TIDMAEWU
RNS Number : 3623D
AEW UK REIT PLC
21 June 2023
AEW UK REIT PLC
Announcement of Full Year Results for the year ended 31 March
2023
AEW UK REIT plc (the 'Company'), which holds a diversified
portfolio of 36 commercial investment properties throughout the UK,
is pleased to publish its full year results for the year ended 31
March 2023.
Mark Burton, Chairman of AEW UK REIT plc, commented :
"The investment manager has continued to actively manage AEWU's
portfolio over the past year, outperforming the benchmark in all
sectors and trading at the narrowest discount of all UK diversified
REITs. The manager's successful asset management initiatives and
timely disposal of five properties during the period maximised the
value of key assets and has crystallised capital growth, with the
sale proceeds being reinvested into more attractive, higher
yielding properties. We are pleased that NAV per share has grown in
the latest quarter and are confident that the Company's track
record of outperformance, robust positioning and the reliable
payment of an eight pence annual dividend for the past seven
consecutive years will stand it in good stead once market sentiment
recovers."
Financial Highlights
-- Net Asset Value ('NAV') of GBP167.10 million and 105.48 pence
per share ('pps') as at 31 March 2023 (31 March 2022: GBP191.10
million and 120.63 pps).
-- Operating profit before fair value changes of GBP11.10
million for the year (year ended 31 March 2022: GBP11.75
million).
-- Loss before tax ('LBT')* of GBP11.33 million and earnings per
share ('EPS') of -7.15 pps for the year (year ended 31 March 2022:
profit before tax of GBP46.70 million and EPS of 29.47 pps). LBT
includes a GBP30.00 million loss arising from changes to the fair
values of investment properties in the period (year ended 31 March
2022: GBP32.32 million gain).
-- EPRA Earnings Per Share ('EPRA EPS')* for the year of 5.70
pps (year ended 31 March 2022: 6.79 pps). See page 104 in the full
Annual Report for the calculation of EPRA EPS.
-- Total dividends of 8.00 pps declared for the year (year ended 31 March 2022: 8.00 pps).
-- Shareholder total return* for the year of -16.44% (year ended 31 March 2022: 53.61%).
-- The price of the Company's Ordinary Shares on the Main Market
of the London Stock Exchange was 92.10 pps as at 31 March 2023 (31
March 2022: 119.80 pps).
-- The Company secured a new GBP60.00 million, five-year term
loan facility with AgFe, a leading independent asset manager
specialising in debt-based investments. The loan is priced as a
fixed rate loan with a total interest cost of 2.959%.
-- As at 31 March 2023, the Company had drawn GBP60.00 million
(31 March 2022: GBP54.00 million) of a GBP60.00 million (31 March
2022: GBP60.00 million) term credit facility with AgFe and was
geared to 28.06% of GAV (31 March 2022: 22.48%) (see note 15 on
pages 113 and 114 in the full Annual Report for further
details).
-- The Company held cash balances totalling GBP14.32 million as
at 31 March 2023 (31 March 2022: GBP6.77 million).
Property Highlights
-- As at 31 March 2023, the Company's property portfolio had a
valuation of GBP213.83 million across 36 properties (31 March 2022:
GBP240.18 million across 36 properties) as assessed by the Valuer 1
and a historical cost of GBP224.03 million (31 March 2022:
GBP207.96 million).
-- Over the period, the Company's portfolio delivered
outperformance against the MSCI/AREF PFI Balanced Funds Quarterly
Property Index of 10.9%. Outperformance of the Company's assets
against the benchmark was also seen in each main property
sector.
-- The Company won four awards during the period. The Company
received gold and silver awards from EPRA for its high standard of
financial reporting and for standards of sustainability reporting,
respectively. The Company also won the Citywire investment trust
award in the 'UK Property' category, and was named 'Best REIT' at
the AJ Bell Shares Magazine awards.
-- The Company acquired five properties during the year for a
total purchase price of GBP32.05 million, excluding acquisition
costs (year ended 31 March 2022: four properties for a purchase
price of GBP38.23 million).
-- The Company made five disposals during the year with total
gross sale proceeds of GBP44.41 million (year ended 31 March 2022:
two disposals with total gross sale proceeds of GBP16.71
million).
-- The portfolio had an EPRA Vacancy Rate** of 7.83% as at 31
March 2023 (31 March 2022: 10.69%).
-- Rental income generated in the year under review was GBP17.71
million (year ended 31 March 2022: GBP15.92 million). The number of
tenants as at 31 March 2023 was 145 (31 March 2022: 131).
-- EPRA Net Initial Yield ('NIY')** of 7.65% as at 31 March 2023 (31 March 2022: 5.87%).
-- Weighted Average Unexpired Lease Term ('WAULT')* of 3.05
years to break (31 March 2022: 3.94 years) and 4.33 years to expiry
(31 March 2022: 5.78 years).
-- The Company has achieved very high rent collection levels,
which stand at over 99% for each quarter since March 2022
(excluding current quarter where rent continues to be
collected).
* See KPIs on pages 13 to 15 in the full Annual Report for
definition of alternative performance measures.
** See Glossary on pages 145 to 148 in the full Annual Report
for definition of alternative performance measures.
(1) The valuation figure is reconciled to the fair value under
IFRS in note 12.
Enquiries
AEW UK
L aura Elkin Laura.Elkin@eu.aew.com
Nicki Gladstone Nicki.Gladstone-ext@eu.aew.com
+44(0) 771 140 1021
Liberum Capital Darren.Vickers@liberum.com
Darren Vickers +44 (0)20 3100 2000
TB Cardew AEW@tbcardew.com
Ed Orlebar +44(0) 7738 724 630
Tania Wild +44(0) 7425 536 903
Henry Crane +44 (0)7918 207157
Chairman's Statement
Overview
The year to 31 March 2023 was a tumultuous period on the UK
political scene and for the wider economy. The year saw the end of
the very low interest rate environment that had persisted over the
past decade as the Bank of England base rate increased from 0.75%
in March 2022 to 4.25% by the end of March 2023. Interest rates
have since increased again to 4.5%. Over this time, the average
cost of debt on commercial property increased from around 3.5% to a
peak in excess of 6.5%. During the period, UK commercial property
suffered an average decline in capital value of -18.1%, compared to
-9.2% experienced by the assets of the Company. As a result, the
Company delivered a NAV total return to its shareholders over the
period of -5.8%. This is, of course, disappointing on an absolute
basis but, on a relative basis, is testament to the defensive
nature of the Company's strategy which seeks to acquire assets at
prices that are misaligned with their long-term fundamental values
of vacant possession value and alternative use value. The
Investment Manager actively manages these assets to maximise income
as well as capital returns. We have seen examples during the period
where this has led to counter-cyclical performance.
