Aew Uk Reit Regulatory News (AEWU)

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, CANADA, JAPAN, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information in the Prospectus published today by the Company in connection with the Initial Issue, the share issuance programme of the Company (the "Share Issuance Programme") and the admission of ordinary shares of £0.01 each of the Company ("Shares") to be issued pursuant to the Initial Issue and the Share Issuance Programme to listing on the premium listing segment of the Official List and to trading on the main market for listed securities of London Stock Exchange plc. A copy of the Prospectus is available at www.aewukreit.com.

This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

The contents of this announcement, which have been prepared by and are the sole responsibility of the Company, have been approved by AEW UK Investment Management LLP, as a financial promotion solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 ("FSMA").

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

AEW UK REIT PLC

Placing, Offer for Subscription and Intermediaries Offer

£40 million target raise

and

Publication of a Prospectus and Circular

28 September 2017

LEI: 21380073LDXHV2LP5K50

Further to the announcement made by AEW UK REIT plc (the "Company") on 11 September 2017, the board of directors of the Company (the "Board") is pleased to announce an initial placing, initial offer for subscription and intermediaries offer of new Shares (the "Initial Issue") at a price of 100.5 pence per new Share (the "Issue Price").

The Company has today published a prospectus in relation to the Share Issuance Programme (including the Initial Issue) (the "Prospectus") and will shortly be posting a circular to Shareholders to convene a general meeting to be held at 1.00 p.m. on 17 October 2017 (the "General Meeting") seeking approval, inter alia, for the authorities required to implement the Share Issuance Programme (including the Initial Issue) (the "Share Issuance Programme Resolutions") (the "Circular"). The Prospectus and the Circular are available on the Company's website (www.aewukreit.com).

Commenting on today's announcement, Mark Burton, non-executive Chairman said:

"The existing portfolio continues to perform well, enabling the Company to pay an annualised dividend of 8 pence per share. AEW UK Investment Management has identified a strong pipeline of opportunities that fit our criteria among smaller commercial properties with the potential for asset management improvements, to the potential benefit of new and existing investors."

Fidante Capital is Sponsor, Financial Adviser and Sole Bookrunner to the Share Issuance Programme (including the Initial Issue).

Key Highlights of the Initial Issue:

· Target size of 39,800,995 new Shares (the "New Shares"), (based on the target size of £40 million before expenses) with the ability to increase the size of the Initial Issue to 59,701,493 New Shares (to raise £60 million before expenses) if the Directors, on advice from AEW UK Investment Management LLP (the "Investment Manager"), believe it is appropriate to do so in light of the pipeline of properties and the expected speed of deployment of the net proceeds of the Initial Issue

· Issue Price of 100.5 pence per New Share, representing a 1.0 per cent. discount to the closing price of 101.5 pence per Share as at close of business on 27 September 2017 and a 5.9 per cent. premium to the Company's NAV per Share (96.86 pence as at 31 July 2017), net of the interim dividend of 2.0 pence per share to be paid on 29 September 2017

· New Shares will rank pari passu with the existing Shares in all respects from the date of issue and will be eligible for any dividend payable in respect of the period from 1 August 2017 to 31 October 2017

· The Initial Issue, which is not underwritten, is conditional, amongst other things, on the passing of the Share Issuance Programme Resolutions at the General Meeting and Admission of the New Shares occurring no later than 8.00 a.m. on 24 October 2017 (or such later time and/or date as the Company and Fidante Capital may agree, being no later than 30 November 2017) and the Share Issuance Agreement having become unconditional in accordance with its terms. If these conditions are not met, the Initial Issue will not proceed and an announcement will be made via a Regulatory Information Service

· Application will be made for the New Shares to be issued pursuant to the Initial Issue to be admitted to the premium listing segment of the Official List of the FCA and to trading on the London Stock Exchange's main market for listed securities

Investment highlights:

· The Company invests in and intensively asset manages a diversified portfolio of small, high yielding commercial properties across the UK

· As at 31 July 2017 (the date of the last published NAV) the Company had made direct property investments totalling over £143.7 million (net of acquisition costs), in 32 properties. The Company announced on 27 September 2017 that it had sold Valley Retail Park, Belfast for £11.05 million

· The Investment Manager has identified a strong pipeline of assets providing opportunities to invest in high income producing properties with asset management initiatives

