AEW UK REIT : Quarterly Investor Report, June 2021

AEW UK REIT Plc (AEWU/The Company)
Quarterly Update	Q2 21

AEW UK REIT plc invests in and intensively asset manages a diversified

portfolio of small, high yielding commercial properties across the UK.

Fund Highlights

• Interim dividend of 2.00 pence per share for the three months ended 30 June 2021, in line with the targeted annual dividend of 8.00 pence per share.
• EPRA earnings per share ("EPRA EPS") for the quarter of 2.14 pence (31 March 2021 quarter: 1.10 pence).
• NAV of £169.69 million or 107.11 pence per share as at 30 June 2021 (31 March 2021: £157.08 million or 99.15 pence per share).
• NAV total return of 10.04% for the quarter (31 March 2021 quarter: 5.51%).

• Acquisitions of two properties: Arrow Point
  Retail Park, Shrewsbury, for £8.35 million and
  15-33 Union Street, Bristol, for £10.19 million.
• Successful outcome of legal action against two well-funded national tenants to recover unpaid rent. All rent arrears due from these tenants have since been collected.
• The Company remains conservatively geared with a loan to NAV ratio of 29.76% (31 March 2021: 25.15%). As at 30 June 2021, the Company had a cash balance of £8.43 million and £8.89 million of its loan facility available

to draw up to the maximum 35% Loan to NAV at drawdown.

• For the rental quarter commencing on 24 June 2021, 88% of rent has been collected or is expected to be received under monthly payment plans prior to quarter end. The remainder of rents owed will continue to be pursued.

Portfolio Managers' Comments

The Company's portfolio generated record strong capital growth for the quarter with valuations increasing by 7.47% on a like-for-like basis, the highest quarterly increase since IPO in 2015.

As with the previous quarter, this was largely driven by the performance of the industrial assets in the portfolio which saw a like-for-like increase of 10.62% for the quarter and make up 57% of the portfolio as at 30 June 2021. The industrial and logistics sectors have benefitted from accelerated changes in consumer habits and the shift towards online retail and this continues to be reflected in valuation movements. There is also some expectation that the UKwill begin to see an increase in localised production as a result of supply chain disruption and this could lead to take up being focussed more on traditional manufacturing accommodation, which has seen a decline in total stock in recent years, rather than the currently favoured logistics assets.

We are now seeing more attractive investment opportunities coming to the market and the Company made two acquisitions during the quarter for a combined gross purchase price of £18.54 million, drawing £11.00 million of its loan facility. The first, Arrow Point Retail

growth in the medium to long term, and also strong and stable income streams from their tenancy profiles. While we continue to take a cautious approach towards the retail sector, judging each site on its specific merits, these two acquisitions are an excellent fit for the portfolio. The retail sector now makes up 18% of the portfolio valuation.

The Company's EPRA EPS was 2.14 pence for the quarter, providing a dividend cover of 107% (31 March 2021: 1.10 pence and 55%). During the quarter, the Company announced the successful outcome of legal action against two well-funded national tenants to recover unpaid rent and subsequently recovered all rent arrears due from those tenants. The collection of these significant arrears allowed the reversal of the prudent doubtful debt provision which contributed a one- off 0.37 pence to EPRA EPS during the quarter.

In the coming quarters the Company's earnings will benefit from its recent acquisitions as well as the completion of asset management initiatives.

Ongoing remedial works at the Company's property in Blackpool, which amounted to 0.13 pence per share for the quarter, and a high level ofvacancy at its property in Glasgow, which has exchanged to be sold subject to achieving planning for student

accommodation and vacant possession, are temporarily restricting the Company's earnings potential. Both are expected to be complete by early 2022. We are also encouraged by recent improvements in rent collection levels, which now stand at over 96% for each quarter since the onset of the pandemic (ex current quarter). It is hoped that continued easing of lockdown restrictions will allow this trend to continue.

The Company has £8.43 million of cash and £8.89 million of its loan facility available to draw up to the maximum 35% Loan to NAV at drawdown, which will allow us to take advantage of further attractive opportunities in the market. The Company's share pricewas 96.00 pence as at

30 June 2021 (31 March 2021: 83.20 pence) andwe hope that continued improvements in economic conditionswill bring about the return oftrading at a premium to NAVand enable growth ofthe Company to resume,which remains a key objective.

Valuation movement

As at 30 June 2021, the Company owned investment properties with a fair value of £210.91 million. The like-for-like valuation increase for the quarter of £13.37 million

(7.47%) is broken down as follows by sector:

Park in Shrewsbury, was acquired in May for £8.35 million and is a fully-let,purpose-built retail park prominently located on a busy commercial estate, providing a net initial yield of 8.7%. The second, 15-33 Union Street, Bristol, is a retail site located on a busy pedestrian thoroughfare in Bristol city centre and provides a net initial yield of 8.0%. Both of these assets provide opportunity forvalue

Sector	Valuation 30 June 2021	Valuation movement for the quarter
	£ million	%	£ million	%
Industrial	120.42	57.10	11.57	10.62
Office	39.00	18.49	2.20	5.98
Retail	38.94	18.46	-0.40	-1.92
Leisure	12.55	5.95	0.00	0.00
Total	210.91	100.00	13.37	7.47

Fund Facts

Portfolio Managers

Alex Short

and Laura Elkin

Investment Objective and Strategy

The Company exploits what it believes to be the compelling relative value opportunities offered by pricing inefficiencies in smaller commercial properties let on shorter occupational leases in strong commercial locations. The Company supplements this core strategy with active asset management initiatives to improve the quality of income streams and maximise value.

