AEW UK REIT : Quarterly Investor Report, June 2022

AEW UK REIT Plc (AEWU/The Company)
Quarterly Update	Q2 22

AEW UK REIT plc invests in and intensively asset manages a value-focused portfolio of high yielding commercial properties across the UK

Fund Highlights

• NAV of £200.40 million or 126.50 pence per share as at 30 June 2022 (31 March 2022: £191.10 million or 120.63 pence per share).
• NAV total return of 6.53% for the quarter (31 March 2022 quarter: 7.37%).
• 4.49% like-for-like valuation increase for the quarter (31 March 2022 quarter: 4.74%), driven by a 17.62% like-for-like increase from the office sector associated with the anticipated sale of Eastpoint Business Park in Oxford.
• EPRA earnings per share ("EPRA EPS") for the quarter of 1.50 pence (31 March 2022 quarter: 1.55 pence). This is expected to return to the Company's target level of 2.00 pence per quarter once the sales of both

Eastpoint Business Park, Oxford and Bath Street, Glasgow, complete during August and sales proceeds have been reinvested.

• Interim dividend of 2.00 pence per share for the three months ended 30 June 2022, in line with the targeted annual dividend of 8.00 pence per share.
• New £60 million debt facility with AgFe priced at a fixed total interest cost of 2.959% for five years. Following this refinancing, the existing RBSi loan facility has been repaid in full.
• Loan to NAV ratio at the quarter end was 29.94% (31 March 2022: 28.26%). The Company had a cash balance of £4.51 million and its loan facility was fully drawn.

• Acquisition of Railway Station Retail Park in Dewsbury for a purchase price of £4.70 million, a capital value of £82 per sq. ft. The price reflects a net initial yield of circa 9.4%.
• Attractive investment pipeline of value- orientated assets showing net initial yields between 6.75% and 10% is under exclusivity.
• Post quarter end, contractually committed disposal of Eastpoint Business Park, Oxford for £29.0 million, a 16% premium to the asset's value within the published NAV. Completion of the sale will take place on 8th August 2022. As a result of the transaction having exchanged post quarter end, a further 2.5p is expected to be realised in the Company's Net Asset Value per share.

Portfolio Managers Commentary

The portfolio's strong capital performance continues this quarter, with the majority of the assets demonstrating continued resilience. The office sector value gains seen in the portfolio of late, following a period of strong performance by our industrial assets in previous quarters, demonstrate the benefits of the strategy's ability to invest across market sectors to maximise value at different times. It is also an indicator of the positive NAV impact our proactive approach to portfolio management can have. In a value portfolio such as this, active asset management can continue to drive defensive capital performance at times when values in general may be experiencing increased volatility. Asset management activity this quarter demonstrates this point, with value accretive transactions seen in all major market sectors.

Capital growth in the Company's office assets was driven in the most part this quarter by the Eastpoint Business Park in Oxford which

The high yielding nature of the AEWU portfolio provides significant headroom against rising interest rates that have started to impact prime yields in some sectors. The portfolio's low capital values also provide a defensive starting point due to their correlation with replacement costs and optionality for alternative uses.

Earnings for the quarter of 1.50 pence per share are below target, predominantly due to the continued impact ofvacancy at Bath Street, Glasgow. Following the completed sales of Glasgow and Oxford, which are both due during August, earnings are expected to return to the Company's target level of2.00 pence pershare perquarteronce sales proceeds have been reinvested. The Company's 12-month backward looking dividend cover currently sits at 77% and total historic dividend cover at 97%.

We have placed a significant pipeline of attractive assets under exclusivity and endeavour to complete acquisitions promptly

in order to return the portfolio to a fully invested and maximum income producing position. These pipeline assets have been sourced based upon the same value investment principles as the existing portfolio, with net initial yields ranging between 6.75% and 10%. Further announcements regarding investment transactions are expected in the coming weeks. Following both of these planned sales, the Company's office exposure is projected to reduce to 8% of the portfolio.

Occupational demand also continues to be strong with several value accretive asset management transactions this quarter. These have been undertaken across all major property sectors, highlighting that tenant activity continues where market appropriate levels of ERV have been applied.

has now been formally revalued for the first time since being placed under offer for sale in April. The value of the asset rose 43% during the quarter although, due to the sale having exchanged post quarter end, further NAV uplift equating to 16% of the 30 June 2022 valuation is expected to follow. This is expected to add a further 2.5p to the Company's Net Asset Value per share.

Sector	Valuation 30 June 2022	Valuation movement for the quarter
	£ million	%	£ million	%
Industrial	122.82	48.04	2.08	1.72
Office	50.90	19.91	7.63	17.62
High Street Retail	24.70	9.66	(0.28)	(1.10)
Retail Warehouses	40.05	15.67	1.10	3.21
Leisure	17.18	6.72	0.25	1.48
Total	255.65	100.00	10.78	4.49

Fund Facts

Portfolio Manager

Laura Elkin

Investment Objective and Strategy

The Company exploits what it believes to be the compelling relative value opportunities offered by pricing inefficiencies in smaller commercial properties let on shorter occupational leases in strong commercial locations. The Company supplements this core strategy with active asset management initiatives to improve the quality of income streams and maximise value.

Launch date: 12 May 2015

Fund structure: UK Real Estate Investment Trust

SRI policy: Click here

Year end: 31 March

Fund size (Net Asset Value): £200.40m

Property valuation: £255.65m

		Sector Weightings
3.5%		Industrial	48.0%
Scotland
0.0%	Offices	19.9%
North	Retail Warehouse	15.7%
	East
		Standard Retail	9.7%
	16.9%	Leisure	6.7%
	Yorkshire &
7.5%	Humberside	Based upon Knight Frank valuation. As a percentage of
North
West		portfolio (excluding cash).

