AEW UK REIT reports 10% NAV total return for quarter to end of June 2021.
The group, which owns a diverse property portfolio comprising 36 assets in the UK, posted an 8% increase in NAV to 107.11p (driven by portfolio valuation uplift of 7.47%) and paid a dividend of 2p per share.
The dividend was covered by EPRA earnings in the quarter of 2.14p per share, after it recovered rent from two “well funded” tenants that had refused to pay during the pandemic.
Other highlights from the NAV announcement included:
- Acquisitions of two properties: Arrow Point Retail Park, Shrewsbury, for £8.35m and 15-33 Union Street, Bristol, for £10.19m.
- A loan to NAV ratio of 29.76% (31 March 2021: 25.15%). As at 30 June 2021, the company had a cash balance of £8.43m and £8.89m of its loan facility available to draw up to the maximum 35% Loan to NAV at drawdown.
- Rent collection for the current quarter was 88% o(including rent expected to be received under monthly payment plans prior to quarter end).
Alex Short, portfolio manager, said: “The company’s portfolio generated record strong capital growth for the quarter with valuations increasing by 7.47% on a like-for-like basis, the highest quarterly increase since IPO in 2015. As with the previous quarter, this was largely driven by the performance of the industrial assets in the portfolio which saw a like-for-like increase of 10.62% for the quarter and make up 57% of the portfolio as at 30 June 2021. The industrial and logistics sectors have benefitted from accelerated changes in consumer habits and the shift towards online retail and this continues to be reflected in valuation movements. There is also some expectation that the UK will begin to see an increase in localised production as a result of supply chain disruption and this could lead to take up being focussed more on traditional manufacturing accommodation, which has seen a decline in total stock in recent years, rather than the currently favoured logistics assets.
“We are now seeing more attractive investment opportunities coming to the market and the company made two acquisitions during the quarter for a combined gross purchase price of £18.54m, drawing £11.00m of its loan facility. The first, Arrow Point Retail Park in Shrewsbury, was acquired in May for £8.35m and is a fully-let, purpose-built retail park prominently located on a busy commercial estate, providing a net initial yield of 8.7%. The second, 15-33 Union Street, Bristol, is a retail site located on a busy pedestrian thoroughfare in Bristol city centre and provides a net initial yield of 8.0%. Both of these assets provide opportunity for value growth in the medium to long term, and also strong and stable income streams from their tenancy profiles. While we continue to take a cautious approach towards the retail sector, judging each site on its specific merits, these two acquisitions are an excellent fit for the portfolio. The retail sector now makes up 18% of the portfolio valuation.
“The company’s EPRA EPS was 2.14 pence for the quarter, providing a dividend cover of 107% (31 March 2021: 1.10 pence and 55%). During the quarter, the company announced the successful outcome of legal action against two well-funded national tenants to recover unpaid rent and subsequently recovered all rent arrears due from those tenants. The collection of these significant arrears allowed the reversal of the prudent doubtful debt provision which contributed a one-off 0.37 pence to EPRA EPS during the quarter. In the coming quarters the company’s earnings will benefit from its recent acquisitions as well as the completion of asset management initiatives. Ongoing remedial works at the company’s property in Blackpool, which amounted to 0.13 pence per share for the quarter, and a high level of vacancy at its property in Glasgow, which has exchanged to be sold subject to achieving planning for student accommodation and vacant possession, are temporarily restricting the company’s earnings potential. Both are expected to be complete by early 2022.
“We are also encouraged by recent improvements in rent collection levels, which now stand at over 96% for each quarter since the onset of the pandemic (excluding current quarter). It is hoped that continued easing of lockdown restrictions will allow this trend to continue. The company has £8.43m of cash and £8.89m of its loan facility available to draw up to the maximum 35% Loan to NAV at drawdown, which will allow us to take advantage of further attractive opportunities in the market.
“The company’s share price was 96.00 pence as at 30 June 2021 (31 March 2021: 83.20 pence) and we hope that continued improvements in economic conditions will bring about the return of trading at a premium to NAV and enable growth of the company to resume, which remains a key objective.”
AEWU : AEW UK REIT posts 10% quarterly NAV total return