovery thereafter will largely depend on the success in
implementing a vaccine, while a no deal Brexit scenario will also pose a risk. The KPMG Economic Outlook
forecasts growth of 8.4% in 2021, assuming a vaccine is approved in January 2021 and an outline trade
agreement is reached with the EU by the end of the transition period, with the economy forecast to reach
pre-COVID-19 levels by the start of 2023. However, the picture is ever changing and it is difficult to place
any significant reliance on forecasts with such variable assumptions. Inflation is expected to remain well
below the Bank of England's 2% target, which should see the base rate remain at 0.1% or below until at least
the end of 2021.
General recovery in the UK commercial property market is expected to track that of the wider UK economy
although recovery in sub sectors of the property market will be driven by structural forces as well. A much
publicised example of this includes the growth of online retail sales at the expense of physical stores,
which has seen a divergence in the capital values of the retail and industrial warehousing sectors. This
trend is an important one for the Company's portfolio due to its high weighting to industrial and
warehousing property which makes up 52.9% of its property assets by value as at 30 September 2020. Given
this weighting, the Company expects to continue its current trend of outperformance against the UK
commercial property market as a whole. The high exposure to this sector is expected to continue to provide a
resilient outlook for the Company's major performance indicators including net asset value, earnings and
occupancy, despite wider economic uncertainty. The high portfolio weighting to warehouses is also expected
to continue to provide a positive outlook for rent collection, which, based on levels seen to date since the
start of the pandemic, is ultimately expected to well exceed 90% in each quarter.
This robust base will further be supported by the Investment Manager's proactive approach to asset
management which, despite the ongoing pandemic, has delivered six new lettings in the portfolio since the
start of UK-wide lockdowns in March 2020 across all major market sectors including retail. These lettings
have secured ongoing rental income to the Company at a weighted average of 5% ahead of previous independent
estimates.
Financial Results
The Company's NAV as at 30 September 2020 was GBP147.24 million or 92.73 pps (31 March 2020: GBP147.86 million
or 93.13 pps). This is a decrease of 0.40 pps or 0.27% over the period.
EPRA EPS for the year was 3.41 pps which, based on dividends paid of 4.00 pps, reflects a dividend cover of
85.25%. The reduction in dividend cover has largely come about due to the loss of rental income following
the disposal of 2 Geddington Road, Corby, in May 2020, which realised a profit on disposal of GBP3.67 million.
Income from the remaining tenancy profile has remained largely intact. Collection rates have reached 93% and
89% for the March 2020 and June 2020 quarters respectively, with further payments expected to be received
under longer-term payment plans. Of the outstanding arrears, GBP0.20 million has been provided for expected
credit losses.
Financing
As at 30 September 2020, the Company has a GBP60.0 million loan facility with RBSi, in place until October
2023, the details of which are presented below:
30 September 2020 31 March 2020
Facility GBP60.00 million GBP60.00 million
Drawn GBP39.50 million GBP51.50 million
Gearing (Loan to NAV) 26.83% 34.83%
Interest rate 1.47% all-in (LIBOR 2.10% all-in (LIBOR
+ 1.40%) + 1.4%)
Notional Value of Loan 92.40% 70.90%
Balance Hedged
On 24 June 2020, the Company announced an amendment to its facility, allowing the flexibility to make
repayments and re-draw these amounts, akin to a revolving credit facility.
Property Portfolio
During the period, the Company disposed of 2 Geddington Road, Corby, for net proceeds of GBP18.68 million. The
Company made no acquisitions during the period.
The Company made no acquisitions during the period and disposed of one property, Geddington Road, Corby, for
net proceeds of GBP18.68 million, realising a profit on disposal of GBP3.67 million. The following tables
illustrate the composition of the portfolio in relation to its properties, tenants and income streams:
Summary by Sector as at 30 September 2020
Gross Gross Like- Like-
passing passing for for
like like
Vacancy WAULT rental rental Rental
Number to rental rental
of
Valuation Area by ERV income income ERV ERV income
break growth* growth*
assets
Sector (GBPm) (sq (%) (GBPm) (GBPpsf) (GBPm) (GBPpsf) (GBPm)
ft) (years) (GBPm) %
Industrial 20 90.61 2,33 5.13 3.64 7.03 3.01 8.60 3.68 4.23 0.13 3.24
6,08
7
Office 6 45.85 286, 2.76 4.15 2.91 10.15 4.16 14.50 1.60 -0.08 -5.01
909
Alternatives 2 13.00 112, 0.00 7.85 1.50 13.31 1.28 11.44 0.96 0.04 3.41
355
Standard 5 16.40 168, 11.02 4.82 2.06 12.17 1.65 9.76 1.03 -0.29 -22.15
Retail 917
Retail 1 5.50 51,0 0.00 3.51 0.61 11.96 0.52 10.09 0.30 0.00 0.07
Warehouse 21
Portfolio 34 171.36 2,95 8.21** 4.99 14.11 4.77 16.21 5.49 8.12 -0.20 -2.26
5,28
9
Summary by Geographical Area as at 30 September 2020
Gross Gross Like- Like-
passing passing for for
like like
Vacancy WAULT rental rental Rental
Number to rental rental
of
Valuation Area by ERV income income ERV ERV income
Geographical break growth* growth*
Area assets
(GBPm) (sq (%) (GBPm) (GBPpsf) (GBPm) (GBPpsf) (GBPm)
ft) (years) (GBPm) %
Yorkshire 8 34.46 1,02 4.59 1.87 2.43 2.37 3.49 3.31 1.58 -0.03 -1.59
and 7,80
Humberside 1
South East 5 25.83 195, 8.95 3.77 2.11 10.78 2.21 11.67 1.23 -0.18 -12.93
545
Eastern 5 20.50 344, 11.36 1.99 1.47 4.27 2.10 6.10 0.96 0.03 3.75
885
South West 3 20.60 125, 0.00 2.31 1.73 13.82 1.77 14.14 0.83 0.01 0.64
004
West 4 21.15 398, 3.59 7.21 1.84 4.62 1.75 4.69 0.96 0.03 2.69
Midlands 273
East 1 4.00 28,2 0.00 5.65 0.39 13.64 0.40 18.59 0.38 -0.07 -7.92
Midlands 19
North West 4 13.87 302, 6.11 4.66 1.39 4.61 1.28 4.30 0.66 -0.04 -6.27
061
Wales 2 13.25 376, 0.00 8.58 1.25 3.31 1.30 3.44 0.64 0.00 0.52
138
Greater 1 9.25 71,7 0.00 11.12 0.96 13.40 0.75 10.45 0.52 0.05 10.05
London 20
Scotland 1 8.45 85,6 51.1 1.49 0.54 6.33 1.16 13.54 0.36 0.00 2.52
43
Portfolio 34 171.36 2,95 8.21** 4.99 14.11 4.77 16.21 5.49 8.12 -0.20 -2.26
5,28
9
*like-for-like rental growth is for the six months ended 30 September 2020.
**excluding Glasgow, total vacancy is 4.90%.
Source: Knight Frank/AEW, 30 September 2020.
