TIDMAEWU
RNS Number : 2759M
AEW UK REIT PLC
27 April 2018
27 April 2018
NAV Update and Dividend Declaration for the three months to 31
March 2018
AEW UK REIT plc (LSE: AEWU) ("the Company"), which, as at 27
April 2018, directly owns a diversified portfolio of 36 regional UK
commercial property assets, announces its unaudited Net Asset Value
("NAV") and interim dividend for the three month period ended 31
March 2018.
Highlights
-- At 31 March 2018, the fair value independent valuation of the
property portfolio was GBP192.34 million (31 December 2017:
GBP151.59 million), following five acquisitions during the period
totalling GBP40.02 million. On a like-for-like basis the valuation
of the property portfolio increased by GBP0.74 million (0.48%) over
the quarter (two months to 31 December 2017: GBP0.70 million and
0.47%).
-- NAV of GBP146.03 million or 96.36 pence per share (31
December 2017: GBP147.34 million or 97.21 pence per share). This
decrease is largely due to purchase costs totalling GBP2.35 million
relating to the acquisition of five properties during the quarter.
Excluding purchase costs, the NAV would have increased by GBP1.04
million to GBP148.38 million or 97.91 pence per share.
-- EPRA earnings per share ("EPRA EPS") for the quarter of 1.76
pence per share (two months to 31 December 2017: 1.09 pence per
share).
-- The Company today announces an interim dividend of 2.00 pence
per share for the three months ended 31 March 2018.
-- NAV total return of 0.50% for the three months ended 31 March 2018.
-- The Company remains conservatively geared with a gross loan
to value ratio of 26.00% (31 December 2017: 21.44%). During the
quarter, the Company increased its loan facility with the Royal
Bank of Scotland International Limited ('RBSi') from GBP40.00
million to GBP60.00 million and made drawdowns totalling GBP17.50
million, increasing the total debt drawn to GBP50.00 million as at
31 March 2018.
-- At 31 March 2018, the Company held GBP3.57 million cash for
investment and on 5 April 2018 completed the sale of the Floors
1-9, Pearl House, Nottingham, for gross proceeds of GBP3.65
million.
-- Portfolio and asset management activity during the period included:
o The acquisition of Knowles Lane, Bradford, for GBP2.10 million
on 24 January 2018. The property comprises an industrial warehouse
and two storey ancillary offices and provides a net initial yield
of 7.1%.
o The acquisition of Diamond Business Park, Wakefield, for
GBP4.18 million on 5 February 2018. The multi-let asset comprises
an industrial and office element and provides a net initial yield
of 8.5% and a weighted average unexpired lease term (WAULT) of 5.0
years to expiry.
o The acquisition of 2 Geddington Road, Corby, for GBP12.40
million on 19 February 2018. The asset provides a net initial yield
of 10.0% and a WAULT of 3.5 years to expiry and the site is used by
the tenant for the storage and inspection of vehicles.
o The acquisition of Units 6, 6a and 7 London East Leisure Park,
Dagenham, for GBP11.37 million on 23 March 2018. The leisure asset
currently houses Mecca Bingo, McDonalds and Hollywood Bowl and
provides a net initial yield of 5.8%, rising to 8% in September,
and a WAULT of 12.8 years to expiry.
o The acquisition at Gresford Industrial Park, Wrexham, for
GBP9.98 million on 23 March 2018. This industrial asset is leased
to Plastipak UK Limited and provides a net initial yield of 8.3%
and a WAULT of 14.0 years to expiry.
Alex Short, Portfolio Manager, AEW UK REIT, commented:
"We are pleased to have seen a busy quarter for acquisitions
with five new properties added to the portfolio with a value of
just over GBP40 million. These new acquisitions provide a net
initial yield of 8.1%, rising to 8.7% in September, and a
reversionary yield of 8.3% which are supportive of our target
annual dividend of 8 pence per share. The new acquisitions also
provide a WAULT to break of 8.8 years that will have a positive
impact on the average length of income received across the
portfolio which was 4.5 years at the end of December. We are also
encouraged by the strength of our current pipeline, and the
continued wealth of buying opportunities that the Company has been
taking advantage of since IPO.
The acquisitions completed during the quarter have also allowed
us to increase the Company's debt levels back towards the long term
loan to value target of 25% which should also assist performance.
During the period a total of GBP17.50 million was drawn following
the extension of the Company's existing debt facility however, with
the exception of specific acquisitions ahead of an equity
fundraising or asset disposal, we will continue to target an amount
equivalent to 25% of the Gross Asset Value.
We also exchanged contracts on the sale of offices in
Nottingham, a strategic disposal for the portfolio that we outlined
in our business plan since their acquisition. The disposal removes
c. 1.9% of the portfolio's overall vacancy as well as the ongoing
need for capital expenditure associated with letting the offices.
Completion of the sale occurred post period end and the Company now
retains the fully let retail accommodation in a busy city centre
location at an attractive yield.
