AEWL.L Regulatory News (AEWL)

AEW UK Long Lease REIT plc ("AEWL" or "the Group")

LEI: 213800MPBIJS12Q88F71

9 August 2019

NAV Update for the quarter ended 30 June 2019

AEW UK Long Lease REIT plc (LSE: AEWL) (the "Group"), which owns a diversified portfolio of 19 regional UK commercial property assets, announces its unaudited Net Asset Value ('NAV') for the quarter ended 30 June 2019.

Highlights for the quarter ended 30 June 2019

·; Successful assignment of the three leases at our Dudley and Sheffield industrial sites to Meridian Steel Limited ("Meridian Steel"). Under the terms of the new lease arrangements, the passing rental income for the three assets will remain unchanged at £659,000, following an initial 12-month rent free period. The leases, which will run for a period of eight years, are linked to the Retail Price Index, with annual reviews and are all guaranteed by Duferco International Trading Holding S.A.

·; EPRA earnings per share ("EPRA EPS") for the quarter decreased by 3.4% to 1.343 pence per share (quarter to 31 March 2019: 1.39 pence per share) (unaudited), which represents dividend cover for the quarter of 97.7%.

·; EPRA earnings for the financial year ended 30 June 2019 were 5.47 pence per share (unaudited) reflecting dividend cover for the year of 99.5%. The EPRA EPS include an accrual to reflect the minimum contracted uplifts under the Group's leases and a non -cash adjustment for the amortisation of loan arrangement fees. Without this accrual and non-cash adjustment, the cash earnings were 4.86 pence per share (unaudited) reflecting 88.4% cash dividend cover for the year.

·; At 30 June 2019, the independent fair valuation of the property portfolio was £112.99 million (31 March 2019: £111.14 million). The valuation of £112.99 million includes an increase in the valuation of the Meridian Steel properties by £2.05 million and a valuation decrease of £0.20 million across the rest of the portfolio. On a like-for-like basis, there has been an increase of £1.85 million (1.66%) over the quarter (quarter to 31 March 2019: decrease of £3.15 million or 2.81%).

·; Unaudited NAV increased to £76.32 million, 94.810 pence per share (31 March 2019: £75.04 million, 93.220 pence per share), an increase of 1.71%.

Alex Short, Portfolio Manager, AEW UK Long Lease REIT, commented

The Group's property assets continue to provide an income stream in line with both our expectations and guidance given to investors. The EPRA EPS is slightly reduced for the quarter as a result of rent smoothing accounting adjustments of £36k following the assignment of the Meridian leases and due to one off costs of £32k incurred by the Board in conducting their strategic review. Looking forward, the 12-month rent free period granted on the Meridian Steel leases will adversely impact the cash dividend cover for the financial year to 30 June 2020.

Net Asset Value

As at 30 June 2019, the Group owned 19 investment properties with a fair value of £112.99 million.

The NAV attributable to the ordinary shares has been calculated under International Financial Reporting Standards as adopted by the European Union and incorporates the Group's property portfolio individually valued on a 'Red Book' valuation basis as at 30 June 2019 and income for the quarter, but does not include a provision for the interim dividend for the quarter ended 30 June 2019, as declared on 8 August 2019.

The income earned for the period includes an accrual for the minimum contractual uplifts defined within the index linked leases. In the event that inflation is greater than these minimum contractual uplifts, the income realised will ultimately be greater than that currently accrued.

Debt

As at 30 June 2019, the Group had utilised all of its £41 million fixed interest loan facility with Canada Life Investments and at that date was geared at a loan to Gross Asset Value ('GAV') of 34.3%. The weighted average interest cost of the Group's increased facility is 3.19% and the facility is repayable on 20 October 2025

Portfolio Activity

On 9 May 2019, we announced that the assets and business of Meridian Metal Trading Limited ("MMT") had been acquired by Meridian Steel, a newly incorporated wholly owned subsidiary of Duferco International Trading Holding S.A. ("DITH"). On 22 May the leases were assigned to Meridian Steel for all three properties. Under the terms of the new lease arrangements, the passing rental income for the three industrial assets, two located in Dudley and one in Sheffield, will remain unchanged at £659,000, following an initial 12-month rent free period. The leases, which will run for a period of eight years, are linked to the Retail Price Index, with annual reviews and are all guaranteed by DITH. Following the assignment of the leases, Knight Frank LLP, AEWL's independent valuer, valued the properties at an increased level of £8.85 million.

Inflation linked rent reviews

92% of the portfolio's income stream is reviewed periodically, on an upward only basis, in line with inflation; with 71% and 21% of the portfolio indexed to RPI and CPI respectively.

During the period, rental increases were agreed with Biffa in respect of St Helens and Serco Leisure in respect of North Shields. These uplifts will provide additional annual income to the Group of £14,070. A further rent review falling due during the period in respect of Petrogas in Crawley is awaiting settlement.

Sector weightings

The sector weightings, by value, of the property portfolio as at 30 June 2019 were: Hotels 21.5%; Industrial 19.8%; Residential care homes 16.0%; Car showrooms 13.2%; Student accommodation 10.7%; Leisure 8.6%; Power station 4.5%; Petrol station 3.9%; and Nursery 1.8%.

Future publications

The Group's June 2019 Quarterly Investment Report will be available on the Group's website on 16 August 2019.

- ENDS -

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