Launch date: 12 May 2015

Fund structure: UK Real Estate Investment Trust

SRI policy: Click here

Year end: 30 June

Fund size (Net Asset Value): £169.69m

Property valuation: £211m

Number of properties held: 36

Average lot size: £5.86m

Property portfolio net initial yield (% p.a.): 6.7%

Property portfolio reversionary yield: 7.8%

LTV (Net Asset Value): 29.76%

Average weighted unexpired lease term

To break: 4.1 years	To expiry: 6.2 years
Occupancy: 94.1%*	* As a % of ERV

Occupancy is stated excluding vacancy contributed by the asset at 225 Bath Street Glasgow (the overall level is 91.1% including this asset). This asset has now been exchanged for sale for alternative use redevelopment and as a condition of the sale agreement, full vacancy must be achieved in the building before the sale can be completed.

Number of tenants: 112

Share price as at 30 Jun: 96.0p

NAV per share: 107.11p

Premium/(discount) to NAV: (10.4%)

Shares in issue: 158.42m

Market capitalisation: £152.08m

Annual management charge 0.9% per annum of invested NAV

Dividend target

The Directors will declare dividends taking into account the level of the Company's net income and the Directors' view on the outlook for sustainable recurring earnings. As such, the level of dividends paid may increase or decrease from the current annual dividend of 8.00 pence per share. It remains

		Sector Weightings
3.6%		Industrial	57.1%
Scotland
0.0%	Offices	18.5%
North	Standard Retail	11.8%
	East
		Retail Warehouse	6.7%
	20.4%	Leisure	5.9%
	Yorkshire &
8.4%	Humberside	Based upon Knight Frank valuation. As a percentage of
North
West		portfolio (excluding cash).

		1.8%
	10.5%	East	Top 10 Assets (by value)
	Midlands
	West	11.1%
8.3%	Midlands
Eastpoint Business Park, Oxford	7.1%
	Eastern
Wales
			Gresford Industrial Estate, Wrexham	5.9%
	17.3%		40 Queens Square, Bristol	5.2%
	14.2%	Unit 16 and Unit 16a Langthwaite	5.0%
	South	South East
	West		Grange Industrial Estate, South Kirkby
			5-33 Union Street, Bristol	4.8%
		4.4%/0%	Lockwood Court, Leeds	4.4%
		Rest of London/	London East Leisure Park, Dagenham	4.4%
		Central London
Portfolio Locations		Arrow Point Retail Park, Shrewsbury	4.0%
Based upon Knight Frank valuation.		Storeys Bar Road, Peterborough	3.9%
	Units 1001-1004 Sarus Court, Runcorn	3.7%
As a percentage of portfolio (excluding cash).

Asset Management Update

Arrow Point Retail Park,

Shrewsbury

We have extended British Heart Foundation's unexpired term to break by pushing their November 2021 break option out to December 2024 in return for

4 months' rent free. The majority of the rent free was used to write off rent arrears predating AEWU's ownership.

Diamond Business Park,

Wakefield

We have completed a new 5 year ex-Act lease at £41,866 p.a./£3.75 per sq. ft. on Unit 14, which reflects a rent 25% above the March 2021 ERV. 6 months' rent free was given as an incentive.

Bristol, 40 Queen Square

We have completed a new 5 year ex-Act lease to Brewin Dolphin at £103,770 p.a./£30 per sq. ft. versus the previous passing rent of £22 per sq. ft. and the March 2021 ERV of £26 per sq. ft.

A 12 month rent free incentive was given.

the Company's intention to continue to pay future dividends in line with its dividend policy, however the outlook remains unclear given the current COVID-19 situation.

ISIN: GB00BWD24154  Broker: Liberum

Ticker: AEWU  SEDOL: BWD2415

Key contact 

Investor Relations Kari Clarke [e-mail] T: 020 7016 4804

IMPORTANT NOTICE This is a communication issued by AEW UK Investment Management LLP (the "Investment Manager"), trading as AEW UK ("AEW UK"). It relates to the AEW UK REIT Plc (the "Company"). This communication cannot be relied upon as the basis on which to make a decision to invest in the Company. This communication does not constitute an invitation or inducement to subscribe to any particular investment. This communication is forwarded to you for information purposes only and does not constitute a personal recommendation. You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a guide to future performance. AEW UK Investment Management LLP believes the information to be correct at the time of writing but does not make any representation as to the accuracy or completeness of the material and does not accept liability for any loss arising from the use hereof. It is under no obligation to ensure that updates to the document are brought to your attention.