		1.5%
	17.0%	East	Top 10 Assets (by value)
	Midlands
	West	10.7%
9.4%	Midlands
Eastpoint Business Park, Oxford	9.8%
	Eastern
Wales
			Central Six Retail Park, Coventry	7.2%
	15.9%		Gresford Industrial Estate, Wrexham	5.3%
	13.7%	40 Queens Square, Bristol	4.7%
	South	South East
	West		Lockwood Court, Leeds	4.2%
			15-33 Union Street, Bristol	4.2%
		3.9%/0%	Arrow Point Retail Park, Shrewsbury	3.9%
		Rest of London/	London East Leisure Park, Dagenham	3.9%
		Central London
Portfolio Locations		225 Bath Street	3.5%
Based upon Knight Frank valuation.		Apollo Business Park, Basildon	3.5%
As a percentage of portfolio (excluding cash).

Number of properties held: 37

Average lot size: £6.91m

Property portfolio net initial yield (% p.a.): 5.47%

Property portfolio reversionary yield: 7.36%

LTV (Net Asset Value): 29.94%

Average weighted unexpired lease term

To break: 2.40 years	To expiry: 4.06 years
Occupancy: 91.60%*	* As a % of ERV

Occupancy is stated excluding vacancy contributed by the asset at 225 Bath Street Glasgow (the overall level is 86.97% including this asset). This asset has now been exchanged for sale for alternative use redevelopment and as a condition of the sale agreement, full vacancy must be achieved in the building before the sale can be completed.

Number of tenants: 131

Share price as at 30 Jun: 114.6p

NAV per share: 126.5p

Premium/(discount) to NAV: (9.41%)

Shares in issue: 158.42m

Market capitalisation: £181.55m

Annual management charge 0.9% per annum of invested NAV

Dividend target

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 was 8 pence per Share declared for the year ended 31 March 2022. Based on the current

Asset Management Update

Arrow Point, Shrewsbury (retail warehouse) During May, the Company completed the renewal of Charlie's Stores' lease on straight 10-yearterm at a rent of £385,000 per annum reflecting £11 psf, versus an ERV of £7.50 psf. The valuation consequently rose by £300,000 having already increased by £1.35 million on the 2021 purchase price of £8.35 million.

40 Queens Square, Bristol (office)

The Company has completed an agreement for lease with Konica Minolta Marketing Services Ltd at a new high rental tone for the building of £40 psf on a 10 year lease with a 5 year tenant break option. The letting is subject to the Company undertaking works comprising a Cat A refurbishment and roof, lift and reception works at a cost of £1.07 million plus 11 months' rent-free incentive.

Commercial Road, Portsmouth (high street retail) During May, the Company completed a new

15-year lease to Kokoro UK Limited. The agreed rent is £52,500 per annum versus an ERV of £45,750 per annum.

Diamond Business Park, Wakefield (industrial) During June, the Company completed a new letting of Units 8 and 9 to Wow Interiors, an existing tenant on the estate. Wow have taken a new six-yearlease with a tenant break option at the end of the third year. The commencing rent of

£3 psf will increase to £3.50 psf in years 2 and 3, and subsequently £3.75 psf from year 4 onwards.

Investment Update

Railway Station Retail Park, Dewsbury (retail warehouse)

In June, the Company completed the acquisition of a 6.04-acre Railway Station Retail Park in Dewsbury for a price of £4.70 million. The purchase price reflects a low capital value of £82 psf and provides an attractive net initial yield of 9.4%. The park is fully let with a low average passing rent of £8.28 psf.

Eastpoint Business Park, Oxford (office) During July, the Company exchanged contracts to sell the Eastpoint Business Park in Oxford for the price of £29 million. The asset was acquired in May 2015 for £8.2 million reflecting a net initial yield of over 9%. The sale price crystallises significant profit, exceeding both the valuation level immediately prior to the sale by 16% and the acquisition price by 254%. The asset has delivered an IRR to the Company in excess of 22% during its hold period.

349 Moorside Road, Swinton (industrial)

Post quarter end, the Company has exchanged on the sale of the property for £1.71 million. The sale price represents a 58% premium to the acquisition price. Completion of the sale is due to take place prior to the end of July.

market conditions, the Company expects to pay an annualised dividend of 8 pence per Share in respect of the financial year ending 31 March 2023 and for the interim financial period to 30 September 2023.

ISIN: GB00BWD24154  Broker: Liberum

Ticker: AEWU  SEDOL: BWD2415

Key contact 

Investor Relations Kari Clarke [e-mail] T: 020 7016 4804

IMPORTANT NOTICE This is a communication issued by AEW UK Investment Management LLP (the "Investment Manager"), trading as AEW UK ("AEW UK"). It relates to the AEW UK REIT Plc (the "Company"). This communication cannot be relied upon as the basis on which to make a decision to invest in the Company. This communication does not constitute an invitation or inducement to subscribe to any particular investment. This communication is forwarded to you for information purposes only and does not constitute a personal recommendation. You should seek professional advice before making any investment decision. The value of investments and the income from them can fall as well as rise. An investor may not get back the amount of money invested. Past performance is not a guide to future performance. AEW UK Investment Management LLP believes the information to be correct at the time of writing but does not make any representation as to the accuracy or completeness of the material and does not accept liability for any loss arising from the use hereof. It is under no obligation to ensure that updates to the document are brought to your attention.