NAV Update and Dividend Declaration

RNS Number : 7265C

AEW UK Long Lease REIT PLC

24 January 2018

 

NAV Update for the period 1 October to 31 December 2017

24 January 2018

AEW UK Long Lease REIT plc (LSE: AEWL) (the 'Group') announces its quarterly unaudited Net Asset Value ('NAV') and interim dividend for the three month period ended 31 December 2017.

Highlights

·      8 Properties acquired during the period for total of £53.57 million (net of acquisition costs).

·      At 31 December 2017, fair value independent valuation of the property portfolio was £71.42 million (30 September 2017: £17.72 million).  Acquisitions costs on new property purchases have been written-off.  On a like-for-like basis the valuation of the property portfolio increased by £0.13 million (0.76%) over the quarter.

·      First interim dividend of 0.50 pence per share declared on 1 November 2017, paid on 30 November 2017.

·      NAV of £74.28 million or 92.27 pence per share (30 September 2017: £77.69 million or 96.51 pence).

·      EPRA earnings per share for the period of 0.36 pence per share.

·      Interim dividend of 0.50 pence per share announced for the quarter ended 31 December 2017.

·      The Group has secured a £30m 8 year term loan agreement with Canada Life Investments 

·      Intention to raise up to £35m of equity by way of a placing, offer for subscription and intermediaries offer under its Share Issuance Programme

Portfolio Manager's comment

Alex Short, of AEW UK Investment Management LLP, the Group's Investment Manager, commented "We are delighted to have invested all of the IPO proceeds and to have substantially allocated all the associated debt, with an LTV 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.

Looking forward, the Group is currently under offer on seven further assets totalling approximately £24.8m and beyond that has a varied pipeline of interesting transactions across a range of geographical locations and sectors.  In all cases, the investment value paid is well underpinned by our assessment of alternative use or vacant possession value, in line with our view that financial security for our investors must be derived from the fundamental strength of each property, as well as the long, inflation linked income stream.  With this pipeline in mind, the Group is pleased to have announced its second capital raise, enabling us to continue to grow in line with investors' expectations".

Net Asset Value

The Group's unaudited NAV as at 31 December 2017 was £74.28 million, or 92.27 pence per share.  As at 31 December 2017, the Group owned 11 investment properties with a fair value of £71.42 million.

	Pence per share	£ million
NAV at 1 October 2017	96.51	77.69
Portfolio acquisition costs	(4.26)	(3.43)
Valuation change in property portfolio	0.16	0.13
Income earned for the period	0.67	0.54
Expenses for the period	(0.31)	(0.25)
Dividend paid during the period	(0.50)	(0.40)
NAV at 31 December 2017	92.27	74.28

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards and incorporates the independent portfolio valuation as at 31 December 2017 and income for the period, but does not include a provision for the interim dividend for the three month period to 31 December 2017.

Dividend

The Group today announces an interim dividend of 0.50 pence per share for the period from 1 October 2017 to 31 December 2017.  The dividend payment will be made on 28 February 2018 to shareholders on the register as at 2 February 2018.  The ex-dividend date will be 1 February 2018.

The dividend of 0.50 pence per share will be designated 0.25 pence per share as an interim property income distribution ('PID') and 0.25 pence per share as an interim ordinary dividend ('non-PID').

The dividends to be paid for the period from 1 October 2017 to 31 December 2017, as noted above, total 0.50 pence per share while the EPRA earnings per share for this period are 0.36 pence per share.  The Board of Directors expressed confidence in the Group's ability to meet dividend targets on a covered basis as the Group approaches full investment, although notes that there may be times, particularly during utilisation of the net proceeds of a fund raising, where the dividend will be uncovered.  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.

Debt

On the 8 January 2018, the Group announced that it had entered into a new £30 million term loan facility with Canada Life Investments. The term facility is up to 35% loan to property value, provided on a portfolio basis.

On 19 January the Group drew down on its £30m loan facility from Canada Life Investments. The loan is fixed for 8 years at a total rate of 3.05% per annum. The released funds will be invested in the existing pipeline.

Portfolio activity

During the 3 month period ending 31 December 2017, the Group has acquired a further 8 properties for a total of £53.57 million (net of acquisition costs) and with a weighted net initial yield of 5.5% as described below:

212 Wandsworth Road, London was purchased on 11 October 2017 for £4.4m. The property, which is fully let to Pure Gym Limited at a low passing rent of £11.60 per sq ft, provides an unexpired lease term of 10.2 years to break and 15.1 years to expiry, with five yearly RPI linked reviews. The acquisition price reflects a net initial yield of 5.1%.  The property, constructed in 2012, is situated within close proximity to the new Nine Elms Northern Line London Underground station which is planned to open in 2020.

Pocket Nook Industrial Estate, St Helens was purchased on 25 October 2017 for £9.0m.  The 16.1 acre site is let to three tenants and provides a weighted average unexpired lease term of 66 years to expiry, with 49% of the income let to Biffa Waste Services Ltd until 2134.  The acquisition price reflects a net initial yield of 5.4%.  The estate comprises two industrial units, a small office with a large yard and an area of storage land, with an additional unit currently under construction by the vendor and pre-let to Biffa.  76% of the income is backed by the strong covenants of Biffa and the Driving Standards Agency on uncapped RPI linked leases that are reviewed 5 yearly.  The Merseyside site is located 0.8 miles away from St Helens town centre and benefits from its proximity to the M57, M6 and M62.

The Group acquired two residential care home properties in the West Midlands and East Riding for £10.3m on 30 October 2017. Both were acquired from 90 North Real Estate Partners LLP ("90 North") and are let to Prime Life Limited, a care services provider operating a total of 57 care homes, based mainly in Lincolnshire and the East Midlands.

