4 November 2019
AEW UK Long Lease REIT plc
("AEWL" or the "Group")
NAV, DIVIDEND DECLARATION AND UPDATE FOR THE QUARTER ENDED 30 SEPTEMBER 2019
AEW UK Long Lease REIT plc (ticker: AEWL), the owner of a diversified portfolio of 19 regional UK commercial property assets let on long leases, announces the following update for the quarter ended 30 September 2019.
Highlights for the quarter ended 30 September 2019
· The Board today declared an interim dividend of 1.375 pence per share for the quarter ended 30 September 2019. The dividend will be paid on 29 November 2019 to shareholders on the register on 15 November 2019. The ex-dividend will be 14 November 2019. This dividend will be a Property Income Distribution ("PID").
o In line with the Group's Dividend Payment Policy, the Board is targeting an aggregate dividend of 5.50 pence per share for the year ending 30 June 2020.1
· EPRA earnings per share ("EPRA EPS") for the quarter increased by 0.4% to 1.348 pence per share (quarter to 30 June 2019: 1.343 pence per share (unaudited)), which represents dividend cover for the quarter of 98.0%. The EPRA EPS includes an accrual to reflect the minimum contracted uplifts under the Group's leases and a non-cash adjustment for the amortisation of loan arrangement fees. If these non-cash adjustments are excluded from EPRA EPS, then the (unaudited) cash earnings (which equate to cash generated) were 1.022 pence per share, reflecting 74.3% cash dividend cover for the quarter.
· At 30 September 2019, the independent fair valuation of the property portfolio was £113.06 million (30 June 2019: £112.99 million), an increase over the quarter of £0.07 million (0.06%) (quarter to 30 June 2019: increase of £1.85 million or 1.66% over prior quarter).
· Unaudited Net Asset Value ("NAV") decreased 0.35% over the period to £76.06 million, 94.482 pence per share (30 June 2019: £76.32 million, 94.810 pence per share).
· Long weighted average unexpired lease term to first break or expiry of 20.2 years and 22.3 years to expiry.
· As announced in August, the Board is taking steps to reduce the Group's costs with the objective of delivering a fully cash covered dividend with effect from the financial year commencing 1 July 2020.
Alex Short, Portfolio Manager, AEW UK, commented:
"Despite the backdrop of ongoing political and economic uncertainty, the value of the Group's property portfolio, as independently assessed by third party valuer Knight Frank, has remained robust this quarter. Following on from a period of growth during the year ended 30 June 2019, which saw a capital return (excluding the assets let to Meridian Steel and the three acquisitions in that year) of 3.4% on a like-for-like basis, the underlying valuation increased by £0.07 million during the quarter. However, this quarter's valuation uplift is more than offset by the quarter's recurring rent smoothing charge of £0.29 million resulting in a reduction in the net valuation of £0.22 million.
Looking forward, the portfolio's income is well placed to achieve strong growth relative to traditional property sectors over the coming years due to 92% of all income currently contracted benefiting from growth linked to inflation; in particular, 71% of this is linked to RPI. Consensus forecasts over the coming three years show an average of 2.8% growth for RPI, compared to 0.6% for all property over this period."
Net Asset Value
As at 30 September 2019, the Group owned 19 investment properties with a fair value of £113.06 million.
Movement during the quarter
Pence per share
NAV at 1 July 2019
Capital expenditure costs
Valuation change in property portfolio
Income earned for the period
Expenses for the period
Net finance costs for the period
Interim dividend paid in respect of the quarter ended 30 June 2019
NAV at 30 September 2019
The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the European Union and incorporates both the Group's property portfolio individually valued on a 'Red Book' valuation basis as at 30 September 2019 and net income for the quarter, but does not include a provision for the interim dividend for the quarter ended 30 September 2019.
The income earned for the period includes an accrual for the minimum contractual uplifts defined within the index linked leases. In the event that inflation is greater than these minimum contractual uplifts, the actual income will be greater than that currently accrued.
The Group has drawn all of its £41 million fixed interest loan facility with Canada Life Investments and at 30 September 2019 was geared at a loan to Gross Asset Value ("GAV") of 34.3%. The weighted average interest cost of the Group's facility is 3.19% and the facility is repayable on 20 October 2025.
Ahead of the conclusion of AEW UK's tenure as Investment Manager, the Board will announce the actions it is taking to deliver a significant reduction in the Group's overhead with the objective of delivering a fully cash covered dividend with effect from the financial year commencing 1 July 2020.
Inflation linked rent reviews
92% of the portfolio's income stream is reviewed periodically, on an upward only basis, in line with inflation; with 71% and 21% of the portfolio indexed to RPI and CPI, respectively.
The sector weightings, by value, of the property portfolio as at 30 September 2019: Hotels 21.3%; Industrial 19.9%; Residential care homes 16.0%; Car showrooms 13.1%; Student accommodation 10.7%; Leisure 8.6%; Power station 4.7%; Petrol station 3.9%; and Nursery 1.8%.
The Group's September 2019 Quarterly Investment Report will be available on the Group's website today.
1 Investors should note that any dividend targets are for illustrative purposes only, based on current market conditions and is not intended to be, and should not be taken as, a profit forecast or estimate. Actual returns cannot be predicted and may differ materially from this illustrative figure. There can be no assurance that the target will be met or that any dividend or total return will be achieved.
+44(0) 20 7016 4869
+44(0) 771 140 1021
Steve Smith - Chairman
+44(0) 7787 238 223
+44(0) 20 7397 1920
+44(0) 20 7397 1922
Maitland/AMO (Communications Adviser)
+44(0) 20 7379 5151
The Company's LEI is 213800MPBIJS12Q88F71.
Further information on AEW UK Long Lease REIT is available at: www.aewukllreit.com
About AEW UK Long Lease REIT
AEW UK Long Lease REIT plc aims to generate a sustainable, secure and attractive income return for shareholders, whilst maintaining capital values in real terms, from a diversified portfolio of UK property investments, with an attractive entry yield, predominately in alternative and specialist sectors. The portfolio's assets are let on long leases which contain inflation linked rent review provisions, which help to underpin income distributions to shareholders with the potential for income and capital growth.
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