Individual Property Classifications
Market
Value
Property Sector Region Range (GBPm)
1 40 Queen Square, Offices South West 10.0 - 15.0
Bristol
2 Eastpoint Offices South East 10.0 - 15.0
Business Park,
Oxford
3 Sandford House, Offices West Midlands 7.5 - 10.0
Solihull
4 London East Other Greater London 7.5 - 10.0
Leisure Park, (Leisure)
Dagenham
5 Gresford Industrial Wales 7.5 - 10.0
Industrial
Estate, Wrexham
6 225 Bath Street, Offices Scotland 7.5 - 10.0
Glasgow
7 Langthwaite Industrial Yorkshire and 7.5 - 10.0
Grange Industrial Humberside
Estate, South
Kirby
8 Lockwood Court, Industrial Yorkshire and 5.0 - 7.5
Leeds Humberside
9 Storeys Bar Road, Industrial Eastern 5.0 - 7.5
Peterborough
10 Sarus Court Industrial North West 5.0 - 7.5
Industrial
Estate, Runcorn
The Company's top ten properties listed above comprise 50.1% of the total value of the portfolio.
Market
Value
Property Sector Region Range (GBPm)
11 Apollo Business Industrial Eastern 5.0 - 7.5
Park, Basildon
12 Barnstaple Retail South West 5.0 - 7.5
Retail Park Warehouse
13 Euroway Trading Industrial Yorkshire and 5.0 - 7.5
Estate, Bradford Humberside
14 Brockhurst Industrial West Midlands 5.0 - 7.5
Crescent,
Walsall
15 Above Bar Standard Retail South East <5.0
Street,
Southampton
16 Diamond Business Industrial Yorkshire and <5.0
Park, Wakefield Humberside
17 Cranbourne Industrial South East <5.0
House,
Basingstoke
18 Excel 95, Industrial Wales <5.0
Deeside
19 Oak Park, Industrial West Midlands <5.0
Droitwich
20 Commercial Road, Standard Retail South East <5.0
Portsmouth
21 Pearl Assurance Standard Retail East Midlands <5.0
House,
Nottingham
22 Walkers Lane, Industrial North West <5.0
St. Helens
23 Cedar House, Offices South West <5.0
Gloucester
24 Odeon Cinema, Other (Leisure) Eastern
Southend
<5.0
25 Brightside Lane, Industrial Yorkshire and
Sheffield Humberside
<5.0
26 Magham Road, Industrial Yorkshire and
Rotherham Humberside
<5.0
27 Pipps Hill Industrial Eastern
Industrial
Estate, Basildon
<5.0
28 Bank Hey Street, Standard Retail North West
Blackpool
<5.0
29 Eagle Road, Industrial West Midlands
Redditch
<5.0
30 Clarke Road, Industrial South East
Milton Keynes
<5.0
31 Knowles Lane, Industrial Yorkshire and
Bradford Humberside
<5.0
32 Vantage Point, Offices Eastern
Hemel Hempstead
<5.0
33 Moorside Road, Industrial North West
Salford
<5.0
34 Fargate and Standard Retail Yorkshire and
Chapel Walk, Humberside
Sheffield
<5.0
Sector and Geographical Allocation by Market Value as at 30 September 2020
Sector Allocation
Sector %
Standard Retail 9.6
Retail Warehouse 3.2
Offices 26.8
Industrial 52.8
Other 7.6
Geographical Allocation
Location %
Greater London 5.4
South East 15.1
South West 12.1
Eastern 12.0
West Midlands 12.3
East Midlands 2.3
North West 8.1
Yorkshire and Humberside 20.1
Wales 7.7
Scotland 4.9
Top Ten Tenants
Tenant Sector Property Passing % of
Rental Portfolio
Income Total
(GBP'000) Contracted
Rental
Income
984 6.4
1 The Secretary
of State for
Housing,
Communities
and Local
Government
Office Sandford House,
Solihull and
Cedar House,
Gloucester
2 Plastipak UK Industrial Gresford 883 5.8
Limited Industrial
Estate, Wrexham
3 Ardagh Glass Industrial Langthwaite 676 5.0
Limited Industrial
Estate, South
Kirkby
4 Mecca Bingo Leisure London East 625 4.1
Limited Leisure Park,
Dagenham
5 Harrogate Industrial Lockwood Court, 603 3.9
Spring Water Leeds
6 Odeon Cinemas Leisure Odeon Cinema, 535 3.5
Southend
7 Sports Direct Retail Barnstaple 525 3.4
Retail Park and
Bank Hey Street,
Blackpool
8 Wyndeham Industrial Storeys Bar 525 3.4
Peterborough Road,
Limited Peterborough
9 Egbert H Industrial Oak Park, 500 3.3
Taylor & Droitwich
Company
Limited
10 HFC Prestige Industrial Cranbourne 460 3.0
Manufacturing House,
Basingstoke
The Company's top ten tenants, listed above, represent 41.8% of the total passing rental income of the
portfolio.
Asset Management
The Company completed the following material asset management transactions during the period:
Bank Hey Street, Blackpool - In May 2020, the Company signed a reversionary lease with existing tenant JD
Wetherspoon. This documents the removal of the tenant's break option in 2025 and provides an additional
10-year lease term taking the earliest expiry from 2025 to 2050. The annual rent payable by the tenant has
reduced from GBP96,750 to GBP90,000 but the lease now provides five-yearly fixed increases reflecting 1% per
annum.
2 Geddington Road, Corby - On 22 May 2020, the Company disposed of its largest asset at 2 Geddington Road,
Corby, for gross proceeds of GBP18.80 million, 25% ahead of the valuation level immediately prior and 52%
ahead of its acquisition price in 2018. The asset had been delivering an income yield to the Company of 10%
per annum.
Sandford House, Solihull - During June 2020, the Company completed a 15-year renewal lease with its existing
tenant, the Secretary of State for Housing, Communities and Local Government. The agreement documents the
increase of rental income from the property by 30% as well as providing for five-yearly open market rent
reviews and a tenant break option at year 10. The tenant intends to carry out a full refurbishment of the
property over coming weeks requiring no capital payment by the Company either by way of refurbishment cost
or capital incentive to the tenant. In addition, no rent free incentive has been granted to the tenant.
Throughout its hold period the Company has so far received a net income yield from the asset in excess of 9%
per annum against its purchase price of GBP5.4 million.
Bessemer Road, Basingstoke - In July 2020, the Company completed a 5-year lease renewal at its 58,000 sq ft
industrial premises in Basingstoke. The lease has been granted with no rent free incentive given to the
tenant and secures a rental income to the Company 6% ahead of independent valuer's estimated levels. The
tenant has the benefit of a break option in year 3.
Langthwaite Grange Industrial Estate, South Kirkby - During August 2020, a lease renewal was signed with the
Company's third largest tenant, Ardagh Glass. Rent payable under the new lease has been agreed 13% ahead of
both independent valuer's estimated levels and the previous level of passing rent. The lease is for a
five-year term and the tenant will benefit from four months' rent free and a tenant break option after three
years.
Clarke Road, Milton Keynes and Moorside Road, Swinton - Nationwide Crash Repair Centres Limited, the tenant
of this asset, which comprises 2% of the Company's annual rental income, appointed administrators on 3
September 2020 although subsequently, on 4 September 2020, the business was acquired by Redde Northgate Plc.
Redde Northgate have confirmed that they intend to operate the Milton Keynes branch, the larger of the two
within AEWU ownership, and negotiations are currently underway to extend the terms of this lease which
should prove to be value accretive to the Company. Redde Northgate is a substantial and well capitalised
business reporting profit before tax of over GBP60 million for the year ending 30 April 2019. The former
Swinton branch of Nationwide Crash Repair Centres, representing 0.8% of the Company's annual rental income,
will not be operated by Redde Northgate on an ongoing basis, however interest has already been received from
a prospective new tenant.