We continue to see selected new strong investment opportunities
across all sectors and use our expert stock selection skills to
identify and analyse these. There remains a heavy weighting towards
the industrial sector within our pipeline and given the continued
positive valuation performance of c. 2% across the Company's
industrial portfolio this quarter and the current low average
passing rent of GBP3.44 per sq ft, we consider that this segment in
particular looks well placed to benefit from further growth."
Net Asset Value
The Company's unaudited NAV as at 31 March 2018 was GBP146.03
million, or 96.36 pence per share. This reflects a decrease of
0.89% per share compared with the NAV as at 31 December 2017. This
decrease is largely due to purchase costs totalling GBP2.35 million
relating to the acquisition of five properties during the quarter.
The Company's NAV total return, which includes the interim dividend
for the period from 1 November 2017 to 31 December 2017 (of 1.33
pence per share), is 0.50% for the three month period ended 31
March 2018. As at 31 March 2018, the Company owned investment
properties with a fair value of GBP192.34 million.
Pence per GBP million
share
NAV at 1 January 2018 97.21 147.34
Portfolio acquisition costs (1.55) (2.35)
Capital expenditure (0.06) (0.09)
Valuation change in property portfolio 0.33 0.49
Income earned for the period 2.41 3.65
Expenses and net finance costs for
the period (0.65) (0.99)
Interim dividend paid (1.33) (2.02)
NAV at 31 March 2018 96.36 146.03
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards and incorporates
the independent portfolio valuation as at 31 March 2018 and income
for the period, but does not include a provision for the interim
dividend for the three month period to 31 March 2018.
Dividend
The Company today announces an interim dividend of 2.00 pence
per share for the period from 1 January 2018 to 31 March 2018. The
dividend payment will be made on 31 May 2018 to shareholders on the
register as at 11 May 2018. The ex-dividend date will be 10 May
2018.
The dividend of 2.00 pence per share will be designated 2.00
pence per share as an interim property income distribution
("PID").
The EPRA EPS for the three month period to 31 March 2018 was
1.76 pence (two months ended 31 December 2017: 1.09 pence). The
Company has seen an increase in EPRA EPS during the quarter, as it
invested the remainder of its capital proceeds, as well as a
further GBP17.50 million of debt into direct, income producing
property assets. The Directors expect that, all else being equal, a
full quarter's income from the newly acquired assets will allow the
Company's EPRA EPS to meet the 2.00 pence per share target
quarterly dividend. Further to this, on 5 April 2018, the Company
disposed of Floors 1-9, Pearl Assurance House, Nottingham, of which
c. 54% was vacant by ERV. Re-investment of the GBP3.65 million
proceeds into high yielding assets will provide a further increase
in potential earnings.
The Directors will declare dividends taking into account the
level of the Company's net income and the Directors' view on the
outlook for sustainable recurring earnings. As such, the level of
dividends paid may increase or decrease from the current annual
dividend of 8.00 pence per share, as declared pro-rata for the 11
months to 31 March 2018. Based on the current market conditions,
the Company expects to pay an annualised dividend of 8.00 pence per
share in respect of the financial period ending 31 March 2019.
Investors should note that this target is for illustrative
purposes only, based on current market conditions and is not
intended to be, and should not be taken as, a profit forecast or
estimate. Actual returns cannot be predicted and may differ
materially from this illustrative figure. There can be no assurance
that the target will be met or that any dividend or total return
will be achieved.
Financing
Equity
The Company's issued share capital consists of 151,558,251
Ordinary Shares.
Debt
On 12 February 2018, the Company utilised the remaining GBP7.50
million of its GBP40.00 million credit facility with RBSi. On 8
March 2018, the available facility was increased from GBP40.00
million to GBP60.00 million, which will allow the Company to
increase its gearing ahead of any future capital raise, in
accordance with the guidelines of the Prospectus, and reduce the
impact of cash drag. The Company utilised GBP10.00 million of the
increased facility on 15 March 2018, taking the total amount drawn
to GBP50.00 million. As at 31 March 2018, the Company was geared at
a gross loan to value of 26.00% and a net loan to value of
23.55%.
The loan continues to attract interest at LIBOR + 1.4%. To
mitigate the interest rate risk that arises as a result of entering
into a variable rate linked loan, on 26 February 2018 the Company
entered into interest rate caps on a notional value of a further
GBP10.00 million, becoming effective from 20 April 2018 and with a
cap rate of 2.0%. As at 31 March 2018, the Company had entered into
interest rate caps on GBP36.51 million of the total value of the
loan, with GBP26.51 million at a 2.5% cap rate and GBP10.00 million
at a 2.0% cap rate, resulting in the loan being 73% hedged. The
Investment Manager and the Company will keep the levels of gearing
and hedging under review.
Portfolio activity and asset management
Knowles Lane, Bradford
In January, the Company completed the purchase of Knowles Lane,
Bradford, for GBP2.10 million. The asset is fully let to one
tenant, Pilkington UK Ltd, who have been in occupation for c. 30
years. The property comprises an industrial warehouse and two
storey ancillary offices and was acquired for a price reflecting a
low capital value of GBP45 per sq ft and a net initial yield of
7.1%. The property is located two miles south of Bradford and eight
miles to the west of Leeds and is well located for the national
motorway network.
