NAV Update and Dividend Declaration

RNS Number : 2885M

AEW UK Long Lease REIT PLC

26 April 2018

 

26 April 2018

NAV Update and Dividend Declaration for the three months ended 31 March 2018

AEW UK Long Lease REIT plc (LSE: AEWL) (the "Group"), which as at 26 April 2018, directly owns a diversified portfolio of 16 regional UK commercial property assets, announces its quarterly unaudited Net Asset Value ('NAV') and interim dividend for the three month period ended 31 March 2018.

Highlights

·      At 31 March 2018, the fair value independent valuation of the property portfolio was £93.46 million (31 December 2017: £71.42 million), following four acquisitions during the period totalling £21.99 million.  On a like-for-like basis the valuation of the property portfolio increased by £0.03 million (0.04%) over the quarter (quarter to 31 December 2017: £0.13 million and 0.76%).

·      NAV of £73.09 million or 90.79 pence per share (31 December 2017: £74.28 million or 92.27 pence per share).

·      A total of £6.19 million of portfolio acquisition costs have been incurred since the inception of the Group. The main element of these acquisition costs relate to stamp duty, and together with agents, legal and other fees, have led to a reduction in NAV of 7.68 pence per share.

·      EPRA earnings per share ("EPRA EPS") for the quarter of 1.01 pence per share (quarter to 31 December 2017: 0.36 pence per share).

·      The Group today announces an interim dividend of 1.00 pence per share for the quarter ended 31 March 2018.  This follows a dividend of 0.50 pence per share for the quarter to 31 December 2017 and a dividend of 0.50 pence per share for the period since inception to 30 September 2017. 

·      Utilisation of £28.64 million of the loan facility with Canada Life Investments.

·      Portfolio activity during the period included:

o  The acquisition of Gazebrook Industrial Park, Dudley and Provincial Park, Sheffield for £10.14 million on 23 January 2018.  This acquisition comprises of a set of two industrial units and provides a net initial yield of 6.0% and a weighted average unexpired lease term of 15 years to expiry.

o  The acquisition of Mercure City Hotel, Glasgow for £8.03 million on 23 January 2018.  This hotel, situated in central Glasgow provides a net initial yield of 6.5% and a weighted average unexpired lease term of 18.5 years.

o  The acquisition of Applegreen Petrol Filling Station, Crawley for £3.82 million on 20 February 2018. The acquisition provides a net initial yield of 5.3% and a lease term of 15 years to expiry (no breaks) with three-yearly rental uplifts linked to RPI, capped at 3.5%. 

·      Post the period end, the Group acquired 500 Chiswick High Road, Chiswick for £2.2m on 4 April 2018.  This gymnasium is leased to Snap Fitness for a term of 15 years to expiry with no breaks and provides 5 yearly inflation linked reviews. The transaction reflects a net initial yield of 5.5%.

·      A further 2 assets are currently under offer, which would take the Group to fully invested.

Portfolio Manager's comment

Alex Short, of AEW UK Investment Management LLP, the Group's Investment Manager (the "Investment Manager"), commented:

"We are delighted that we shortly will have invested all of the IPO proceeds and to have fully allocated all the associated debt, with a loan to Gross Asset Value of around 30%, to an interesting and varied collection of assets.  We have exceeded the aims of our stated strategy with a weighted average unexpired lease term in excess of 22 years, 90% of the rental income being inflation linked and a net initial yield at portfolio level of 5.6%.  This has all been achieved in line with the timetable we set out to investors prior to the Group's launch.

During this quarter the Group has benefited from a modest capital value increase, demonstrating the strength of this market and the quality of the assets we have purchased.  The interim dividends have been paid in line with guidance given at IPO and the loan to Gross Asset Value at 30% is cost effective and accretive to performance whilst maintaining a fairly conservative risk profile. 

At present the Group has two further assets under offer which will finalise the current investment programme.  It is anticipated that these purchases will complete within the current Quarter.

The long lease strategy focuses on the fundamental quality and underlying value of the property as well as the security of the income stream, with the expectation that the company will provide not only an inflation linked income return but also an inflation linked capital value return in the long term.  Property fundamentals will remain a critical part of our investment process." 

Net Asset Value

The Group's unaudited NAV as at 31 March 2018 was £73.09 million, or 90.79 pence per share.  This reflects a decrease of 1.60% per share compared with the NAV as at 31 December 2017.  This decrease is largely due to purchase costs totalling £1.63 million relating to the acquisition of four properties during the quarter.  As at 31 March 2018, the Group owned 15 investment properties with a fair value of £93.46 million.

	Pence per share	£ million
NAV at 31 December 2017	92.27	74.28
Portfolio acquisition costs	(2.02)	(1.63)
Valuation change in property portfolio	0.03	0.03
Income earned for the period	1.79	1.44
Expenses  and net finance costs for the period	(0.78)	(0.63)
Interim dividend paid	(0.50)	(0.40)
NAV at 31 March 2018	90.79	73.09

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards and incorporates the independent portfolio valuation as at 31 March 2018 and income for the period, but does not include a provision for the interim dividend for the three month period to 31 March 2018.

Dividend

The Group today announces an interim dividend of 1.00 pence per share for the period from 1 January 2018 to 31 March 2018.  The dividend payment will be made on 31 May 2018 to shareholders on the register as at 4 May 2018.  The ex-dividend date will be 3 May 2018.

The dividend of 1.00 pence per share will be designated 1.00 pence per share as an interim property income distribution ("PID").

