Alternative Investment Fund Managers Directive Fund 3.2.2R Disclosures
AEW UK REIT plc (the "Company" or the "AIF")
The UK AIFM Regime requires certain disclosures to be made by UK fund managers, such as AEW UK Investment Management LLP (the "AIFM" or the "Investment Manager"), when they market interests in an alternative investment fund to investors located in the United Kingdom.
This document contains the information required to be made available to investors in the Company before they invest, pursuant to the requirements of the UK AIFM Regime. Article 23 of the EU AIFM Directive has been implemented in the United Kingdom through Chapter 3.2 of the Investment Funds sourcebook of the Financial Conduct Authority Handbook ("FUND 3.2"). The table below sets out information required to be disclosed pursuant to the FUND 3.2 and related national implementing measures. It is made available to investors in the Company by being made available on its website at
https://www.aewukreit.com/investors/documents/2022.
This document is issued by the AIFM in its capacity as the alternative investment fund manager and investment manager of the Company and contains solely the information that the AIFM is required to make available to investors in the Company pursuant to Fund 3.2 and should not be relied upon as the basis for any investment decision.
This document contains either the information required by FUND 3.2 or cross-refers to the Company's website or the relevant document available to investors that contains such information.
Important Information
This document contains solely that information that the AIFM is required to make available to investors in the Company pursuant to the FUND 3.2 and should not be relied upon as the basis for any investment decision. This document is not being issued for any purpose other than to make certain, required regulatory disclosures to investors and, to the fullest extent permitted under applicable law and regulations, the Company and the AIFM will not be responsible to persons other than the Shareholders for their use of this document, nor will they be responsible to any person (including the Shareholders) for any use which they may make of this document other than to provide information to invest in the ordinary shares of £0.01 each in the capital of the Company ("Ordinary Shares").
This document does not purport to provide complete details of the Company and potential investors should not solely rely upon this document when determining whether to make an investment. This document does not constitute, and may not be used for the purposes of, an offer or solicitation to buy or sell, or otherwise undertake investment activity in relation to, the Ordinary Shares.
This document is not a prospectus and it is not intended to be an invitation or inducement to any person to engage in any investment activity. This document may not include (and it is not intended to include) all the information which investors and their professional advisers may require for the purpose of making an informed decision in relation to an investment in the Company and its Ordinary Shares.
The Company and the AIFM are not advising any person in relation to any investment or other transaction involving shares in the Company. Recipients must not treat the contents of this document or any subsequent communications from the Company, the AIFM or any of their subsidiaries, affiliates, officers, directors, employees or agents, as advice relating to financial, investment, taxation, accounting, legal, regulatory or any other matters. Prospective investors must rely on their own professional advisers, including their own legal advisers and accountants, as to legal, tax, accounting, regulatory, investment or any other matters concerning the Company or an investment in Ordinary Shares.
The distribution of this document in certain jurisdictions may be restricted and accordingly persons into whose possession this document comes are required to inform themselves about and to observe such restrictions. The Ordinary Shares have not been, and will not be, registered under the US Securities Act of 1933 (as amended) or under any of the relevant securities laws of Canada, Australia, the Republic of South Africa or Japan. Accordingly, the Ordinary Shares may not (unless an exemption from such Act or such laws is available) be offered, sold or delivered, directly or indirectly, in or into the USA, Canada, Australia, the Republic of South Africa or Japan.
The Company is not registered under the US Investment Company Act of 1940 (as amended) and investors are not entitled to the benefits of such Act. Prospective investors must inform themselves as
to (a) the legal requirements within their own countries for the purchase, holding, transfer or other disposal of Ordinary Shares; (b) any foreign exchange restrictions applicable to the purchase, holding, transfer or other disposal of Ordinary Shares which they might encounter; and (c) the income and other tax consequences which may apply in their own countries as a result of the purchase, holding, transfer or disposal of Shares.
Potential investors in the Company's shares should consult their stockbroker, bank manager, solicitor, accountant or other financial adviser before investing in the Company.