The Lyndon Croft Care Centre, located on Ulleries Road, Solihull, was acquired for £6.2m. It provides 52 beds for those with needs associated to old age and dementia. The property provides an unexpired lease term of 31 years. The acquisition price reflects a net initial yield of 5.5%.

Westerlands Care Village, located on Elloughton Road, Brough, was purchased for £4.1m and comprises 62 beds in two adjacent homes. Elloughton House provides residential and nursing care as well as care of those with dementia needs. Brough House provides specialist memory care for high dependency residents. The acquisition price reflects a net initial yield of 6.0% and the properties have an unexpired lease term of 31 years.

Motorpoint, Birmingham was purchased on 14 December 2017 for £8.0m. The showroom is located on Lichfield Road, 2 miles north of Birmingham City Centre. The prominent 68,002 sq ft site is let to Motorpoint, the UK's largest independent used vehicle retailer. It comprises a modern, detached two storey vehicle dealership with three large showrooms, as well as a 1.69 acre compound to store 350 cars. The property provides a weighted average unexpired lease term of 19.6 years to expiry and has RPI linked reviews. The acquisition reflects a net initial yield of 5.85%.

Audi showroom, Huddersfield was purchased on 22 December 2017 for £6.3m.  This Audi dealership is located in the Trident Business Park in Huddersfield, a prime motor retail location. This 29,345 sq ft purpose built facility includes a showroom, offices, workshop and valeting facilities. The recently refurbished property is let to VW Group UK and provides a weighted average unexpired lease term of 7.7 years to expiry. The acquisition reflects a net initial yield of 5.89%.

Bramall Court, Salford was purchased on 22 December 2017 for £10.9m. This 94,290 sq ft student accommodation block, was purchased for £10.9m. The asset is located on Cannon Street, 0.8 miles east of the main campus of the University of Salford and one mile from Manchester City Centre. The asset is let to Mears Group plc on a 24 year unexpired lease with annual rent reviews linked to CPI. The acquisition reflects a net initial yield of 5.35%.

Finally, Hoddesdon, Hertfordshire was purchased on 28 December 2017 for £4.8m.  This 47,350 sq ft industrial property is fully let to Hoddesdon Energy Ltd who occupy the building for use as a thermal treatment, waste to energy power plant. Hoddesdon Energy received investment of £60m from the Green Investment Bank, the Noy Fund and P3P Partners for the construction of the plant which is designed to produce energy from the combustion of dry commercial waste. When running it will be able to provide power to over 7,000 homes using about 90,000 tonnes of feedstock each year supplied by two waste management companies. The plant will be operated by Bouygues Energies and Services, a leading global contractor specialising in energy sectors.

The energy plant is located in the commuter town of Hoddesdon, with convenient links to the M1, M11, M25 and two mainline train stations. The area has successfully established itself as a hub for power stations, with Rye House Power Station run by Scottish Power located adjacently. The property is let at a passing rent equating to £6.30 per sq ft compared to nearby standard industrial accommodation which is currently attracting rents in excess of £8 per sq ft. The acquisition reflects a net initial yield of 5.9% and provides a lease term of 32 years to expiry and 14 years to break.

All purchase prices are net of acquisition costs.

The sector weighting, by value, of the property portfolio as at 31 December 2017 was Hotels 20.9%, Car showrooms 20.0%, Student accommodation 15.2%, Residential care homes 14.4%, Industrial 12.6%, Leisure 10.2%, Power station 6.7%

Post quarter end activity

The Group made three further acquisitions on 23 January 2018 for a combined total of £18.1m net of acquisition costs.

The first two acquisitions are a set of two industrial units in Dudley and Sheffield, bought for £10.1m. 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%.

The Group has also acquired Mercure City Hotel on Ingram Street, Glasgow for £8.0m. 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%.

Taking into account the above acquisitions, the sector weighting, by value, of the property portfolio as at 23 January 2018 was Hotels 25.6%, Car showrooms 15.9%, Student accommodation 12.2%, Residential care homes 11.5%, Industrial 21.4%, Leisure 8.1%, Power station 5.3%

With these transactions the equity raised by AEW UK Long Lease REIT at IPO has been fully invested, and the Group has also utilised £22.1m from its £30m debt facility.

On 8 January 2018 the Group announced that it is seeking to raise up to £35m of equity by way of a placing, offer for subscription and intermediaries offer under its Share Issuance Programme.

The Manager has a further 7 assets under offer and expects to make additional announcements in the coming weeks.

The Group will publish the unaudited half yearly report for the period ended 31 December 2017 during February 2018.

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

The Investment Manager AEW UK Investment Management LLP is a 50:50 joint venture between the principals of the Investment Manager and AEW.  It 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 €57 billion of assets under management as at 30 September 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 30 September 2017, AEW Group managed €26.6 billion in value in properties of all types located in 15 countries, with close to 400 staff.

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

About AEW Europe

AEW is one of the world's largest real estate asset managers, with €57bn of assets under management as at 30 September 2017. AEW has over 600 employees, with its main offices located in Boston, London, Paris and Hong Kong and offers a wide range of real estate investment products including comingled funds, separate accounts and securities mandates across the full spectrum of investment strategies. AEW represents the real estate asset management platform of Natixis Global Asset Management, one of the largest asset managers in the world.

As at 30 September 2017, AEW managed €26.6bn of real estate assets in Europe on behalf of a number of funds and separate accounts. AEW has close to 400 employees based in 10 offices across Europe and has a long track record of successfully implementing core, value-add and opportunistic investment strategies on behalf of its clients. In the last five years, AEW has invested and divested a total volume of over €17.5bn of real estate across European markets.

www.aeweurope.com 

LEI: 213800MPBIJS12Q88F71

 

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