AEW UK REIT plc

Interim Report and Financial Statements

for the six months ended 30 September 2021

Contents

Financial Highlights

1

Property Highlights

1

Chairman's Statement

2

Key Performance Indicators

5

Investment Manager's Report

8

Principal Risks and Uncertainties

16

Interim Management Report and Directors' Responsibility Statement

22

Independent Review Report

23

Financial Statements

Condensed Statement of Comprehensive Income

24

Condensed Statement of Changes in Equity

25

Condensed Statement of Financial Position

26

Condensed Statement of Cash Flows

27

Notes to the Condensed Financial Statements

28

EPRA Performance Measures

46

Company Information

53

Glossary

55

Gold medal for

Silver medal for

Most Improved Award for

Financial Reporting 2020

Sustainability Reporting 2020

Sustainability Reporting 2020

Financial Highlights

  • Net Asset Value ('NAV') of £174.29 million and of 110.01 pence per share ('pps') as at 30 September 2021 (31 March 2021: £157.08 million and 99.15 pps).
  • Operating profit before fair value changes of £5.88 million for the period (six months ended 30 September 2020: £5.93 million).
  • Profit Before Tax ('PBT')* of £23.55 million and earnings per share ('EPS') of 14.86 pps for the period (six months ended 30 September
    2020: £5.72 million and 3.61 pps). PBT includes a £16.60 million gain arising from changes to the fair values of investment
    properties in the period (six months ended 30 September 2020: loss of £3.33 million). This change explains the significant rise in PBT for the period.
  • EPRA Earnings Per Share ('EPRA EPS') for the period of 3.45 pps (six months ended 30 September 2020: 3.41 pps). See page 33 for the calculation of EPRA EPS.
  • Total dividends of 4.00 pps declared in relation to the period (six months ended 30 September 2020: 4.00 pps).
  • Shareholder Total Return for the period of 28.37% (six months ended 30 September 2020: 16.13%).
  • The price of the Company's Ordinary Shares on the London Stock Exchange was 102.80 pps as at 30 September 2021 (31 March 2021: 83.20 pps).
  • As at 30 September 2021, the Company had a balance of £50.50 million drawn down (31 March 2021: £39.50 million) of its
    £60.00 million (31 March 2021: £60.00 million) term credit facility with the Royal Bank of Scotland International Limited ('RBSi') and
    was geared to 28.97% of NAV (31 March 2021: 25.15%). The Company can draw £9.50 million of the remaining facility up to the maximum 35% Loan to NAV at drawdown (see note 13 on page 43 for further details).
  • The Company held cash balances totalling £15.16 million as at 30 September 2021 (31 March 2021: £17.45 million).

Property Highlights

  • As at 30 September 2021, the Company's property portfolio had a valuation of £206.69 million across 35 properties (31 March 2021: £179.00 million across 34 properties) as assessed by the valuer1 and a historical cost of £197.69 million (31 March 2021: £173.28 million).
  • The Company acquired two properties during the period for a total purchase price of £18.54 million, excluding acquisition costs (year ended 31 March 2021: one property for £5.40 million). Post period-end, in November 2021, the Company acquired a retail park asset in Coventry for a purchase price of £16.41 million, excluding acquisition costs.
  • The Company made one disposal during the period, Langthwaite Industrial Estate, South Kirkby for gross sale proceeds of £10.84 million (year ended 31 March 2021: two properties for gross sale proceeds of £29.30 million). Post period-end, in October 2021, the
    Company disposed of Wella Warehouse, Basingstoke, for gross proceeds of £5.86 million.
  • The portfolio had an EPRA vacancy rate** of 8.59% as at 30 September 2021 (31 March 2021: 8.96%). Excluding vacancy contributed by Bath Street, Glasgow, which was exchanged to be sold with the condition of vacant possession, the vacancy rate was
    5.43% (31 March 2021: 5.58%).
  • Rental income generated during the period was £7.87 million (six months ended 30 September 2020: £8.12 million).
  • EPRA Net Initial Yield ('EPRA NIY')** of 6.45% as at 30 September 2021 (31 March 2021: 7.37%).
  • Weighted Average Unexpired Lease Term ('WAULT') of 4.00 years to break and 6.20 years to expiry (31 March 2021: 4.43 years to break and 6.71 years to expiry).
  • As at the date of this report, 87% of the rent due for the September 2021 quarter had been collected, 99% for the June 2021 quarter and 99% for the March 2021 quarter.

* See KPIs on pages 5 to 7 for definition of alternative performance measures.

  • See glossary on pages 55 to 58 for definition of alternative performance measures. 1 The valuation figure is reconciled to the fair value under IFRS in note 10.

AEW UK REIT PLC • Interim Report and Financial Statements • 30 September 2021

1

Chairman's Statement

Overview

I am pleased to report the unaudited interim results of AEW UK REIT plc (the 'Company') for the six months ended 30 September 2021 (the 'period'). The Company held a diversified portfolio of 35 commercial investment properties located throughout the UK with a value of £206.69 million as at 30 September 2021.