Apollo Business Park, Basildon - During September 2020, the Company completed a 5-year lease renewal on
35,300 sq ft of these multi-let industrial premises in Basildon. The lease secures a rental income to the
Company 4% ahead of independent valuer's estimated levels and 30% ahead of the previous rental level. The
tenant will benefit from 6 months' rent free.
Wheeler Gate, Nottingham - In September 2020, a 5-year renewal lease was completed with Costa Coffee on a
1,400 sq ft retail unit located in central Nottingham. The reversionary lease documents the rebasing of
Costa's rent from GBP110,000 to GBP52,000 per annum in line with its estimated rental value. The tenant benefits
from 9 months' rent free.
Bath Street, Glasgow - During October 2020, the Company exchanged contracts to sell its 85,000 sq ft office
holding at 225 Bath Street in Glasgow city centre to a subsidiary company of IQ Student Accommodation. The
transaction is conditional upon various matters including the grant of planning permission for the
development of a 480 bedroom student housing development. Sale pricing will be determined following the
approval of all conditions according to an agreed matrix ranging from GBP8.55 to GBP9.30 million. Transaction
pricing reflects 98% of pricing levels being discussed by the parties prior to the onset of the COVID-19
pandemic.
Bank Hey Street, Blackpool - The Company has begun to undertake remedial works to its property in Blackpool,
which include the overhaul and reinstatement of its cathodic protection system, and comprehensive repairs to
faience elevations and windows. Works have been budgeted at a total cost to the Company of GBP1.7 million over
two years. The nature of these repair works means that as the costs are incurred, they will be expensed to
the Company's profit or loss, with a corresponding increase expected to be seen in the revaluation of the
property, all else being equal.
Weston Super Mare - Post period end, the Company acquired the multi-let Westlands Distribution Park in
Weston Super Mare for a purchase price of GBP5.4 million. The purchase price reflects a low capital value of
GBP175,000 per acre which provides strong potential for future capital value growth based upon nearby
comparable land transactions which range between GBP350,000 and GBP500,000 per acre for other commercial and
residential uses. The estate, located 3 miles from the M5 Motorway, provides a net initial yield of 6.4%
which is expected to increase to at least 7.4% within the medium term. The average passing rent of GBP1.50 per
sq ft also provides strong potential for rental growth. Tenants include North Somerset District Council who
make up 30% of the income stream.
Vacancy - The portfolio's overall vacancy level now sits at 4.9%, excluding vacancy contributed by the asset
at 225 Bath Street, Glasgow which, as discussed above, has now been exchanged for sale for alternative use
redevelopment. As a condition of the sale agreement, full vacancy must be achieved in the building before
the sale can be completed. Including this asset, overall vacancy is 8.21%.
AEW UK Investment Management LLP
17 November 2020
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 overall responsibility for reviewing the effectiveness of the system of risk management and
internal control which is operated by the Investment Manager. The Company's ongoing risk management process
is designed to identify, evaluate and mitigate the significant risks the Company faces.
At least twice a year, the Board undertakes a formal risk review with the assistance of the Audit Committee,
to assess the adequacy and effectiveness of the Investment Manager and other service providers' risk
management and internal control processes.
The Board has carried out a robust assessment of the principal and emerging risks facing the Company,
including those that would threaten its business model, future performance, solvency or liquidity.
An analysis of the principal risks and uncertainties is set out below. The risks below do not purport to be
exhaustive as some risks are not yet known and some risks are currently not deemed material but could turn
out to be material in the future. Changes to the principal risks since the date of the Annual Report and
Financial Statements for the year ended 31 March 2020 are indicated below.
Principal risks and How risk is managed Risk assessment
their potential
impact
REAL ESTATE RISKS
1. Property market
Any property market The Company has investment Probability:
recession or future restrictions in place to High
deterioration in the invest and manage its
property market assets with the objective
could, inter alia, of spreading and
(i) cause the mitigating risk. Impact: High
Company to realise
its investments at
lower valuations;
and (ii) delay the Movement: No
timings of the change
Company's
realisations. These
risks could have a
material adverse
effect on the
ability of the
Company to achieve
its investment
objective.
2. Property
valuation
The Company uses an Probability:
Property and independent external Moderate
property-related valuer (Knight Frank LLP)
assets are to value the properties at
inherently difficult fair value in accordance
to value due to the with accepted RICS Impact: Low to
individual nature of appraisal and valuation Moderate
each property. standards.
Movement:
Decrease
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.
3. Tenant default
Failure by tenants Comprehensive due Probability:
to fulfil their diligence is undertaken on High
rental obligations all new tenants. Tenant
could affect the covenant checks are
income that the carried out on all new
properties earn and tenants where a default Impact: High
the ability of the would have a significant
Company to pay impact.
dividends to its
shareholders. Movement: No
change
Asset management team
conducts ongoing
monitoring and liaison
with tenants to manage
potential bad debt risk.
4. Asset management
initiatives
Costs incurred on asset Probability:
Asset management management initiatives are
initiatives, such as closely monitored against
refurbishment works, budgets and reviewed in
may prove to be more regular presentations to Low to moderate
extensive, expensive the Investment Management Impact: Low to
and take longer than Committee of the moderate
anticipated. Cost Investment Manager. Movement:
overruns may have a Increase
material adverse
effect on the
Company's
profitability, the
NAV and the share
price.
5. Due diligence
Due diligence may The Company's due Probability:
not identify all the diligence relies on work Low
risks and (such as legal reports on
liabilities in title, property
respect of an valuations, environmental
acquisition and building surveys) Impact:
(including any outsourced to third Moderate
environmental, parties who have expertise
structural or in their areas. Such third
operational defects) parties have professional
that may lead to a indemnity cover in place. Movement: No
material adverse change
effect on the
Company's
profitability, the
NAV and the price of
the Company's
Ordinary Shares.
6. Fall in rental
rates
The Company builds a Probability:
Rental rates may be diversified property and Moderate to
adversely affected tenant base with High
by general UK subsequent monitoring of
economic conditions concentration to
and other factors individual occupiers (top
that depress rental 10 tenants) and sectors Impact:
rates, including (geographical and sector Moderate to
local factors exposure). High
relating to
particular
properties/locations
(such as increased Movement: No
competition). change
The Investment Manager
holds quarterly meetings
with its Investment
Strategy Committee and
regularly meets the Board
Any fall in the of Directors to assess
rental rates for the whether any changes in the
Company's properties market present risks that
may have a material should be addressed in the
adverse effect on Company's strategy.
the Company's
profitability, the
NAV, the price of
the Ordinary Shares
and the Company's
ability to meet
interest and capital
repayments on any
debt facilities.
FINANCIAL RISKS
7. Breach of
borrowing covenants
The Company monitors the Probability:
The Company has use of borrowings on an
entered into a term ongoing basis through
credit facility. weekly cash flow
forecasting and quarterly Low to Moderate
risk monitoring to monitor
financial covenants.
Impact: High
Material adverse
changes in Movement: No
valuations and net change
income may lead to
breaches in the LTV
and interest cover
ratio covenants.
8. Interest rate
rises (short term)
The Company uses interest Probability:
The Company's rate caps on a significant
borrowings through a notional value of the loan
term credit facility to mitigate the adverse
are subject to impact of possible Low to Moderate
interest rate risk interest rate rises.
through changing
LIBOR rates. Any
increases in LIBOR Impact: Low
rates may have an
adverse effect on
the Company's
ability to pay Movement:
dividends. The Investment Manager and Decrease
Board of Directors monitor
the level of hedging and
interest rate movements to
ensure that the risk is
managed appropriately.
