AEW UK REIT plc
Annual Report and Financial Statements
for the year ended 31 March 2024
Strategic Report
Financial Highlights 2
Property Highlights 2
Chairman’s Statement 3
Business Model and Strategy 7
Strategy in Action 9
Key Performance Indicators 14
Investment Manager’s Report 17
Principal Risks and Uncertainties 36
Stakeholder Engagement 43
Governance
Board of Directors 46
Corporate Governance Statement 48
Report of the Audit Committee 54
Directors’ Remuneration Report 58
Directors’ Report 62
Statement of Directors’ Responsibilities 81
Independent Auditor’s Report to the members of AEW UK REIT plc 83
Financial Statements
Statement of Comprehensive Income 92
Statement of Changes in Equity 93
Statement of Financial Position 94
Statement of Cash Flows 95
Notes to the Financial Statements 96
EPRA Unaudited Performance Measures 128
EPRA Sustainability Performance Measures 134
Company Information 148
Glossary 150
Contents
2
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Financial Highlights
• Net Asset Value (‘NAV’) of £162.75 million and 102.73 pence per share (‘pps’) as at 31 March 2024 (31 March 2023: £167.10 million
and 105.48 pps).
• NAV Total Return for the period of 4.98% (31 March 2023: -5.93%).
• Operating profit before fair value changes of £13.36 million for the year (year ended 31 March 2023: £11.10 million).
• Profit before tax (‘PBT’)* of £9.09 million and earnings per share (‘EPS’) of 5.71 pps for the year (year ended 31 March 2023: loss before
tax of £11.33 million and EPS of -7.15 pps). PBT includes a £4.35 million loss arising from changes to the fair values of investment
properties in the year (year ended 31 March 2023: £30.00 million loss).
• EPRA Earnings Per Share (‘EPRA EPS’)* for the year of 7.29 pps (year ended 31 March 2023: 5.70 pps). See page 108 for the
calculation of EPRA EPS.
• Total dividends of 8.00 pps declared for the year (year ended 31 March 2023: 8.00 pps), consistently paid since Q1 2016
(34consecutive quarters).
• Shareholder total return* for the year of 1.85% (year ended 31 March 2023: -16.44%).
• The price of the Company’s Ordinary Shares on the Main Market of the London Stock Exchange was 85.80 pps as at 31 March 2024
(31 March 2023: 92.10 pps).
• As at 31 March 2024, the Company had drawn £60.00 million (31 March 2023: £60.00 million) of a £60.00 million (31 March 2023:
£60.00 million) term credit facility with AgFe and was geared to 28.97% of GAV (31 March 2023: 28.06%) (see note 16 on pages 118
and 119 for further details).
• The Company held cash balances totalling £11.40 million as at 31 March 2024 (31 March 2023: £14.32 million).
Property Highlights
• As at 31 March 2024, the Company’s property portfolio had a valuation of £210.69 million across 33 properties (31 March 2023:
£213.83 million across 36 properties) as assessed by the Valuer
1
and a historical cost of £214.66 million (31 March 2023: £224.03 million).
• Over the year, the Company's portfolio delivered outperformance against the MSCI/AREF PFI Balanced Funds Quarterly Property Index
of 7.0%. Outperformance of the Company's assets against the benchmark was also seen in each main property sector.
• The Company also won the Citywire investment trust award in the 'UK Property' category for the fourth successive year, as well as
winning the 'Property' category at the Investment Week Investment Company of the Year awards.
• The Company acquired two properties during the year for a total purchase price of £21.52 million, excluding acquisition costs (year
ended 31 March 2023: five properties for a purchase price of £32.05 million).
• The Company made five disposals during the year with total gross sale proceeds of £26.95 million (year ended 31 March 2023:
fivedisposals with total gross sale proceeds of £44.41 million).
• The portfolio had an EPRA Vacancy Rate** of 6.38% as at 31 March 2024 (31 March 2023: 7.83%).
• Rental income generated in the year under review was £19.89 million (year ended 31 March 2023: £17.71 million). The number of
tenants as at 31 March 2024 was 133 (31 March 2023: 145).
• EPRA Net Initial Yield (‘NIY’)** of 8.02% as at 31 March 2024 (31 March 2023: 7.65%).