· The Company has an income focussed strategy, and is currently the highest yielding UK REIT in its peer group having declared dividends of 15.5 pence per Share since launch in April 2015. The Company is targeting an annualised 8pps dividend for the financial period ending 31 March 2018 and the interim financial period to 30 September 20181

· Additional capital value is achieved through asset management initiatives, including repositioning assets to add value, crystallising value through rent review and lease re-gears, improving the quality of the income stream and altering properties where appropriate

· The Investment Manager focuses on strong commercial locations with low levels of supply which have the potential for rental growth

· The Investment Manager seeks to exploit pricing inefficiencies available in smaller commercial properties (between £2.5 million and £15 million lot sizes), resulting in significant yield advantage

· Downside risk is protected with a high residual value, low obsolescence stock selection strategy

Benefits of the Initial Issue

The Directors believe that the Initial Issue will have the following principal benefits for Shareholders:

· Provide additional capital which will enable the Company to benefit from the continued investment opportunities in the market

· Potentially enhance the NAV per Share through new Share issuances at a premium to the prevailing NAV per Share, after the related costs have been deducted

· Grow the Company, thereby spreading operating costs over a larger capital base, which should reduce the Company's total expense ratio

· Increase the number of Shares in issue, which may provide Shareholders with additional liquidity

General Meeting

The Company is today posting a Circular to Shareholders to convene a general meeting to be held at 1.00 p.m. on 17 October 2017 (the "General Meeting") in order to seek Shareholder approval in connection with the Share Issuance Programme (including the Initial Issue) and certain minor changes to the Company's investment policy. The resolutions to be proposed at the General Meeting are as follows:

· To approve the allotment of up to 250 million New Shares in connection with the Share Issuance Programme

· To dis-apply statutory pre-emption rights in connection with the allotment of up to 250 million New Shares in connection with the Share Issuance Programme

· To amend the Company's investment policy to permit the investment of up to 50 per cent. of GAV (instead of 50 per cent. of NAV) in any one sector

· To increase the Company's maximum borrowing limits to 35 per cent. of GAV in advance of a fundraise or sale of an asset, proceeds from either of which would reasonably be expected subsequently to reduce the borrowing level of the Company to 25 per cent. of GAV, or less

Forms of Proxy should be returned by not later than 1.00 p.m. on 13 October 2017.

Publication of the Prospectus and Circular

A copy of each of the Prospectus and Circular will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.hemscott.com/nsm.do and at www.aewukreit.com.

Capitalised terms used and not otherwise defined in this announcement have the meaning set out in the Prospectus and/or Circular (as the context requires).

1 The figures in relation to dividends are indicative only and are not intended to be, and should not be taken as, a profit forecast or estimate. Actual returns cannot be predicted and may differ materially from these figures. There can be no assurance that they will be met.

Each of the times and dates set out above may be adjusted by the Company, in which event details of the new times and dates will be notified to the FCA and the London Stock Exchange via an RIS. References to times of day are to London times.

For further information, please contact:

About the Company

The Company was launched in May 2015 to invest in UK smaller commercial properties.

As at 31 July 2017, the Company had made direct property investments totalling over £143.7 million (net of acquisition costs), comprising 32 direct properties and had fully utilised all of the proceeds from the sale of its investment in the AEW UK Core Property Fund (announced on 12 May 2017) and all £32.5 million of the 5 year term loan facility with RBS International. On 27 September 2017 the Company announced the sale of Valley Retail Park, Belfast, for £11.05 million. The Company has declared dividends of 15.5 pence per Share since launch.

The Initial Issue

Pursuant to the Share Issuance Programme, the Company is targeting an initial issue of £40 million, with the ability to increase the size of the Initial Issue up to a maximum amount of £60 million if the Directors, on advice from the Investment Manager, believe it is appropriate to do so in light of the pipeline of properties and the expected speed of deployment of the net proceeds of the Initial Issue. The Initial Issue will together comprise the Initial Placing, the Initial Offer for Subscription and the Intermediaries Offer.