9. Interest rate
rises (long term)
The Company uses interest Probability:
The Company's rate caps on a significant High
borrowings through a notional value of the loan
term credit facility to mitigate the adverse
are subject to impact of possible
interest rate risk interest rate rises. Impact: Low to
through changing Moderate
LIBOR rates. Any
increases in LIBOR
rates may have an
adverse effect on Movement:
the Company's Increase
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.
10. Availability and
cost of debt
The Company maintains a Probability:
The term credit good relationship with the
facility expires in bank providing the term
October 2023. In the credit facility.
event that RBSi does Low to Moderate
not renew the
facility, the
Company may need to
sell assets to repay Impact: High
the outstanding
loan. Any increase
in the financing The Company monitors the
costs of the projected usage and Movement: No
facility on renewal covenants of the credit change
would adversely facility on a quarterly
impact on the basis.
Company's
profitability.
CORPORATE RISKS
11. Use of service
providers
The performance of service Probability:
The Company has no providers in conjunction Moderate to
employees and is with their service level High
reliant upon the agreements is monitored
performance of third via regular calls and
party service face-to-face meetings and
providers. the use of key performance Impact:
indicators, where Moderate
relevant.
Movement:
Increase
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.
12. Dependence on
the Investment
Manager
The Investment
Manager is The Investment Manager has Probability:
responsible for endeavoured to ensure that Moderate
providing investment the principal members of Impact:
management services its management team are Moderate to
to the Company. suitably incentivised. High
Movement: No
change
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.
13. Ability to meet
objectives
The Company has an Probability:
The Company may not investment policy to High
meet its investment achieve a balanced
objective to deliver portfolio with a
an attractive total diversified asset and
return to tenant base. The Company Impact: High
shareholders from also has investment
investing restrictions in place to
predominantly in a limit exposure to
portfolio of smaller potential risk factors. Movement: No
commercial These factors mitigate the change
properties in the risk of fluctuations in
United Kingdom. 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
14. Company REIT
status
The Company monitors REIT Probability:
The Company has a UK compliance through the Low
REIT status that Investment Manager on
provides a acquisitions; the
tax-efficient Administrator on asset and
corporate structure. distribution levels; the Impact: High
Registrar and Broker on
shareholdings and the use
of third-party tax
advisers to monitor REIT Movement: No
change
If the Company fails compliance requirements.
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.
15. POLITICAL/ECONOMIC RISKS
15. General
political/economic The Board considers the
environment impact of political and
macroeconomic events when
reviewing strategy. Probability:
High
Political and
macroeconomic events
present risks to the
real estate and Impact: High
financial markets
that affect the
Company and the
business of its Movement: No
tenants. The level change
of uncertainty that
such events bring
has been highlighted
in recent times,
most pertinently
following the EU
referendum vote
(Brexit) in June
2016.
16. COVID-19
The economic The Investment Manager is Probability:
disruption arising in close contact with High
from the COVID-19 tenants. The Investment
virus could impact Manager has put in place
rental income social distancing measures
receipts from as advised by the UK Impact: High
tenants, the ability government. The Investment
to access funding at Manager has maintained a
competitive rates, close relationship with
maintain the RBSi to ensure continuing Movement:
Company's dividend dialogue around covenants. Increase
policy and its
adherence to the
HMRC REIT regime,
particularly if the
UK government
restrictions are in
place for a
prolonged period.
Interim Management Report and Directors' Responsibility Statement
Interim Management Report
The important events that have occurred during the period under review, the key factors influencing the
financial statements and the principal risks and uncertainties for the remaining six months of the financial
year are set out above.
Responsibility Statement
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the EU;
· the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R, being an indication of important events that have occurred during the first six months of
the financial year and their impact on the condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R, being related party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial position or performance of the
entity during that period; and any changes in the related party transactions described in the last annual
report that could do so.
On behalf of the Board
Mark Burton
Chairman
17 November 2020
Independent Review Report to AEW UK REIT PLC
*Conclusion *
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2020 which comprises the Condensed Statement of
Comprehensive Income, Condensed Statement of Changes in Equity, Condensed Statement of Financial Position,
Condensed Statement of Cash Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of
financial statements in the half-yearly financial report for the six months ended 30 September 2020 is not
prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the
EU and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority
('the UK FCA').
*Scope of review *
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland)
2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by
the Auditing Practices Board for use in the UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical
and other review procedures. We read the other information contained in the half-yearly financial report and
consider whether it contains any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards
on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
*Directors' responsibilities *
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The
Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the
UK FCA.
The annual financial statements of the Company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by
the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in
the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the
Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we
might state to the Company those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company for our review work, for this report, or for the conclusions we have reached.
Matthew Williams
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
17 November 2020
Financial Statements
Condensed Statement of Comprehensive Income
for the six months ended 30 September 2020
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Income
Rental and 3 8,838 8,777 17,790
other income
Property 4 (1,933) (509) (1,326)
operating
expenses
Net rental and 6,905 8,268 16,464
other income
Other operating 5 (971) (1,004) (1,992)
expenses
Operating 5,934 7,264 14,472
profit before
fair value
changes
Change in fair 10 (3,328) (2,407) (9,444)
value of
investment
properties
Realised gains 10 3,670 44 44
on disposal of
investment
properties
Operating 6,276 4,901 5,072
profit
Finance expense 6 (552) (742) (1,420)
Profit before 5,724 4,159 3,652
tax
Taxation 7 - - -
Profit after 5,724 4,159 3,652
tax
Other - - -
comprehensive
income
Total 5,724 4,159 3,652
comprehensive
income for the
period
Earnings per 8 3.61 2.74 2.40
share (pence
per share)
(basic and
diluted)
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Changes in Equity
for the six months ended 30 September 2020
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
For the capital account earnings the Company
period 1
April 2020
to
Notes GBP'000 GBP'000 GBP'000 GBP'000
30
September
2020
(unaudited)
Balance as 1,587 56,578 89,698 147,863
at 1 April
2020
Total - - 5,724 5,724
comprehensi
ve income
Dividends 9 - - (6,351) (6,351)
paid
Balance as 1,587 56,578 89,071 147,236
at 30
September
2020
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
For the capital account earnings the Company
period 1
April 2019
to
30 Notes GBP'000 GBP'000 GBP'000 GBP'000
September
2019
(unaudited)
Balance at 1,515 49,770 98,171 149,456
1 April
2019
Total - - 4,159 4,159
comprehensi
ve income
Dividends 9 - - (6,062) (6,062)
paid
Balance as 1,515 49,770 96,268 147,553
at 30
September
2019
Total capital
Capital and reserves
Share reserve and attributable to
Share premium retained owners of
For the year capital account earnings the Company
ended 31 March
2020 (audited)
Notes GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 1,515 49,770 98,171 149,456
April 2019
Total - - 3,652 3,652
comprehensive
income
Ordinary 72 6,928 - 7,000
shares issued
Share issue - (120) - (120)
costs
Dividends paid 9 - - (12,125) (12,125)
Balance as at 1,587 56,578 89,698 147,863
31 March 2020
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Financial Position
as at 30 September 2020
As at As at As at
30 September 30 September 31 March 2020
2020 2019
(audited)
(unaudited) (unaudited)
GBP'000
GBP'000 GBP'000
Notes
Assets
Non-Current
Assets
Investment 10 160,601 193,979 187,042
property
160,601 193,979 187,042
Current Assets
Receivables 11 9,063 7,621 7,351
and
prepayments
Other 12 49 58 14
financial
assets held at
fair value
Cash and cash 13,357 2,012 9,873
equivalents
22,469 9,691 17,238
Held for sale
assets
Investment 10 8,212 - -
property held
for sale
Total assets 191,282 203,670 204,280
Non-Current
Liabilities
Interest 13 (39,082) (49,528) (51,047)
bearing loans
and borrowings
Lease 15 (635) (636) (635)
obligations
(39,717) (50,164) (51,682)
Current
Liabilities
Payables and 14 (4,281) (5,905) (4,687)
accrued
expenses
Lease 15 (48) (48) (48)
obligations
(4,329) (5,953) (4,735)
Total (44,046) (56,117) (56,417)
Liabilities
Net Assets 147,236 147,553 147,863
Equity
Share capital 1,587 1,515 1,587
Share premium 56,578 49,770 56,578
account
Capital 89,071 96,268 89,698
reserve and
retained
earnings
Total capital 147,236 147,553 147,863
and reserves
attributable
to equity
holders of the
Company
Net Asset 8 92.73 97.36 93.13
Value per
share (pps)
The financial statements were approved by the Board of Directors on 17 November 2020 and were signed on its
behalf by:
Mark Burton
Chairman
AEW UK REIT plc
Company number: 09522515
The notes below form an integral part of these condensed financial statements.
