Shareholder Update and Dividend Declaration

1 May 2025

AEW UK REIT plc

Shareholder Update and Dividend Declaration

AEW UK REIT plc (LSE: AEWU) ("AEWU" or the "Company"), which directly owns a value-focused, diversified portfolio of 33 UK commercial property assets, announces its unaudited Net Asset Value ("NAV") as at 31 March 2025 and interim dividend for the three-month period ending 31 March 2025.

Highlights

·      NAV of £174.44 million or 110.11 pence per share at 31 March 2025 (31 December 2024: £174.30 million or 110.02 pence per share).

·      NAV total return of 1.90% for the quarter (31 December 2024 quarter: 2.73%).

·      1.42% like-for-like valuation increase for the quarter (31 December 2024 quarter: 1.22% increase).

·      EPRA earnings per share ("EPRA EPS") for the quarter of 1.71 pence (31 December 2024 quarter: 2.35 pence).

·      Interim dividend of 2.00 pence per share for the three months ended 31 March 2025, paid for 38 consecutive quarters and in line with the targeted annual dividend of 8.00 pence per share, representing a dividend yield of 7.9% as at quarter-end.

·      Loan to GAV ratio at the quarter end was 25.01% (31 December 2024: 25.03%). Significant headroom on all loan covenants.

·      Company continues to benefit from a low fixed cost of debt of 2.959% until May 2027.

·    Acquisition of a high-street retail asset in Hitchin for £10.00 million, reflecting a NIY of 8.31%.

·    £627,530 of new rental income from lettings completed during the quarter.

Laura Elkin, Portfolio Manager, AEW UK REIT, commented:

"We are pleased with the continued growth in NAV per share, principally driven by another quarter of like-for-like valuation gain in the Company's portfolio. This consistent valuation growth, at a time when property markets have been subdued, continues to reflect the effectiveness of the Company's active asset management strategy in driving income and capital growth through various market cycles.

EPRA earnings were subdued due to the disposal proceeds from Units 1-11, Central Six Retail Park, Coventry, being held as cash for most of the quarter, albeit the impact of this was partially offset by the funds being held in a high-interest rate deposit account. Given these disposal proceeds amounted to circa 11% of GAV, earnings of 1.71 pence per share were robust, highlighting that the Company's programme of ongoing asset management initiatives, which delivered annualised new rental income of £627,530 in the quarter, continues to deliver strong financial performance.

The acquisition of a high-yielding retail asset in Hitchin during the quarter marks a significant step in redeploying the disposal proceeds from Units 1-11, Central Six Retail Park, Coventry, into earnings accretive investment opportunities. The remainder of the proceeds are under exclusive negotiation, with further purchase announcements expected in the near term.

The Company remains committed to pay its quarterly dividend of 2.00 pence per share, which has now been paid for 38 consecutive quarters."

Valuation Movement

As at 31 March 2025, the Company owned investment properties with a total fair value of £204.55 million, as assessed by the Company's independent valuer, Knight Frank. The like-for-like valuation increase for the quarter of £2.74 million (1.42%) is broken down as follows by sector:

* This is the overall weighted average like-for-like valuation increase of the portfolio.

In accordance with RICS mandatory rotation cycles, the Company is changing valuer from Knight Frank to CBRE, with the latter performing their first valuation for the June 2025 quarter.

Portfolio Manager's Review

The Company's portfolio saw a like-for-like valuation increase of 1.42% for the quarter, similar to the valuation gains of the previous four quarters.

The like-for-like increase in valuation was primarily driven by effective asset management across several of the Company's high-street retail and industrial properties, with increases of 3.98% and 1.62%, respectively. In the retail sector, the Company successfully completed a five-year lease regear with Next Holdings Limited ("Next") for its high street store in Bromley, signifying Next's long-term commitment to the property, where it has traded strongly in recent years. As part of this agreement, Next has been granted a nine-month rent-free incentive, contingent upon the refurbishment of the store.

At another of the portfolio's high-street retail assets, the Company completed a new letting to Grip-UK Ltd (trading as Climbing Hanger) on the ground and basement levels at 15-33 Union Street in Bristol, resulting in the former Wilko unit being fully let, following its division to provide two new leisure units. The first floor was leased to Roxy Lanes (Bristol) Ltd, an existing tenant in the building, as announced during the quarter ending 30 September 2024.

Positive asset management activity and occupational buoyancy on the high-street bodes well for the Company's recent acquisition in Hitchin. As noted in previous announcements, the Manager remains excited about the current buying opportunities in the UK property market, believing that now is an opportune time to deploy capital into new acquisitions, capitalising on favourable pricing conditions. The Company has identified an attractive pipeline of investments available for purchase and is considering available opportunities to raise additional capital, which may include the issue of new equity.

In the industrial sector, the Company completed a 10-year lease renewal with Pilkington United Kingdom Limited at Knowles Lane in Bradford, resulting in a 27% increase in rent. At Sarus Court in Runcorn, the Company completed a new letting of Unit 1001 following a recent refurbishment. The achieved rent of £8.50 per sq. ft. marks a significant increase from £6.50 per sq. ft. paid by the previous tenant before the refurbishment. The Manager intends to continue driving rental growth at the property, with Units 1002 and 1003 currently being marketed.