Expectations of a pricing correction in the commercial property
market, which was mostly concentrated within the last two quarters
of 2022 following Liz Truss's short reign as UK Prime Minister,
caused the shares of listed property companies to be sold off
almost indiscriminately in the latter part of the year. The
Company's own shares started the period trading at a negligible
discount to NAV of 0.7%, peaked at a discount of 30.3% in September
2022 and finished the period trading at a discount of 12.7%. The
average discount seen across the UK diversified REIT peer group at
the end of the period was 28.1%, so despite the Company's shares
having recorded a disappointing shareholder total return for the
period of -16.4%, they have traded at the narrowest discount of our
peer group in UK diversified REITs. We hope that this, along with
the Company's track record of outperformance, robust positioning
and reliable dividends will stand its shares in good stead once
market sentiment recovers.
Volatile markets can present significant opportunities for an
actively managed value strategy such as that of the Company.
Following a number of timely disposals which helped to maximise the
values of key assets during the summer of 2022, the Company saw an
increase in attractive opportunities in its investment pipeline
during calendar Q4. This enabled the Company to access quality
assets at more favourable pricing than had previously been
possible. This is an opportunity set that has persisted to the
current day and as such, the Company made a further acquisition in
March 2023.
The Investment Manager and the Board believe that the Company's
ability to seek value opportunities unconstrained by sector is key
to maximising total return over the long term. This strategy allows
the Investment Manager to take counter-cyclical sector positions,
an example of which was the most recent acquisition of a freehold
solus Matalan store in Preston. It was acquired for GBP6.45
million, reflecting a low capital value of GBP110 per sq ft and an
attractive net initial yield of 9.5%.
A major focus for both the Board and the Investment Manager has
been the recovery of the Company's income stream towards its
long-term target level following erosion caused by a period of
higher than average vacancies. These vacancies were predominantly
linked to the assets in Oxford and Glasgow and were required to
maximise sale proceeds from developers. The Board took the decision
during this time to continue to pay the Company's dividend based on
its understanding of the Company's potential to generate earnings
in future periods and in the knowledge that the uncovered element
has, over this time period, been funded by profit generated from
the asset sales. Since the sale of these assets, the Company has
made progress in building its earnings to a level that is more
supportive of the current dividend. Quarterly earnings increased to
1.77 pps in Q4 2022, reflecting a divided cover for the quarter of
89%. Further progress towards the target of full dividend cover is
expected to be made during the next few quarters.
Financial Results Summary
Year ended Year ended
31 March 31 March 2022
2023
----------- ---------------
Operating profit before fair value
changes (GBP'000) 11,096 11,752
Operating (loss)/profit (GBP'000) (9,164) 46,913
(Loss)/profit before tax (GBP'000) (11,325) 46,695
(Loss)/ Earnings Per Share (basic
and diluted) (pence)* (7.15) 29.47
EPRA Earnings Per Share (basic and
diluted) (pence)* 5.70 6.79
Ongoing Charges (%) 1.37 1.35
Net Asset Value per share (pence) 105.48 120.63
* See note 10 of the financial statements in the full Annual
Report for calculation.
Financing
The Company had a GBP60.00 million loan facility, of which it
had drawn a balance of GBP60.00 million as at 31 March 2023 (31
March 2022: GBP60.00 million facility; GBP54.00 million drawn),
producing the following measures of gearing:
Year ended Year ended
31 March 2023 31 March
2022
% %
---------------- -----------
Loan to NAV 35.91 28.26
Gross Loan to GAV 28.06 22.48
Net Loan to GAV (deducts cash balance
from the outstanding loan value) 21.37 19.67
In May 2022, the Company secured a new GBP60.00 million,
year-year term loan facility with AgFe, a leading independent asset
manager specialising in debt-based investments. The loan is priced
as a fixed rate loan with a total interest cost of 2.959%. The
existing RBSi loan facility, which was priced at a floating rate
linked to SONIA, was due to mature in October 2023 and has been
repaid in full by the new loan facility. Simultaneous to the
funding, the Company's interest rate cap was sold for proceeds of
GBP743,000 with a residual accounting loss of GBP88,000. In the
current inflationary environment, the Company considered it prudent
to fix the loan.
Awards
I am delighted that the Company's market leading performance and
practices have been recognised in four awards received during the
period. The Company has once again been awarded by EPRA, the
European Public Real Estate Association, a gold medal for its high
standard of financial reporting and a silver medal for standards of
sustainability reporting. During the year, the Company has won the
Citywire investment trust award in the 'UK Property' category, an
award given to the trust displaying the highest NAV returns over a
three-year period. The Company won this award in both 2020 and
2021, so we are very pleased to receive it for a third consecutive
year. During the year, Company has also been awarded 'Best REIT' at
the AJ Bell Shares Magazine awards, voted for by readers of the
publication. We are delighted that these awards and nominations
recognise the hard work and dedication that is put into running the
Company by both my colleagues on the Board and the Company's
Investment Manager, AEW.
ESG+R
AEW, as Investment Manager of the Company, has committed to
abide by the UN Principles for Responsible Investment (PRI), where
these are consistent with operating guidelines, as outlined in its
Socially Responsible Investment Policy. As a result, the Investment
Manager looks to continually improve its processes relating to
environmental, social, governance and resilience (ESG+R) in line
with sector best practices as they evolve, on behalf of the
Company. As a result, within this Annual Report, the Company is
voluntarily reporting against the Task Force on Climate-related
Financial Disclosures ('TCFD') for the third time. In recent
periods, the Investment Manager has made progress by improving the
integration of ESG+R into its investment, asset management and
operations processes. This has been improved further during the
period with greater analysis and scoring of assets being carried
out at the time of purchase, along with greater analysis at that
time in terms of an asset's specific climate resilience.
During 2018, AEW established sustainability targets across its
managed portfolio. The managed portfolio comprises service charged
assets and vacant accommodation, whose utilities the Company
controls. These targets include the reduction of Scope 1 and 2
greenhouse gas emissions and waste disposal. Since this time,
overall energy usage has reduced by 15%, emissions have been
reduced by 19%, and waste transferred to landfill has been reduced
to zero within the managed portfolio. We would like to thank the
Company's very committed managing agents, Mapp, for their
assistance in achieving these improvements. As a result of the
Company's very pleasing performance against these targets, new
targets have been set out within this report against current levels
of performance that the Company hopes will lead to further
improvement in the sustainability of its activities.
GRESB is a global real estate benchmark that assesses
Environmental, Social and Governance performance. AEWU achieved two
stars out of five in its seventh submission year, improving on its
2021 score to achieve an overall score of 67 out of 100 against a
peer group average of 65. Much of the GRESB score relates to data
coverage and due to the high percentage of assets in the Company's
portfolio with tenant-procured utilities, the Company does not
score as well as peers with a smaller holding of single-let
assets.
Minimum Energy Efficiency Standards (MEES)
AEW are committed to ensuring compliance with MEES regulations
which first came into effect from April 2018, when it became
unlawful to grant new leases of commercial property with an EPC of
below an 'E' rating. From 1 April 2023, all existing leases will
become unlawful if the premises are certified with an 'F' or 'G'
rating, even if the lease was granted prior to the MEES Regulations
coming into force in 2018.