The Company's NAV has performed well over the period, having increased by 10.96%. The valuation of the Company's property portfolio rose by 9.81% on a like-for-like basis over the period, chiefly driven by its industrial assets. The sales of Langthwaite Industrial Estate, South Kirkby for £10.84 million and Wella Warehouse, Basingstoke for £5.86 million post period end were undertaken at 1.9x and 1.7x the purchase prices, respectively. The resulting profits achieved on disposal were £2.25 million and £1.93 million above book values, respectively, providing a boost to the Company's NAV. The Company closed the period in a position to take advantage of attractive opportunities to reinvest as a result of its cash position and debt covenant headroom. The Company has maintained a conservative Loan to NAV ratio, which stood at 29.00% at 30 September 2021, and had a healthy cash balance of £15.16 million.

Following the disposal of the Corby and Solihull sites in the prior period, the Company reinvested the sales proceeds to make two acquisitions during the period. Arrow Point Retail Park in Shrewsbury was acquired in May 2021 for £8.35 million and is a fully-let,purpose-built retail park prominently located on a busy estate and providing a Net Initial Yield ('NIY') of 8.7%. The second, 15-33 Union Street, Bristol, is a prime retail site located on a busy pedestrian thoroughfare in Bristol city centre and was purchased for £10.19 million, equating to a low capital value of £161 per sq ft and reflecting a NIY of 8.0%. Both of these assets provide opportunity for value growth in the medium to long term, and also have strong and stable income streams from their tenancy profiles.

The ongoing remedial works in Blackpool, along with the vacancy costs at Glasgow where we have sold an asset conditional on obtaining vacant possession, have constrained the portfolio's overall EPRA EPS, which was 3.45 pence for the period, providing a dividend cover of 86.10%. Following the planned sale of Glasgow, currently anticipated in December 2021, and completion of the works at Blackpool in early 2022, we expect this cost overhead to fall, leading to an increase in the EPRA EPS. The Company has made one acquisition post period-end of a retail park in Coventry for a purchase price of £16.41 million. This presents opportunities to add value through active asset management by renewing current tenancies and securing new tenants, which will further add to the recent strong income return and NAV growth achieved by the Company. The acquisition is accretive to EPRA EPS and takes the Company close to full investment.

The Company continues to work with its tenants in order to manage the difficulties posed by the pandemic. To date, the tenancy profile of the Company has proved to be resilient, demonstrated by the Company's low underlying vacancy rate of 5.43%* by Estimated Rental Value ('ERV') as at 30 September 2021. Rent collection rates have remained high for the March and June 2021 quarters, being 99% for both and 87% has been collected to date for the September 2021 rent quarter. These collection rates are high in comparison with the averages seen in the wider market and we expect that ultimate rates of collection, following the expiry of longer-term payment plans, should result in collection rates in excess of 98%. There are a small number of tenants who continue to face challenges in the current environment, and in a small number of cases the Company has agreed a longer-term payment plan to recover rental income in full over an extended period. A prudent assessment has been made of the recoverability of the Company's outstanding debts and a provision has been made in the financial statements for potential debt write-offs.

The office park at Oxford continues to perform well with its transition to life sciences/medical use, a sector which is seeing particularly strong investor demand at present. Moreover, after a tumultuous period for the retail sector, we have seen valuations stabilise this period, with our valuations increasing by 1.36% on a like-for-like basis, particularly driven by our new retail warehousing holding

in Shrewsbury. Stock selection and active asset management continue to be key features of the Company's strategy and drivers of performance. During the period, the Company completed a number of lettings and lease renewals, the most notable of which was two new lettings at our office holding in Bristol, both of which were 15% above ERV. These are noted in more detail on page 13 in the 'Asset Management' section of the Investment Manager's Report.

* Including vacancy contributed by Bath Street, Glasgow, which has been sold with the condition of vacant possession, the vacancy rate was 8.59%.

2

AEW UK REIT PLC • Interim Report and Financial Statements • 30 September 2021

Chairman's Statement (continued)

Company Portfolio Performance vs.

Benchmark for six months to 30 September 2021

16

14

12

10

% 8

6

4

2

0

AEW UK REIT

Benchmark

Capital Growth

Income Return

Total Return

Key:

Benchmark - MSCI/AREF UK PFI Balanced Funds Quarterly Property Index Benchmark

The Company's share price was 102.80 pence per share as at

30 September 2021, representing a 6.56% discount to NAV (31 March 2021: 83.20 pence per share, representing a 16.1% discount to NAV). Subsequent to the period-end, the Company's share price has experienced additional growth, causing a further reduction in the discount to NAV.

Source: MSCI 30 September 2021

Financial Results

Six months ended

Year ended

Six months ended

30 September

31 March

30 September

2021

2021

2020

Operating Profit before fair value changes (£'000)

5,879

10,735

5,934

Operating Profit (£'000)

23,919

23,102

6,276

Profit before Tax (£'000)

23,547

22,172

5,724

Earnings Per Share (basic and diluted) (pence)*

14.86

13.98

3.61

EPRA Earnings Per Share (basic and diluted) (pence)*

3.45

6.19

3.41

Ongoing Charges (%)

1.31

1.36

1.31

Net Asset Value per share (pence)

110.01

99.15

92.73

EPRA Net Asset Value per share (pence)

109.94

99.11

92.70

* See note 8 of the Financial Statements for the corresponding calculations.

AEW UK REIT PLC • Interim Report and Financial Statements • 30 September 2021

3

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AEW UK REIT plc published this content on 17 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 November 2021 10:59:06 UTC.