AEW UK REIT plc: NAV Update and Dividend Declaration (1099815)
July 23 2020 - 2:00AM
UK Regulatory
AEW UK REIT plc (AEWU)
AEW UK REIT plc: NAV Update and Dividend Declaration
23-Jul-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.
23 July 2020
AEW UK REIT Plc (the "Company")
NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) (the "Company"), which, as at 23 July 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 June 2020.
Highlights
· The Company today announces an interim dividend of 2.00 pence per share
for the three months ended 30 June 2020, in line with the targeted annual
dividend of 8.00 pence per share.
· EPRA earnings per share ("EPRA EPS") for the quarter of 1.81 pence (31
March 2020: 2.12 pence).
· NAV of GBP148.24 million or 93.37 pence per share as at 30 June 2020 (31
March 2020: GBP147.86 million or 93.13 pence per share).
· NAV total return of 2.40% for the quarter (31 March 2020: -2.17%).
· During the quarter, the Company disposed of 2 Geddington Road, Corby,
for gross proceeds of GBP18.80 million, 25% ahead of prior valuation. The
property was purchased for GBP12.40 million in February 2018.
· EPRA occupancy 95.70% (31 March 2020: 96.32%). During the quarter, the
Company completed a lease renewal with the Secretary of State for Housing,
Communities and Local Government at Sandford House, Solihull for term of
15 years at a rent of GBP662,785 per annum. The property's valuation
increased by 37% over the quarter.
· For the rental quarter commencing on 24 June, 84% of rent has been
collected or is expected to be received under monthly payment plans prior
to quarter end. A further 6% of income is expected to be received under
agreed, longer term payment plans with an additional 4% still under
negotiation.
· The Company remains conservatively geared with a gross loan to value
ratio of 30.03% (31 March 2020: 27.21%). The Company had a cash balance of
GBP28.09 million and net loan to value ratio of 13.65% as at 30 June 2020.
Post quarter-end, the Company repaid GBP12.00 million of the facility,
reducing the gross loan to value to 23.03%.
Alex Short and Laura Elkin, Portfolio Managers, AEW UK REIT, commented:
"We are very pleased to be able to announce today an increase in NAV for the
quarter providing a NAV total return of 2.4%. We are also confirming an
interim dividend of 2 pence per share for the quarter, in line with the
annual dividend target of 8 pence per share. This success is a result of two
main factors, firstly, the unceasing hard work carried out by our asset
management team whose proactive approach is such a key piece of the AEWU
strategy. Asset Management gains have resulted in two significantly NAV
accretive wins for the Company during the period at our asset in Solihull
and our former asset in Corby. Both of these transactions are examples of
the Investment Manager's major business plans reaching fruition and it has
been very encouraging to see our assets demonstrating such resilience in the
current market. The second factor here is the defensive nature of the
portfolio assets which has always been a focus for us when selecting stock
for AEWU. This, combined with the portfolio's majority weighting in the
industrial sector, we believe will continue to provide a robust base for
investors' capital.
Another major Management focus in recent weeks has been to take steps to
ensure that the Company has the ability to retain its conservative outlook
towards its borrowings across a range of market conditions, including the
current. We have therefore taken a number of steps during the period
including amending the facility to allow unrestricted rights of repayment
and draw down which will allow AEWU to bring its borrowing below its long
term target of 25% in the short term whilst not prejudicing its ability to
access borrowing over the long term. Another action taken has been to obtain
a waiver of interest cover covenant tests until 2021 with the lender
pledging further support past this date if needed. These changes were
enacted despite banking covenants having been passed with significant
headroom at their most recent test date in April and without increase in
cost of debt. We would like to thank our lender RBS International for their
support to the Company.
A highlight of the Company's announcement today is confirmation of the
Company's dividend of 2p per share for the quarter to 30 June 2020. We are
very pleased to be able to announce this as it shows the continuation of the
Company's track record, now in excess of 4 years, in paying dividends at
this level. Our outstanding performance in achieving the sale of Corby
during May at a level 25% ahead of valuation, has created a significant
profit in cash reserves that we can call on at this time. Going forward, we
would hope to see normalisation in our rent collection that will continue to
support the dividend at this level over the long term.
The aforementioned sale of Corby leaves the Company holding a significant
cash balance which we believe is advantageous in current market conditions
as it increases Management optionality. We have held regular discussions
with Directors over recent weeks to assess potential uses of this capital.
We also believe that the investment market will continue to yield attractive
purchasing opportunities over coming weeks and months and we are currently
analysing a number of opportunities within our pipeline."
The like-for-like valuation decrease for the quarter of GBP2.81 million
(1.61%) by sector is broken down as follows:
Sector Valuation 30 June Valuation movement for the
2020 quarter
GBP million % GBP million %
Industrial 89.61 52.2 (1.59) (1.75)
Office 46.25 27.0 1.35 3.01
Retail 22.48 13.1 (0.92) (3.91)
Other 13.15 7.7 (1.65) (11.15)
Total 171.49 100.0 (2.81) (1.61)
Net Asset Value
47.8% of the Company's portfolio valuation as at 30 June 2020, which
includes all of its assets that do not sit within the industrial sector, is
subject to material uncertainty following the Standing Independent Valuer's
determination of material valuation uncertainty as per VPS 3 and VPGA 10 of
the RICS Red Book Global, due to the unprecedented set of circumstances
surrounding the COVID-19 Global Pandemic. Consequently, less certainty and a
higher degree of caution should be attached to the NAV. The industrial
sector was removed from this clause a short time prior to the valuation
date. This set of circumstances is not unique to the Company and is being
reported by all major UK Commercial RICS registered property valuers at this
time.
