AEW UK REIT plc (AEWU)
16 January 2020
NAV Update and Dividend Declaration for the three months to 31 December 2019
AEW UK REIT plc (LSE: AEWU) ("the Company"), which, as at 15 January 2020, directly owns a diversified portfolio of 35 regional UK commercial property assets, announces its unaudited Net Asset Value ("NAV") and interim dividend for the three month period ended 31 December 2019.
Alex Short, Portfolio Manager, AEW UK REIT, commented:
"The result of the UK general election on 13th December delivered a significant majority to the UK government for the first time in a decade, removing some of the political uncertainty which has prevailed for some time and leading to improved sentiment across the market. This is encouraging for the sector as a whole and positive for the Company. The Company's portfolio is well-positioned as we move into 2020 and we are seeing many exciting opportunities.
As manager, AEW UK Investment Management LLP is successfully executing the investment strategy, which has seen the Company's assets generate property level total returns of 6.69% over the 12 months to 30 September 2019 (being the most recent date for which benchmark data is available) from standing investments, an outperformance of 3.80% relative to the market (as measured by the MSCI/AREF UK PFI Balanced Funds Quarterly Index). Over the 12 months to 31 December 2019 the Company has generated total shareholder returns of 20.67% and, as noted above, has achieved a significant number of lettings ahead of estimated rental values.
The REIT has consistently paid out dividends of 8 pence per share per annum, making it one of the highest dividend yields among UK listed REITs. It has paid total dividends of 32.8 pence per share since IPO, in addition to those announced below. Annualised total property returns since the Company's May 2015 IPO have been 10.89% up to 30 September 2019 on standing investments, an outperformance of 3.42% relative to the benchmark.
We are actively working on an exciting pipeline of potential acquisitions with a particular focus on the industrial and office sectors, which we believe will be accretive to the strategy both in terms of income but also in terms of long term value retention and creation opportunities. To that end, the Company intends to raise additional capital under its existing Placing Programme in the near future.
Through the December quarter valuation, the portfolio maintained value on the whole with a marginal decrease of 0.13%. Industrial and office performed well increasing by 1.01% and 2.03% respectively, however this was offset by a decrease in retail assets. Whilst the headwinds experienced by the retail sector are well publicised, the portfolio has a low vacancy rate (at 3.9%) amongst its assets and we have identified certain potential value creation opportunities which we are actively pursuing."
The like-for-like valuation decrease for the quarter of £0.25 million (0.13%) is detailed as follows by sector:
Strong valuation uplift for the quarter came from the Company's office asset in Solihull where the Secretary of State for Communities and Local Government has agreed to take a new 15 year lease at an increased rental level with very limited capital cost to the REIT. This transaction is currently in solicitors' hands and is due to complete within the coming quarters, at which point we expect further valuation uplift.
Net Asset Value
The Company's unaudited NAV as at 31 December 2019 was £147.38 million, or 97.24 pence per share. This reflects a decrease of 0.12% compared with the NAV as at 30 September 2019. The Company's NAV total return, which includes the interim dividend for the period from 1 July 2019 to 30 September 2019 of 2.00 pence per share, is 1.93% for the three-month period ended 31 December 2019. As at 31 December 2019, the Company owned investment properties with a fair value of £195.80 million.
The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards. It incorporates the independent portfolio valuation as at 31 December 2019 and income for the period, but does not include a provision for the interim dividend for the three month period to 31 December 2019.
The Company today announces an interim dividend of 2.00 pence per share for the period from 1 October 2019 to 31 December 2019. The dividend payment will be made on 28 February 2020 to shareholders on the register as at 24 January 2020. The ex-dividend date will be 23 January 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 31 December 2019 was 2.18 pence (30 September 2019: 2.13 pence).
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. Based on 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 2020.
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.
The Company's issued share capital consists of 151,558,251 Ordinary Shares and there was no movement during the quarter.
The Company has a strong pipeline of opportunities which it is actively pursuing. Accordingly, the Company intends to raise additional capital under its existing Placing Programme in the near future. Further announcements of any potential equity fundraise will be made as and when appropriate.
During the quarter, the Company drew £1.50 million of its loan facility, to bring the total borrowings to £51.50 million and producing a gross loan to value of 26.30% and a net loan to value of 24.74%.
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, the Company has entered into interest rate caps on £36.51 million of the total value of the loan (£26.51 million at 2.5% cap rate and £10.00 million at 2.0% cap rate) up to October 2020, resulting in the loan being 71% hedged.
The loan term runs to October 2023 and the Company has entered into additional interest rate caps covering the period from October 2020 to October 2023, capping a notional value of £46.51 million at LIBOR of 2.0% per annum, which represents 90% of the current £51.50 million loan balance. The Investment Manager and the Company will keep the levels of gearing and hedging under review.
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 £15 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 £100.5m. Since IPO it has raised a further £51m.
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.
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 EUR70.2bn of assets under management as at 30 September 2019. 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 September 2019, AEW Group managed EUR32.3bn of real estate assets on behalf of a number of funds and separate accounts with over 400 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.
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