NAV Update and Dividend Declaration

RNS Number : 5369Q

AEW UK REIT PLC

29 February 2016

 

NAV Update and Dividend Declaration for the period 1 November 2015 to 31 January 2016

29 February 2016

AEW UK REIT plc (LSE: AEWU) (the "Company") announces its unaudited Net Asset Value ("NAV") and interim dividend for the period ended 31 January 2016.

Highlights

·      £17.18 million gross proceeds raised in December on issue of 17,010,000 new ordinary shares.

·      7 Properties acquired during the period for total of £31.09 million (net of acquisition costs).

·      Fair value independent valuation of the property portfolio as at 31 January 2016 of £103.60 million. Acquisition costs of £4.58 million on new property purchases have been written off. The valuation of the property portfolio on a like for like basis compared with 31 October 2015 has increased by 1.61%.

·      AEW UK Core Property Fund valuation of £10.01 million (31 October 2015: £9.94 million).

·      The Company has utilised £14.25 million of its £40 million 5 year term loan facility with RBS International.  These funds were used to finance the acquisition of properties acquired during December 2015.  As at 31 January 2016, the Company had a cash balance of £14.71 million remaining of the £17.18 million gross proceeds raised during the December 2015 share issue.

·      First interim dividend of 1.5 pence per share ('pps') declared on 27 November 2015, paid on 31 December 2015.

·      Second interim dividend of 0.75 pps declared on 3 December 2015, payable on 31 March 2016 to shareholders on the register on 11 December 2015.

·      NAV per share at 31 January 2016 of 97.67 pence (31 October 2015: 97.09 pence).

·      Earnings per share (excluding revaluation gains and losses on fair value of investments and calculated on weighted average of shares in issue) for the 3 month period ending 31 January 2016 are 1.60 pence per share.

Net Asset Value

The Company's unaudited NAV as at 31 January 2016 was £114.77 million, or 97.67 pence per share. This reflects an increase of 0.59% per share compared with the NAV as at 31 October 2015, or a NAV total return, including the first interim dividend for the period to 31 October 2015 of 1.50 pps, of 2.14%.  As at 31 January 2016, the Company owned investment properties with a fair value of £103.60 million. The Company's investment in AEW UK Core Property Fund is valued at £10.01 million and the Company had cash balances of £14.71 million for capital investment.

	Pence per share	£ million
NAV at 1 November 2015	97.09	97.58
Portfolio acquisition costs	(1.08)	(1.04)
Valuation change in property portfolio	0.95	1.03
Valuation change in AEW UK Core Property Fund	0.06	0.06
Income earned for the period	2.17	2.36
Expenses and net finance costs for the period	(0.56)	(0.61)
Interim dividend paid	(1.50)	(1.51)
Issue of equity (net of costs)	0.55	16.90
NAV at 31 January 2016	97.67	114.77

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards and incorporates the independent portfolio valuation as at 31 January 2016 and income for the period but does not include a provision for the second and third interim dividends, which will be paid in March 2016.

Dividend

The Company announces today a third interim dividend of 1.25 pps for the period from 15 December 2015 to 31 January 2016. The dividend payment will be made on 31 March 2016 to shareholders on the register as at 11 March 2016. The ex-dividend date will be 10 March 2016.

The dividend of 1.25 pps will be designated 1.25 pps as an interim property income distribution ('PID').

On the 3 December 2015 the Company announced a second interim dividend of 0.75p per share for the period from 1 November 2015 to 14 December 2015.  This dividend will be paid to shareholders on the register as at close of business on 11 December 2015 on 31 March 2016 in accordance with the Company's normal dividend timetable. The dividend was designated 0.75p per Share as an interim property income distribution.

The dividends to be paid for the period from 1 November 2015 to 31 January 2016, as noted above, total 2.0 pps.  The actual earnings per share for this period are 1.60 pps.  The Board of Directors expressed confidence in the Company's ability to meet the 2p per quarter target dividend payment from property income and to maintain this level going forward as the REIT approaches full investment and reaches its target gearing of 20% of Gross Asset Value.  In addition a number of asset management initiatives continue to add to the REIT's income stream. 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 issued 17,010,000 new ordinary shares on 15 December 2015 at an issue price of 101p per Share, raising gross proceeds of £17.18 million.  Following this issue of Shares, the Company's issued share capital consists of 117,510,000 Shares.

Debt

The Company utilised £14.25 million of its £40 million facility with RBS International.  Gearing as at 31 January 2016 is 13.8% (loan to market value of the property portfolio).  The loan attracts interest at LIBOR + 1.4% and is fully compliant with covenants.

