TIDMAEWL
RNS Number : 9056Z
AEW UK Long Lease REIT PLC
22 May 2019
AEW UK Long Lease REIT plc ("AEWL" or "the Group")
LEI: 213800MPBIJS12Q88F71
22 May 2019
Meridian Metals Update and NAV Update for the quarter ended 31
March 2019
AEW UK Long Lease REIT plc (LSE: AEWL) (the "Group"), which owns
a diversified portfolio of 19 regional UK commercial property
assets, can today update investors on the leases of three
properties previously let to Meridian Metal Trading Limited ("MMT")
and also announces its unaudited Net Asset Value ('NAV') for the
quarter ended 31 March 2019.
Meridian Metal Update
-- On 3 April 2019, the Group announced that MMT, the tenant
occupying three industrial assets, had appointed Administrators. As
a consequence, the value of the three assets have been included in
the 31 March 2019 valuation at their vacant possession value of
GBP6.80 million, a fall of GBP3.95 million from the 31 December
2018 valuation of GBP10.75 million. Prior to going into
administration MMT paid the full rent due for the quarter ending 24
June 2019.
-- On 9 May 2019, we announced that the assets and business of
Meridian Metal Trading Limited ("MMT") had been acquired by
Meridian Steel Limited ("Meridian Steel"), a newly incorporated
wholly owned subsidiary of Duferco International Trading Holding
S.A. ("DITH").
-- We are pleased to announce that earlier today the leases have
been assigned to Meridian Steel for all three properties. Under the
terms of the new lease arrangements, the passing rental income for
the three industrial assets, two located in Dudley and one in
Sheffield, will remain unchanged at GBP659,000, following an
initial 12-month rent free period. The leases, which will run for a
period of eight years, are linked to the Retail Price Index, with
annual reviews and are all guaranteed by DITH.
-- Following the assignment of the leases, Knight Frank LLP,
AEWL's independent valuer, has valued the properties at GBP8.85
million. The impact of this revised valuation would increase the
Group's reported NAV based on the balance sheet as at 31 March 2019
(see below) by GBP2.05 million (2.55 pence per share).
Highlights for the quarter ended 31 March 2019
-- EPRA earnings per share ("EPRA EPS") for the quarter
decreased by 2.1% to 1.39 pence per share (quarter to 31 December
2018: 1.42 pence per share) (unaudited), which represents dividend
cover for the quarter of 101%.
-- For the first 9 months of the Company's current financial
year, EPRA earnings were 4.09 pence per share (unaudited)
reflecting dividend cover for the 9 months of 99.2%. The EPRA EPS
include an accrual to reflect the minimum contracted uplifts under
the Group's leases, without this accrual, the cash earnings were
3.54 pence per share (unaudited) reflecting 85.8% cash dividend
cover for the 9 month period.
-- At 31 March 2019, the independent fair valuation of the
property portfolio was GBP111.14 million (31 December 2018:
GBP112.23 million). The valuation of GBP111.14 million includes the
acquisition of YMCA Nursery, Southampton, which increased the
valuation by GBP2.06 million, a fall in the valuation of the
Meridian Metals properties (see Meridian Metals Update above) by
GBP3.95 million and a valuation increase of GBP0.80 million across
the rest of the portfolio. On a like-for-like basis, there has been
a decrease of GBP3.15 million (2.81%) over the quarter (quarter to
31 December 2018: increase of GBP1.60 million or 1.54%).
-- Unaudited NAV decreased to GBP75.04 million, 93.22 pence per
share (31 December 2018: GBP78.46 million, 97.46 pence per share),
a fall of 4.35%.
Alex Short, Portfolio Manager, AEW UK Long Lease REIT,
commented
"Prior to going into Administration MMT settled its full rent
due in respect of the quarter ending 24 June 2019. We are very
pleased to have secured assignments of all three leases at our
Dudley and Sheffield sites, minimising the overall impact on the
valuation of the portfolio.
All other properties in the portfolio either retained or
increased their value during the quarter.
Investor demand in the long lease sector of the market generally
remains robust and AEW UK remains committed to achieving the best
outcome for the investors of AEWL".