Regulatory | Disclosure | Disclosure | ||||
Reference | Requirement | |||||
FUND 3.2.2R | ||||||
1(a) | a description of the | Investment Objective | ||||
investment strategy | ||||||
and objectives of the | The investment objective of the Company is to deliver an | |||||
Company | attractive total | return to shareholders from | investing | |||
predominantly in a portfolio of smaller commercial | ||||||
properties in the United Kingdom. | ||||||
Investment Policy | ||||||
In order to achieve its investment objective, the Company | ||||||
invests in freehold and leasehold properties across the | ||||||
whole spectrum of the commercial property sector (office | ||||||
properties, industrial/warehouse | properties, retail | |||||
warehouses and high street retail) to achieve a balanced | ||||||
portfolio with a diversified tenant base. | ||||||
Investment restrictions | ||||||
The Company invests and manages its assets with the | ||||||
objective of spreading risk through the following | ||||||
investment restrictions: | ||||||
• | the value of no single property, at the time of | |||||
investment, will represent more than 15.00% of | ||||||
GAV; | ||||||
• | the Company may commit up to a maximum of | |||||
10.00% of its NAV (measured at the | ||||||
commencement of the project) to development | ||||||
activities; | ||||||
• | the value of properties, measured at the time of | |||||
each investment, in any one of the following sectors: | ||||||
office properties, retail warehouses, high street | ||||||
retail and industrial/warehouse properties will not | ||||||
exceed 50.00% of GAV. The 50.00% sector limit | ||||||
may be increased to 60.00% as part of the | ||||||
Investment | Manager's | efficient | portfolio | |||
management whereby the Investment Manager | ||||||
determines it appropriate to pursue an attractive | ||||||
investment opportunity which could cause the | ||||||
50.00% sector limit to be exceeded on a short-term | ||||||
basis pending a repositioning of the portfolio | ||||||
through a sale of assets or other means; | ||||||
• | investment in unoccupied and non-income | |||||
producing assets will, at the time of investment, not | ||||||
exceed 20.00% of NAV; | ||||||
• | the Company may commit up to a maximum of | |||||
10.00% of the NAV (at the time of investment) in the | ||||||
AEW UK Core Property Fund (the "Core Fund"). |
Regulatory | Disclosure | Disclosure | |
Reference | Requirement | ||
The Company disposed of its last remaining units in | |||
the Core Fund in May 2017 and it is not the current | |||
intention of the Directors to invest in the Core Fund; | |||
• | the Company will not invest in other closed-ended | ||
investment companies; and | |||
• | if the Company invests in derivatives for the | ||
purposes of efficient portfolio and cash | |||
management, the total notional value of the | |||
derivatives at the time of investment will not exceed, | |||
in aggregate, 35.00% of GAV. | |||
The Directors currently intend, at all times, to conduct the | |||
affairs of the Company so as to enable the Group to | |||
qualify as a REIT for the purposes of Part 12 of the | |||
Corporation Tax Act 2010 ("CTA") (and the regulations | |||
made thereunder). | |||
The Company will at all times invest and manage its | |||
assets in a way that is consistent with its objective of | |||
spreading investment risk and in accordance with its | |||
published investment policy and will not, at any time, | |||
conduct any trading activity which is significant in the | |||
context of the business of the Company as a whole. | |||
In the event of a breach of the investment policy and | |||
investment restrictions set out above, the Directors upon | |||
becoming aware of such breach will consider whether the | |||
breach is material, and if it is, notification will be made to | |||
a Regulatory Information Service. | |||
1(b) | if the Company is a | Not applicable. The Company is not a feeder AIF. | |
feeder fund, | |||
information on where | |||
the master fund is | |||
established; | |||
1(c) | if the Company is a | Not applicable. The Company is not a fund of funds. | |
fund of funds, | |||
information on where | |||
the underlying funds | |||
are established; | |||
1(d) | a description of the | The Company exploits what it believes to be the | |
types of assets in | compelling relative value opportunities currently offered | ||
which the Company | by pricing inefficiencies in smaller commercial properties | ||
may invest; | let on shorter occupational leases. The Company | ||
supplements this core strategy with asset management | |||
initiatives to upgrade buildings and thereby improve the | |||
quality of income streams. In the current market | |||
environment, the focus is to invest in properties which: | |||
• | typically have a value, on investment, of between | ||
£2.50 million and £15.00 million; | |||
• | have initial net yields, on investment, of typically | ||
between 7.5-10%; | |||
• | achieve across the whole portfolio an average | ||
weighted lease term of between three to six years | |||
remaining; | |||
Regulatory | Disclosure | Disclosure | |
Reference | Requirement | ||
• | achieve, across the whole portfolio, a diverse and | ||
broad spread of tenants; and | |||
• | have potential for asset management initiatives to | ||
include refurbishment and re-lettings. | |||
1(e) | the investment | Details of the Company's investment techniques are set | |
techniques that the | out in the responses to 1(a) and 1(d) above. | ||
Company may | |||
employ and all | Associated risks | ||