The Company's industrial assets, which comprise 38% of the portfolio, have experienced another quarter of growth in ERVs, particularly in Redditch, Sheffield and St Helens, leading to improved valuations. This ERV growth highlights the reversionary potential of the portfolio, with the net initial yield and reversionary yield for the Company's industrial assets standing at 7.16% and 8.62%, respectively.

The retail warehousing sector, which has seen a notable decrease in its portfolio weighting following the sale of Central Six Retail Park in Coventry (declining from 25% in September to 15% in December), experienced a quieter quarter compared to the previous three. The valuation increase during the period was primarily attributed to the successful letting of the former Mecca Bingo unit to Tenpin at The Railway Centre in Dewsbury. Whilst this letting completed in September, the valuation gain was fully realised this quarter following the third and final capital contribution being made, coinciding with the bowling alley opening to the public at the beginning of February.

The office sector, making up the Company's smallest sector exposure at 12%, had another quiet quarter. The refurbishment of vacant space at 40 Queen Square, Bristol, is currently underway, with the refurbishment at Cambridge House, Bath, currently being appraised. Until these projects are nearing practical completion, and marketing is fully underway, their valuations are likely to remain muted.

Net Asset Value

The Company's unaudited NAV at 31 March 2025 was £174.44 million, or 110.11 pence per share. This reflects an increase of 0.08% compared with the NAV per share at 31 December 2024. The Company's NAV total return, which includes the interim dividend of 2.00 pence per share for the period from 1 October 2024 to 31 December 2024, was 1.90% for the three-month period ended 31 March 2025.

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards. It incorporates the independent portfolio valuation at 31 March 2025 and income for the period, but does not include a provision for the interim dividend declared for the three-month period to 31 March 2025.

Share Price and Discount

The closing ordinary share price at 31 March 2025 was 101.4p, an increase of 1.00% compared with the share price of 100.4p at 31 December 2024. The closing share price represents a discount to the NAV per share of 7.91%. The Company's share price total return, which includes the interim dividend of 2.00 pence per share for the period from 1 October 2024 to 31 December 2024, was 2.99% for the three-month period ended 31 March 2025.

Dividend

Dividend declaration

The Company today announces an interim dividend of 2.00 pence per share for the period from 1 January 2025 to 31 March 2025. The dividend payment will be made on 30 May 2025 to shareholders on the register as at 9 May 2025. The ex-dividend date will be 8 May 2025. The Company operates a Dividend Reinvestment Plan ("DRIP"), which is managed by its registrar, MUFG Corporate Governance Limited. For shareholders who wish to receive their dividend in the form of shares, the deadline to elect for the DRIP is 9 May 2025.

The dividend of 2.00 pence per share will be designated 2.00 pence per share as an interim property income distribution ("PID").

The Company has now paid a 2.00 pence quarterly dividend for 38 consecutive quarters¹, providing consistently high levels of income to our shareholders.

¹For the period 1 November 2017 to 31 December 2017, a pro rata dividend of 1.33 pence per share was paid for this two-month period, following a change in the accounting period end.

Dividend outlook

It remains the Company's intention to continue to pay dividends in line with its dividend policy. In determining future dividend payments, regard will be given to the financial circumstances prevailing at the relevant time, as well as the Company's requirement, as a UK REIT, to distribute at least 90% of its distributable income annually.

Financing

Equity:

The Company's share capital consists of 158,424,746 Ordinary Shares in issue.

Debt:

The Company has a £60.00 million, five-year term loan facility with AgFe, a leading independent asset manager specialising in debt-based investments. The loan is priced as a fixed rate loan with a total interest cost of 2.959% until May 2027.

The loan was fully drawn at 31 March 2025, producing a Loan to GAV ratio of 25.01%.

Headroom on the debt facility's 60% loan to value ("LTV") covenant continues to be conservative. For those properties secured under the loan, a 41.82% fall in valuation would be required before the LTV covenant were to be breached.

Investment Update

During the quarter the Company completed the following purchase:

13/13A, 114-119, 121-123 Bancroft and 3-4 Portmill Lane, Hitchin (retail) - In March, the Company completed the purchase of a freehold, high-street retail asset at 13/13A, 114-119, 121-123 Bancroft and 3-4 Portmill Lane in the affluent commuter town of Hitchin for £10,000,000. The purchase price reflects an attractive net initial yield of 8.31% and a capital value of £213 per sq. ft.

The property, located in the centre of Hitchin's high-street retail pitch, provides accommodation totalling 46,905 sq. ft. across 12 retail units and a standalone office building, as well as car parking and service yards. The retail elements of the property are fully let to a strong line-up of 12 tenants, with recent leasing activity evidencing the strength of the location. Major tenants include Marks & Spencer plc, Next Holdings Ltd, Vodafone Ltd, The White Company and Holland & Barrett. The vacant office element to the rear provides various asset management options in the short-to-medium term, including new lettings or residential conversion. Hitchin is a busy market town located in Hertfordshire with an affluent catchment. The town is served by rail connections to both London and Cambridge, underpinning its attractiveness as a commuter location.

