AEW UK REIT upbeat despite small NAV hit – over the three months ending 30 September 2020, AEW UK REIT’s NAV fell from 93.37p to 92.73p and its EPRA earnings per share fell from 1.81p in the previous quarter to 1.60p. That still works out as a positive NAV total return figure of 1.46%, however. The dividend is being maintained at 2p per quarter, with the balance coming from distributable reserves.
88% of rent has been collected or will come in via monthly payment plans and a further 3% is expected to be received under agreed, longer term payment plans. They say the rent is coming in faster than it had been as well. The managers think that this suggests that “on the whole, our tenants wish to return to normality as much as they can, including the usual payment of rent“.
The breakdown of the NAV move is much as you might expect, with a 1.1% uplift in the value of industrial property offset by a 2.6% fall in retail and smaller falls in other sectors. The vacancy rate rose slightly to 4.9% from 4.7%. The headline figure is higher than this at 8.2% but this includes an asset held for sale which needs to be sold with vacant possession.
The balance sheet is fairly robust with an LTV of 26.8% versus a maximum of 35.0%. The company repaid £12m of its £60m loan facility during the quarter using part of the proceeds of its £18.8m sale of the car parking facility in Corby in May 2020.
The managers are quite excited about the increased freedom to obtain change of use planning for a range of assets. This could offer opportunities to add value to the portfolio. The new national planning regime includes the introduction of ‘Use Class E’ which groups together various commercial property uses such as retail, office, light industrial and gyms, and allows greater ease of movement between them.
Within the portfolio, they secured a new 5 year lease to existing tenant Vink Holdings at the Apollo Business Park in Basildon, 4% ahead of the valuer’s previous estimates, and 30% ahead of the previous rental level. The 6 new lettings completed in the portfolio since the start of UK wide lockdowns in March have secured rental income at a weighted average of 5% ahead of previous estimates. The portfolio’s high weighting to the industrial and warehousing sector has helped as this sector remains in demand. They say that “further new lettings and lease renewals are currently under offer which look set to continue this positive trend into future quarters“.