As at the end of the period, the Company had no assets with a
certified EPC 'F' or 'G' rating, with the majority of the Company's
assets (approximately 93% based on the portfolio's ERV) being MEES
compliant. There are 12 units across three assets where at the end
of the period there was no valid EPC (due to recent expiries) in
place. These units are expected to be 'F' and 'G' rated, however,
all are currently subject to ongoing improvement plans to achieve
MEES compliance.
To mitigate future MEES risk, the Company will continue to
undertake its gap analysis, identifying assets that fall below the
MEES regulations, and will either need an improvement plan
implemented to achieve an 'E' rating or better, or an exemption
lodged, where applicable.
The Company regards its relatively short WAULT (to break and
expiry) as an opportunity to proactively engage with its existing
tenants at lease events to improve the energy performance of its
assets, as well as in the event of a vacancy. An example of this is
at one of the Company's industrial assets in Rotherham, where the
EPC of the property was improved from C67 rating to B44 rating
following the completion of roof works as part of a new letting to
an incoming tenant.
Succession Planning
Both Bim Sandhu and I have been Directors since the Company's
IPO in June 2015. In seeking to comply with best corporate
governance practice, we both intend to resign by 2024. In order to
stagger our departures, we have determined that Bim, who chairs the
Audit Committee, whilst seeking re-election at the forthcoming AGM
on 14 September 2023 will step down following the AGM or, if later,
following the appointment of a new Chairman Designate of the
Company which we are expecting to make in the last quarter of 2023.
I will resign at the AGM in 2024. The Board has also determined
that our successors should have sufficient time to familiarise
themselves with the Company before they formally take over our
respective roles. With that in mind, my fellow board members and I
were delighted to welcome Mark Kirkland, who was appointed to the
Board of the Company as Non-Executive Director and Audit Committee
Chairman designate with effect from 9 November 2022. Mark will take
over from Bim following his resignation during the year. Mark
brings extensive corporate experience gained over 30 years, having
held numerous senior roles in public and private companies. Mark's
early career was in corporate finance, predominantly with UBS
Limited. He has been CFO of numerous public and private companies
and latterly was CEO of Delin Property, a pan-European logistics
developer, investor and manager. He is currently a Non-Executive
Director and Audit Committee Chairman of Strix Group plc,
and an Advisor to DP World.
With consideration to appointing my own successor, the Board has
engaged Trust Associates, an independent firm specialising in
recruiting for the investment trust sector, to commence this
process.
Outlook
The Board and Investment Manager believe that the Company is
both defensively and opportunistically positioned to take advantage
of the current market conditions. We are pleased by the resilience
that the portfolio has shown during a period of significant
uncertainty versus the performance that has been achieved across
the commercial property market as a whole. We also believe that the
Company's investment strategy is well placed to benefit from
current market conditions that allow it to be nimble in making
cross sector and often counter-cyclical moves that can deliver
optimal value to our Shareholders.
Earnings growth will be a continued focus over coming quarters
as the Company looks to return to full investment while also
undertaking efficient capital recycling through the sales of select
lower yielding assets. The realisation of income accretive major
lettings that are underway at assets such as Central Six retail
park in Coventry will provide further benefit.
In the near term, the Board and Investment Manager will continue
to take a prudent approach towards the management of the Company,
given the ongoing economic uncertainty. Although the outlook for
commercial property values is now significantly more stable than
during the previous 12 months, the Investment Manager and the Board
will continue to monitor economic conditions closely.
Mark Burton
Chairman
20 June 2023
Investment Manager's Report
Economic Outlook
Despite some major political and economic volatility, the UK
economy has performed better than expected since September 2022. UK
recession has been avoided to date with GDP recording modest growth
of 0.2% during April following 0.1% growth in the first quarter.
The prospect of lower household energy bills from July and the
impact of the fiscal loosening announced in March's Budget mean
that recovery is expected to gain traction in H2 2023. Inflation is
expected to resume its downward trajectory, albeit slowly with the
Bank of England increasing interest rates to 4.5% in May.
The UK's labour market has remained resilient but, with a
slowdown in job creation seen since the fourth quarter of 2022, the
unemployment rate is projected to increase before the end of 2023,
adding to the cost of living pressure already being acutely felt by
many consumers.
As financial markets take stock of recent uncertainties,
including the instability and failure of various US based financial
institutions, we expect the lending environment to remain
cautious.
Property Market Outlook
Following the swift repricing of UK commercial property in the
second half of 2022 and an improving macro-economic outlook, UK
property is expected to offer healthy return prospects over coming
periods. Consensus forecasts show an expected return to positive
rental growth across all major market sectors by 2025 and all UK
property total returns to average 5.6% per annum over the next five
years (2023-2027).
Industrial
The industrials sector saw the steepest value declines of all
commercial property sectors in the 12 months to 31 March 2023 after
a strong period of growth up to early 2022.
Due to structurally low levels of stock availability, the sector
is expected to deliver the highest level of rental growth across
the commercial property market over the coming five years, with an
average expected growth rate from consensus forecasts of 2.6% pa.
We believe that the Company's industrial portfolio, with an average
passing rent of GBP3.24 per sq ft, will be well placed to
benefit.
That said, the Company has completed a number of sales from the
sector in recent periods where yield compression can be achieved as
a result of vendors' positive expectations on rental growth. Where
sales yields can be compressed significantly compared to pipeline
assets, select recycling of assets has taken place.
The industrial sector is the portfolio's largest sector holding,
with 44.2% of the valuation. The Company's industrial holding
outperformed the Benchmark, both in terms of income return, with a
relative outperformance of 2.0%, and capital growth, with a
relative outperformance of 4.6%.
Retail
The Covid-19 pandemic accelerated trends already present in
consumer habits prior to its onset and this led to a significant
structural contraction in retail markets. However, since this time
of turbulence, occupancy levels and values have now stabilised
significantly in robust locations. Online sales have fallen back
from their pandemic peak of 37% and retailer insolvencies and CVAs
are no longer a prevalent theme. We believe that the sector offers
select investment opportunities where tenant trade is robust and
values are underpinned by alternative uses.
By contrast, performance in the retail warehousing sector has
generally been more robust, with capital values buoyed by
underpinning from the industrial sector. The sector has also
benefited from improved flexibility in the planning regime, which
allows greater mobility between sectors. Vacancy levels across the
sector have fallen to 4.7%, the lowest level seen since 2018.
Retail represents the portfolio's second largest sector holding,
with 39.2% of the valuation. The Company's retail holding
outperformed the Benchmark, both in terms of income return, with a
relative outperformance of 1.8%, and capital growth, with a
relative outperformance of 4.3%.
Office
Office occupancy on the whole had a stronger post-Covid recovery
than some may have expected, with office-based employment growing
in 2022. This trend is expected to reverse during 2023 with a
contraction in occupancy that is expected to be felt more
poignantly in regional cities than in London.