The EPRA EPS for the three month period was 1.01 pence (three month period ended 31 December 2017: 0.36 pence) which is in line with the target earnings for this period as set out in the Group's Prospectus.  The Group has seen an increase in EPRA EPS during the quarter, as it invested the remainder of its capital proceeds, as well as £28.64 million of debt into direct, income producing property assets. 

Investors should note that any dividend targets are 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 Group's issued share capital consists of 80,500,000 Ordinary Shares.

Debt

During the three month period ending 31 March, the Group utilised a total of £28.64 million of its £30 million fixed interest loan facility with Canada Life Investments.  As at 31 March 2018, the Group was geared at a loan to Gross Asset Value of 28.1 %.  Upon full utilisation of the loan facility, it is anticipated that the loan to Gross Asset Value will be c.30%.

Portfolio activity

Gazebrook Industrial Park, Dudley and Provincial Park, Sheffield

In January, the Group completed the acquisition of a set of two industrial units in Dudley and Sheffield for £10.14 million.   Both properties are let to Meridian Metal Trading Ltd on 15-year leases and subject to five yearly rent reviews linked to RPI, with annual uplifts between 1% and 4%. The first property, Works 1 and Works 2 are located in Gazebrook Industrial Park, Dudley, and total 137,002 sq ft. The Park enjoys good transport links, located in close proximity to the A461 and Junction 2 of the M5. The second property in the portfolio is a 33,405 sq ft unit in Provincial Park, Sheffield. The Park comprises a large warehouse and distribution facility with several smaller units located around the perimeter. The site has excellent connectivity to the M1. The total portfolio has a weighted average unexpired lease term of 15 years to expiry and reflects a net initial yield of 6.0%.

Mercure City Hotel, Glasgow

In January, the Group acquired Mercure City Hotel, Glasgow for £8.03 million. The 34,228 sq ft, 91-bedroom hotel enjoys a prime central location in the city on Ingram Street, an upmarket retail location, hosting retailers such as Ralph Lauren, Emporio Armani and Mulberry. It is one of the most centrally located hotels in Glasgow. The asset is let to Jupiter Hotels Limited, with a weighted average unexpired lease term of 18.5 years and reviewed annually by RPI. It has a net initial yield of 6.5%.

Applegreen Petrol Filling Station, Crawley

In February, the Group acquired Applegreen Petrol Filling Station, Crawley for £3.82 million. The acquisition price reflects a net initial yield of 5.3% and provides the group with a lease term of 15 years to expiry (no breaks) with three-yearly rental uplifts linked to RPI, capped at 3.5%. 

The asset is situated on the busy Crawley Avenue (A23) dual-carriageway, one mile to the west of Crawley town centre. The A23 connects the major towns on the south coast with Crawley and continues northward to London. The property comprises a modern Applegreen branded petrol station comprehensively refurbished by the operator in 2015 and occupying a large site of 1.5 acres. The facility provides eight filling points as well as parking for 20 cars, a convenience store, Greggs bakery, Subway sandwich shop and an off-licence.

Snap Fitness, Chiswick

Post period end the Group made a further acquisition on 3 April 2018 of a gymnasium in Chiswick, West London, for £2.2 million.

The 5,918 sq ft purpose-built gym is situated over two levels and forms part of a larger residential based development at 500 Chiswick High Road. The asset is held on a virtual freehold basis and is leased to Snap Fitness for a term of 15 years to expiry with no breaks and provides 5 yearly inflation linked reviews. The transaction reflects a net initial yield of 5.5%. 

The property benefits from its location in Chiswick, an affluent London suburb approximately 6 miles west of central London. It is situated on the corner of Chiswick High Road and Chiswick Road, a 5 minute walk from both Chiswick Park and Gunnersbury stations, providing access to both the national rail network and London Underground. The surrounding area comprises a mix of high-end residential and retail accommodation.

The sector weighting, by value, of the property portfolio as at 27 April 2018 was: Hotels 24.0%; Car showrooms 14.9%; Student accommodation 11.4%; Residential care homes 10.8%; Industrial 20.0%; Leisure 9.9%; Power stations 5.0%; and Petrol stations 4.0%.

Following these transactions, the equity raised at IPO is almost fully invested and the Group has also utilised £28.6m of its £30m debt facility.

The Investment Manager has a further 2 assets under offer and expects to make additional announcements in the coming weeks.

About AEW UK Long Lease REIT

AEW UK Long Lease REIT plc (LSE: AEWL) aims to generate a sustainable, secure and predictable income return, whilst at least maintaining capital values in real terms, by investing in a diversified portfolio of UK properties, with an attractive entry yield, predominately in alternative and specialist sectors. It will invest in a diverse range of sectors that are underrepresented in institutional portfolios including leisure, healthcare, education, hotels, student accommodation, supported living and automotive. At its IPO on June 6 2017, AEWL raised £80.5m from institutional and retail investors. At least 85% of the gross passing rent from the portfolio's leases will contain inflation linked rent reviews, and average initial unexpired leases in excess of 18 years at the time of investment.

About AEW UK Investment Management LLP

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 €58.6 billion of assets under management as at 31 December 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 31 December 2017, AEW Group managed €28.4 billion in value in properties of all types located in 15 countries, with over 390 staff. The Investment Manager is a 50:50 joint venture between the principals of the Investment Manager and AEW.

AEW UK
Alex Short	[e-mail] [phone]
Laura Elkin	[e-mail] [phone]
Nicki Gladstone	[e-mail]
	[phone]
Company Secretary
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TB Cardew	[e-mail]
Ed Orlebar Tom Allison Lucy Featherstone	[phone] [phone] [phone]

LEI: 213800MPBIJS12Q88F71

 

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