NAV Update and Dividend Declaration (1142252)

 
 AEW UK REIT plc (AEWU) 
NAV Update and Dividend Declaration 
 
22-Oct-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. 
 
           22 October 2020 
 
     AEW UK REIT Plc (the "Company") 
 
     NAV Update and Dividend Declaration 
 
  AEW UK REIT plc (LSE: AEWU) (the "Company"), which, as at 21 October 2020, 
 directly owns a diversified portfolio of 34 regional UK commercial property 
assets, announces its unaudited Net Asset Value ("NAV") and interim dividend 
           for the three month period ended 30 September 2020. 
 
           Highlights 
 
  · Interim dividend of 2.00 pence per share for the three months ended 30 
  September 2020, in line with the targeted annual dividend of 8.00 pence 
  per share. 
 
  · EPRA earnings per share ("EPRA EPS") for the quarter of 1.60 pence (30 
  June 2020: 1.81 pence). 
 
  · NAV of GBP147.24 million or 92.73 pence per share as at 30 September 2020 
  (30 June 2020: GBP148.24 million or 93.37 pence per share). 
 
  · NAV total return of 1.46% for the quarter (30 June 2020: 2.40%). 
 
  · For the rental quarter commencing on 29 September 2020, 88% of rent has 
  been collected or is expected to be received under monthly payment plans 
  prior to quarter end. A further 3% of income is expected to be received 
  under agreed, longer term payment plans. 
 
  · The Company remains conservatively geared with a loan to NAV ratio of 
  26.83% (30 June 2020: 34.74%). As at 30 September 2020, the Company had a 
  cash balance of GBP13.36 million and during the quarter, the Company repaid 
  GBP12.00 million of the GBP60.00 million loan facility. The Company has GBP12.03 
  million of the facility available to draw up to the maximum 35% Loan to 
  NAV at drawdown. 
 
     Alex Short and Laura Elkin, Portfolio Managers, AEW UK REIT, commented: 
 
 "We are pleased to report robust NAV performance for the Company again this 
    quarter and to announce an interim dividend of 2 pence per share for the 
        quarter, especially given the backdrop of the ongoing pandemic. This 
     demonstrates the strong fundamentals underlying the Company's portfolio 
 including its high industrial weighting and focus on locations with a depth 
  of tenant demand. Due to the Company's NAV resilience, high cash weighting 
    and conservative debt exposure, during the quarter we decided to utilise 
 some of the Company's available cash to increase EPS in order to build back 
   towards full dividend cover following the profitable sale of Corby in May 
 for GBP18.8 million. Post quarter end, the Company bought back 200,000 of its 
    own Ordinary Shares for gross consideration of GBP153,000. In addition, we 
        have identified a pipeline of both NAV and earnings accretive direct 
    purchase opportunities, some of which are well advanced and we expect to 
       make further announcements in this respect during the coming quarter. 
 
 The Company's relatively stable NAV performance reflects the fact that many 
 of the portfolio assets benefit from viable alternative use potential which 
   acts as a value stabiliser limiting downside risk and volatility. Seeking 
      asset purchases where pricing is supported by either a higher or equal 
      alternative use value has always been a feature of our stock selection 
 process, and we expect to see an increasing number of opportunities such as 
 these due to newly introduced changes to the national planning regime which 
  increase flexibility of use. These changes include the introduction of Use 
 Class E which groups together a number of previously disparately classified 
 commercial property uses such as retail, office, light industrial and gyms, 
           to allow greater ease of movement between them. 
 
   Elsewhere in the portfolio, it is encouraging to see our Asset Management 
team continue to drive value and income growth, having completed further new 
           lettings this quarter, often securing income streams ahead of our 
independent valuer's estimate of rental value. Amongst these is a new 5 year 
       lease to existing tenant Vink Holdings at the Apollo Business Park in 
     Basildon, where rental income has been secured 4% ahead of the valuer's 
   previous estimates, and 30% ahead of the previous rental level. The 6 new 
 lettings completed in the portfolio since the start of UK wide lockdowns in 
       March have secured rental income at a weighted average of 5% ahead of 
  previous estimates. This can be attributed in part to both the portfolio's 
 high weighting to the industrial and warehousing sector which has continued 
  to provide opportunities to grow income, as well as the proactive approach 
    taken by our team. Further new lettings and lease renewals are currently 
      under offer which look set to continue this positive trend into future 
           quarters. 
 
         In terms of rent collection in the portfolio, payment speed for the 
      September quarter has increased from both the June and March quarters' 
   collection rate. This is another encouraging sign for coming quarters and 
  proves that, on the whole, our tenants wish to return to normality as much 
           as they can, including the usual payment of rent." 
 