Pipeline investments

Key to the success of the Company is timely deployment of capital through careful investment selection. The Investment Manager has identified a strong pipeline of potential opportunities generated by its network of contacts across the UK commercial property market. Over the 12 months to September 2017 the Investment Manager received over 2,400 separate deal introductions via Propex, the online data exchange for the institutional property market, with a combined total value of £24 billion. The Investment Manager has, on average, invested £50 million a quarter into the smaller lot size commercial property market and continues to see a range of attractive potential opportunities which meet the Company's return requirements. The Company expects to commit substantially all the net proceeds of the Initial Issue within 3 months of Initial Admission. The current pipeline includes a diverse range of geographical locations and property sectors. In line with the Company's strategy the Investment Manager continues to focus on finding future acquisitions which will deliver an attractive return as part of a well-diversified regional portfolio. The Company has a strategy to raise funds in line with investment expectations to minimise cash drag.

Investment Objective

The investment objective is to deliver an attractive total return to Shareholders from investing predominantly in a portfolio of smaller commercial properties in the United Kingdom.

Investment Policy

In order to achieve its investment objective the Company invests in freehold and leasehold properties across the whole spectrum of the commercial property sector (office properties, retail warehouses, high street retail and industrial/warehouse properties) to achieve a balanced portfolio with a diversified tenant base. The Company acquires smaller commercial properties.

Within the scope of restrictions set out below (under the heading 'Investment Restrictions') the Company may invest up to 10 per cent. of its Net Asset Value (at the time of investment) in the AEW UK Core Property Fund and up to 10 per cent. of its Net Asset Value (measured at the commencement of the project) in development opportunities, with the intention of holding any completed development as an investment. The AEW UK Core Property Fund is a property authorised investment fund managed by the Investment Manager which has a similar investment policy to that of the Company. Any investment by the Company into the AEW UK Core Property Fund will not be subject to management fees or performance fees otherwise charged to investors in the AEW UK Core Property Fund by the Investment Manager.

The Company will at all times invest and manage its assets in a way that is consistent with its objective of spreading investment risk and in accordance with its published investment policy. The Company will not, at any time, conduct any trading activity which is significant in the context of the business of the Company as a whole.

Investment Strategy

The Company seeks to exploit what it believes to be the compelling relative value opportunities currently offered by pricing inefficiencies in smaller commercial properties let on shorter occupational leases

The Company supplements this core strategy with asset management initiatives to upgrade buildings and thereby improve the quality of income streams. The Company may also invest up to a maximum of 10 per cent. of its Net Asset Value in the AEW UK Core Property Fund.

In the current market environment the focus is to invest in properties which:

· typically have a value, on investment, of between £2.5 million and £15 million;

· have initial net yields, on investment, of typically between 7.5-10 per cent.;

· achieve across the whole Portfolio an average weighted lease term of between three to six years remaining;

· achieve, across the whole Portfolio, a diverse and broad spread of tenants; and

· have potential for asset management initiatives to include refurbishment and re-lettings.

The Company may invest in UK commercial properties or portfolios of commercial property assets which, in addition, include ancillary or secondary utilisations such as residential elements.

The Company may invest in UK corporate and other entities that hold property. The Company may also invest in conjunction with third party investors and purchase assets from, or sell assets to, AEW Funds, in each case subject to the approval of the Board.

The Investment Manager

The Investment Manager is part of the AEW Group, one of the world's largest real estate managers, with €58.5 billion of assets under management as at 30 June 2017. The AEW Group comprises AEW SA and AEW Capital Management L.P., a U.S. registered investment manager and their respective subsidiaries as well as AEW UK Investment Management LLP. In Europe, as at 30 June 2017, the AEW Group managed €26.0 billion in value in properties of all types located in 15 countries, with over 380 staff. The Investment Manager is a 50:50 joint venture between the principals of the Investment Manager and AEW.

Dividend Policy

The Board has declared and paid (save with regard to the 9th interim dividend which is due to be paid on 29 September 2017) dividends totalling 15.5 pence per Share in respect of the period since launch.

On 8 September 2017 the Company changed its accounting reference date to 31 March in order to align the Company's quarterly NAV reporting dates with its peers in the UK commercial property sector.

In order to align dividend payments with the Company's new accounting period, in respect of the 3 month period to 31 October 2017, the Company currently intends to pay a dividend of 2 pence per Share and then, in respect of the 2 month period to 31 December 2017, it currently intends to pay a further dividend at a rate of two-thirds of the 2 pence per Share dividend currently being paid for a three month period (reflecting the 2 month period since the previous dividend payment).

From March 2018 the Company anticipates resuming quarterly dividends with dividends declared in January, April, July and October of each year. 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, which is 8 pence per Share, over the 12 months ending 30 April 2017.

