AEW UK REIT has reported a NAV total return of 5.0% for the year to the end of March 2024.
NAV fell 2.6% to 102.73p per share due to the impact of higher interest rates on the value of its portfolio. However, dividends of 8p per share over the year brought its total return into positive territory.
The company made good progress on earnings growth (and consequently dividend cover) over the year, boosting rental income through the letting of vacant space. EPRA earnings were 7.29p per share, up from 5.7p the year prior. Dividend cover now stands at 91% (2023: 71%).
Share price total return for the year was 1.85% (2023: -16.44%), with the share price falling from 92.1p to 85.8p over the year. The discount to NAV at the end of the financial year was 16.5%.
The company is conservatively geared, with a loan to value of 29.0% through a £60m credit facility. It has cash balances totaling £11.4m.
Property highlights
- As at 31 March 2024, the company’s property portfolio was valued at £210.7m across 33 properties (2023: £213.8m across 36 properties).
- Over the year, the company’s portfolio delivered outperformance against the MSCI/AREF PFI Balanced Funds Quarterly Property Index of 7.0%. Outperformance of the company’s assets against the benchmark was also seen in each main property sector.
- The company acquired two properties during the year for £21.52m, excluding acquisition costs, and sold five assets for £26.95m.
- The portfolio had an EPRA vacancy rate of 6.4% as at 31 March 2024 (31 March 2023: 7.8%).
- Rental income grew to £19.9m (2023: £17.7m).
- EPRA net initial yield (NIY) of 8.0% (2023: 7.65%).
- Weighted Average Unexpired Lease Term (WAULT) of 4.27 years to break (2023: 3.05 years) and 5.60 years to expiry (2023: 4.33 years).
Mark Burton, chairman, commented:
“We are pleased with the performance of the Company over the past year, which has delivered a NAV total return to shareholders of 4.98% and an outperformance against the previous year on all return and earnings metrics, despite the difficult economic backdrop. It is testament to the Manager’s value-focused strategy of investing in mispriced properties, where income can be grown and value created through active asset management, which has enabled the Company to continue to pay its market-leading 8p per share dividend for the ninth consecutive year.
“During the year, the Manager sold several lower-yielding assets, crystallising asset management gains, and recycled the resulting capital into higher-yielding, earnings-accretive properties. From an asset management perspective, the Manager has completed new leases and rent reviews that have supported the growth of the Company’s rental income. We are encouraged by the portfolio’s year-end reversionary yield of 8.8%, which exceeds its initial yield of 8.0%, demonstrating that further rental growth can be pursued in the future.
“The outlook for commercial property values is more positive than it has been for the past year, and we believe that the Company is well positioned to continue to add value for shareholders.”