As a result of lower occupancy levels and greater choice, the
office occupier has also become more discerning in recent years, a
trend that is expected to continue during 2023. Office occupiers
now wish to benefit from strong sustainability credentials for
their accommodation as well as surrounding amenity and top-quality
space. This is particularly the case for large corporate tenants
but is increasingly becoming a key factor for smaller businesses
too.
The assets that provide the highest quality accommodation and
sustainability goals will be best placed to outperform.
Alternatively, specific asset management strategies may drive
strong performance from the office sector and during the period,
the sale of the Company's office assets in Glasgow and Oxford was
completed, with both assets being sold to vendors for alternative
use development in order to maximise sales receipts. The profit on
these sales drove significant outperformance against the benchmark
during the period.
When considering office assets for investment, we have often
sought to acquire those showing strong alternative use values.
This was the strongest performing sector relative to the
Benchmark, achieving an outperformance of 36.3%, largely driven by
capital growth of 35.3% resulting from the disposal of Eastpoint
Business Park, Oxford.
Alternatives
Across the leisure market, where the Company's alternative
sector holdings lie, operators are at various stages of recovery
following the Covid-19 pandemic. Visibility of performance in
trading updates is key to investor demand and where this is strong,
investment volumes have held up despite their overall decline.
Operators carrying unsustainably high levels of debt are seen as a
concern and are the subject of much press coverage as recently seen
with the uncertainty facing Cineworld.
The squeeze on consumer spend will continue to challenge the
profitability of occupiers, however, leisure has historically fared
relatively defensively during periods of economic uncertainty.
We find the sector attractive on a selective basis going
forward, particularly for assets that offer an attractive income
return and occupy larger land holdings or sites in urban areas and
therefore can often be underpinned by alternative use values, most
likely residential.
Assets held in alternative sectors comprise 9.4% of the 31 March
2023 valuation, all of which is within the leisure sector. The
Company's alternatives holding outperformed the Benchmark, both in
terms of income return, with a relative outperformance of 3.7%, and
capital growth, with a relative outperformance of 12.1%.
Property Portfolio
The Company made five acquisitions during the year:
Railway Station Retail Park, Dewsbury (retail warehouse)
In June, the Company completed the acquisition of a 6.04-acre
Railway Station Retail Park in Dewsbury for a price of GBP4.70
million, reflecting a low capital value of GBP82 per sq ft and an
attractive net initial yield of 9.4%. The park occupies a prominent
location on the edge of the town centre within an established
retail and leisure area. Neighbouring occupiers include Sainsburys,
Aldi, Matalan, Pets at Home, Iceland and a council operated library
and sports facility. Dewsbury has a tight supply of retail
warehousing stock, with very few current vacancies within the
town.
The park is fully let with a low average passing rent of GBP8.28
per sq ft, which the Manager believes provides potential for rental
growth. Tenants include Sports Direct, Mecca Bingo, Fieldrose Ltd,
trading as KFC, and the Danish furniture retailer, Jysk.
Craigmont Drive, Glasgow (leisure)
The Company completed the purchase of a high yielding leisure
asset in Glasgow for GBP2.60 million reflecting a low capital value
of GBP99 per sq ft and a net initial yield of 7.4%. The property
comprises a standalone leisure unit let to JD Sports Gym Ltd, which
operates 74 gyms in the UK and is a subsidiary of JD Sports Fashion
Plc. The lease provides an unexpired lease term of 10.4 years,
benefitting from five-yearly upward-only reviews. The site also
contains a vacant plot of land which may be suitable for
redevelopment over the medium term, subject to planning.
High Street, Bromley (retail)
In late November, the Company completed the purchase of a
freehold retail asset in Bromley for GBP5.30 million, reflecting a
low capital value of GBP101 per sq ft and a net initial yield of
8.7%. The asset is located in a prominent position on the western
side of the pedestrianised Bromley High Street and provides 54,215
sq ft of accommodation, let in its entirety to Next Holdings
Limited. Next Holdings Limited has occupied the property since 2000
and, in September 2021, renewed a four-year lease at a rebased
level of rent. A comprehensive store re-fit was undertaken by the
tenant at this time, demonstrating the retailer's commitment to the
location.
Northgate House, Bath (retail)
In late November, the Company completed the purchase of a 67,020
sq ft mixed-use block located in Bath city centre at a price of
GBP13.00 million, reflecting a low capital value of GBP194 per sq
ft and a net initial yield of 8.5%. The asset provides 48,805 sq ft
of retail accommodation fronting on to Bath's High Street, Upper
Borough Walls and Union Passage. The retail accommodation is let to
11 tenants, anchored by TK Maxx, which has recently renewed its
commitment to the location by agreeing the removal of a tenant
break option. Retail lettings provide a weighted unexpired lease
term in excess of five years. The remaining 18,215 sq ft of
accommodation comprises grade A specification offices recently
refurbished by the vendor. The office accommodation is fully let to
a wholly owned subsidiary of Regus Group until 2032, trading as
co-working brand, Spaces.
Cuerden Way, Preston (retail warehouse)
In late March, the Company completed the purchase of a freehold
solus retail warehousing unit in Bamber Bridge, Preston for GBP6.45
million, reflecting a low capital value of circa GBP110 per sq ft
and an attractive net initial yield of 9.5%. The 58,696 sq ft unit
is single-let to Matalan Retail Limited and has 9.2 years left on
the lease. Matalan is known to trade strongly from the location,
with the store being one of its top 10 performers, as well as being
the retailer's first ever store in the U.K. The lease benefits from
a 2027 rent review to the higher of open market value, or 2.5% per
annum compounded, resulting in a minimum reversionary yield of
10.7%. The site totals 4.39 acres, providing a low site cover of
approximately 30%. It is well located on Cuerden Way which connects
to the A6, half a mile from Junction 1 of the M65. Neighbouring
tenants include Aldi and Sainsburys to the south, with
predominantly industrial uses to the north. There is the potential
to repurpose the unit for trade counter or industrial use, and to
extend the accommodation, subject to planning, if required in
future. In January, Matalan announced the completion of a
refinancing, reducing its gross debt by 43% from GBP593 million to
GBP336 million. Its new debt facility will mature in 2027. The
refinancing also provides GBP100 million for business growth over
the next three years, with a return to profitability anticipated by
Matalan in FY 2024.
The Company made five disposals during the year:
Bath Street, Glasgow (office)
Following the expiry of the three-month planning judicial review
period, the Company completed on the sale of the property for
GBP9.30 million (GBP109 per sq ft). The sale realises a long-term
change of use strategy for the asset, with contracts for the sale
exchanged with a subsidiary company of IQ Student Accommodation in
October 2020. The sale agreement required AEW to negotiate with
tenants to bring the asset to vacancy and, as a result, following
its sale, the occupancy rate for the Company's portfolio increased
to 92.3% from 87.0%, as at 30 September 2022. At the time of
purchase in 2016, the Company intended to keep the asset producing
income as a multi-let office however, due to weakening in the
occupier market conditions in this location, an alternative use
strategy was then pursued.
