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AEW UK REIT posts marginal fall in NAV

Earnings per share for the quarter increased to 2.18p per share from 2.13p per share in September

AEW UK REIT posted a marginal fall in its net asset value (NAV) for the three months to the end of December 2019

The company, which owns a diversified portfolio of 35 regional UK commercial property assets, reported NAV of 97.24p per share for the quarter, a decrease of 0.1% on September’s NAV of 97.36p per share.

The fall was due to a slight decrease in the value of its property portfolio of 0.13% – driven largely by a fall in value of its retail properties.

Earnings per share for the quarter increased to 2.18p per share from 2.13p per share in September. The company declared an interim dividend of 2p per share for the quarter, in line with its targeted annual dividend of 8p per share.

NAV total return for the three months was 1.93%. Share price total return for the 12 months to the end of December was 20.67%.

Alex Short, portfolio manager for AEW UK REIT, said: “The result of the UK general election on 13 December delivered a significant majority to the UK government for the first time in a decade, removing some of the political uncertainty which has prevailed for some time and leading to improved sentiment across the market. This is encouraging for the sector as a whole and positive for the company. The company’s portfolio is well-positioned as we move into 2020 and we are seeing many exciting opportunities.

“We are actively working on an exciting pipeline of potential acquisitions with a particular focus on the industrial and office sectors, which we believe will be accretive to the strategy both in terms of income but also in terms of long term value retention and creation opportunities. To that end, the company intends to raise additional capital under its existing placing programme in the near future.

Property performance

The company’s assets generated property level total returns of 6.69% over the 12 months to 30 September 2019 (being the most recent date for which benchmark data is available), an outperformance of 3.80% relative to the market (as measured by the MSCI/AREF UK PFI Balanced Funds Quarterly Index).

Annualised total property returns since the company’s May 2015 IPO have been 10.89% up to 30 September 2019 on standing investments, an outperformance of 3.42% relative to the benchmark.

Portfolio valuation

Through the December quarter valuation, the portfolio maintained value on the whole with a marginal decrease of 0.13% from £196.05m to £195.8m. Industrial and office performed well increasing by 1.01% and 2.03% respectively, however this was offset by a decrease in retail assets of 6.31%.

Equity raise

The company said it is pursuing a pipeline of opportunities and, accordingly, intends to raise additional capital under its existing placing programme in the near future. It said further announcements of any potential equity fundraise will be made as and when appropriate.

Debt

During the quarter, the company drew £1.5m of its loan facility, to bring the total borrowings to £51.5m and producing a gross loan to value (LTV) of 26.3% and a net loan to value of 24.74%.

The loan continues to attract interest at LIBOR + 1.4%. To mitigate the interest rate risk that arises as a result of entering into a variable rate linked loan, the company has entered into interest rate caps on £36.51m of the total value of the loan (£26.51m at 2.5% cap rate and £10m at 2.0% cap rate) up to October 2020, resulting in the loan being 71% hedged.

The loan term runs to October 2023 and the company has entered into additional interest rate caps covering the period from October 2020 to October 2023, capping a notional value of £46.51m at LIBOR of 2.0% per annum, which represents 90% of the current £51.50m loan balance.

AEWU : AEW UK REIT posts marginal fall in NAV

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