Diamond Business Park, Wakefield
During February, the Company acquired Diamond Business Park in
Wakefield comprising 201,543 sq ft of multi-let industrial and
office accommodation. The property is let to 12 tenants and
provides a WAULT of 2.6 years to break and 5.0 years to expiry. The
transaction of GBP4.18 million reflects a net initial yield of 8.5%
and low capital value of GBP22 per sq ft and GBP430,000 per
acre.
The large site of ten acres benefits from being situated in
Wakefield, an established industrial location. The business park is
strategically located at the intersection of the M1/M62 motorways,
providing access to Manchester, Liverpool, Sheffield and beyond to
London. The adjoining sites comprise recently developed residential
accommodation highlighting potential to add value through change of
use in the future.
2 Geddington Road, Corby
Also in February the Company acquired 2 Geddington Road, Corby,
an asset of 35 acres fully let to GEFCO UK Ltd, a wholly owned
subsidiary of GEFCO SA, a global provider of logistics services to
manufacturers, with 3.5 years to expiry. The property comprises a
secure fenced site along with a modern industrial property
extending to 52,000 sq ft and is used by the tenant for the storage
and inspection of vehicles. The transaction of GBP12.40 million
reflects an attractive net initial yield of 10.0%.
A mix of commercial and residential development surrounds the
site, including the Eurohub logistics park and a 250-acre
development site being brought to the market by Frogmore and
Mulberry Developments where Eddie Stobart have recently signed up
for a new 844,000 sq ft facility.
Gresford Industrial Estate, Wrexham
During March the Company acquired a single let industrial unit
on the Gresford Industrial Estate, Wrexham for a price of GBP9.98
million reflecting a low capital value of GBP35 per sq ft. The
property provides 279,541 sq ft leased to Plastipak UK Limited for
a further 14 years and comprises three units within a
self-contained site. The asset benefits from its location in
Gresford Industrial Estate, approximately two miles north of
Wrexham town centre, with key motorway links across the North West
via the A483. A key feature of the building is its large power
supply at 18 megawatts which is rarely seen in buildings of this
nature and could therefore be attractive to future tenants. The
asset provides a net initial yield today of 8.3% with a fixed
rental uplift due in 2022 taking the yield in excess of 9%.
East London Leisure Park, Dagenham
During March the Company acquired c. 72,000 sq ft of leisure
accommodation forming the eastern section of the London East
Leisure Park, a purpose built leisure destination, for GBP11.37
million. The property currently houses Mecca Bingo, McDonalds and
Hollywood Bowl and provides a net initial yield of 5.8%, rising to
8% in September 2018 upon expiry of a rent free period, with a
WAULT of 12.8 years.
A major attraction of the park is its location, 11 miles east of
Central London and being highly accessible both via public
transport but also with close links to the A13 and M25. Dagenham is
an area due to go through major regeneration over the next ten
years with the Council recently setting out plans for the
development of thousands of new homes as well as the first film
studio to be built in London for 25 years. The surrounding area
comprises a mix of retail, industrial and residential property.
Pearl Assurance House, Nottingham
Post period end the Company has completed the part sale of Pearl
Assurance House, which was purchased by the Company in 2016 for
GBP8.15 million. The sale of GBP3.65 million comprises the first to
the ninth floors of the building as well as a ground floor
reception and car parking spaces, providing a total area of 41,262
sq ft. The transaction reflected a net initial yield of 6.9% and
reduces the overall vacancy level in the portfolio by 1.9%.
The Company will retain the fully let ground floor accommodation
in this busy city centre location, totalling 28,432 sq ft, let to
national retail operators including Costa Coffee, Poundland and
Lakeland. The retained element will provide the Company with an
ongoing yield of 9.5% based on its component value of GBP5.26
million.
Enquiries
AEW UK
Alex Short alex.short@eu.aew.com
T: +44(0) 20 7016 4848
Nicki Gladstone nicki.gladstone-ext@eu.aew.com
T: +44(0) 20 7016 4880
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
T: +44(0) 20 7954 9547
TB Cardew
Ed Orlebar ed.orlebar@tbcardew.com
T: 07738 724 630
Lucy Featherstone lucy.featherstone@tbcardew.com
T: +44 (0) 20 7002 1482
M: +44 (0) 7789 374
663
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.
Since its IPO in May 2015, the Company has invested over GBP190
million in 36 assets. It 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. Whilst occupational demand in strategic
locations remains, securing tenants on shorter leases allows AEWU
to crystallise value through rent reviews and lease re--gears.
AEWU is currently paying a dividend of 8.00 pence per share
p.a..
AEW UK Investment Management LLP employs a well-resourced team
comprising 25 individuals covering investment, asset management,
operations and strategy. It is part of AEW Group, one of the
world's largest real estate managers, with EUR58.6 billion of
assets under management as at 31 December 2017. 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 31 December 2017, AEW Group managed EUR28.4 billion in value in
properties of all types located in 15 countries, with over 390
staff. The Investment Manager is a 50:50 joint venture between the
principals of the Investment Manager and AEW.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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