Eastpoint Business Park, Oxford (office)
The Company completed the sale of the property for GBP29.00
million (GBP388 per sq ft), having acquired the asset in May 2015
for GBP8.20 million, reflecting a net initial yield of over 9%. The
sale price crystallised significant profit, exceeding both the
value immediately prior to the sale by 16% and the acquisition
price by 254%. The asset has delivered an IRR to the Company in
excess of 22% during its hold period. Due to prior valuation
increases, the asset was producing an income yield of circa 1.0%
and therefore reinvested proceeds from the sale, in assets
producing net initial yields between 7.5% and 10%, have been
significantly accretive to the Company's earnings.
349 Moorside Road, Swinton (industrial)
The Company completed the sale of the property for GBP1.71
million. A sale at this price reflects a net initial yield of circa
6.6% and a capital value of GBP75 per sq ft The freehold property
comprises 22,831 sq ft of modern industrial accommodation on a
1.4-acre site. The property was acquired in September 2015 for
GBP1.07 million reflecting a 9.0% net initial yield. A sale at
GBP1.71 million represents a 58% premium to the acquisition
price.
Clarke Road, Milton Keynes (industrial)
In mid-March, the Company completed the sale of its industrial
holding at Clarke Road, Milton Keynes, for GBP2.75 million (circa
GBP91 per sq ft), reflecting a 6.3% net initial yield. The 30,262
sq ft industrial unit was acquired in October 2015 for GBP1.53
million (circa GBP50 per sq ft) at a circa 8.3% net initial yield.
After the Company acquired the asset, it was re-let to FMG Repair
Services Limited, with a guarantor from Northgate Vehicle Hire, on
a 10-year lease, with a five-year tenant break option. By securing
a stronger tenant covenant on a longer lease, the sale realises
significant profit, exceeding the 31 December 2022 valuation of
GBP2.58 million by 6.6%.
Mark Road, Hemel Hempstead (office)
In late March, the Company completed the sale of its office
holding, Vantage Point, on Mark Road, Hemel Hempstead for GBP1.65
million (circa GBP92 per sq ft), reflecting an 11.5% net initial
yield. The valuation as at 31 December 2022 was GBP0.99 million
(circa GBP55 per sq ft) with the sale price reflecting a 66.6%
premium. The Company took the decision to dispose of the asset to
mitigate any risk of long-term vacancy of the property following a
deadlock situation with the main tenant resulting in uncertainty
over its future occupation and the potential requirement for
significant refurbishment capex.
Asset Management Update
The Company completed the following material asset management
transactions during the period:
- Arrow Point Retail Park, Shrewsbury (retail warehousing) -
During May, the Company completed the renewal of Charlie's Stores'
lease on a straight ten-year term at a rent of GBP385,000 per annum
reflecting GBP11 per sq ft, versus an ERV of GBP7.50 per sq ft.
Charlie's Stores is the scheme's anchor tenant, so this is an
important letting for the property. Only nine months' rent-free
incentive was given. The valuation consequently rose by GBP0.30
million to GBP10.00 million, having already increased by GBP1.35
million on the 2021 purchase price of GBP8.35 million.
- Co mmercial Road, Portsmouth (high street retail) - During
May, the Company completed a new 15-year lease to Kokoro UK
Limited, a Japanese-Korean restaurant. The agreed rent is GBP52,500
per annum versus an ERV of GBP45,750 per annum. The tenant has the
benefit of a 12-month rent free period and a tenant only break
option at the end of the tenth year.
- Diamond Business Park, Wakefield (industrial) - During June,
the Company completed a new letting of Units 8 and 9 to Wow
Interiors, an existing tenant on the estate already occupying Unit
7. Wow have taken a new six-year lease with a tenant break option
at the end of the third year. The commencing rent of GBP3 per sq ft
will increase to GBP3.50 per sq ft in years two and three, and
subsequently GBP3.75 per sq ft from year four onwards. In doing so,
the Company has also completed a lease re-gear on Unit 7, removing
Wow's 2022 tenant break option and agreeing a three-year
reversionary lease with a tenant break option mirroring Units 8 and
9.
- Mangham Road, Rotherham (industrial) - The Company completed a
new ten-year ex-Act lease to Senior Architectural Systems Ltd at a
rent of GBP410,000 per annum reflecting a rent of GBP5 per sq ft.
This shows a significant uplift to the rent paid by previous
tenant, Hydro Components, at GBP275,000 per annum. The lease
provides for five-yearly rent reviews to the higher of open market
rent or RPI, with a collar and cap at 2% & 4% per annum,
respectively. There was no rent-free incentive granted to the
tenant, however the landlord undertook works to upgrade the
building at a cost of GBP964,700. These works were completed during
the quarter and improved the property's EPC rating from C67 to B44.
The tenant benefits from a break option at the end of year
five.
- Bank Hey Street, Blackpool (retail/leisure) - Repair works at
the property which commenced in 2020 reached practical completion
in August 2022. The total cost of these works amounted to circa
GBP2.89 million, of which approximately GBP1.15 million is expected
to be recovered from tenants. The recoverable elements of this
expenditure have been raised within the service charge budget and
all tenants are up to date with payments.
The Company completed a five-year lease renewal with Sports
Direct, whose lease expired on 4 October 2022. The lease has a
tenant rolling break option, subject to 18 months term certain, and
a landlord rolling break option from the expiry of the third year.
The rent is GBP175,000 per annum, inclusive of service charge
currently running at approximately GBP40,000 per annum. No
rent-free incentive was given.
- Central Six Retail Park, Coventry (retail/leisure) - In
October, the Company completed an agreement for lease with new
tenant, Aldi Stores Limited, for vacant units 8 & 9. Aldi will
enter into a new 20-year lease with a 15-year tenant break option
at a rent of GBP270,166 per annum, reflecting GBP13 per sq ft, to
be reviewed every five years based on compounded annual RPI,
collared and capped at 1% and 3% respectively. The letting is
subject to the landlord securing planning permission for 1) change
of use to food use (achieved in July 2022), 2) external alteration
works (achieved in November 2022) and 3) extended delivery hours,
as well as landlord works which are expected to cost GBP894,212.
Lease completion is targeted for July 2023. The letting also
includes a 12-month rent-free incentive.
In November 2022, the Company completed a lease renewal with
existing tenant Next Holdings Limited. The tenant entered into a
new five-year lease with a three-year tenant break option, at a
rent of GBP151,800 per annum, reflecting GBP15 per sq ft, with a
nine-month rent-free incentive.
In December 2022, the Company completed a lease renewal with
existing tenant Caspian Food Services Limited, trading as Burger
King. The tenant entered into a new ten year lease at a rent of
GBP100,000 per annum, reflecting GBP40 per sq ft.