Condensed Statement of Cash Flows
for the six months ended 30 September 2020
Period from
Period from Year ended
1 April 2020 to
1 April 2019 31 March
to
30 September
2020
30 September
2019
2020
(audited)
(unaudited)
(unaudited)
GBP'000
GBP'000
GBP'000
Cash flows from
operating activities
Profit after tax 5,724 4,159 3,652
Adjustment for
non-cash items:
Finance expenses 552 742 1,420
Loss from change in 3,328 2,407 9,444
fair value of
investment property
Realised gains on (3,670) (44) (44)
disposal of investment
property
Increase in other (1,573) (3,152) (2,882)
receivables and
prepayments
(Decrease)/Increase in (463) 2,640 1,424
other payables and
accrued expenses
Net cash generated 3,898 6,752 13,014
from operating
activities
Cash flows from
investing activities
Purchase of and (106) (257) (358)
additions to
investment property
Proceeds of disposal 18,676 44 44
of investment property
Net cash generated 18,570 (213) (314)
from/(used in)
investing activities
Cash flows from
financing activities
Proceeds from issue of - - 7,000
ordinary share capital
Share issue costs - - (120)
Loan draw down - - 1,500
Loan repayment 12,000 - -
Arrangement loan (13) - (39)
facility fee paid
Premiums on interest (63) - -
rate caps
Finance costs (557) (596) (1,174)
Dividends paid (6,351) (6,062) (12,125)
Net cash flow used in (18,984) (6,658) (4,958)
financing activities
Net 3,484 (119) 7,742
increase/(decrease) in
cash and cash
equivalents
Cash and cash 9,873 2,131 2,131
equivalents at start
of the period/year
Cash and cash 13,357 2,012 9,873
equivalents at end of
the period/year
The notes below form an integral part of these condensed financial statements.
Notes to the Condensed Financial Statements
for the six months ended 30 September 2020
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.
2. Accounting policies
2.1 Basis of preparation
These interim condensed unaudited financial statements have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU, and should be read in conjunction with the Company's last
financial statements for the year ended 31 March 2020. These condensed unaudited financial statements do not
include all information required for a complete set of financial statements proposed in accordance with IFRS
as adopted by the EU ('EU IFRS'). However, selected explanatory notes have been included to explain events
and transactions that are significant in understanding changes in the Company's financial position and
performance since the last financial statements.
The financial information contained in this Interim Report and Financial Statements for the six months ended
30 September 2020 and the comparative information for the year ended 31 March 2020 does not constitute
statutory accounts as defined in sections 435(1) and (2) of the Companies Act 2006. Statutory accounts for
the year ended 31 March 2020 have been delivered to the Registrar of Companies. The Auditor reported on
those accounts. Its report was unqualified and did not contain a statement under section 498(2) or (3) of
the Companies Act 2006.
A review of the interim financial information has been performed by the Auditor of the Company for issue on
17 November 2020.
The comparative figures disclosed in the condensed unaudited financial statements and related notes have
been presented for both the six month period ended 30 September 2019 and year ended 31 March 2020 and as at
30 September 2019 and 31 March 2020.
These condensed unaudited financial statements have been prepared under the historical-cost convention,
except for investment property and interest rate derivatives that have been measured at fair value. The
condensed unaudited 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 were a number of new standards and amendments to existing standards which are required for the
Company's accounting periods beginning after 1 April 2020, which have been considered and applied. These
being:
· Amendments to IFRS 3 "Business Combinations", definition of a business
· Amendments to IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in
Accounting Estimates and Errors", definition of material
· Revised Conceptual Framework for Financial Reporting
· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
The Company has applied the new standards and there has been no impact on the financial statements.
As a result of COVID-19 there was an amendment to IFRS 16, Leases, for COVID-19 related rent concessions.
The amendment to the standard has been considered, however at the reporting date had not been required to be
applied.
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 on or after 1 April 2021 or later. The Company has
not early adopted any of these new or amended standards as the impact of the adoption is not considered to
be significant.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IAS 34 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.
2.3 Segmental information
The Board of Directors retains overall control of the Company but the Investment Manager (AEW UK Investment
Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing
the performance of the Company's operating segments and is therefore considered to be the Chief Operating
Decision Maker ('CODM'). In accordance with IFRS 8, the Company considers each of its properties to be an
individual operating segment. The CODM allocates resources, and reviews the performance of, the Company's
portfolio on a property-by-property basis and discrete financial information is available for each
individual property.
These operating segments have similar economic characteristics and, as such, are aggregated into one
reporting segment, being investment in property and property-related investments in the UK.
2.4 Going concern
The Directors assessed the Company's ability to continue as a going concern, which takes into consideration
the uncertainty surrounding the outbreak of COVID-19, as well as the Company's cash flows, financial
position, liquidity and borrowing facilities.
In that assessment the Directors' considered that the Company benefits from a diversified income stream from
numerous tenants and sectors, which reduces risk. They also noted that:
· The Company's rent collection has been strong with at least 90% of contracted rent either collected - or
payment plans agreed - for each of the March, June and September 2020 quarters. Based on the contracted
rent as at 30 September 2020, a reduction of 64% could be accommodated before breaching the interest cover
ratio (ICR) covenant in the Company's debt arrangements;
· Based on the property valuation at 30 September 2020, the Company had room for a GBP59m fall in valuations
before reaching the maximum Loan to Value (LTV) covenant in the Company's debt arrangements. If certain
conditions are met, a further GBP16m fall in values could be accommodated.
Finally, the Directors' note that the Company's cash flow can also be significantly managed through the
adjustment of dividend payments.
Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months, including
a severe but plausible downside scenario which makes the following assumptions:
· A reduction in rental income of 45% and collection of 70% of those rents on the quarter date, with
remaining collection deferred for three quarters;
· No new lettings or renewals, other than those where terms have already been agreed; and
· A 15% fall in property valuations.
Given the Company's financial position and headroom on covenants then even in this severe scenario, the
Directors do not consider there are any material uncertainties in relation to the Company's ability to meets
its liabilities as they fall due and continue in operation for a period of 12 months from the date of
approval of these financial statements. They therefore consider the going concern basis adopted in the
preparation of the interim financial statements is appropriate.
