AEW UK REIT PLC The investment objective of the Company is to deliver an 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) resulting in 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 relevant 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 60.00% of
GAV; ? 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'). 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.
Any material change to the investment policy or investment restrictions of the Company may only be made with the prior approval of shareholders.
Our Strategy
The Company exploits what it believes to be the compelling relative value opportunities currently offered by pricing inefficiencies in smaller commercial properties 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 GBP2.50 million and GBP15.00 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; ? 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.
How we add value
An Experienced Team
The investment management team averages 20 years working together, reflecting stability and continuity.
Value Investing
The Investment Manager's investment philosophy is based on the principle of value investing. The Investment Manager looks to acquire assets with an income profile coupled with underlying characteristics that underpin long-term capital preservation. As value managers, the Investment Manager looks for assets where today's pricing may not correspond to long-term fundamentals.
Active Asset Management
The Investment Manager has an in-house team of dedicated asset managers with a strong focus on active asset management to enhance income and add value to commercial properties.
Strategy in Action
Extending income streams and realising gains
Sandford House, Solihull ? The asset was acquired in August 2015 for GBP5.4 million and has been fully let to the Secretary of State for
Communities and Local Government since this time, producing a net income yield against the purchase price of 9.6%.
No further capital expenditure was spent on the asset during the hold period. ? A 15-year lease agreement was signed with the tenant in June 2020, increasing the rental income from the asset by
30%. ? The asset was sold in February 2021 for GBP10.5 million, crystallising significant gains both against acquisition
price and against the valuation pre-letting.
Driving rental growth
Storeys Bar Road, Peterborough ? In November 2020 the Company agreed a 15-year lease renewal with the existing tenant, Wyndeham Peterborough Ltd. ? The renewal achieved an uplift in rent from GBP2.95 per sq ft to GBP3.50 per sq ft, equating to an increase of GBP115,000
per annum. ? The like-for-like valuation as provided by the valuer increased by 20% over the year.
Seeking high-yielding assets supported by land and alternative use value
2 Geddington Road, Corby ? The asset was acquired in February 2018 for GBP12.4 million and was fully let to Gefco UK Ltd during the hold period,
producing a net income yield against the purchase price of 10%. ? The Company completed the sale of the asset in May 2020 for gross proceeds of GBP18.8 million, generating an IRR of
27.2%.
Acquiring assets with low capital value and potential to add value through asset management initiatives Westlands Distribution Park, Weston-super-Mare ? In November 2020, the Company completed the acquisition of the multi-let distribution park for a price of GBP5.4
million. ? This reflects a capital value of GBP175,000 per acre compared with nearby comparable land transactions which have
ranged between GBP350,000 and GBP500,000 per acre for other commercial and residential uses. ? Short-term opportunities to add value through lettings and renewals.
Key Performance Indicators
KPI AND DEFINITION
RELEVANCE TO STRATEGY TARGET PERFORMANCE
7.37%
1. EPRA NIY at 31 March
2021
A representation to the investor of what
their initial net yield would be at a The Company's EPRA NIY demonstrates the ability to
predetermined purchase price after generate income from its portfolio in the short-term in 7.50 -
taking account of all associated costs, order to meet its target dividend. 10.00% (31 March
e.g. void costs and rent free periods. 2020:
8.26%)
2. True Equivalent Yield 8.15%
The average weighted return a property at 31 March
will produce according 2021
to the present income and estimated
rental value ('ERV') assumptions, The Company's True Equivalent Yield demonstrates the 7.50 -
assuming the income is Company's ability to generate income, both from its 10.00% (31 March
existing leases and its ERVs, in order to meet its target 2020:
received quarterly in advance. dividend. 8.04%)
8.18%
3. Reversionary Yield at 31 March
2021
The expected return the property will A Reversionary Yield profile shows a potentially
sustainable income stream that can be used to meet 7.50 -
provide once rack-rented. dividends past the expiry of a property's current leasing 10.00%
arrangements. (31 March
2020:
7.90%)
6.71 years
4. WAULT to Expiry
The Investment Manager believes that current market at 31 March
The average lease term remaining to conditions present an opportunity whereby assets with a 2021
shorter unexpired lease term are often mispriced. It is (MORE TO FOLLOW) Dow Jones Newswires
June 24, 2021 02:03 ET (06:03 GMT)