In December 2022, the Company completed an agreement for lease
with new tenant Iceland Foods Limited, trading as The Food
Warehouse for units 6a & 6b. The tenant will enter into a new
ten-year lease at a rent of GBP250,000 per annum, reflecting
GBP16.51 per sq ft. The letting includes a three-month rent free
and a GBP812,500 cash incentive which will be paid to the tenant on
completion of the lease which is expected to be in November. The
letting is subject to the landlord securing planning permission for
1) change of use to food use and 2) extended delivery hours.
- Odeon Cinema, Southend (leisure) - The Company completed a
straight five-year reversionary lease with Odeon Cinemas Ltd at the
previous passing rent of GBP534,000 per annum. In doing so, a
seven-and-a-half-month rent-free incentive was granted to the
tenant, which resulted in a GBP1.35 million valuation increase for
the property. This has contributed to a valuation increase for the
quarter of GBP1.35 million.
- 40 Queen Square, Bristol (office) - Having entered into an
Agreement for Lease, subject to landlord refurbishment works, the
Company has now completed on the lease and licence for alterations
with existing tenant, Konica Minolta Marketing Services Ltd, on the
third floor. A new ten-year lease commenced on 19 December at a
rent of GBP218,840 per annum, reflecting a new high rental tone for
the building of GBP40 per sq ft. There is a five-year tenant break
option. The refurbishment works included roof, lift and reception
upgrades at a cost of GBP1.07 million plus an eleven-month
rent-free incentive. The works undertaken will provide benefits to
all tenants within the building and are expected to assist with
further rental growth at the asset.
- Cedar House, Gloucester (office) - The Secretary of State for
Communities and Local Government, who occupy the entire 37,753 sq
ft office property, have not actioned their 1 April 2023 tenant
break option. Consequently, they will remain in occupation for
another five years until 2028. Permitted development rights for
conversion to 45 residential units was approved in December 2022,
meaning there is now the ability to change the use of the building
to residential use, without having to submit a full planning
application, until December 2025.
- North Moons Industrial Estate, Redditch (industrial) - the
August 2022 annual uncapped RPI rent review has been settled at
GBP269,963 per annum, reflecting an GBP29,654 per annum. The 37,992
sq ft property is entirely let to Carrs Coatings Ltd until August
2028.
- 15-33 Union Street, Bristol (retail) - the Company completed a
two-year lease renewal with VIRR Ltd, trading as Subway, with a
landlord rolling break option. The new lease is at the same rent of
GBP32,500 per annum and is outside the Landlord and Tenant Act,
with no tenant incentive given. This short-term renewal makes it
possible to let the unit along with the neighbouring unit, let to
Kemps, whose lease expires in September 2023.
Vacancy
As at year-end, the portfolio's overall vacancy sat at 6.57%
excluding units where agreements for lease have been completed with
incoming tenant's at Central Six Retail Park in Coventry. Including
these units increases the portfolio's overall vacancy level to
9.00%
Financial Results
The Company's NAV as at 31 March 2023 was GBP167.10 million or
105.48 pps (31 March 2022: GBP191.10 million or 120.63 pps). This
represents a decrease of 15.15 pps or 12.56% over the 12- month
period, with the underlying movement in NAV set out in the table
below:
Pps
NAV as at 1 April 2022 120.63
Change in fair value of investment
property (16.60)
Portfolio acquisition costs (1.83)
Capital expenditure (1.63)
Gain on disposal of investment
property 7.21
Income earned for the period 11.31
Expenses and net finance costs
for the period (5.61)
Dividends paid (8.00)
NAV as at 31 March 2023 105.48
EPRA EPS for the year was 5.70 pence which, based on dividends
paid of 8.00 pps, reflects a dividend cover of 71.25%. The decrease
in dividend cover compared to the prior 12-month period has largely
arisen due to the Company completing a number of key sales, leaving
it with a high cash weighting and a resulting loss of rental income
in the short term. Earnings have been further depressed by one-off
costs associated with refurbishment works being undertaken at Queen
Square, Bristol and Mangham Road, Rotherham, which will both be
accretive to the Company's earnings in the medium to long term.
The focus of the Company's investment strategy remains to return
to full investment and full dividend cover. Income across the
tenancy profile has remained intact. Collection rates have reached
99% for both the September and December 2022 quarters, with further
payments expected to be received under longer-term payment plans.
Of the outstanding arrears, the Company has made a GBP0.97 million
expected credit loss provision, given the uncertain economic
outlook. The Company will continue to pursue all outstanding
arrears.
Financing
During the period, the decision was taken to complete the
refinancing of the portfolio, as announced in May 2022. The Company
has secured a new GBP60.00 million, five-year term loan facility
with AgFe, a leading independent asset manager specialising in
debt-based investments. The loan is priced as a fixed rate loan
with a total interest cost of 2.959%. The existing RBSi loan
facility, which was priced at a floating rate relative to SONIA,
was due to mature in October 2023 and has been repaid in full by
the new loan facility. Simultaneous to the funding, the Company's
interest rate cap was sold for proceeds of GBP743,000 with a
residual accounting loss of GBP88,000. In the current inflationary
environment, the Company considered it prudent to fix the loan and
interest, rather than run the risk of further interest rate rises
nearer renewal.
