Earnings Release • Jan 25, 2019
Earnings Release
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Dissemination of a RegulatoryAnnouncement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
AEW UK REIT plc (LSE: AEWU) ("the Company"), which, as at 25 January 2019, directly owns a diversified por3olio 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 2018.
"Despite an uncertain polical outlook, property performance generated from the Company's por3olio connues to be strong, highlighng the experse of the Manager in selecng assets that will deliver sustainably strong returns under a range of economic outlooks. We are pleased to start the New Year with both a valuaon upliF and stable EPRA earnings for the quarter, which demonstrates the ongoing resilience of our strategy.
The like-for-like valuaon upliF for the quarter of £1.03 million (0.53%) is detailed as follows by sector:
| Sector | Valuaon 31 Dec 18 | Valuaon movement for the quarter | Valuaon movement for the quarter |
|---|---|---|---|
| £ million | £ million | % | |
| Industrial | 87.23 | 2.35 | 2.77 |
| Other | 30.33 | 0.38 | 1.25 |
| Office | 43.20 | (0.20) | (0.46) |
| Retail | 31.90 | (1.50) | (4.49) |
| Total | 192.66 | 1.03 | 0.53 |
Whilst there connue to be concerns around the retail sector, we are pleased the Company's exposure has fallen during the quarter from 18.24% to 16.56% of the por3olio valuaon. This is partly as a result of the disposal of Stoneferry Retail Park, Hull, for £1.80 million and partly as a result of the valuaon losses shown above. Although the Company's remaining retail assets have seen a fall in valuaon due to negave senment towards the sector, they are generally located in town and city centres with large catchment populaons and in many cases are supported by strong alternave use values and asset management opons, liming the downside risk.
We firmly believe that, given the Company's light exposure to retail property and lack of exposure altogether to the Central London Office Market where Brexit related demand concerns may be building, the Company is well posioned to weather challenges in the wider economy and to take advantage of opportunies in the market.
Following on from recent quarters' asset management successes, this quarter saw further leDng success with a 10 year lease renewal being signed with Hydro Components UK Ltd on an 80,000 sq F industrial unit in Rotherham, which crystallised a 20% upliF in the level of passing rent. In addion, a new leDng was completed with Footasylum on Above Bar Street in Southampton, which highlighted that well located retail property is sll able to aBract tenant demand and, as such, vacancy across the por3olio remains low at 3.08%. Despite this low level of vacancy, we sll expect to see significant value add opportunity from the por3olio in coming quarters as other asset management transacons that are currently being negoated start to reach fruion. Other acvity during the quarter included the sale of the Stoneferry Retail Park in Hull to an owner occupier which further reduced the por3olio's exposure to the retail sector.
The sale of the asset in Hull, along with the use of our debt facility up to an LTV of 25.95%, provides us with further capital to invest and as such, we are currently undertaking detailed due diligence on a new industrial asset which we hope to be able to announce imminently. As shown by thi s potenal acquision, the Company's investment pipeline connues to look strong with a variety of opportunies that could be accreve to our earnings."
The Company's unaudited NAV as at 31 December 2018 was £152.12 million, or 100.37 pence per share.This reflects an increase of 0.31% compared with the NAV as at 30 September 2018.The Company's NAV total return, which includes the interim dividend for the period from 1 October 2018 to 31 December 2018 of 2.00 pence per share, is 2.31% for the three month period ended 31 December 2018. As at 31 December 2018, the Company owned investment properes with a fair value of £192.66 million.
| Pence per share | £ million | |
|---|---|---|
| NAV at 1 October 2018 | 100.06 | 151.65 |
| Loss on disposal of investment proper8es | (0.20) | (0.30) |
| Capital expenditure | (0.13) | (0.21) |
| Valua8on change in property porolio | 0.75 | 1.14 |
| Valua8on change in deriva8ves | (0.09) | (0.14) |
|---|---|---|
| Income earned for the period | 2.90 | 4.40 |
| Expenses and net finance costs for the period | (0.92) | (1.39) |
| Interim dividend paid | (2.00) | (3.03) |
| NAV at 31 December 2018 | 100.37 | 152.12 |
The NAV aBributable to the ordinary shares has been calculated under Internaonal Financial Reporng Standards and incorporates the independent por3olio valuaon as at 31 December 2018 and income for the period, but does not include a provision for the interim dividend for the three month period to 31 December 2018.
