AEW UK REIT posts quarterly NAV return after Leicester acquisition

(Sharecast News) - AEW UK REIT reported a net asset value total return of 0.69% for the quarter ended 30 June on Thursday, supported by continued asset management activity and completion of a high-yielding acquisition in Leicester, as the company maintained its quarterly dividend and delivered its sixth consecutive quarter of portfolio valuation gains. The London-listed company's unaudited net asset value declined slightly to £172.47m or 108.87p per share, down from 110.11p per share in March.

That reflected transaction costs and capital expenditure associated with the redeployment of proceeds from the sale of Central Six Retail Park into higher-yielding opportunities, including the £11.15m purchase of Freeman's Leisure Park in Leicester at a net initial yield of 10.6%.

EPRA earnings per share rose modestly to 1.73p, up from 1.71p in the prior quarter.

An interim dividend of 2p per share was declared, marking the 39th consecutive quarterly payment and representing a 7.4% dividend yield at the end of the period.

"We are pleased to report a quarterly shareholder total return of 8.9%, continuing what was a year of strong share price performance to the end of March, driving a 12-month total return of 36.5%," said Laura Elkin, portfolio manager of AEW UK REIT.

"Encouragingly, the company's shares have returned to trade at close to NAV, and modestly above, on several occasions since the end of the quarter."

She added that the latest results reflected the effectiveness of AEW's "counter-cyclical investment approach and active asset management strategy," with future income and capital returns expected to strengthen following the Leicester acquisition and ongoing refurbishment projects.

The portfolio's total value rose to £215.81m following the new acquisition, with a like-for-like valuation increase of 0.05% for the quarter.

AEW said the retail sector led performance, with high street and retail warehouse valuations increasing by 1.51% and 1.01% respectively, while the industrial segment - representing 36% of the portfolio - saw marginal growth of 0.08%. Office and 'other' assets recorded valuation declines.

Several new lettings and renewals were completed across industrial and retail assets, including a new 10-year lease to Boots Opticians in Sheffield and multiple industrial leases in Wakefield and Weston-super-Mare, many at or above estimated rental values.

At Sarus Court in Runcorn, a £426,000 refurbishment project was completed to enhance sustainability and rental prospects, with re-letting underway.

The Leicester asset, fully let to national tenants including Odeon and Nando's, extended the portfolio's weighted average lease term and was expected to enhance forward earnings.

AEW said the acquisition completed the redeployment of proceeds from the high-premium sale of the Coventry asset.

The company's loan-to-gross asset value ratio stood at 25.21%, with its £60m fixed-rate debt facility carrying a low 2.959% interest cost through to May 2027.

Shareholders also approved a block listing application for up to 15.8 million new shares to facilitate potential future equity raises, should market conditions allow.

AEW reiterated its confidence in sustaining the 8p annual dividend, and expressed optimism about future valuation growth as interest rates eased and UK commercial investment activity started to recover.

At 1128 BST, shares in AEW UK REIT were up 1.11% at 109p.

Reporting by Josh White for Sharecast.com.