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AEW UK REIT PLC  -  AEWU   

NAV Update and Dividend Declaration

Released 07:00 01-Dec-2017

RNS Number : 0307Y
AEW UK REIT PLC
01 December 2017
 

1 December 2017

 

NAV Update and Dividend Declaration for the three months to 31 October 2017

 

AEW UK REIT plc (LSE: AEWU) ("the Company"), which, as at 1 December 2017, directly owns a diversified portfolio of 32 regional UK commercial property assets, announces its quarterly unaudited Net Asset Value ("NAV") and interim dividend for the three month period ended 31 October 2017.

 

Highlights

 

·      The Company raised gross capital proceeds of £28.05 million pursuant to the Initial Placing, Initial Offer for Subscription and Intermediaries Offer (the "Initial Issue") of the Share Issuance Programme, as described in the prospectus published by the Company on 28 September 2017 (the "Prospectus"). Net proceeds were £27.50 million.

 

·      At 31 October 2017, fair value independent valuation of the property portfolio was £147.79 million (31 July 2017: £150.38 million), following a disposal at a sale price of £11.05 million and an acquisition at a purchase price of £6.37 million. On a like-for-like basis the valuation of the property portfolio increased by £2.09 million (1.50%) (31 July 2017: £1.94 million and 1.41%) over the quarter.

 

·      NAV of £148.22 million or 97.80 pence per share (31 July 2017: £119.76 million or 96.86 pence per share).

 

·      EPRA earnings per share for the period of 1.65 pence per share (31 July 2017: 2.10 pence per share). The decrease in EPRA earnings per share is partly attributable to a loss of income from the sale of Valley Retail Park, Belfast, and increased lease renewal costs during the quarter.

 

·      Interim dividend of 2.0 pence per share announced for the quarter ended 31 October 2017.

 

·      NAV total return of 3.10% and shareholder total return of 2.16% for the quarter ended 31 October 2017.

 

·      The Company remains conservatively geared with a gross loan to value ratio of 22.0% (31 July 2017: 21.6%). The Company increased its debt facility from £32.5 million to £40.0 million during the quarter.

 

·      At 31 October 2017, the Company held £32.44 million cash for investment with a further £7.5m of loan facility available for new investment. At 31 October, the Company had one property under offer to purchase for £10.5 million, which remains under offer as at 1 December 2017.

 

·      Portfolio and asset management activity during the period included:

Disposal of Valley Retail Park, Belfast, on 22 September for £11.05 million. The asset was acquired for £7.1 million in 2015.

On 5 October 2017, the Company completed the renewal of two leases with its largest tenant Ardagh Glass securing the strong covenant for an additional 3 years to expiry. 

On 31 October 2017, the Company purchased 208-220 Commercial Road, Portsmouth, for £6.4 million. The asset is fully let and provides a net initial yield of 9.6%.

 

Alex Short, Portfolio Manager, AEW UK REIT, commented:

 

"We are pleased to be investing again following our successful raise of £28 million in October and already a significant amount of these funds have been allocated to properties under offer.  With a lot of focus in the market currently on longer leased properties we are seeing some very compelling buying opportunities at present for our strategy which continues to find yield premium by investing in smaller lot size properties let on shorter than average leases but with a focus on sustainable locations and replicable income streams.  We therefore expect to be making further acquisition announcements shortly.  We have already completed one acquisition since the close of the capital raise for over £6m being a High Street retail asset in Portsmouth, a top 50 retailing centre which is set to see £1 billion of investment over the next 20 years.

The performance of the Company's assets has continued strongly again this quarter with like-for-like valuation growth of 1.5%. This compares favourably to MSCI data which shows that the market as a whole delivered growth of 1.3% over the quarter to 30 September 2017 on a "standing investment" basis (excluding transactions and developments).

We are particularly pleased with the capital appreciation delivered by the Company's industrial assets which have seen the strongest growth of all of the sectors in which the Company is invested, at an average of 3.2% within the quarter. The portfolio has been particularly well placed to benefit from this movement with its high weighting towards the industrial sector where many of our recent acquisitions have been focused, particularly in locations which exhibit low levels of supply alongside robust tenant demand and a low level of passing rent.

Our asset management team have had another successful quarter completing the disposal of the Valley Retail Park in Belfast which is the culmination of 2 years of hard work that has seen some significant value added to the asset with an overall valuation uplift in excess of 50% achieved.  The team have also this quarter completed a lease renewal with the company's largest tenant Ardagh Glass lengthening the income stream and creating a 9% valuation uplift."

 

Net Asset Value

 

The Company's unaudited NAV as at 31 October 2017 was £148.22 million, or 97.80 pence per share. This reflects an increase of 0.97% per share compared with the NAV as at 31 July 2017, or a NAV total return including the interim dividend for the period from 1 August 2017 to 31 October 2017 (of 2.0 pence per share), of 3.10%. As at 31 October 2017, the Company owned investment properties with a fair value of £147.79 million.

 

 

Pence per share 

£ million 

NAV at 1 August 2017

96.86

119.76

Portfolio acquisition costs

Realised loss on sale of investments

(0.26)

(0.17)

(0.39)

(0.22)

Capital expenditure

(0.03)

(0.03)

Valuation change in property portfolio

1.60

2.00

Income earned for the period

2.55

3.20

Expenses and net finance costs for the period

(0.90)

(1.13)

Interim dividend paid

(2.00)

(2.47)

Issue of equity (net of costs)

0.15

27.50

NAV at 31 October 2017

97.80

148.22

 

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards and incorporates the independent portfolio valuation as at 31 October 2017 and income for the period, but does not include a provision for the interim dividend for the three month period to 31 October 2017.