As at 31 March 2023, the Company has a GBP60.00 million loan
Facility with AgFe, in place until May 2027, the details of which
are presented below:
31 March 2023 31 March 2022
----------------- ----------------------
Facility GBP60.00million GBP60.00 million
Drawn GBP60.00 million GBP54.00 million
Gearing (Loan to GAV) 28.06% 22.48%
Gearing (Loan to NAV) 35.91% 28.26%
Interest rate 2.959% fixed 2.20% variable (SONIA
+1.4%)
Notional Value of
Loan Balance Hedged N/A 95%
Property Portfolio
The following tables illustrate the composition of the portfolio
in relation to its properties, tenants and income streams:
Summary by Sector as at 31 March 2023
Gross Gross Like- Like-
WAULT passing passing for-like for-like
Number Area Vacancy to rental rental Rental rental rental
of Valuation (sq by ERV break income income ERV ERV income growth* growth
Sector assets (GBPm) ft) (%) (years) (GBPm) (GBPpsf) (GBPm) (GBPpsf) (GBPm) (GBPm) (%)
-------------- -------- ----------- ---------- --------- --------- -------- --------- -------- --------- -------- --------- ---------
Industrial 17 94.60 2,308,782 8.74 3.50 7.47 3.24 9.44 4.09 7.68 0.41 5.81
Retail
Warehouse 5 43.90 484,033 9.11 3.92 4.34 8.96 4.56 9.43 3.67 0.01 1.67
Standard
Retail 8 39.90 357,227 5.84 4.52 4.25 11.88 4.00 11.21 3.11 (0.24) (12.00)
Alternatives 4 20.13 178,165 0.00 8.97 1.44 8.11 1.85 10.38 1.90 (0.03) (2.00)
Office 2 15.30 74,186 13.27 3.93 0.90 12.17 1.49 20.04 1.35 (0.03) (2.83)
-------- ----------- ---------- --------- --------- -------- --------- -------- --------- -------- --------- ---------
Portfolio 36 213.83 3,402,393 7.83 3.05 18.40 5.41 21.34 6.27 17.71 0.12 0.98
-------- ----------- ---------- --------- --------- -------- --------- -------- --------- -------- --------- ---------
Summary by Geographical Area as at 31 March 2023
Gross Gross Like- Like-
WAULT passing passing for-like for-like
Number Area Vacancy to rental rental Rental rental rental
Geographical of Valuation (sq by ERV break income income ERV ERV income growth* growth
area assets (GBPm) ft) (%) (years) (GBPm) (GBPpsf) (GBPm) (GBPpsf) (GBPm) (GBPm) (%)
South West 6 48.35 584,455 9.53 4.02 4.14 7.08 4.89 8.36 3.44 0.07 3.27
West Midlands 5 40.25 597,860 9.97 3.88 3.60 6.02 4.17 6.97 3.77 (0.04) (3.48)
Yorkshire
and
Humberside 8 36.70 928,903 5.06 2.29 3.18 3.42 4.08 4.39 2.84 0.20 8.85
Eastern 4 21.45 326,419 0.81 2.08 1.38 4.22 2.05 6.30 2.09 0.24 14.46
North West 4 20.95 336,043 0.00 6.04 1.89 5.62 1.90 5.67 1.41 (0.03) (2.17)
Wales 3 19.00 415,607 27.55 9.98 1.27 3.07 1.84 4.43 1.42 (0.19) (14.50)
South East 3 11.65 86,826 5.62 2.52 1.39 15.99 1.07 12.30 1.23 (0.13) (13.83)
Rest of
London 1 9.63 71,720 0.00 8.49 0.93 13.04 0.75 10.45 0.98 0.01 1.03
East Midlands 1 3.70 28,219 0.00 3.70 0.41 14.56 0.38 13.38 0.40 (0.01) (2.50)
Scotland 2.15 26,341 0.00 5.05 0.21 7.97 0.21 7.97 0.13 - -
Portfolio 36 213.83 3,402,393 7.83 3.05 18.40 5.41 21.34 6.27 17.71 0.12 0.98
--------------- -------- ----------- ---------- --------- --------- -------- --------- -------- --------- -------- --------- ---------
* Like-for-like rental growth is for the year ended 31 March
2023.
Source: Knight Frank/AEW, 31 March 2023.
Properties by Market Value as at 31 March 2023
Sector weighting by valuation - high industrial weighting and
low exposure to offices
Sector Percentage
Industrial 44%
Offices 7%
Alternative 9%
Standard Retail 19%
Retail Warehouse 21%
Geographical weighting by valuation - highly diversified across
the UK
Region Percentage
Yorkshire and
Humberside 17%
South East 5%
Eastern 10%
South West 23%
West Midlands 19%
East Midlands 2%
North West 10%
Wales 9%
Rest of London 4%
Scotland 1%
Properties by Market Value as at 31 March 2023
Market Value
Property Sector Region Range (GBPm)
Top 10:
1. Central Six Retail Park, Retail Warehouses West Midlands 15.0 - 20.0
Coventry
2. Northgate House, Bath Standard Retail South West 10.0 ---
15.0
3. 40 Queen Square Bristol Offices South West 10.0 - 15.0
4. Gresford Industrial Estate, Industrial Wales 10.0 - 15.0
Wrexham
5. London East Leisure Park, Other Rest of London 7.5 - 10.0
Dagenham
6. Lockwood Court, Leeds Industrial Yorkshire 7.5 - 10.0
and Humberside
7. Arrow Point Retail Park, Retail Warehouses West Midlands 7.5 - 10.0
Shrewsbury
8. 15-33 Union Street, Bristol Standard Retail South West 7.5 - 10.0
9. Apollo Business Park, Basildon Industrial Eastern 5.0 - 7.5
10. Units 1001 - 1004 Sarus Industrial North West 5.0 - 7.5
Court
The Company's top ten properties listed above comprise 49.2% of
the total value of the portfolio.
Market
Value
Range
Property Sector Region (GBPm)
11. Matalan, Preston Retail Warehouses North West 5.0 - 7.5
12. Barnstaple Retail Park, Barnstaple Retail Warehouses South West 5.0 - 7.5
13. Storey's Bar Road, Peterborough Industrial Eastern 5.0 - 7.5
14. Mangham Road, Rotherham Industrial Yorkshire 5.0 - 7.5
and Humberside
15. Brockhurst Crescent, Walsall Industrial West Midlands 5.0 - 7.5
16. Westlands Distribution Park, Industrial South West 5.0 - 7.5
Weston Super Mare
17. Next, Bromley Standard Retail South East 5.0 - 7.5
18. Walkers Lane, St Helens Industrial North West 5.0 - 7.5
19. Euroway Trading Estate, Bradford Industrial Yorkshire 5.0 - 7.5
and Humberside
20. Diamond Business Park, Wakefield Industrial Yorkshire 5.0 - 7.5
and Humberside
21. Odeon Cinema, Southend Other Eastern 5.0 - 7.5
22. 710 Brightside Lane, Sheffield Industrial Yorkshire < 5.0
and Humberside
23. Deeside Industrial Park, Deeside Industrial Wales < 5.0
24. Oak Park, Droitwich Industrial West Midlands
25. Pearl House, Nottingham Standard Retail East Midlands < 5.0
26. The Railway Centre, Dewsbury Retail Warehouses Yorkshire < 5.0
and Humberside
27. Cedar House, Gloucester Offices South West < 5.0
28. PRYZM, Cardiff Other Wales < 5.0
29. Pipps Hall Industrial Estate, Industrial Eastern < 5.0
Basildon
30. Commercial Road, Portsmouth Standard Retail South East < 5.0
31. 69-75 Above Bar Street, Southampton Standard Retail South East < 5.0
32. Eagle Road, Redditch Industrial West Midlands < 5.0
33. Bridge House, Bradford Industrial Yorkshire < 5.0
and Humberside
34. Pricebusters Building, Blackpool Standard Retail North West < 5.0
35. JD Gyms, Glasgow Other Scotland < 5.0
36. 11/15 Fargate, Sheffield Standard Retail Yorkshire < 5.0
and Humberside
Top 10 Tenants as at 31 March 2023
% of
Portfolio
Passing Total
Rental Passing
Income Rental
Tenant Sector Property (GBP'000) Income
Gresford Industrial
1. Plastipak UK Ltd Industrial Estate, Wrexham 975 5.3
2. Mecca Bingo Ltd Leisure Various 806 4.4
Retail
3. Matalan Ltd Warehouse Cuerden Way, Preston 651 3.5
Wyndeham Peterborough
4. Ltd Industrial Wyndeham, Peterborough 644 3.5
5. Poundland Ltd Retail Various 631 3.4
6. TJX UK Ltd Retail Various 608 3.3
7. Sports Direct Retail Various 604 3.3
Harrogate Spring
8. Water Ltd Industrial Lockwood Court, Leeds 603 3.3
15-33 Union Street,
9. Wilko Retail Ltd Retail Bristol 481 2.6
10. Next Holdings Ltd Retail Next, Bromley 478 2.6
The Company's top ten tenants, listed above, represent 35.2% of
the total passing rental income of the portfolio.