Net Asset Value
As at 31 March 2019, the Group owned 19 investment properties
with a fair value of GBP111.14 million.
Movement during the Quarter Pence per GBP
share million
NAV at 31 December 2018 97.464 78.46
Net portfolio acquisition costs (0.349) (0.28)
Valuation change in property portfolio (3.913) (3.15)
Income earned for the period 2.184 1.76
Expenses and net finance costs for
the period (0.791) (0.64)
Interim dividend paid (1.375) (1.11)
NAV at 31 March 2019 93.220 75.04
The NAV attributable to the ordinary shares has been calculated
under International Financial Reporting Standards as adopted by the
European Union and incorporates the Group's property portfolio
individually valued on a 'Red Book' valuation basis as at 31 March
2019 and income for the quarter, but does not include a provision
for the interim dividend for the quarter ended 31 March 2019, as
declared on 9 May 2019.
The income earned for the period includes an accrual for the
minimum contractual uplifts defined within the index linked leases.
In the event that inflation is greater than these minimum
contractual uplifts, the income realised will ultimately be greater
than that currently accrued.
Debt
On 11 January 2019, the Group increased its loan facility by
GBP11 million with its existing lender, Canada Life Investments,
taking the total loan drawn down to GBP41 million. As at 31 March
2019, the Group had utilised all of its GBP41 million fixed
interest loan facility with Canada Life Investments and at that
date was geared at a loan to Gross Asset Value ('GAV') of 35.3%.
The weighted average interest cost of the Group's increased
facility is 3.19% and the facility is repayable on the 20 October
2025.
Portfolio Activity
YMCA Nursery, 53 Victoria Road, Southampton
On 18 April 2019, the Group completed the acquisition of a
nursery property in central Southampton for GBP2.1 million,
reflecting a net initial yield of 5.9%. The property at 53 Victoria
Road, was purchased by way of a sale and leaseback agreement with
YMCA Fairthorne Group, a regional operation of the charity YMCA,
the world's largest youth charity. The lease arrangement provides
the Group with an income stream of 25 years, which will increase
annually in line with the Consumer Price Index. The 8,097 sq ft
property comprises a modern, purpose-built nursery facility forming
part of the Centenary Quay development, which has seen the addition
of some 1,500 new homes since 2012.
Inflation linked rent reviews
92% of the portfolio's income stream is reviewed periodically,
on an upward only basis, in line with inflation; with 71% and 21%
of the portfolio indexed to RPI and CPI respectively.
Sector weightings
The sector weightings, by value, of the property portfolio as at
31 March 2019 were: Hotels 21.9%; Industrial 18.3%; Residential
care homes 16.3%; Car showrooms 13.6%; Student accommodation 10.9%;
Leisure 8.7%; Power station 4.4%; Petrol station 4.0%; and Nursery
1.9%.
Profit Estimate
The EPRA EPS constitutes a profit estimate for the purposes of
Rule 28 of the Takeover Code (the "Profit Estimate"). The Profit
Estimate has been prepared based on the unaudited management
accounts for the quarter ended 31 March 2019. The Directors confirm
that the Profit Estimate remains valid and had been properly
compiled on the basis of the assumptions stated and that the basis
of accounting used is consistent with the Group's accounting
policies. Given that the period to which the Profit Estimate
relates has been completed, there are no other principal
assumptions underpinning the Profit Estimate.
Future publications
The Group's March 2019 Quarterly Investment Report will be
available on the Group's website on 24 May 2019.
- ENDS -
Enquires
AEW UK
Alex Short alex.short@eu.aew.com
+44(0) 20 7016 4838
Ed Long ed.long@eu.aew.com
+44(0) 20 7016 4848
Nicki Gladstone Nicki.Gladstone-ext
@eu.aew.com
+44(0) 771 140 1021
Cenkos Securities plc
Tom Scrivens +44(0) 207 397 1915
Sapna Shah +44(0) 207 397 1922
TB Cardew aew@tbcardew.com
Ed Orlebar +44(0) 7738 724 630
Emma Crawshaw +44(0) 7971 468 308
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END
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