Company update

RNS Number : 0955E

AEW UK Long Lease REIT PLC

25 February 2020

 

The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than the Republic of Ireland or the Netherlands), Canada, Australia, Japan or the Republic of South Africa.

25 February 2020

AEW UK Long Lease REIT plc

(the "Company" or the "Group")

COMPANY UPDATE

The Board of Directors of AEW UK Long Lease REIT plc (ticker: AEWL), the owner of a diversified portfolio of 19 regional UK commercial property assets let on long leases,   is pleased to provide an update on the changes to the Company's service providers and the resulting significant cost savings to the Group.

T he changes set out below are expected to reduce the Company's recurring annual overhead costs to approximately half of its historic level.  The Board is confident that the new service providers will deliver the requisite service levels to the Company.

The Board expects that, with effect from the financial year commencing 1 July 2020, the combination of the reduction in the Company's overheads and the contracted ¹ rental income from the Company's portfolio enables the Board to reaffirm its current target annual dividend of 5.5 pence per share but one that it expects will be on a fully cash covered basis from 1 July 2020 ² .

· Mason Owen and Partners Limited ("Mason Owen") has been appointed as the Company's Investment Adviser with effect from 9 April 2020 with prime responsibility for the Group's property portfolio and will also assume the role of Property Manager with effect from 1 March 2020.

o  Established in 1967 and headquartered in Liverpool, Mason Owen is a full-service agency that offers all aspects of property advice including investment, asset management, valuation and compulsory purchase advice as well as insurance brokerage. Clients include Assura plc, Greggs PLC, Grosvenor Europe, Iceland Foods Ltd, Legal & General Investment Management, LondonMetric Property Plc, LXi REIT plc, M&G Real Estate and Nuveen.

· Langham Hall Fund Management LLP will act as the Company's Alternative Investment Fund Manager ("AIFM") with effect from 9 April 2020 and Langham Hall UK Depositary LLP will continue to act as the Group's Depositary.

· King Capital Consulting Limited has been appointed by the Group as its consultant portfolio manager.

o  King Capital Consulting's principal is David King, who is non-executive chairman of CBRE Asset Services and a consultant to the Hermes Vista UK Residential Investment Fund. Between 1985 and 2011 David King held a variety of senior positions, including Chief Executive, at Nelson Bakewell and NB Real Estate Limited.

· Hanway Advisory Limited will become Company Secretary with effect from 5 March 2020, replacing Link Company Matters Limited.

o  Hanway is an independent professional services firm that provides a full range of outsourced company secretarial, administrative and legal support services to UK listed Investment Trusts and Real Estate Investment Trusts, including Triple Point Social Housing REIT plc.

· Westlake Clark Limited will assume the role of the Company's Administrator replacing Link Alternative Fund Administrators Limited whose contract will end on 5 June 2020.

o  Westlake Clark is part of the SKS Business Services Limited group, which provides full-service tax, finance outsourcing and accounting services across a network of practices in the UK and overseas.

· AEW UK's tenure as the Company's Investment Manager and AIFM will cease on 9 April 2020.

Steve Smith, Chairman of AEW UK Long Lease REIT plc, commented:

"The Board's actions, together with the Group's contracted ¹ rental income from our portfolio, enables the Board to reaffirm its current target annual dividend of 5.5 pence per share but one that it expects will be on a fully cash covered basis from 1 July 2020 ² with effect from the financial year commencing 1 July 2020. The Board is confident that the changes to the Company's service providers will achieve a saving in the region of half of the Company's historic level of recurring annual overhead cost, whilst potentially enhancing service levels. 

The Company is now well-placed to deliver to our shareholders attractive, sustainable and fully cash-covered dividends over the short and longer term, together with the potential for income growth from its diversified portfolio of UK property investments, the majority of which are let on long leases that contain inflation-linked rent uplifts.

The Board, along with the Group's advisers, is continuing to seek longer term solutions to expand the Group, including the introduction of new capital, and to deliver further shareholder value."

Notes

1  References above to the Group's contracted rental income include the rent which is due to be received with effect from the June 2020 rent quarter day from the three properties at Grazebrook Industrial Estate, Dudley and Provincial Park, Sheffield previously let to Meridian Metal Trading Limited ("MMTL"). As announced by the Company in May 2019, the assets and business of MMTL were acquired by Meridian Steel Limited ("MSL"), a newly incorporated wholly-owned subsidiary of Duferco International Trading Holding S.A. ("DITH") and all three leases were assigned to MSL. Under the terms of the revised lease arrangements, the passing annual rental income from the three industrial assets, two located in Dudley and one in Sheffield, remained unchanged at £659,000, with an initial 12-month rent free period, ending on 24 June 2020. The leases, which run for a period of eight years, are linked to the Retail Price Index, now with annual reviews and are all guaranteed by DITH.

2  Investors should note that any dividend 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.

Background to the above changes

As announced by the Company on 10 April 2019, the Board commenced a strategic review and served protective notice of termination of the Company's investment management agreement with AEW UK Investment Management LLP. This strategic review implemented by the Board sought to achieve value for shareholders either by expanding the Group's equity and asset base to achieve full dividend cover, or considering offers from interested parties, or by selling the Group's portfolio and returning funds to shareholders.

On 7 August 2019, the Board announced the conclusion of its review and following meetings with each of the interested parties and consultation with major shareholders, the Board concluded that none of the proposals reflected the true value of the Group and were therefore not in the best interests of shareholders. The Board implemented a cost reduction exercise, with the objective of delivering a fully cash-covered dividend, in line with the original dividend target at the time of the Group's IPO, for the financial year ending 30 June 2021. The outcome of this exercise is detailed above.

ENQUIRIES

AEW UK Long Lease REIT plc
Steve Smith - Chairman	via Maitland/AMO below
Maitland/AMO (Communications Adviser)
James Benjamin	[e-mail] [phone]
Cenkos
Will Rogers	[e-mail] [phone]
Rob Naylor	[e-mail] [phone]

The Company's LEI is 213800MPBIJS12Q88F71.

Further information on the Group is available at: www.aewukllreit.com

About the Group

AEW UK Long Lease REIT plc aims to generate a sustainable, secure and attractive income return for shareholders, whilst maintaining capital values in real terms, from a diversified portfolio of UK property investments, predominately in alternative and specialist sectors. The majority of the assets in the Group's portfolio are let on long leases which contain inflation-linked rent review provisions, which help to underpin income distributions to shareholders with the potential for income and capital growth.

Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

 

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