           Valuation movement 
 
As at 30 September 2020, the Company owned investment properties with a fair 
      value of GBP171.36 million. The like-for-like valuation decrease for the 
       quarter of GBP0.14 million (0.08%) is broken down as follows by sector: 
 
    Sector  Valuation 30 September  Valuation movement for the 
                              2020                     quarter 
             GBP million           %     GBP million             % 
Industrial       90.61        52.9          1.00          1.12 
    Office       45.85        26.7        (0.40)        (0.86) 
    Retail       21.90        12.8        (0.59)        (2.60) 
     Other       13.00         7.6        (0.15)        (1.14) 
     Total      171.36       100.0        (0.14)        (0.08) 
 
           Net Asset Value 
 
 The Company's unaudited NAV as at 30 September 2020 was GBP147.24 million, or 
  92.73 pence per share. This reflects a decrease of 0.68% compared with the 
     NAV per share as at 30 June 2020. The Company's NAV total return, which 
 includes the interim dividend of 2.00 pence per share for the period from 1 
   April 2020 to 30 June 2020, was 1.46% for the three-month period ended 30 
           September 2020. 
 
                                      Pence per share  GBP million 
                  NAV at 1 July 2020            93.37     148.24 
                 Capital expenditure           (0.04)     (0.05) 
        Valuation change in property           (0.19)     (0.30) 
                           portfolio 
     Valuation change in derivatives           (0.01)     (0.02) 
        Income earned for the period             2.43       3.86 
  Expenses and net finance costs for           (0.83)     (1.32) 
                          the period 
               Interim dividend paid           (2.00)     (3.17) 
            NAV at 30 September 2020            92.73     147.24 
 
       The NAV attributable to the ordinary shares has been calculated under 
International Financial Reporting Standards. It incorporates the independent 
  portfolio valuation as at 30 September 2020 and income for the period, but 
   does not include a provision for the interim dividend for the three month 
           period to 30 September 2020. 
 
           Dividend 
 
           Dividend declaration 
 
 The Company today announces an interim dividend of 2.00 pence per share for 
 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 will be 29 October 2020. 
 
The dividend of 2.00 pence per share will be designated 2.00 pence per share 
           as an interim property income distribution ("PID"). 
 
 The EPRA EPS for the three-month period to 30 September 2020 was 1.60 pence 
           (30 June 2020: 1.81 pence). 
 
           Dividend outlook 
 
It remains the Company's intention to continue to pay dividends in line with 
  its dividend policy, however the outlook remains unclear given the current 
 COVID-19 situation. 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. 
 
           Financing 
 
           Equity and share buy-back 
 
The Company's share capital consists of 158,774,746 Ordinary Shares, of 
which 200,000 are currently held by the Company as treasury shares. This 
reflects 200,000 Ordinary Shares having been bought back since the period 
end for gross consideration of GBP153,000. 
 
           Debt 
 
  During the quarter, the Company repaid GBP12.00 million of its loan facility 
   and had borrowings of GBP39.50 million as at 30 September 2020, producing a 
 Loan to NAV ratio of 26.83%. The Company is able to re-draw this amount and 
   has a total undrawn facility of GBP20.50 million of which GBP12.03 million is 
      available as at 30 September 2020 up to the maximum 35% Loan to NAV at 
           drawdown. 
 
  Whilst the Company passed its banking covenant tests in April and in order 
       to be prudent in the current market environment, the Company obtained 
     consent from its lender, RBS International, to waive the interest cover 
 tests within its loan agreement for July and October with the next proposed 
    test date being January 2021. Irrespective of these waivers, the Company 
 would have passed its interest cover tests for July and October. The lender 
  also conveyed a willingness to review the position again in December based 
on circumstances then prevailing. The Company is not required to place funds 

   on account or to comply with additional terms in order to qualify for the 
  waiver and, during the period of the waiver, the Company will maintain its 
           usual interest payments on the loan. 
 
   The loan continues to attract interest at LIBOR + 1.4% and as a result is 
  currently benefitting from the reduction in LIBOR rates. The Company's all 
           in interest rate as at 30 September 2020 was 1.47%. 
 
To mitigate the risk of interest rates rising, the Company has interest rate 
 caps effective for the remaining term of the loan, capping LIBOR at 1.0% on 
            a notional value of GBP51.50 million. 
 
           Rent Collection 
 
         The Company is pleased to report that the speed of payment for rent 
 collection seen in the first 10 days of the September rent quarter exceeded 
  that seen in the June and March quarters' collection by some 5%. As at the 
   date of this announcement, the Company had collected the following rental 
payments for the rental quarter commencing 29 September 2020, expressed as a 
           percentage of the quarter's total rental income: 
 
Current Position as at 21 October 2020   Q1 2020 Q2 2020 Q3 2020 
Received                                     90%     89%     67% 
Monthly Payments Expected Prior to             -       -     21% 
Quarter End 
                                             90%     89%     88% 
Agreed on longer term payment plans           6%      3%      3% 
 
Under Negotiation                             2%      4%      4% 
                                             99%     96%     95% 
Outstanding                                   1%      4%      5% 
Total                                       100%    100%    100% 
 
   It should be noted that this is an evolving picture with further payments 
           being received each day. 
 
