A real estate investment trust traded on the Main Market of the London Stock Exchange

Case studies

Maintaining income streams

Bath Street, Glasgow

Key asset management highlights

City centre location, attractive yield profile

  • Acquired in July 2015.
  • Low ongoing capex requirement due to comprehensive refurbishment in 2008 – modern plant and machinery, refurbished reception area.
  • 5 year reversionary lease completed with existing tenant Indigo at £15 psf. £0.50 psf ahead of ERV.

£12.65m

Current Value

£144 psf

Capital Value

9.63%

Net Initial Yield

9.24%*

Reversionary Yield

Property characteristics

Property Name225 Bath Street

Property Type Offices

Area87,827 sq ft

Purchase Price£12.2m (£139 psf)

Purchase Yield10.0%

Constructed1980’s

VendorFund

Lease

TenantsFully let to 7 tenants providing a WAULT of 2.3 years to breaks and 4.5 years to expiry

RentAverage passing rent of c.£15 psf

Adding value

  • The current low passing rents make the building well placed to benefit from future rental growth
  • Requires minimal capex going forward, eg. Improvement of tenant amenity space on the ground floor

Investment Summary

  • Multi-let city centre office building
  • Comprehensively refurbished in 2008
  • Shortage of competing stock for this size of floor plate

Driving rental growth

40 Queen Square, Bristol

Key asset management highlights

Prime Bristol Office Location, refurbishment potential

  • Acquired by AEW in December 2015.
  • Very little asset management carried out by previous landlord.
  • 10,465 sq ft of accommodation relet since purchase at ERV of c.£22psf (average passing rent of £16.70 psf). This equates to 34% of vacancy at acquisition.
  • Business plan to refurbish accommodation and re let. £825,000 of capex spent in March as projected at acquisition.
  • Refurbish underutilised lower ground floor to provide improved common facilities, eg. bike storage, showers. Will help to drive rental growth.
  • Rental growth in Bristol forecast to be in excess of 6% pa for the next 3 years.

£7.58m

Current Value

£198 psf

Capital Value

6.5%

Net Initial Yield

8.6%

Reversionary Yield

Property characteristics

Property Name40 Queen Square, Bristol

Property Type Office

Area36,365 sq ft

Purchase Price£7.2m

Purchase Yield8.7%

VendorFund

Lease

TenantsMulti-let to 6 tenants with 46% vacancy in terms of floor area. WAULT of 1.5 years to break and 3.2 years to expiry

Rent£16.70 psf (on let space)

Investment Summary

  • Prime office location in central Bristol
  • Increasing levels of occupier demand is driving rental growth
  • Asset management opportunities – regear of existing leases and refurbish vacant space

Immediate upside with further potential

Fargate, Sheffield

Key asset management highlights

Prime retailing location, attractive yield profile

Immediate upside

  • A sale of the vacant office floors has been agreed in excess of valuation to a student housing developer.
  • Assumed value of uppers at purchase £0.25m. Sale price achieved £0.71m.
  • Running yield post sale of 10.3%.

Potential further upside

  • Prime units fronting Fargate are currently let at low levels so provide good potential for rental growth in the future.
  • The letting of two vacant retail units on Chapel Walk will strengthen the income stream further providing yield compression.

£5.65m

Current Value

£164 psf

Capital Value

8.24%

Net Initial Yield

7.95%

Reversionary Yield

Property characteristics

Property Name11-15 Fargate and 18-36 Chapel Walk

Property Type Retail

Area40,128 sq ft

Purchase Price£5.3m

Purchase Yield8.7%

ConstructedTBC

VendorFund

Lease

TenantsMulti let to 7 tenants providing a WAULT of 3.8 years to breaks and 5.3 years to expiry

RentPassing rent of £135 psf on the prime units

Investment Summary

  • Prime retail location within Top 25 retailing city
  • Potential to add value through letting of vacant units and sale of upper parts
  • Low passing rent on the prime units
  • Further retail development nearby will help to draw more footfall into the city centre

Attracting retailers

Valley Retail Park, Belfast

Key asset management highlights

Modern scheme, attractive yield profile

  • Surrender premium of £1m received from outgoing tenant Harvey Norman.
  • New 20 year lease completed to Go Outdoors for their first Northern Ireland store.
  • Remaining vacant accommodation let to Smyths Toys.
  • Significantly improved footfall levels.
  • Rents on nearby parks: £15-23 psf, we can offer space at £9-10psf.
  • Running yield of c 15% against the acquisition price once deals complete.

£10.05m

Current Value

£100 psf

Capital Value

3.5%

Net Initial Yield

7.9%

Reversionary Yield

Property characteristics

Property NameValley Retail Park, Newtownabbey

Property Type Retail warehouse

Area100,413 sq ft

Purchase Price£7.1m (£71 psf)

Purchase Yield12.8%

Constructed2003

VendorAsset Manager

Lease

TenantsLet to 4 tenants providing a WAULT of 3.5 years to breaks and 7 years to expiry

RentAverage passing rent of c.£12 psf

Investment Summary

  • Modern scheme
  • Attractive yield profile
  • Low vacancy level within the surrounding area
  • Ability to offer space at a discount to surrounding schemes
  • Halfords trading strongly
  • Wider interpretation of bulky goods planning consent than rest of UK

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AEW UK REIT plc

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