 

Dividend

 

The Company today announces an interim dividend of 2.0 pence per share for the period from 1 August 2017 to 31 October 2017. The dividend payment will be made on 29 December 2017 to shareholders on the register as at 15 December 2017. The ex-dividend date will be 14 December 2017.

 

The dividend of 2.0 pence per share will be designated 1.0 pence per share as an interim property income distribution ('PID') and 1.0 pence per share as an interim ordinary dividend ('non-PID').

 

The EPRA earnings per share for this period were 1.65 pence (31 July 2017: 2.10 pence). This decrease in earnings per share is partly attributable to a loss of income following the sale of Valley Retail Park, Belfast. There were also increased lease renewal costs during the quarter, mostly associated with the lease renewal of Ardagh Glass.

 

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 pence per share, over the 12 months ending 30 April 2017.  Based on the current market conditions, the Company expects to pay an annualised dividend of 8 pence per share in respect of the financial period ending 31 March 2018 and for the interim period to 30 September 2018.

 

In order to align dividend payments with the Company's new accounting period, in respect of the 3 month period to 31 October 2017, the Company will pay a dividend of 2 pence per share and then, in respect of the 2 month period to 31 December 2017, it currently intends to pay a further dividend of at a rate of two-thirds of the 2 pence per share dividend currently being paid for a three month period (reflecting the two month period).  With the dividend to the period to 31 October 2017, the Company will have paid 17.5 pence per share since launch.

 

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. The Company issued 27,911,001 Shares at a price of 100.5 pence per Share raising gross capital proceeds of £28.05 million on 24 October 2017.

 

Debt

The Company's borrowings remained at £32.50 million throughout the quarter, representing a gross loan to value ratio of 22.0% as at 31 October 2017. On 17 October 2017 the Company increased the available facility to £40.0 million, which will allow the Company to make further drawdowns on investment of the proceeds of the capital raise. 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 £26.51 million of the total balance of the loan at a strike rate of 2.5%, resulting in the loan being 82% hedged. The Investment Manager and the Company will keep the level of gearing under review and, if appropriate, will look to increase the facility.

 

Portfolio activity and asset management

 

Valley Retail Park, Belfast

 

In September the Company completed the disposal of the Valley Retail Park in Belfast for £11.05 million. The Company originally purchased the 100,189 sq ft property for £7.1m in 2015 with a WAULT of only 3 years to break and vacancy in excess of 20%. The Company's proactive asset management activity has added significant value with new lettings to Go Outdoors for a 20 year term and Smyths Toys for a term of 15 years.  A surrender premium of £1m was also taken from outgoing tenant Harvey Norman.

 

After completion of the asset's business plan, it was felt to be the most beneficial time to dispose given the pipeline of attractive investment opportunities for the Company.

 

Langthwaite Industrial Estate, South Kirkby

 

In October the Company completed the renewal of two leases with its largest tenant, Ardagh Glass, on two warehouse buildings at the Langthwaite Industrial Estate in South Kirkby, Yorkshire, located c.4 miles from Junction 38 of the A1M and c.10 miles from Junction 37 of the M1.  Ardagh Glass, whose parent group's latest reported full year figures show annual turnover in excess of 6,000 million, use the premises for storage and distribution serving their nearby factories.  The manufacturing group has taken the units for an additional term with just under 3 years to expiry resulting in a valuation uplift for the Company of 9%.

 

Commercial Road, Portsmouth

 

In October the Company acquired 208-220 Commercial Road and 7-13 Crasswell Street, Portsmouth for £6.4m.  The asset provides a net initial yield of 9.6% and is fully let to seven retail tenants and one office tenant providing a WAULT of 4 years to expiry. The 12,475 sq ft retail property is situated within the prime pedestrianised pitch of Commercial Road within Portsmouth's city centre. The property is also directly opposite the main covered shopping centre, The Cascades, which is anchored by Primark, H&M, Next and Marks and Spencer.

 

As part of the 'Shaping Portsmouth' development initiative, the city is set to receive £1 billion of investment from both public and private sector organisations over the next 20 years.

Eastpoint Business Park, Oxford

The Company completed a new letting of 2,800 sq ft of office accommodation to publishing company Capstone at the Eastpoint Business Park in Oxford.  The unit has been let for a term of 5 years with a break option in year 3 at a rent of £15.50 per sq ft which is in excess of ERV. 

 

Enquiries

 

AEW UK

 

Alex Short

alex.short@eu.aew.com

 

+44(0) 20 7016 4848

Nicki Gladstone

nicki.gladstone-ext@eu.aew.com

 

+44(0) 20 7016 4880

Company Secretary

 

Link Company Matters Limited

T: +44(0) 20 7954 9547

 

 

Temple Bar Advisory

 

Ed Orlebar

edo@templebaradvisory.com

 

T: 07738 724 630

Lucy Featherstone

lucyf@templebaradvisory.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 £10 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 £150 million in 32 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 8p 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 58.5 billion of assets under management as at 30 June 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 30 June 2017, AEW Group managed 26.0 billion in value in properties of all types located in 15 countries, with over 380 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
 
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NAV Update and Dividend Declaration - RNS