           Asset Management Update 
 
     During the quarter the Company completed the following asset management 
           transactions: 
 
    Bessemer Road, Basingstoke - During July, 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, 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. 
 
Apollo Business Park, Basildon - During September, 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. 
 
   Clarke Road, Milton Keynes and Moorside Road, Swinton - Tenant Nationwide 
  Crash Repair Centres Limited, making up 2% of the Company's rental income, 
         appointed administrators on 3 September although subsequently, on 4 
September, 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 GBP60m for the year 
     ending April 2019. The former Swinton branch of Nationwide Crash Repair 
      Centres, representing 0.8% of the Company's rental income, will not be 
       operated by Redde Northgate on an ongoing basis, however interest has 
           already been received from a prospective new tenant. 
 
         Wheeler Gate, Nottingham - In September, 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. 
 
    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 c. 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. 
 
  Bath Street, Glasgow - Post quarter end 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 on the Coronavirus pandemic. 
 
     Vacancy - The portfolio's vacancy level now sits at 4.9% (30 June 2020: 
4.7%), excluding vacancy contributed by the asset at 225 Bath Street Glasgow 
    (the overall level is 8.2% including this asset). As set out above, this 
 asset 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. Additional vacancy this quarter 
   arises from an industrial unit in Basildon where an agreement was made to 
 surrender the lease of existing tenant Fulfilment Logistics in exchange for 
      full payment of arrears as well as a surrender premium contributing to 
     dilapidations. The unit is felt to have some reversionary potential and 
     viewings have already been conducted with possible replacement tenants. 
    Vacancy also increased due to the departure of H Samuel at 15 Fargate in 
  Sheffield. Again, tenant interest has been seen in this unit but, being in 
the retail sector, faces obvious head winds. The portfolio vacancy level (ex 
Bath St Glasgow) is in line with the Company's target vacancy level of below 
           5%. 
 
                   Enquiries 
                      AEW UK 
                  Alex Short          [e-mail] 
                                        [phone] 
                 Laura Elkin         [e-mail] 
 
                                        [phone] 
             Nicki Gladstone [e-mail] 
                                        [phone] 
           Company Secretary 
Link Company Matters Limited     [e-mail] 
                                        [phone] 
 
                   TB Cardew               [e-mail] 
                  Ed Orlebar           [phone] 
              Lucas Bramwell           [phone] 
 
             Liberum Capital 
Gillian Martin/Owen Matthews           [phone] 
 
           Notes to Editors 
 
           About AEW UK REIT 
 
   AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total return to 
    shareholders by investing predominantly in smaller commercial properties 
 (typically less than GBP15 million), on shorter occupational leases in strong 
   commercial locations across the United Kingdom. The Company was listed on 
the Official List of the UK Listing Authority and admitted to trading on the 
   Main Market of the London Stock Exchange on 12 May 2015, raising GBP100.5m. 
            Since IPO it has raised a further GBP58m. 
 
 The Company is currently invested in office, retail, industrial and leisure 
          assets, with a focus on active asset management, repositioning the 
           properties and improving the quality of the income stream. 
 
           AEWU is currently paying an annualised dividend of 8p per share. 
 
           www.aewukreit.com [1] [2] 
 
           About AEW UK Investment Management LLP 
 
AEW UK Investment Management LLP employs a well-resourced team comprising 26 
 individuals covering investment, asset management, operations and strategy. 
   It is part of AEW Group, one of the world's largest real estate managers, 
   with &euro70.2bn of assets under management as at 30 June 2020. AEW Group 
         comprises AEW SA and AEW Capital Management L.P., a U.S. registered 
   investment manager and their respective subsidiaries. In Europe, as at 30 
 June 2020, AEW Group managed &euro33.6bn of real estate assets on behalf of 
    a number of funds and separate accounts with over 420 staff located in 9 
        offices. The Investment Manager is a 50:50 joint venture between the 
principals of the Investment Manager and AEW. In May 2019, AEW UK Investment 
 Management LLP was awarded Property Manager of the Year at the Pensions and 
           Investment Provider Awards. 
 
           www.aewuk.co.uk [3] 
 
ISIN:           GB00BWD24154 
Category Code:  MSCH 
TIDM:           AEWU 
LEI Code:       21380073LDXHV2LP5K50 
OAM Categories: 3.1. Additional regulated information required to be 
                disclosed under the laws of a Member State 
Sequence No.:   86342 

EQS News ID:    1142252 
 
End of Announcement EQS News Service 
 
 
1: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=c9b6404682d7efd026577394ecbedab5&application_id=1142252&site_id=vwd&application_name=news 
2: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=9220892e63355ca6947a3a3423a3bac8&application_id=1142252&site_id=vwd&application_name=news 
3: https://eqs-cockpit.com/cgi-bin/fncls.ssp?fn=redirect&url=c3ab986d9b746ee23c3523d74649f8db&application_id=1142252&site_id=vwd&application_name=news 
 

(END) Dow Jones Newswires

October 22, 2020 02:00 ET (06:00 GMT)