The Company's unaudited NAV as at 30 June 2020 was GBP148.24 million, or 93.37
pence per share. This reflects an increase of 0.26% compared with the NAV
per share as at 31 March 2020. The Company's NAV total return, which
includes the interim dividend for the period from 1 January 2020 to 31 March
2020 of 2.00 pence per share, was 2.40% for the three-month period ended 30
June 2020. As at 30 June 2020, the Company owned investment properties with
a fair value of GBP171.49 million.
Pence per share GBP million
NAV at 1 April 2020 93.13 147.86
Gain on disposal of investment 2.31 3.67
property
Capital expenditure (0.03) (0.05)
Valuation change in property (1.84) (2.92)
portfolio
Valuation change in derivatives (0.01) (0.01)
Income earned for the period 2.71 4.31
Expenses and net finance costs for (0.90) (1.44)
the period
Interim dividend paid (2.00) (3.18)
NAV at 30 June 2020 93.37 148.24
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation as at 30 June 2020, which is subject to material
uncertainty and income for the period, but does not include a provision for
the interim dividend for the three month period to 30 June 2020.
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 April 2020 to 30 June 2020. The dividend payment will be
made on 28 August 2020 to shareholders on the register as at 31 July 2020.
The ex-dividend date will be 30 July 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 June 2020 was 1.81 pence (31
March 2020: 2.12 pence).
Dividend outlook
It remains the Company's intention to continue to pay future 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 and
there was no movement during the quarter.
The Board announces that it has approved a share buy-back programme
utilising cash available for this purpose. Liberum Capital Limited has been
appointed in connection with the buy-back programme and can use its
discretion to buy-back shares within set parameters.
Shareholders should be aware that a purchase of shares by the Company on any
trading day may represent a significant proportion of the daily trading
volume in the shares and could exceed 25 per cent of the average daily
trading volume of the preceding 20 business days.
Debt
The Company had borrowings of GBP51.50 million as at 30 June 2020, producing a
gross loan to value of 30.03% and a net loan to value of 13.65%.
During the quarter, the Company amended its loan facility to allow the
flexibility to make repayments and re-draw these amounts, akin to a
revolving credit facility, without incurring additional fees or increasing
the loan margin. On 20 July 2020, the Company repaid GBP12.00 million of the
facility, reducing the gross loan to value to 23.03%.
Whilst the Company passed its banking covenant tests with significant
headroom in April, in order to be prudent in the current market environment,
the Company, during the quarter, 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.
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
intends to 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 June 2020 was 2.05%.
To mitigate the risk of interest rates rising, the Company has interest rate
caps effective for the remaining term of the loan. During the quarter, the
Company, replaced it existing interest rate caps covering the period from
October 2020 to October 2023, which capped the interest rate at 2.0% on a
notional value of GBP49.51 million, with new caps covering the same period
capping the interest rate at 1.0% on a notional value of GBP51.50 million. The
Company paid a premium of GBP62,968.
Rent Collection
The Investment Manager maintains close contact with all tenants, which has
been particularly relevant over recent months where rent collection across
the real estate sector has proved more challenging than usual. As at the
date of this announcement, the Company had collected the following rental
payments for the rental quarter commencing 24 June 2020, expressed as a
percentage of the quarter's total rental income:
Current Position As at 23 July 2020
Received 66%
Monthly Payments Expected Prior to Quarter 17%
End
84%
Agreed on longer term payment plans 6%
Under Negotiation - pending the agreement 4%
of potential asset management transactions
93%
Outstanding 7%
Total 100%
In respect of the quarter commencing on the 25 March 2020, the Company
reports that 86% of rents have now been collected with a further 8% of
payments expected to be received over coming periods by way of agreed
payment plans which, once received, will total 94%.
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:
Bank Hey Street, Blackpool - During 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 valuation level immediately prior and 52% ahead of its
acquisition price in 2018. The asset had been delivering an income stream 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 - Post period end, the Company has 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.
Enquiries
AEW UK
Alex Short alex.short@eu.aew.com
+44(0) 20 7016 4848
Laura Elkin Laura.elkin@eu.aew.com
+44(0) 20 7016 4869
Nicki Gladstone nicki.gladstone-ext@eu.aew.com
+44(0) 7711 401 021
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
TB Cardew AEW@tbcardew.com
Ed Orlebar +44 (0) 7738 724 630
Lucas Bramwell +44 (0) 7939 694 437
Liberum Capital
Gillian Martin/Owen Matthews +44 (0) 20 3100 2000
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 &euro71.2bn of assets under management as at 31 March 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 31
March 2020, AEW Group managed &euro33.5bn 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]
LEI: 21380073LDXHV2LP5K50
ISIN: GB00BWD24154
Category Code: MSCM
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.: 77425
EQS News ID: 1099815
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