2.5 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are consistent
with those applied within the Company's Annual Report and Financial Statements for the year ended 31 March
2020 except for the changes as detailed in note 2.1.
3. Revenue
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Gross rental income 8,124 8,777 17,418
Service charge income 674* - -
Dilapidation income 40 - 372
Total rental and 8,838 8,777 17,790
other income
Gross rental income includes adjustment for the effect of any incentives agreed.
*For the current period, service charge income has been presented gross to reflect the Company's role as
principal in its agreements with tenants. In comparative periods, they have been presented net, however the
difference in presentation is considered to be immaterial.
4. Property operating expenses
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Recoverable service 674* - -
charge expense
Non-recoverable 601# 143 436
service charge
expense
Other property 658 366 890
operating expenses
Total property 1,933 509 1,326
operating expenses
* For the current period, recoverable service charge expenditure has been presented gross to reflect the
Company's role as principal in its agreements with tenants. In comparative periods, they have been presented
net, however the difference in presentation is considered to be immaterial.
# Of the c. GBP601,000 non-recoverable service charge expenditure c. GBP394,000 relates to Bank Hey Street,
Blackpool which includes costs relating to the remedial works as detailed in the Investment Manager's
Report.
5. Other operating expenses
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Investment management 579 665 1,308
fee
Audit fee 30 24 82
ISRE 2410 review 25 24 24
(interim review fee)
Operating costs 289 230 463
Directors' 48 61 115
remuneration
Total other operating 971 1,004 1,992
expenses
6. Finance expense
Period from Period from
1 April 2020 1 April 2019 Year
to to ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Interest payable on loan 438 556 1,108
borrowings
Amortisation of loan 49 53 110
arrangement fee
Commitment fee payable on 37 29 54
loan borrowings
524 638 1,272
Change in fair value of 28 104 148
interest rate derivatives
Total 552 742 1,420
7. Taxation
Period from Period from Year
1 April 2020 to 1 April 2019 to ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Analysis of charge in
the period
Profit before tax 5,724 4,159 3,652
Theoretical tax at UK 1,088 790 694
corporation tax
standard rate of 19%
(30 September 2019:
19%; 31 March 2020:
19%)
Adjusted for:
Exempt REIT income (1,023) (1,239) (2,488)
Non taxable investment (65) 449 1,794
losses/(gains)
Total - - -
8. Earnings per share and NAV per share
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Earnings per share:
Total comprehensive 5,724 4,159 3,652
income (GBP'000)
Weighted average 158,774,746 151,558,251 152,208,919
number of shares
EPS (basic and 3.61 2.74 2.40
diluted) (pence)
EPRA earnings per 5,724 4,159 3,652
share:
Total comprehensive
income (GBP'000)
Adjustment to total
comprehensive
income:
Change in fair 3,328 2,407 9,444
value of investment
property (GBP'000)
Realised gain on (3,670) (44) (44)
disposal of
investment property
(GBP'000)
Change in fair 28 104 148
value of interest
rate derivatives
(GBP'000)
Total EPRA Earnings 5,410 6,626 13,200
(GBP'000)
EPRA earnings per 4.37 8.67
share (basic and
diluted) (pence)
3.41
NAV per share:
Net assets (GBP'000) 147,236 147,553 147,863
Ordinary Shares 158,774,746 151,558,251 158,774,746
NAV per share 92.73 97.36 93.13
(pence)
EPRA NAV per share:
Net assets (GBP'000) 147,236 147,553 147,863
Adjustments to net
assets:
Other financial (49) (58) (14)
assets held at fair
value (GBP'000)
EPRA NAV (GBP'000) 147,187 147,495 147,849
EPRA NAV per share 92.70 97.32 93.12
(pence)
Earnings per share 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
30 September 2020, EPRA NNNAV was equal to IFRS NAV and as such a reconciliation between the two measures
has not been presented.
9. Dividends paid
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
Dividends paid GBP'000 GBP'000 GBP'000
during the period
Represents 6,351 6,062 12,125
two/two/four
interim dividends
of 2.00 pps each
Period from Period from
1 April 2020 to 1 April 2019 to Year ended
30 September 30 September 31 March
2020 2019 2020
Dividends relating GBP'000 GBP'000 GBP'000
to the period
Represents 6,351 6,062 12,269
two/two/four
interim dividends
of 2.00 pps each
Dividends paid relate to Ordinary Shares only.
10. Investments
10.a) Investment property
Period from 1 April 2020 to
30 September 2020
(unaudited)
Investment Investment Total Period from
properties properties GBP'000 1 April Year
2019 ended
freehold leasehold
to 30 31 March
September
GBP'000 GBP'000
2020
2019
(audited)
(unaudited)
Total
Total
GBP'000
GBP'000
UK
Investment
property
As at 147,400 41,900 189,300 197,605 197,605
beginning
of period
Purchases 106 - 106 257 358
and capital
expenditure
in the
period
Disposals - (15,006) (15,006) - -
in the
period
Revaluation (4,901) 1,856 (3,045) (1,812) (8,663)
of
investment
property
Valuation 142,605 28,750 171,355 196,050 189,300
provided by
Knight
Frank
Adjustment (3,225) (2,755) (2,941)
to fair
value for
lease
incentive
debtor
Adjustment 683 684 683
for lease
obligations
*
Total 168,813 193,979 187,042
Investment
property
Classified
as:
Investment 8,212 - -
property
held sale#
Investment 160,601 193,979 187,042
property
168,813 193,979 187,042
Change in
fair value
of
investment
property
Change in (3,045) (1,812) (8,663)
fair value
before
adjustments
for lease
incentives
Adjustment
for
movement in
the period:
in value of (283) (595) (781)
lease
incentive
debtor
(3,328) (2,407) (9,444)
Gains
realised on
disposal of
investment
property
Net 18,676 44 44
proceeds
from
disposals
of
investment
property
during the
period
Fair value (15,006) - -
at
beginning
of period
Gains 3,670 44 44
realised on
disposal of
investment
property
* Adjustment in respect of minimum payment under head leases separately included as a liability within the
Condensed Statement of Financial Position.
# 225 Bath Street, Glasgow, has been classified as held-for-sale as at 30 September 2020. Contracts to sell
the property were exchanged post period-end, details of which can be found in Note 18 to the Financial
Statements.
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 is based upon the income capitalisation approach. This approach involves
applying capitalisation yields to current and future rental streams net of income voids arising from
vacancies or rent-free periods and associated running costs. These capitalisation yields and estimated
rental values are based on comparable property and leasing transactions in the market using the valuer's
professional judgement and market observation. Other factors taken into account in the valuations include
the tenure of the property, tenancy details, capital values of fixtures and fittings, environmental matter
and the overall repair and condition of the property.
In the annual report to 31 March 2020 the report of the valuer included a material valuation uncertainty
clause due to COVID 19 and its unknown impact at that point in time. This valuation uncertainty clause had
been removed for the valuation provided as at 30 September 2020.
10.b) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for non-current assets:
Quoted prices
Significant Significant
in active
observable unobservable
markets
inputs inputs
(Level 1)
(Level 2) (Level 3) Total
Assets measured GBP'000
at fair value
GBP'000 GBP'000 GBP'000
30 September 2020
Investment - - 168,813 168,813
property
30 September 2019
Investment - - 193,979 193,979
property
31 March 2020
Investment - - 187,042 187,042
property
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.