associated risks; | Any property market recession or future deterioration in | ||
the property market could, inter alia, (i) cause the | |||
Company to realise its investments at lower valuations; | |||
and (ii) delay the timings of the Company's realisations. | |||
These risks could have a material adverse effect on the | |||
ability of the Company to achieve its investment | |||
objective. | |||
Property and property-related assets are inherently | |||
difficult to value due to the individual nature of each | |||
property. There may be an adverse effect on the | |||
Company's profitability, the NAV and the price of | |||
Ordinary Shares in cases where properties are sold | |||
whose valuations have previously been materially | |||
overstated. | |||
Failure by tenants to fulfill their rental obligations could | |||
affect the income that the properties earn and the ability | |||
of the Company to pay dividends to its shareholders. | |||
Asset management initiatives, such as refurbishment | |||
works, may prove to be more extensive, expensive and | |||
take longer than anticipated. Cost overruns may have a | |||
material adverse effect on the Company's profitability, | |||
the NAV and the share price. | |||
Due diligence may not identify all the risks and liabilities | |||
in respect of an acquisition (including any environmental, | |||
structural or operational defects) that may lead to a | |||
material adverse effect on the Company's profitability, | |||
the NAV and the price of the Company's Ordinary | |||
Shares. | |||
Rental rates may be adversely affected by general UK | |||
economic conditions and other factors that depress rental | |||
rates, including local factors relating to particular | |||
properties/locations (such as increased competition). | |||
Any fall in the rental rates for the Company's properties | |||
may have a material adverse effect on the Company's | |||
profitability, the NAV, the price of the Ordinary Shares | |||
and the Company's ability to meet interest and capital | |||
repayments on any debt facilities. | |||
1(f) | any applicable | Details of the Company's investment restrictions are set | |
investment | out in the response to 1(a) above. | ||
restrictions; | |||
1(g) | the circumstances in | The Company utilises borrowings to enhance returns | |
which the Company | over the medium term. | ||
may use leverage; | |||
Regulatory | Disclosure | Disclosure |
Reference | Requirement | |
1(h) | the types and | Borrowings will be utilised on a limited recourse basis for |
sources of leverage | each investment on all or part of the total Portfolio. It is | |
permitted and the | currently anticipated that the Directors will target a level | |
associated risks; | of total borrowings of up to 25 per cent. of Gross Asset | |
Value (measured at drawdown) and will comply with the | ||
REIT condition relating to the ratio between the Group's | ||
'property profits' and 'property finance costs'. | ||
The above borrowing limit of 25 per cent. may be | ||
increased to 35 per cent.: (i) provided that the Directors | ||
reasonably believe that the Company will complete an | ||
equity fundraising within 3 months of such investment; or | ||
(ii) as part of the Investment Manager's efficient portfolio | ||
management whereby the investment is made prior to | ||
the anticipated sale of an existing investment, and where | ||
completion of the sale is expected to be completed within | ||
3 months of the relevant investment and the proceeds of | ||
such equity fund raising or sale would be reasonably | ||
expected to reduce the borrowing of the Company to 25 | ||
per cent of the Gross Asset Value or less. | ||
The Company has a £60.00 million (31 March 2020: | ||
£60.00 million) credit facility with RBSi of which £39.50 | ||
million (31 March 2020: £51.50 million) has been utilised | ||
as at 31 March 2021. | ||
Associated risks | ||
The Company has entered into a term credit facility. | ||
Material adverse changes in valuations and net income | ||
may lead to breaches in the LTV and interest cover ratio | ||
covenants. | ||
The Company's borrowings through a term credit facility | ||
are subject to interest rate risk through changing SONIA | ||
rates. Any increases in SOMIA rates may have an | ||
adverse effect on the Company's ability to pay dividends. | ||
The term credit facility expires in October 2023. In the | ||
event that RBSi does not renew the facility, the Company | ||
may need to sell assets to repay the outstanding loan. | ||
Any increase in the financing costs of the facility on | ||
renewal would adversely impact on the Company's | ||
profitability. | ||
1(i) | any restrictions on | Details of the restrictions on the use of leverage are set |
the use of leverage | out in the response to 1(h) above. | |
and any collateral | ||
and asset reuse | There are no collateral and asset reuse arrangements. | |
arrangements | ||
1(j) | the maximum level of | Details of the maximum level of leverage which the AIFM |
leverage which the | is entitled to employ on behalf of the Company are set | |
AIFM is entitled to | out in the response to 1(h) above. | |
employ on behalf of | ||
the Company; | ||
(2) | a description of the | Any material change to the investment policy or |
procedures by which | investment restrictions of the Company may only be | |
the Company may | made with the prior approval of Shareholders. | |
change its investment | ||
strategy or |
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AEW UK REIT plc published this content on 02 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 February 2022 10:08:01 UTC.