Source: Knight Frank valuation report as at 31 March 2023.
ESG Update
The Company has maintained its two stars Global Real Estate
Sustainability Benchmark ('GRESB') rating for 2022 and improved its
score to 67 (GRESB Peer Group Average 65). A large portion of the
GRESB score relates to performance data coverage where, due to the
high percentage of single-let assets with tenant procured
utilities, the Company does not score as well as Funds with a
smaller holding of single-let assets and a higher proportion of
multi-let assets where the owner is responsible for the utilities
and can therefore gather the relevant data.
We continue to implement our plan to improve overall data
coverage and data collection for all utilities through increased
tenant engagement at our single-let assets and by installing
automated meter readers ('AMR') across the portfolio. So far, we
are in the process of installing AMRs in all of our multi-let
properties. We are also in discussions with the tenants of our top
10 single-let FRI assets (in terms of floor area) regarding the
installation of AMR.
We endeavour, where the opportunity presents itself through a
lease event, to include green clauses in leases, covenanting
landlord and tenant to collaborate over the environmental
performance of the property. Green clauses seek to improve data
coverage by ensuring tenants provide regular and appropriate
utility consumption data.
We continue to assess and strengthen our reporting and alignment
against the framework set out by the TCFD with further disclosure
to be provided in the 2023 annual report and accounts. We are
pleased to report that the Company has maintained its EPRA Silver
rating for Sustainability Best Practice Recommendations (sBPR) for
ESG disclosure and transparency.
Each asset within the Company has an individual Asset
Sustainability Action Plan (ASAP). This document tracks ESG
initiatives across the portfolio on an asset-by-asset basis for
targeted/ relevant and specific implementation of ESG improvements.
All managed assets and units have been contracted to High Quality
Green Tariffs, ensuring the electricity supply is from renewable
sources. All void and vacant unit supplies have also been
transferred to High Quality Green Tariffs.
We are underway with implementing a number of initiatives across
our portfolio, including a new landscaping/biodiversity programme
at our retail warehouse in Barnstaple, which we completed during
the period, replacing the existing plants and shrubs with a greater
diversity of appropriate species which in turn will attract a wider
variety of insects and wildlife to the property.
Approximately GBP3.02 million of the Company's current
contracted income stream is subject to an expiry or break within
the 12-month period commencing 1 April 2023. 26.68% (GBP776,757) of
this income is in the industrial sector, where we anticipate strong
occupier demand, low incentives and reversionary rents. Regarding
the remainder, the Company is proactively looking to renew leases
or to complete new lettings.
Alternative Investment Fund Manager ('AIFM')
AEW UK Investment Management LLP is authorised and regulated by
the FCA as a full-scope AIFM and provides its services to the
Company.
The Company has appointed Langham Hall UK Depositary LLP
('Langham Hall') to act as the depositary to the Company,
responsible for cash monitoring, asset verification and oversight
of the Company.
Information Disclosures under the AIFM Directive
Under the AIFM Directive, the Company is required to make
disclosures in relation to its leverage under the prescribed
methodology of the Directive.
Leverage
The AIFM Directive prescribes two methods for evaluating
leverage, namely the 'Gross Method' and the 'Commitment Method'.
The Company's maximum and actual leverage levels are as per
below:
31 March 2023 31 March 2022
Commitment Gross Commitment
Leverage Exposure Gross Method Method Method Method
------------------- ------------- ----------- -------- -----------
Maximum Limit 140% 140% 140% 140%
Actual 127% 136% 125% 129%
In accordance with the AIFM Directive, leverage is expressed as
a percentage of the Company's exposure to its NAV and adjusted in
line with the prescribed 'Gross' and 'Commitment' methods. The
Gross method is representative of the sum of the Company's
positions after deducting cash balances and without taking into
account any hedging and netting arrangements. The Commitment method
is representative of the sum of the Company's positions without
deducting cash balances and taking into account any hedging and
netting arrangements. For the purposes of evaluating the methods
above, the Company's positions primarily reflect its current
borrowings and NAV.
Remuneration
The AIFM has adopted a Remuneration Policy which accords with
the principles established by AIFMD. AIFMD Remuneration Code Staff
includes the members of the AIFM's Management Committee, those
performing Control Functions, Department Heads, Risk Takers and
other members of staff that exert material influence on the AIFM's
risk profile or the AIFs it manages.
Staff are remunerated in accordance with the key principles of
the firm's remuneration policy, which include:
(1) promoting sound risk management;
(2) supporting sustainable business plans;
(3) remuneration being linked to non-financial criteria for Control Function staff;
(4) incentivising staff performance over long periods of time;
(5) awarding guaranteed variable remuneration only in exceptional circumstances; and
(6) having an appropriate balance between fixed and variable remuneration.
As required under section 'Fund 3.3.5.R(5)' of the Investment
Fund Sourcebook, the following information is provided in respect
of remuneration paid by the AIFM to its staff for the year ended 31
December 2022.
Year ended
31 December
2022
-------------
Total remuneration paid to employees during financial
year:
a) remuneration, including, where relevant, any
carried interest paid by the AIFM 3,717,218
b) the number of beneficiaries 32
The aggregate amount of remuneration of the AIFM
Remuneration Code staff, broken down by:
a) senior management GBP512,674
b) members of staff GBP3,204,543
Fixed Variable Total
remuneration remuneration remuneration
-------------- -------------- --------------
Senior management GBP362,500 GBP150,174 GBP512,674
Staff GBP2,202,729 GBP1,001,815 GBP3,204,544
-------------- -------------- --------------
Total GBP2,565,229 GBP1,151,989 GBP3,717,218
-------------- -------------- --------------
Fixed remuneration comprises basic salaries and variable
remuneration comprises bonuses.
AEW UK Investment Management LLP
20 June 2023
FURTHER INFORMATION
The financial information does not constitute the Company's
financial statements for the periods ended 31 March 2023 or 31
March 2022 but is derived from those financial statements.
Financial statements for the year ended 31 March 2022 have been
delivered to the Registrar of Companies and those for the year
ended 31 March 2023 will be delivered following the Company's
Annual General Meeting. The auditor's reports on both the 31 March
2022 or 31 March 2023 financial statements were unqualified; did
not draw attention to any matters by way of emphasis; and did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006.
AEW UK REIT PLC's annual report and accounts for the year ended
31 March 2023 (which includes the notice of meeting for the
Company's AGM) will be available today on www.aewukreit.com.
It will also be submitted shortly in full unedited text to the
Financial Conduct Authority's National Storage Mechanism and will
be available for inspection at
data.fca.org.uk/#/nsm/nationalstoragemechanism in accordance with
DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules.
END
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FR EAEKEAENDEAA
(END) Dow Jones Newswires
June 21, 2023 02:00 ET (06:00 GMT)
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