There have been no transfers between Level 1 and Level 2 during either period, nor have there been any
transfers in or out of Level 3.
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 portfolios of investment properties are:
1) 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 yield in isolation would result in a lower/(higher) 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 are:
Significant
Fair value Valuation unobservable
Class GBP'000 technique inputs Range
30 September
2020
Investment 171,355 Income ERV GBP0.50-
Property capitalisati GBP95.00
on
Equivalent yield
6.23% -
10.48%
30 September
2019
Investment 196,050 Income ERV GBP0.50-
Property capitalisati GBP127.00
on
Equivalent yield
5.95% -
9.69%
31 March 2020
Investment 189,300 Income ERV GBP0.50-
Property capitalisati GBP105.00
on
Equivalent yield
5.71% -
10.54%
Fair value per Knight Frank LLP.
Where possible, sensitivity of the fair values of Level 3 assets are tested to changes in unobservable
inputs to 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, are recorded in profit and loss.
The tables below set out a sensitivity analysis for each of the key sources of estimation uncertainty with
the resulting increase/(decrease) in the fair value of investment property.
Fair Change in ERV Change in equivalent
value yield
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sensitivity +5% -5% +5% -5%
Analysis
30 September 171,35 176,434 161,957 163,582 179,481
2020 5
30 September 196,05 204,427 187,935 185,802 207,198
2019 0
31 March 189,30 197,146 180,075 179,906 199,956
2020 0
Fair Change in ERV Change in equivalent
value yield
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sensitivity +10% -10% +10% -10%
Analysis
30 September 171,35 183,940 154,933 156,710 188,744
2020 5
30 September 196,05 213,858 179,153 178,444 217,351
2019 0
31 March 189,30 205,933 171,723 171,251 211,640
2020 0
Fair Change in ERV Change in equivalent
value yield
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sensitivity +15% -15% +15% -15%
Analysis
30 September 171,35 191,497 147,893 150,433 199,087
2020 5
30 September 196,05 222,863 170,767 170,822 229,917
2019 0
31 March 189,30 214,777 163,364 163,327 224,687
2020 0
11. Receivables and prepayments
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Receivables
Rent debtor 3,469 2,789 2,579
Allowance for expected (207) (51) (190)
credit losses
Rent agent float account 2,056 1,363 1,486
Dilapidations receivable 69 - 372
Other receivables 368 481 115
5,755 4,582 4,362
Rent free debtor 3,225 2,755 2,941
Prepayments 83 284 48
Total 9,063 7,621 7,351
The aged debtor analysis of receivables as follows:
30 September 30 31 March
September
2020 2020
2019
GBP'000 GBP'000
GBP'000
Less than three months due 4,206 4,257 4,317
Between three and six months 1,549 325 45
due
Total 5,755 4,582 4,362
12. Interest rate derivatives
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At the beginning of the 14 162 162
period
Interest rate cap premium 63 - -
paid
Changes in fair value of (28) (104) (148)
interest rate derivatives
At the end of the period 49 58 14
The Company is protected from a significant rise in interest rates as it currently has interest rate caps in
effect with a combined notional value of GBP36.51 million (31 March 2020: GBP36.51 million), with GBP26.51 million
capped at 2.50% and GBP10.00 million capped at 2.00%, resulting in the loan being 92% hedged (31 March 2020:
71%). These interest rate caps are effective until 19 October 2020. The Company has additional interest rate
caps covering the remaining period of the loan from 20 October 2020 to 23 October 2023. During the period,
the Company replaced its existing caps covering this period, which capped the interest rate at 2.00% on a
notional value of GBP49.51 million, with new caps covering the same period capping the interest rate at 1.00%
on a notional value of GBP51.50 million. The Company paid a premium of GBP62,968.
Fair Value hierarchy
The following table provides the fair value measurement hierarchy for interest rate derivatives:
Assets measured at fair value
Quoted Significant Significant
prices
observable unobservable
in active
input inputs
markets
(Level 2) (Level 3) Total
(Level 1)
Valuation date GBP'000 GBP'000 GBP'000
GBP'000
30 September 2020 - 49 - 49
30 September 2019 - 58 - 58
31 March 2020 - 14 - 14
The fair value of these contracts is recorded in the Condensed 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.
13. Interest bearing loans and borrowings
Bank borrowings drawn
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
At the beginning of the 51,500 50,000 50,000
period
Bank borrowings drawn in the - - 1,500
period
Bank borrowings repaid in (12,000) - -
the period
Interest bearing loans and 39,500 50,000 51,500
borrowings
Unamortised loan arrangement (418) (472) (453)
fees
At the end of the period 39,082 49,528 51,047
Repayable between two and 39,500 50,000 51,500
five years
Bank borrowings available 20,500 10,000 8,500
but undrawn in the period
Total facility available 60,000 60,000 60,000
The Company has a GBP60.00 million (31 March 2020: GBP60.00 million) credit facility with RBSi of which GBP39.50
million (31 March 2020: GBP51.50 million) has been utilised as at 30 September 2020.
The Company has a target gearing of 35% Loan to NAV, which is the maximum gearing on drawdown under the
terms of the facility. As at 30 September 2020, the Company's gearing was 26.83% Loan to NAV (31 March 2020:
34.83%).
Borrowing costs associated with the credit facility are shown as finance costs in note 6 to these financial
statements.
14. Payables and accrued expenses
31
30 September 30 September
March
2020 2019
2020
(unaudited) (unaudited)
(audited)
GBP'000 GBP'000
GBP'000
Deferred income 2,835 3,312 2,906
Accruals 991 1,037 814
Other creditors 455 1,556 967
Total 4,281 5,905 4,687
15. Lease obligation as lessee
Leases as lessee are capitalised at the lease's commencement at 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 present value of the minimum lease payments under non-cancellable finance
leases:
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Current 48 48 48
Non Current 635 636 635
Lease liabilities included 683 684 683
in the Statement of
Financial Position at 30
September 2020
16. Issued share capital
There was no change to the issued share capital during the period. The number of ordinary shares in issue
and fully paid remains 151,774,746 of GBP0.01 each.
17. Transactions with related parties
As defined by IAS 24 Related Party 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 six months ended 30 September 2020, the Directors of the Company are considered to be the key
management personnel. Directors' remuneration is disclosed in note 5.
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 quarterly management fee which
is calculated and accrued monthly at a rate equivalent to 0.9% per annum of NAV (excluding uninvested
proceeds from fundraising).
During the period from 1 April 2020 to 30 September 2020, the Company incurred GBP578,821 (six months ended 30
September 2019: GBP665,344) in respect of investment management fees and expenses of which GBP304,595 was
outstanding at 30 September 2020 (31 March 2020: GBP311,683).
18. Events after reporting date
Dividend
On 22 October 2020, the Board declared its second interim dividend of 2.00 pps in respect of the period from
1 July 2020 to 30 September 2020. The dividend payment will be made on 30 November 2020 to shareholders on
the register as at 30 October 2020. The ex-dividend date was 29 October 2020.
The dividend of 2.00 pps was designated as an interim property income distribution ('PID'). Unless
shareholders have elected to receive the PID gross, 20% tax will be deducted at source.
Property acquisitions
Post period-end, in November 2020, the Company acquired a warehouse asset in Weston-Super-Mare for a
purchase price of GBP5.40 million.
Share buybacks
The Company's share capital consists of 158,774,746 Ordinary Shares, of which 350,000 are currently held by
the Company as treasury shares. This reflects 350,000 Ordinary Shares having been bought back since the
period end for a gross consideration of GBP262,995.
