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AEW UK REIT sees modest recovery in valuations in Q3 2016

AEW UK REIT has published interim results covering the period from 1 May 2016 to 31 October 2016. Under European Public Real Estate Association (‘EPRA’) methodology, earnings per share for the period was 3.81 pence and the NAV per share at 31 October 2016 was 95.47p, down from 98.97p. During the period, they paid an interim dividend on 30 September 2016 of 2p and, on 15 November 2016, the Board declared a second interim dividend of 2p.

As at 31 October 2016, the portfolio had a fair value of GBP125.89 million. In the period between May 2016 to July 2016 the portfolio valuation fell by 1.81%. In comparison, the capital values of direct properties as measured by MSCI fell by 3% over the same period. Since July 2016, their valuers have removed their caveat reflecting a lack of post-Brexit transactional evidence from their valuations and have applied a modest level of post-Brexit capital growth of 0.33% in the period August 2016 to October 2016. This compares favourably to a fall of 0.8% in capital values of direct properties as measured by MSCI over the same 3-month period to October 2016.

They comment on five bits of asset management activity in the period:

Cranbourne House, Basingstoke

In return for the landlord’s consent to assign the lease to HFC Prestige Manufacturing Limited, Wella Holdings Limited contracted to remove their 2017 break clause giving the Company an extra two years of guaranteed income to 2019 at GBP410,000 p.a. plus a 6 month rental guarantee. The tenant is now also carrying out refurbishment works to the building demonstrating their commitment to the location.

Odeon Cinema, Southend

They have obtained an uplift of GBP30,000 per annum for the outstanding 2012 rent review from GBP505,000 to GBP535,000 backdated to 29 September 2012. Negotiations have now commenced on the 2017 rent review. We have also joined the Southend Town Centre Action Group which unites the interests of Southend’s retailers and landlords, making representations on planning, parking and out of town schemes.

Sandford House, Solihull

The portfolio’s second largest tenant did not exercise its break option in 2017 and is now contracted to stay in occupation for a further two years until 2019. We are looking at various long term options for this central Solihull property including residential, retail or a second office building.

11-15 Fargate, Sheffield

They have completed on the disposal of the vacant upper parts (250 year long leasehold) for a price of GBP710,000. The median sale estimation at the time of acquisition (September 2015) was GBP250,000.

Valley Retail Park, Belfast

They completed a 15 year lease with Smyths Toys on units 5 & 6 at GBP200,000 p.a. This resulted in a fully let scheme.

AEWU : AEW UK REIT sees modest recovery in valuations in Q3 2016

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