No disposals were made by the Company during the quarter.

Asset Management Update

The Company completed and exchanged on the following asset management transactions during the quarter:

Cambridge House, Bath (office) - The Company completed a new lease on the ground and basement floors with premium gym operator, Marchon Bath Ltd (trading as Marchon). The tenant has entered a straight 10-year lease paying a rent of £70,000 per annum. Lease completion was subject to the completion of circa £70,000 of landlord strip-out works, including fees. There will be a five-yearly upwards only rent review to the higher of open market or annually compounded RPI (2% collar and 4% cap). The tenant has been granted a 12-month rent free period. This will be Marchon's fourth location, including White City and Stratford, as well as Harpenden.  

40 Queen Square, Bristol (office) - A circa £200,000 refurbishment project has commenced on the former Ramboll Whitbybird (Ramboll) space on the first floor (north). Ramboll's dilapidation liability was settled at £37,888, therefore net capital expenditure equates to approximately £162,000. A circa £250,000 refurbishment project in the reception has also commenced alongside the refurbishment of the first floor (north) and is expected to practically complete in mid-May. The reception requires refurbishment to assist with the prospective lettings of the first and third floors. The cost of the works will be service charge recoverable from the existing tenants.

15-33 Union Street, Bristol (retail) - The Company completed a new lease of the ground and basement levels to Grip-UK Ltd (trading as Climbing Hanger), which will operate the space as a climbing and bouldering centre. The tenant has entered a 12-year lease, with a tenant break option on the expiry of the tenth year, paying a rent of £300,000 per annum. There will be a five yearly rent review in line with annually compounded CPI (2% collar and 4% cap). The tenant has been granted a 12-month rent free period. The unit became available after the previous tenant, Wilko, went into administration in the second half of 2023. Following its refurbishment and subdivision, the space is now fully let with no other vacancy in the building.

148-154 High Street, Bromley (retail) - The Company completed a lease regear with Next, who will enter a five-year reversionary lease effective from September 2025 in return for rebasing the rent at a fixed amount of £430,000 per annum with nine months' rent-free, subject to Next completing a refurbishment of the store. Next will continue to pay the existing base rent of £350,000 per annum plus a turnover rent equal to 8% of turnover above £3.5 million until September this year. With the lease regear remaining outside the 1954 Act, this is advantageous to the Company, with the property being an attractive opportunity for a residential developer or an owner occupier.

11-15 Fargate, Sheffield (retail) - The Company completed a new lease to fashion retailer, Blue Banana Retail Limited. The tenant has entered into a 10-year lease, with a tenant break option on the expiry of the fifth year, paying a rent of £55,000 per annum. There will be a five yearly-rent review to RPI compounded annually (1% collar and 3% cap). The tenant has been granted a seven-month rent free period.

Central Six Retail Park (the Triangle Site), Coventry (retail warehouse) - The Company completed a new lease of Unit A1 to Costa Limited. The tenant has entered a lease expiring in November 2032, with a tenant break option on the expiry of the fifth year, paying a rent of £65,000 per annum. There will be a five-yearly open market rent review capped at 2.5%, compounded annually. The tenant has been granted a six-month rent-free period.

Knowles Lane, Bradford (industrial) - The Company completed a lease renewal with Pilkington United Kingdom Limited at an increased rent of £265,000 per annum. The previous rent (payable until September 2024) was £208,000 per annum, representing a 27% increase. On the fifth anniversary of the lease term, there is an open market rent review, as well as a tenant only break option. No tenant rent-free or incentive was given. 

Sarus Court, Runcorn (industrial) - Following practical completion of a speculative refurbishment project of Units 1001 and 1003 in October 2024, the Company has completed a new lease of Unit 1001 to ODL Europe Ltd. The tenant has entered a straight five-year lease paying a rent of £137,530 per annum (£8.50 per sq. ft.). The tenant has been granted a three-month rent-free incentive. The previous passing rent, prior to refurbishment, was £6.50 per sq. ft. In carrying out roof improvements, respraying of external elevations, internal strip-out and decoration, and replacing M&E services to improve the EPC ratings to a B, the Company has crystalised significant rental growth.  

Diamond Business Park, Wakefield (industrial) - Following a statutory demand being served on the last remaining office tenant of Diamond House, AFI-Uplift Ltd ("AFI"), due to service charge and insurance arrears of £210,967, AFI has paid all of its arrears and surrendered its lease, which was due to expire in November 2027. An early surrender will enable demolition of the entire block, facilitating an industrial open storage letting on the estate.

Westlands Distribution Park, Weston-super-Mare (industrial) - The Company completed a three-year lease renewal of Unit 3A with Weston & District Community Transport Ltd at a rent of £12,000 per annum. On the first anniversary of the lease term, there is a mutual rolling break option.

Glossary of Commonly Used Terms

Industry specific terms used in the Company's communications are defined in the glossary of commonly used terms which can be found on the Company's website: https://www.aewukreit.com/investors/glossary

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 €79.1bn of assets under management as at 31 December 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 31 December 2024, AEW managed €36.8bn 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 €14.9bn 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.