Bath Street, Glasgow
During October 2020, the Company exchanged contracts to sell its 85,000 sq ft office holding at 225 Bath
Street in Glasgow city centre. The transaction is conditional upon various matters including the grant of
planning permission for the development of a 480 bedroom student housing development. Sale pricing will be
determined following the approval of all conditions according to an agreed matrix ranging from GBP8.55 to
GBP9.30 million. Due to these conditions, there is some uncertainty as to the date of completion of the
transaction, but there is considered to be a high probability that the transaction will complete within 12
months of the balance sheet date and, as such, the property has been classified as held-for-sale in these
financial statements
EPRA Performance Measures
Detailed below is a summary table showing the EPRA performance measures of the Company. All EPRA performance
measures have been calculated in line with EPRA Best Practices Recommendations Guidelines which can be found
at www.epra.com [1].
MEASURE AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings
Earnings from A key measure of GBP5.41 million/3.41
operational activities. a company's pps
underlying
operating results
and an indication
of the extent to EPRA earnings for the
which current six month period
dividend payments ended 30 September
are supported by 2020 (six month
earnings. period ended 30
September 2019: GBP6.63
million/4.37 pps)
2. EPRA NAV
NAV adjusted to include Makes adjustments GBP147.19 million/92.70
properties and other to IFRS NAV to pps EPRA NAV as at 30
investment interests at provide September 2020 (At 31
fair value and to stakeholders with March 2020: GBP147.85
exclude certain items the most relevant million/ 93.12 pps)
not expected to information on
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 GBP147.24 million/92.73
include the fair values to EPRA NAV to pps EPRA NNNAV as at
of: provide 30 September 2020
stakeholders with
the most relevant
information on
(i) financial the current fair (At 31 March 2020:
instruments; value of all the GBP147.86 million/93.13
assets and pps)
liabilities
within a real
(ii) debt; and estate company.
(iii) deferred taxes.
4.1 EPRA NIY
Annualised rental income A comparable 7.21%
based on the cash rents measure for
passing at the balance portfolio
sheet date, less valuations. This
non-recoverable property measure should EPRA NIY
operating expenses, make it easier
divided by the market for investors to
value of the property, judge themselves,
increased with how the valuation as at 30 September
(estimated) purchasers' of portfolio X 2020
costs. compares with
portfolio Y.
(At 31 March 2020:
8.26%)
4.2 EPRA 'Topped-Up' NIY
This measure A comparable 8.39%
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 the valuation as at 30 September
and step rents). of portfolio X 2020
compares with
portfolio Y.
(At 31 March 2020:
8.66%)
5. EPRA Vacancy
Estimated Market Rental A "pure" (%) 8.21%
Value ('ERV') of vacant measure of
space divided by ERV of investment
the whole portfolio. property space
that is vacant, EPRA vacancy
based on ERV.
as at 30 September
2020
(At 31 March 2020:
3.68%)
6. EPRA Cost Ratio
Administrative and A key measure to 27.15%
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 cost) as at
30 September 2020
(At 30 September
2019: 16.93%)
16.70%
EPRA Cost ratio
excluding direct
vacancy costs as at
30 September 2020
(At 30 September
2019: 13.76%)
7. EPRA Capital
Expenditure
Is used to GBP0.11 million for the
Property which has been illustrate change period ended 30
held at both the current in comparable September 2020
and comparative balance capital values.
sheet dates for which
there has been no
significant development. (31 March 2020: GBP0.29
million)
8. EPRA Like-for-like
Rental Growth Is used to
illustrate change
in comparable
income values. (GBP0.20
Net income generated by million)/(2.26%) for
assets which were held the period ended 30
by the Company September 2020 (31
throughout both the March 2020: GBP0.29
current and comparable million/1.71%)
periods which there has
been no significant
development which
materially impacts upon
income.
Calculation of EPRA NIY and 'topped-up' NIY
30 September
2020
GBP'000
Investment property - wholly-owned 171,355
Allowance for estimated purchasers' costs at 6.8% 11,652
Grossed-up completed property portfolio valuation 183,007
(B)
Annualised cash passing rental income 14,144
Property outgoings (955)
Annualised net rents (A) 13,189
Rent from expiry of rent-free periods and fixed 2,169
uplifts
'Topped-up' net annualised rent (C) 15,558
EPRA NIY (A/B) 7.21%
EPRA 'topped-up' NIY (C/B) 8.39%
EPRA 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 30
September 2020, plus an allowance for estimated purchasers' costs. Estimated purchasers' 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 periods and future contracted rental uplifts.
Calculation of EPRA Vacancy Rate
30 September
2020
GBP'000
Annualised potential rental value of vacant 1,330
premises (A)
Annualised potential rental value for the 16,211
completed property portfolio (B)
EPRA Vacancy Rate (A/B) 8.21%
Calculation EPRA Cost Ratios
30 September
2020
GBP'000
Administrative/operating expense per IFRS income 2,230
statement
Less: Ground rent costs (33)
EPRA costs (including direct vacancy costs) 2,197
Direct vacancy costs (846)
EPRA costs (excluding direct vacancy costs) (B) 1,351
Gross rental income less ground rent costs (C) 8,091
EPRA Cost Ratio (including direct vacancy costs) 27.15%
(A/C)
EPRA Cost Ratio (excluding direct vacancy costs) 16.70%
(B/C)
The Company has not capitalised any overhead or operating expenses in the accounting period disclosed above.
Only costs directly associated with the purchase or construction of properties as well as all subsequent
value-enhancing capital expenditure are capitalised.
Company Information
Shareholder 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 +44 (0)370 707 1341 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 [2]. Shareholders eligible to receive dividend payments gross of tax may also
download declaration forms from that website.
Share Information
Ordinary GBP0.01 Shares 158,774,746
SEDOL Number BWD2415
ISIN Number GB00BWD24154
Ticker/TIDM AEWU
The Company's Ordinary Shares are traded on the Main Market of the London Stock Exchange.
Annual and Interim Reports
Copies of the Annual and Interim Reports are available from the Company's website: www.aewukreit.com [3].
Provisional Financial Calendar
31 March 2021 Year end
June 2021 Announcement of annual results
September 2021 Annual General Meeting
30 September 2021 Half-year end
November 2021 Announcement of interim results
Dividends
The following table summarises the dividends declared in relation to the period:
GBP
Interim dividend for the period 1 April 2020 to 30 3,175,495
June 2020 (payment made on 28 August 2020)
Interim dividend for the period 1 July 2020 to 30 3,175,495
September 2020 (payment to be made on 30 November
2020)
Total 6,350,990
Independent Directors
Mark Burton (Non-executive Chairman)
Bimaljit ('Bim') Sandhu (Non-executive Director and Chairman of the Audit Committee)
Katrina Hart (Non-executive Director)
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
Mapp
180 Great Portland Street
London
W1W 5QZ
Corporate Broker
Liberum
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Legal Adviser
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Depositary
Langham Hall UK LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
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.
National Storage Mechanism
A copy of the Interim Report will be submitted shortly to the National Storage Mechanism ('NSM') and will be
available for inspection at
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism [4].
LEI: 21380073LDXHV2LP5K50
ISIN: GB00BWD24154
Category Code: IR
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 1.2. Half yearly financial reports and audit reports/limited
reviews
Sequence No.: 88041
EQS News ID: 1148838
End of Announcement EQS News Service
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(END) Dow Jones Newswires
November 18, 2020 02:01 ET (07:01 GMT)
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