DJ AEW UK REIT plc: COVID-19 Statement, NAV Update and Dividend Declaration
AEW UK REIT plc (AEWU)
AEW UK REIT plc: COVID-19 Statement, NAV Update and Dividend Declaration
20-Apr-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
20 April 2020
AEW UK REIT Plc (the "Company")
COVID-19 Statement, NAV Update and Dividend Declaration
AEW UK REIT plc (LSE: AEWU) (the "Company"), which, as at 20 April 2020,
directly owns a diversified portfolio of 35 regional UK commercial property
assets, announces its COVID-19 statement, unaudited Net Asset Value ("NAV")
and interim dividend for the three month period ended 31 March 2020.
Highlights
· The Company today announces an interim dividend of 2.00 pence per share
for the three months ended 31 March 2020, in line with the targeted annual
dividend of 8.00 pence per share. This dividend is more than covered by
EPRA earnings per share ("EPRA EPS") for the quarter of 2.12 pence per
share.
· NAV of GBP147.86 million or 93.13 pence per share as at 31 March 2020.
· 64% of rent has so far been collected for the current quarter. This
figure is expected to increase to 75% once payments have been received
from tenants making monthly payments. Pending the agreement of potential
asset management transactions, this could then increase to 85% once
negotiations have completed.
· The Company remains conservatively geared with a gross loan to value
ratio of 27.21% (31 December 2019: 26.30%). Having raised gross capital
proceeds of GBP7m during the quarter, the Company had a cash balance of
GBP9.87 million and net loan to value ratio of 21.99% as at 31 March 2020.
The Company expects to pass all banking covenant tests for this quarter
with significant headroom when they are measured at the end of April.
· Strongly performing underlying property portfolio producing the highest
level of income return and the second highest total return when compared
with the MSCI UK Balanced Funds Quarterly Property Index for the 12 month
period to 31 December 2019 (latest index data available).
COVID-19 statement
Since the onset of the COVID-19 situation, the Investment Manager, in close
liaison with the Board of Directors, has been working unremittingly to
minimise the impact and ensure that the Company is well-positioned to
withstand the challenges. The health and well-being of all members of the
team and individuals involved in the Company is paramount and the Company is
pleased to report that all individuals are well. Furthermore, the business
continuity measures which the Company has implemented are operating
effectively with the Investment Manager able to continue to manage the
Company's portfolio of properties efficiently. All desk-based operations are
functioning well and none of the Investment Manager's employees have been
furloughed.
As with many other real estate companies and REITs, the focus over recent
weeks has been on ensuring that rents due for the quarter are paid and
collected efficiently and an update on the Company's progress in doing that
is provided below.
Whilst the Investment Manager and the Board of Directors believe that the
full impacts of COVID-19 on both the UK economy and the real estate market
are yet to become clear, the Company exhibits a number of features which
make it as robustly positioned as possible to deal with the ongoing
situation:
· Low leverage - The Company remains conservatively geared with a gross
loan to value ratio of 27.21% (31 December 2019: 26.30%). Banking
covenants in respect of loan to value and interest cover both benefit from
significant headroom and the Company expects to pass all covenant tests
for this quarter with headroom at the end of April. Furthermore, the cost
of the Company's debt is calculated relative to LIBOR and, although it
does have interest rate caps in place to limit any future increase in this
cost, it is currently benefitting from the recent reduction in rates. The
Company's all-in interest rate as at 31 March 2020 was 2.10%.
· Well capitalised - Following the Company's recent Placing, it has a
strong cash position of GBP9.87 million.
· Low vacancy level - Vacancy level remains very low at 3.68%. The
portfolio has now maintained a vacancy level below 4% for seven
consecutive quarters.
· Strong industrial weighting - The portfolio benefits from a high
industrial weighting of 48.2% and a low weighting towards those market
sectors more immediately affected by the current situation namely, retail
(12.4%) and leisure (7.8%).
· Diversified portfolio - the Company's portfolio comprises 35 properties
let to 91 tenants in strong commercial, regional locations where there are
few alternatives for tenants to relocate. The Company's largest tenant
accounts for 7.6% of passing rental income and a total of 76% of the
Company's tenant base are classed as either government bodies, essential
services, large international companies or benefit from online trading.
The Investment Manager continues to monitor tenants' financial positions
and prospects on an ongoing basis.
· Active management of assets - The Investment Manager's active management
approach led to 12 lettings being completed during the year to 31 December
2019, with annual headline income achieved 9% ahead of estimated rental
value from independent valuers. The Investment Manager continues to pursue
its active management strategies notwithstanding the current uncertain
situation relating to COVID-19, with a number of negotiations ongoing.
· Strongly performing underlying property portfolio - The portfolio
produced the highest level of income return and the second highest total
return compared with the MSCI UK Balanced Funds Quarterly Property Index
for the 12 month period to 31 December 2019 (latest index data available).