Based on the current market conditions as at the date of the Prospectus, the Company expects to pay an annualised dividend of 8 pence per Share in respect of the financial period ending 31 March 2018 and for the interim financial period to 30 September 2018.

The New Shares will, when issued and fully paid, rank equally in all respects with the existing Shares currently in issue, including the right to receive all dividends or other distributions made, paid or declared, if any, by reference to a record date after the date of their issue.

Investors should note that the figures in relation to dividends set out above and elsewhere are for illustrative purposes only and are not intended to be, and should not be taken as, a profit forecast or estimate. Actual returns cannot be predicted and may differ materially from these illustrative figures. There can be no assurance that they will be met or that any dividend or NAV growth will be achieved.

Borrowings

The Company intends to utilise borrowings to enhance returns over the medium term. Borrowings will be utilised on a limited recourse basis for each investment on all or part of the total Portfolio. It is currently anticipated that the Directors will target a level of total borrowings of up to 25 per cent. of Gross Asset Value (measured at drawdown) and will comply with the REIT condition relating to the ratio between the Group's 'property profits' and 'property finance costs'.

Subject to the Investment Policy Resolution being passed at the General Meeting, the Company may borrow in excess of the above borrowing target of 25 per cent. subject to a maximum of 35 per cent. of Gross Asset Value: (i) provided that the Directors reasonably believe that the Company will complete an equity fundraising within 3 months of such increased borrowings; or (ii) as part of the Investment Manager's efficient portfolio management whereby the investment is made prior to the anticipated sale of an existing investment, where completion of the sale is expected to be completed within 3 months of the relevant investment and the proceeds of such equity fundraising or sale would be reasonably expected to reduce the borrowing of the Company to 25 per cent. of the Gross Asset Value or less.

As at 31 July 2017 (being the latest practicable date prior to the publication of Prospectus), the Company had a gross loan to value of approximately 21.6 per cent. on the Portfolio.

Disclaimer

The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The material set forth herein is for information purposes only and is not intended, and should not be construed, as an offer of securities for sale in the United States or any other jurisdiction.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, South Africa or Japan. The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement does not contain or constitute an offer for sale of, or the solicitation of an offer or an invitation to buy or subscribe for, Shares to any person in the United States, Australia, Canada, South Africa or Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

The Company will not be registered under the US Investment Company Act of 1940, as amended. In addition, the Shares referred to herein have not been and will not be registered under the US Securities Act of 1933 (the "Securities Act") or under the securities laws of any state of the United States and may not be offered or sold in the United States or to or for the account or benefit of US persons absent registration or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable State securities laws. The offer and sale of Shares referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of any state, province or territory of Australia, Canada, South Africa or Japan. Subject to certain exceptions, the Shares referred to herein may not be offered or sold in Australia, Canada, South Africa or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, South Africa or Japan. There will be no public offer of the Shares in the United States, Australia, Canada, South Africa or Japan.

Any purchase of Shares in the Share Issuance Programme should be made solely on the basis of the information contained in the Prospectus issued today by the Company. No reliance may or should be placed by any person for any purposes whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness.

Fidante Partners Europe Limited (trading as Fidante Capital) is authorised and regulated in the United Kingdom by the Financial Conduct Authority, and acting exclusively for the Company and no-one else in connection with the Share Issuance Programme. They will not regard any other person as their respective clients in relation to the Share Issuance Programme and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice in relation to the Share Issuance Programme, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the Share Issuance Programme, Fidante Capital and its affiliates, acting as investors for its or their own accounts, may subscribe for or purchase Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for its or their own account(s) in the Shares and other securities of the Company or related investments in connection with the Share Issuance Programme or otherwise. Accordingly, references in the prospectus to Shares being issued, offered, acquired, subscribed or otherwise dealt with, should be read as including any issue or offer to, acquisition of, or subscription or dealing by Fidante Capital and any of its affiliates acting as an investor for its or their own account(s). Neither Fidante Capital nor any of its affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In addition, Fidante Capital and its affiliates may enter into financing arrangements with investors, such as share swap arrangements or lending arrangements in connection with which Fidante Capital may from time to time acquire, hold or dispose of shareholdings in the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Company's board of directors' current beliefs and expectations about future events. These forward-looking statements may be identified by the use of forward- looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, the results of operations, financial condition prospects, growth and dividend policy of the Company and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. Forward looking statements speak only as of the date of this announcement.