AEW UK REIT (AEWU) has published its annual results for the year to 31 March 2025, marking its tenth anniversary with a strong set of figures that reflect the consistent execution of its value-driven, sector-agnostic strategy. The company delivered a NAV total return of 15.3% and a shareholder total return of 28.7%, significantly outperforming both the MSCI benchmark and many of its listed peers. Since inception in 2015, AEWU has now delivered a share price total return of 121.7%.
NAV rose by 7.2% to £174.4m, or 110.11p per share (31 March 2024: 102.73p), and profit before tax more than doubled to £24.4m (2024: £9.1m). EPRA earnings per share increased to 9.0p (2024: 7.29p), providing dividend cover of 112.5%. AEWU has now paid an annual dividend of 8.0p per share for nine consecutive years, with all dividends in the 2025 financial year covered by earnings. The trust’s shares closed the period at 101.4p, up from 85.8p a year earlier.
Strong performance across portfolio and transactions
The trust’s portfolio of 33 UK commercial properties delivered a 14.8% total return for the year, comprising 6.0% capital growth and an 8.8% income return – double the return of the MSCI/AREF PFI Balanced Property Index benchmark (7.4%). AEWU’s management strategy continues to focus on sourcing mispriced smaller assets (typically under £15m), unlocking value through active asset management.
During the year, AEWU completed two disposals – Oak Park Industrial Estate and part of Central Six Retail Park – for a combined £32.6m, achieving significant uplifts to their original purchase prices. The part-disposal of Central Six delivered a 60% gain versus acquisition and achieved an IRR of around 15%. Meanwhile, the industrial asset in Droitwich was sold at a 33% premium to its March 2024 valuation.
In terms of acquisitions, the trust bought a high street retail asset in Hitchin for £10.0m, reflecting a net initial yield of 8.3%. This aligns with AEWU’s increasing focus on retail, particularly where alternative use value underpins the investment case. The portfolio was further expanded post-period end with the acquisition of Freemans Leisure Park in Leicester, using remaining proceeds from earlier sales.
Operational resilience and balance sheet strength
The portfolio had an EPRA net initial yield of 7.97% as at 31 March 2025 (2024: 8.02%) and was 92.5% let to 124 tenants. The trust’s EPRA vacancy rate rose modestly to 7.5% (2024: 6.4%), while the weighted average unexpired lease term stood at 4.1 years to break and 5.7 years to expiry.
Rental income generated was £18.9m (2024: £19.9m), with the reduction primarily reflecting disposals during the year. A number of asset management initiatives helped support earnings and reversionary potential, with recent leasing activity boosting passing rents and EPC improvements enhancing asset quality.
AEWU remains fully invested, with a drawn £60m debt facility in place until May 2027 at a fixed rate of 2.96%. Gearing stands at a moderate 25.0% of gross assets. Cash and restricted balances at the year end totalled £27.8m, giving the trust flexibility to capitalise on further investment opportunities. The board noted that refinancing is not expected to materially alter earnings, even with an anticipated rise in borrowing costs post-2027.
Sector and regional exposure
As at year end, the portfolio was diversified across industrial (38%), retail (35% combined for high street and retail warehousing), leisure (14%), and offices (12%). AEWU’s weighting to retail has increased through counter-cyclical acquisitions in recent years, while exposure to offices remains low and selective, focused on high-quality, well-located buildings with alternative use potential.
Geographically, the portfolio spans a broad UK footprint, with the largest allocations in the South West (27%) and West Midlands (21%). The top 10 assets represent just over half the portfolio by value and include a balanced mix of sectors and locations, with key holdings in Wrexham, Bath, Bristol and Dagenham.
Active asset management delivering results
AEWU continues to demonstrate its ability to generate both income and capital gains through asset management. Highlights during the year included: a 60% increase in net operating income at Central Six Retail Park prior to part-disposal; lettings at Sarus Court in Runcorn post-refurbishment, achieving rents of £8.50 psf compared to £6.50 psf prior; a new 25-year lease to Tenpin at The Railway Centre in Dewsbury at a rent significantly above previous ERVs; retail letting activity in Hitchin, Bristol and Sheffield that brought in national names such as Next, Superdrug, Costa and Farmfoods; and several successful rent reviews and lease renewals, including 27% uplift at Pilkington in Bradford and 12.5% increase at Storey’s Bar Road in Peterborough.
Governance, outlook, and scaling potential
Chairman Robin Archibald highlighted the trust’s consistent delivery over the last decade, with a focus on high, covered income and capital growth through repositioning opportunities. The trust’s long-standing 8p dividend remains a central attraction, currently yielding 7.9% on the year-end share price.
The board remains open to scaling the strategy, including potential equity issuance, provided it aligns with shareholder interests. Benefits would include improved secondary market liquidity and reduced operating cost ratios. AEWU also continues to advocate for more accurate cost disclosure regulation under PRIIPs, highlighting that current methodology distorts comparisons with other property vehicles.
Looking ahead, AEWU’s manager believes current market conditions present an attractive opportunity to deploy capital, with asset values at their lowest point since IPO.
[QD comment Matthew Read: AEWU has marked its tenth anniversary with a strong set of results, showing that its value-led, sector-agnostic approach continues to pay off. The NAV total return of 15.3% and shareholder return of nearly 29% for the year are compelling in the context of a UK commercial property market that is still recovering. The manager’s focus on active asset management and buying mispriced assets has been key to the trust’s performance, with AEWU once again outperforming the MSCI benchmark by a wide margin.
Gearing is modest and fixed at attractive rates, giving AEWU breathing room to capitalise on market dislocations, and with the trust’s discount having narrowed, there may be appetite for future growth through equity issuance down the line if this continues. With an 8% yield and consistent execution, AEWU looks to be one of the more compelling income-focused plays in the listed property space.]