The portfolio has also outperformed the index producing 3.1% total return
outperformance on an annualised basis over the past 3 years.
Rent Collection
The Investment Manager maintains close contact with all tenants, which has
been particularly relevant over recent weeks where rent collection across
the real estate sector has proved more challenging than usual. As at the
date of this announcement, the Company has collected the following rental
payments expressed as a percentage of the quarter's total rental income:
Current Position As at 17 April As at 17 April
2020 2019
Received 64% 83%
Monthly Payments Expected 11% 9%
Prior to Quarter End
75% 92%
Under Negotiation - 10% -
pending the agreement of
potential asset
management transactions
85% 92%
15% 8%
Outstanding
Total 100% 100%
It should be noted that this is an evolving picture with further payments
being received each day.
In addition to the above the Manager reports that none of the Company's
tenants have filed for administration as at the date of this announcement.
NAV Update
At 31 March 2020, the fair value independent valuation of the property
portfolio was GBP189.30 million (31 December 2019: GBP195.80 million). On a
like-for-like basis the valuation of the property portfolio decreased by
GBP6.50 million (3.32%) over the quarter (31 December 2019: decrease of GBP0.25
million and 0.13%). Property valuations across the UK have been reported on
the basis of 'material valuation uncertainty' in line with guidance from the
RICS. Other highlights are as follows:
· NAV of GBP147.86 million or 93.13 pence per share (31 December 2019:
GBP147.38 million or 97.24 pence per share).
· EPRA earnings per share ("EPRA EPS") for the quarter of 2.12 pence per
share (31 December 2019: 2.18 pence per share).
· EPRA occupancy 96.32% (31 December 2019: 96.14%).
· NAV total return of -2.17% for the three months ended 31 March 2020
(three months ended 31 December 2019: 1.93%).
Dividend
Dividend declaration
The Company today announces an interim dividend of 2.00 pence per share for
the period from 1 January 2020 to 31 March 2020. The dividend payment will
be made on 29 May 2020 to shareholders on the register as at 1 May 2020. The
ex-dividend date will be 30 April 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 March 2020 was 2.12 pence (31
December 2019: 2.18 pence).
Dividend outlook
It remains the Company's intention to continue to pay future dividends in
line with its dividend policy, however the outlook remains unclear given the
current COVID-19 situation. In determining future dividend payments, regard
will be had to the circumstances prevailing at the relevant time, as well as
the Company's requirement, as a UK REIT, to distribute at least 90% of its
distributable income annually, which will remain a key consideration.
Alex Short, Portfolio Manager, AEW UK REIT, commented:
"We are currently seeing an unprecedented period of uncertainty within UK
and global markets and understandably, this is having an impact on real
estate markets. This is demonstrated within our property valuation this
quarter and also by the fact that the property valuation, in line with
guidance given by the RICS to the UK real estate market as a whole, is
issued with material uncertainty.
Features inherent in the Company give us comfort however, that it is as
well-positioned as possible in the current time. Firstly, the high and very
stable level of earnings generated from the portfolio represent a strong
starting point in times of increased volatility. Looking at UK real estate
return components since the inception of the MSCI index, income is by far
the least volatile providing a much more resilient profile even in times of
large capital declines. The Company's ability to generate both high and
stable earnings is demonstrated by its dividend of 2p per share per quarter
which has been reliably paid each quarter for four years now and was most
recently covered to 106%.
Furthermore, the Company's strong focus towards industrial property at over
48% is expected to provide a robust base, both during the crisis and also
for recovery once normal life resumes. We can already see that the
restrictions that have been placed on all of our lives have led to a
significant drop off in trade for retail and leisure operators. In the
industrial sector however, we see supermarkets and online retailers looking
to take on additional space in order to deal with increased capacity and UK
manufacturers rising to new production challenges with an entrepreneurial
spirit.
Another area which provides us with some optimism is in connection with
ongoing asset management transactions. As Manager of the Company, AEW's very
active approach to asset management is a major feature of its investment
strategy and proven by the portfolio's outperformance of the MSCI UK
Balanced Index at property level over various time periods. Since
restrictions have been sanctioned in the UK, we have seen some of the
portfolio's potentially most accretive value plays continue to progress and,
in addition, some new opportunities have come to light during this time. We
continue to work assets hard in order to maximise value. This can be
demonstrated by the portfolio's very low vacancy level, which has now
remained below 4% for seven consecutive quarters.