The Company today announces an interim dividend of 2.00 pence per share for the period from 1 October 2018 to 31 December 2018.The dividend payment will be made on 28 February 2019 to shareholders on the register as at 8 February 2019. The ex-dividend date will be 7 February 2019.
The dividend of 2.00 pence per share will be designated 2.00 pence per share as an interim property income distribuon ("PID").
The EPRA EPS for the three month period to 31 December 2018 was 1.98 pence (3 0 September 2018: 2.06 pence). The fall in EPRA earnings is largely as a result of one-off charges on void units, equang to 0.07 pence per share.The Company had £8.91 million cash for investment as at 31 December 2018, which will provide the opportunity to increase earnings through re-investment into high yielding assets.
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 condions, 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 illustrave purposes only, based on current market condions and is not intended to be, and should not be taken as, a profit forecast or esmate. Actual returns cannot be predicted and may differ materially from this illustrave 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's borrowings remained at £50.00 million throughout the quarter and at 31 December 2018, the Company was geared at a gross loan to value of 25.95% and a net loan to value of 21.33%.
The loan connues to aBract interest at LIBOR + 1.4%. To migate 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, resulng in the loan being 73% hedged. The Investment Manager and the Company will keep the levels of gearing and hedging under review.
On 22 October 2018, the Company extended the term of the loan facility by three years up to October 2023, incurring arrangement fees of £270,000. The Company also entered into interest rate caps covering the extension period, capping a noonal value of £46.51 million at LIBOR of 2.00% per annum from October 2020 to October 2023, which represents 90% of the current loan balance.The premium paid was £512,000.
In October 2018, the Company completed a lease renewal with Hydro Components UK Limited for a ten year term at a rent of £275,000 per annum at its c. 80,000 sq F industrial unit in Rotherham.This represents an increase of 20% in passing rent and the valuaon of the property increased by over 30% for the quarter.
In October 2018, the Company completed the lease of Unit 3, 69/75 Above Bar Street, Southampton, to Footasylum Plc. for a term of ten years at a rent of £135,000 per annum.
In December 2018, the Company completed the sale of Stoneferry Retail Park, Hull, for gross proceeds of £1.80 million, reducing the Company's exposure to the retail sector.
In December, the Company completed the regear of the lease at London East Leisure Park, Dagenham, with McDonalds Restaurants Ltd for a 15 year term at a rent of £75,000 in years 1 to 3, increasing to £90,000 thereaFer.The leDng led to an increase in value of £250,000 for the quarter.
| AEW UK | ||||
|---|---|---|---|---|
| Alex Short | [email protected] | |||
| +44(0) 20 7016 4848 | ||||
| Nicki Gladstone | [email protected] | |||
| +44(0) 7711 401 021 | ||||
| Company Secretary | ||||
| Link Company MaBers Limited [email protected] | ||||
| T: +44(0) 20 7954 9547 | ||||
| TB Cardew | ||||
| Ed Orlebar | [email protected] | |||
| T: 07738 724 630 | ||||
| Lucy Featherstone | [email protected] | |||
| T: +44 (0) 20 7002 1482 | ||||
| M: +44 (0) 7789 374 663 | ||||
| Liberum Capital | ||||
| Gillian Marn | T: +44 (0) 20 3100 2000 |
AEW UK REIT plc (LSE: AEWU) aims to deliver an aBracve total return to shareholders by invesng predominantly in smaller commercial properes (typically less than £10 million), on shorter occupaonal leases in strong commercial locaons across the United Kingdom. The Company was listed on the Official List of the UK Lisng Authority and admiBed 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 acve asset management, reposioning the properes and improving the quality of the income stream.
AEWU is currently paying an annualised dividend of 8p per share.
AEW UK Investment Management LLP employs a well-resourced team comprising 23 individuals covering investment, asset management, operaons and strategy. It is part of AEW Group, one of the world's largest real estate managers, with just over EUR63.5bn of assets under management as at 30 September 2018. AEW Group comprises AEW SA and AEW Capital Management L.P., a U.S. registered investment manager and their respecve subsidiaries. In Europe, as at 30 September 2018, AEW Group managed nearly EUR30bn in value in properes of all types located in 9 countries, with close to 400 staff. The Investment Manager is a 50:50 joint venture between the principals of the Investment Manager and AEW.
ISIN: GB00BWD24154 Category Code: MSCH TIDM: AEWU LEICode: 21380073LDXHV2LP5K50 OAM Categories:3.1.Additional regulated information required to be disclosed under the laws of a Member State Sequence No.: 7250 EQS News ID: 769415
End ofAnnouncementEQS News Service
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