Part sale of retail warehouse park

16 December 2024

AEW UK REIT plc

Part sale of retail warehousing park

AEW UK REIT plc ("AEWU" or the "Company") is pleased to announce that it has completed the sale of units 1-11 of Central Six Retail Park, Coventry, for £26,250,000, reflecting a net initial yield of 7.49% and a capital value of £213 per sq. ft. This sale price represents a 60% premium to the purchase price of the entire property which was acquired in November 2021 for £16,411,000 (£110 per sq. ft.), and a 6.7% premium to the 30 June 2024 valuation, being the latest valuation date prior to agreeing Heads of Terms.

Excluding the remaining part of the retail park (Units 12, A(1), A(2) and B), known as the 'triangle site', which the Company will retain, the sale is expected to deliver an IRR in excess of 16%.

The sale price will be paid in two tranches; the first instalment of £25,900,000 was paid on sale completion on 13^th December 2024. The second instalment, amounting to £350,000 and currently held in escrow, will be paid on the completion of a new lease of Unit 10 to Superdrug Stores Plc, where an agreement for lease has already exchanged (please see further details below).

The purchaser is also contracted to pay a third instalment of £500,000 to the Company, should it complete a letting to an electric vehicle charging operator within the first 18 months of ownership.

Following the completion of three new lettings to Aldi Stores Limited, Iceland Foods Limited and Whitecross Dental Care Limited, which added £668,000 of annual rental income, the property is now fully let, having had circa 24% vacancy (% of ERV) at the time of acquisition. These three lettings, coupled with lease renewals and regears to Next Group plc, Boots UK Ltd and TJX UK (TK Maxx), have maximised both income and the value of the asset.

In June 2023, the Company completed the acquisition of the freehold interest of Units 1-11, which had previously been held by way of a restrictive long leasehold title from Friargate JV Projects Limited (Friargate). The remainder, known as the 'triangle site', still held on a long leasehold, can be acquired by Friargate at any time for a five-year period from July next year. This, as well as the completion of the foremost occupational transactions mentioned above, prompted the decision to market the asset for sale. Furthermore, having increased the net operating income by circa 54% since acquisition, the property is no longer considered reversionary, with two of the ten units, where lease renewals are anticipated in 2025, being considered 'over-rented' with a forecast reversionary yield of 6.88%.         

Commenting on the sale, Henry Butt of AEW UK REIT, said: "As a result of our active asset management strategy, we have sold part of this asset at a very healthy premium to the purchase price of the whole, thereby delivering excellent returns to the Company's shareholders. The value created by our successful asset management presents an opportunity to crystallise capital growth and reinvest the sale proceeds into higher yielding opportunities in the market. A significant part of the proceeds from the sale are already under offer and, as such, we expect to make purchase announcements in the coming months."

Agreement for lease to Superdrug Stores Plc

On 9^th December, the Company simultaneously exchanged an agreement for surrender with TUI UK Retail Limited (TUI) and an agreement for lease with Superdrug Stores Plc (Superdrug) for Unit 10.

The agreement for surrender with TUI is conditional on the tenant carrying out works to Unit 10 in line with a pre-agreed specification in preparation of the new letting to Superdrug. The agreement for lease with Superdrug is conditional on the works being carried out by TUI, vacant possession and a capital contribution of £31,000 by the Company. Once the conditions have been satisfied, Superdrug will enter into a new 10-year lease, with a tenant only break option in year five, at a rent of £158,760 per annum (£18 per sq. ft.). The letting includes a twelve-month rent-free incentive. Lease completion is anticipated in February next year.

Separately, the Company has exchanged an agreement for lease with TUI for Unit A(2) of the "triangle site". The tenant will enter a new five-year lease, with a tenant only break option in year three, at a rent of £75,000 per annum (£43.55 per sq. ft.). The letting includes a six-month rent-free incentive effective from 1 July 2025 and a tenant break option penalty equivalent to twelve months' rent.

ENDS

AEW UK

Notes to Editors

About AEW UK REIT

AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total return to shareholders by investing predominantly in smaller commercial properties (typically less than £15 million), on shorter occupational leases in strong commercial locations across the United Kingdom. The Company is currently invested in office, retail, industrial and leisure assets, with a focus on active asset management, repositioning the properties and improving the quality of income streams.  AEWU is currently paying an annualised dividend of 8p per share. 

The Company was listed on the Official List of the Financial Conduct Authority and admitted to trading on the Main Market of the London Stock Exchange on 12 May 2015. www.aewukreit.com

LEI: 21380073LDXHV2LP5K50

About AEW

AEW is one of the world's largest real estate asset managers, with €77.4bn of assets under management as at 30 September 2024. AEW has over 860 employees, with its main offices located in Boston, London, Paris and Singapore and offers a wide range of real estate investment products including comingled funds, separate accounts and securities mandates across the full spectrum of investment strategies. AEW represents the real estate asset management platform of Natixis Investment Managers, one of the largest asset managers in the world.

As at 30 September 2024, AEW managed €37.1bn of real estate assets in Europe on behalf of a number of strategies and separate accounts. AEW has over 510 employees based in 11 offices across Europe and has a long track record of implementing core, value-add and opportunistic investment strategies on behalf of its clients. In the last five years, AEW has invested and divested a total volume of €17.4bn of real estate across European markets.

www.aew.com

AEW UK Investment Management LLP is the Investment Manager.  AEW is a group of companies which includes AEW Europe SA and its subsidiaries as well as affiliated company AEW Capital Management, L.P. in North America and its subsidiaries. AEW Europe SA, together with its subsidiaries AEW UK Investment Management LLP, AEW S.à.r.l., AEW Invest GmbH and AEW SAS, is a European real estate investment manager with headquarter offices in Paris and London. AEW Europe SA and AEW Capital Management, L.P. are owned by Natixis Investment Managers. Natixis Investment Managers is an international asset management group based in Paris, France, that is principally owned by Natixis, a French investment banking and financial services firm. Natixis is principally owned by BPCE, France's second largest banking group.

Disclaimer

This communication cannot be relied upon as the basis on which to make a decision to invest in AEWU. This communication does not constitute an invitation or inducement to subscribe to any particular investment. Issued by AEW UK Investment Management LLP, 8 Bishopsgate, London, EC2N 4BQ.
Company number: OC367686 England. Authorised and regulated by the Financial Conduct Authority.