Turning to the valuation, movement per sector can be seen below with the
impact in retail sectors being felt most acutely. Strong valuation uplift
for the quarter came from the Company's asset in Corby, shown within
'other', due to improved occupational market conditions. The like-for-like
valuation decrease for the quarter of GBP6.50 million (3.32%) is detailed as
follows by sector":
Sector Valuation 31 March Valuation movement for the
2020 quarter
GBP million % GBP million %
Industrial 91.20 48.2 (3.68) (3.87)
Office 44.90 23.7 (0.35) (0.77)
Other 29.80 15.7 0.13 0.42
Retail 23.40 12.4 (2.60) (10.00)
Total 189.30 100.0 (6.50) (3.32)
Net Asset Value
The Net Asset Value ("NAV") as at 31 March 2020 is subject to material
uncertainty following the Standing Independent Valuer's determination of
material valuation uncertainty as per VPS 3 and VPGA 10 of the RICS Red Book
Global, due to the unprecedented set of circumstances surrounding the
COVID-19 Global Pandemic. Consequently, less certainty and a higher degree
of caution should be attached to the NAV. This set of circumstances is not
unique to the Company and is being reported by all major UK Commercial RICS
registered property valuers at this time.
The Company's unaudited NAV as at 31 March 2020 was GBP147.86 million, or
93.13 pence per share. This reflects a decrease of 4.23% compared with the
NAV per share as at 31 December 2019. The Company's NAV total return, which
includes the interim dividend for the period from 1 October 2019 to 31
December 2019 of 2.00 pence per share, is -2.17% for the three-month period
ended 31 December 2019. As at 31 March 2020, the Company owned investment
properties with a fair value of GBP189.30 million.
Pence per share GBP million
NAV at 1 January 2020 97.24 147.38
Valuation change in property (4.28) (6.59)
portfolio
Valuation change in derivatives (0.02) (0.04)
Income earned for the period 2.95 4.54
Expenses and net finance costs for (0.83) (1.28)
the period
Interim dividend paid (2.00) (3.03)
93.06 140.98
Issue of equity (net of costs) 0.07 6.88
NAV at 31 March 2020 93.13 147.86
The NAV attributable to the ordinary shares has been calculated under
International Financial Reporting Standards. It incorporates the independent
portfolio valuation as at 31 March 2020, which is subject to material
uncertainty and income for the period, but does not include a provision for
the interim dividend for the three month period to 31 March 2020.
Financing
Equity
During the quarter, the Company raised gross proceeds of GBP7 million at 97
pence per share pursuant to the Placing under its Placing Programme, which
expired on 28 February 2020. The Company issued 7,216,495 new Ordinary
Shares which were admitted to listing on the premium listing segment of the
Official List and to trading on the Main Market of London Stock Exchange
Group plc on 28 February 2020 ("Admission"). Following Admission, the
Company's issued share capital consists of 158,774,746 Ordinary Shares.
Following the capital raise, the Company holds a cash balance of GBP9.87
million as at 31 March 2020.
Debt
The Company has borrowings of GBP51.50 million, producing a gross loan to
value of 27.21% and a net loan to value of 21.99%. The Company expects to
pass all banking covenant tests for this quarter with significant headroom
when they are calculated at the end of April.
The loan continues to attract interest at LIBOR + 1.4% and as a result is
currently benefitting from the reduction in rates. The Company's all in
interest rate as at 31 March 2020 was 2.10%.
To mitigate the interest rate risk of interest rates rising, the Company has
entered into interest rate caps on GBP36.51 million of the total value of the
loan (GBP26.51 million at 2.5% cap rate and GBP10.00 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 GBP46.51 million at LIBOR of 2.0%
per annum, which represents 90% of the current GBP51.50 million loan balance.
The Investment Manager and the Board will keep the levels of gearing and
hedging under review.
Enquiries
AEW UK
Alex Short alex.short@eu.aew.com
+44(0) 20 7016 4848
Laura Elkin Laura.elkin@eu.aew.com
+44(0) 20 7016 4869
Nicki Gladstone nicki.gladstone-ext@eu.aew.com
+44(0) 7711 401 021
Company Secretary
Link Company Matters Limited aewu.cosec@linkgroup.co.uk
+44(0) 1392 477 500
TB Cardew AEW@tbcardew.com
Ed Orlebar +44 (0) 7738 724 630
Lucas Bramwell +44 (0) 7939 694 437
Liberum Capital
Gillian Martin/Owen Matthews +44 (0) 20 3100 2000
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 GBP15 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 GBP100.5m.
Since IPO it has raised a further GBP58m.
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.
www.aewukreit.com [1] [2]
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 EUR 69.5bn of assets under management as at 31 December 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 31
December 2019, AEW Group managed EUR 33bn 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.
www.aewuk.co.uk [3]
ISIN: GB00BWD24154
Category Code: MSCL
TIDM: AEWU
LEI Code: 21380073LDXHV2LP5K50
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 59032
EQS News ID: 1024535
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(END) Dow Jones Newswires
April 20, 2020 02:00 ET (06:00 GMT)
