AEW UK REIT’s latest interim results show that the portfolio’s performance returned to positive territory in the six months to the end of September, following a tumultuous period for valuations.
The company, which owns a £219.36m portfolio of 35 properties, achieved NAV growth of 0.49%, with two successive quarters of positive valuation movements and several sales.
Chairman Mark Burton said positive like-for-like valuation movement was seen in all sectors of the portfolio except for offices. All sectors – industrial, retail warehouses, high street retail and offices – outperformed the MSCI index during the period.
Quarterly EPRA earnings per share grew by 4%, with EPS reaching 1.84p per share for the quarter ending 30 September. Burton said further growth in earnings and NAV is expected in the near term, with plentiful pipeline opportunities identified, less direct competition and a “greater prevalence of mispricing”.
AEW UK carried out three sales during the period for a total of around £20m and reinvested a similar amount.
Industrial assets in Leeds and Bradford were sold as a package for a blended net initial yield of 6.2%, far below the company’s achieved average purchase yield during the period of 8.6%. The sale prices exceeded the assets’ valuations prior to disposal by an average of 14%. A vacant industrial property in Deeside, sold to avoid a costly refurbishment, achieved an 8% premium to valuation.
Reinvestment focused on higher yielding assets in core urban locations, with the purchases of NCP, York, and Cambridge House, Bath, bought at a combined initial yield of 8.6%.
The company will continue to pay its market-leading 2p quarterly dividend, which has now been paid for 32 consecutive quarters. Its shares are currently trading at an enviably narrow discount of 4.5%, while its 12-month average discount is 8%.
Financial Highlights
- Net asset value of £167.9m and 106p per share as at 30 September 2023 (31 March 2023: £167.10m and 105.48p per share).
- NAV total return for the period of 4.3% (six months to 30 September 2022: 4.35%).
- Operating profit before fair value changes of £6.63m (six months ended 30 September 2022: £5.25m).
- Profit before tax of £7.16m and earnings per share of 4.52p per share for the period (six months ended 30 September 2022: £8.32m and 5.25p per share).
- The company has a £60m loan facility with AgFe and is geared to 27.35% of GAV (31 March 2023: 28.06%).
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