Portfolio activity

During the 3 month period ending 31 January 2016, the Company has acquired a further 7 properties for a total of £31.09m (net of acquisition costs) and with a weighted net initial yield of 9.7% as described below:

Equinox, Castlegate Business Park, Salisbury was purchased for £2.0 million (net of acquisition costs).  This property is situated at the western end of Castlegate Business Park, an established industrial area located 3 miles north of Salisbury town centre.  The property has a net initial yield of 11.3% and a weighted average unexpired lease term ("WAULT") of 1 year to break and 6 years to expiry.  The ERV for the property is £195,000 and the reversionary yield is 9.2%.

Langthwaite Business Park, South Kirby was purchased for £5.8 million (net of acquisition costs).  This Business Park consists of two neighbouring industrial warehouses totalling 221,145 sq ft, let to Ardagh Glass Limited.  The properties have a net initial yield of 11% and a WAULT of approximately 1 year to break and 2.5 years to expiry.  The ERV for the properties totals just over £742,000 and the reversionary yield is 12%.

Odeon Cinema, Southend-on-Sea was purchased for £5.7 million (net of acquisition costs).  This property is situated in the town centre adjacent to the Victoria Plaza Shopping Centre and comprises of an 8 screen cinema.  This property has a net initial yield of 8.4% with a WAULT of approximately 7 years to expiry.  The ERV is £548,575 and the reversionary yield is 9.1%.

Cleaver House, Runcorn was acquired for £0.9 million (net of acquisition costs) reflecting a net initial yield of 7.9%.  This property is a single let industrial unit forming part of the Sarus Court development that was previously acquired by the Company in October 2015.  The property is fully let to Performance Products Limited with a WAULT of 2.5 years to break and 5.5 years to expiry.  The property has an ERV of £80,050 and the reversionary yield is 8.3%.

Oak Park, Droitwich was acquired for £5.6 million (net of acquisition costs) reflecting a net initial yield of 10.4%.  This property is an industrial complex totalling 188,515 sq ft let to Egbert H.Taylor & Co Limited (trading as Taylor Bins) with a WAULT of approximately 7 years to expiry.  The property has an ERV of £620,000 and the reversionary yield is 10.4%.

40 Queens Square, Bristol was purchased for £7.2 million (net of acquisition costs).  This property comprises a 36,365 sq ft multi-let city centre office investment in one of the most sought after business addresses in Bristol. The property has a net initial yield of 8.7% with a WAULT of approximately 3 years to expiry and 1.5 years to break.  The property has an ERV of £721,250 and a reversionary yield of 9.5%.

Brockhurst Crescent, Walsall was acquired for £3.9 million (net of acquisition costs) reflecting a net initial yield of 9.9%.  This property is a multi-let industrial warehouse located in an established commercial area located two miles from Junction 9 of the M6.  The property is fully let to Tata Steel UK and Micheldever Tyre Serivces providing a WAULT of 6.4 years to expiry.  The property has an ERV of £344,250 and a reversionary yield of 8.5%.

The sector weighting, by value, of the direct investment portfolio as at 31 January 2016 was 34.6% offices, 30.8% retail, 29.1% industrial and 5.5% other.

Post quarter end activity

Notable recent asset management gains include the letting of 46,513 sq ft at the Valley Retail Park in Belfast to outdoor retailer GO Outdoors for a term of 20 years.  The letting was completed post period end in February simultaneously with the surrender of an existing lease over the space to former tenant Harvey Norman from which the Company received a surrender premium of £1m.  The new letting forms a key element of the Company's plan to reposition the Park following acquisition in August last year and has also provided a catalyst for further lettings with an additional 21,560 sq ft of vacant accommodation under offer to national retailer Smyths Toys who trade from over 60 stores across the UK.

The Company has made a further acquisition of a portfolio of 3 properties during February 2016 for £9.0 million (net of acquisition costs).  The portfolio consists of 3 single-let industrial warehouses located in Basingstoke, Rotherham and St Helens.  The properties are fully let to Wella (UK) Holdings Ltd, Sapa Components UK Ltd and Kverneland Group UK Ltd respectively.  The portfolio has a net initial yield of 9.0% and provides a WAULT of approximately 5 years to break and 6 years to expiry.  The property has an ERV of £954,300 and the reversionary yield is 9.6%.

Taking into account the above acquisition, the sector weighting by value of the direct investment portfolio as at 29 February 2016 was 31.8% offices, 28.3% retail, 34.8% industrial and 5.1% other.

Portfolio Manager's comment

We are pleased with the strong continued growth of the Company over the last quarter and this, combined with some fruitful asset management gains, particularly in the retail warehousing sector, leaves us looking well placed to meet the Company's dividend targets going forward.  We also continue to see an attractive pipeline of assets across all sectors and therefore expect to make further announcements shortly as we invest the remainder of both the equity and our loan facility with RBS International.

Enquiries
Investor Relations	Company Secretary
Kari Clarke, AEW UK Investment Management LLP	Marco Murray, Capita Asset Services
[e-mail]	[e-mail]
T: 020 7016 4804	T: 020 7954 9792

 

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