• Weighted Average Unexpired Lease Term (‘WAULT’)* of 4.27 years to break (31 March 2023: 3.05 years) and 5.60 years to expiry
(31 March 2023: 4.33 years).
* See KPIs on pages 14 to 16 for definition of alternativeperformance measures.
** See Glossary on pages 150 to 153 for definition ofalternativeperformance measures.
1
The valuation figure is reconciled to the fair valueunder IFRS in note 13.
Strategic Report
3
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Chairman’s Statement
Overview
The year to 31 March 2024 was a challenging period for the UK economy, which continued to impact the commercial property
investment market. The higher interest rate environment has suppressed investor demand, contributing to downward pressure
on valuations. This has been exacerbated by low transaction volumes and distressed sales, leading to a lack of evidence on which
valuers can base their valuations. Data from Knight Frank suggests that UK commercial property transaction volumes for 2023 were
approximately £38.0billion, a reduction of 38% from £61.3 billion in 2022, and the weakest year since 2011. This culminated in UK
commercial property suffering an average decline in capital value of -4.8% during the year, compared to -0.6% experienced by the
Company’s portfolio. The expectation is for UK commercial property transaction volumes to remain subdued in the short-term ahead
of the General Election on 4 July, but to pick up in tandem with the cooling of the inflationary environment and corresponding rate cuts
expected later in the calendar year.
There are, however, already signs of some green shoots, with commercial property yields across the UK Monthly MSCI index stabilising. In
March 2024, 61% of MSCI sector yields were stable on a three-month rolling average basis, the highest proportion of stable yields since
April 2022. Meanwhile, 16% of net initial yields in the index were compressing in March 2024, the highest level since December 2023,
signalling that the bottom of the market may be behind us.
During the year, the Company delivered an annual NAV total return to its shareholders of 4.98%. Considering this testing backdrop, the
Company’s relative performance is testament to its value-focused strategy of investing in mispriced assets where our Manager believes
income can be grown and value created through active asset management, which continues to be the beating heart of the Company’s
philosophy.
With market participants deliberating on the timing of long-awaited interest rate cuts, share price weakness amongst listed property
companies has persisted. The Company’s shares traded at an average discount to NAV of 8.6% during the year, compared to the UK
diversified REIT peer group average of 28.9%. Although the Company’s shares produced a subdued shareholder total return of 1.85%
for the year, they traded at the narrowest average discount among the UK diversified REIT peer group. We expect that the Company’s
long-term track record of NAV outperformance, coupled with its dividend record, will aid its share price recovery once market sentiment
improves.
Subdued markets can present opportunities for the Company’s
actively managed value strategy. During the first half of the
year, three industrial assets were sold at levels that maximised
their value over the short to medium term. These sales included
two assets in Leeds and Bradford, sold as a package for a
blended initial yield of 6.2%, at a weighted average premium to
purchase price of 31.2%. The Company was subsequently able
to recycle the resulting capital from these sales into two assets
in Bath and York at an average purchase yield of 8.6%, with
both offering reversionary yields greater than 10%. Accessing
these quality assets in core urban locations at such favourable
pricing demonstrates the Company’s ability to crystallise asset
management gains via the sale of lower yielding assets and
recycling the capital into earnings-accretive, higher yielding
ones. Corresponding capital profits have also been used, where
necessary, to supplement the Company’s market-leading
dividend, which has been maintained for 34 consecutive
quarters.
AEW UK REIT plc Property Performance vs.
Benchmark for 12 months to 31 March 2024
Source: MSCI 31 March 2024
* the Benchmark refers to MSCI/AREF PFI Balanced Funds Quarterly
Property Index.
%
8
4
-6
Benchmark*AEW UK REIT
Capital Growth
Income Return Total Return
-2
0
-4
6
2
4
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
During the year, the Company made good progress in rebuilding its income stream. Active asset management resulted in many leasing
transactions that have supported earnings through a combination of void cost mitigation and rental income enhancement. Recently,
three new lettings at the Company’s retail warehousing holding in Coventry have augmented annual rental income by £535,000,
contributing to circa 20% year-on-year rental growth for the property. The Company also settled two office rent reviews at each of its
mixed-use assets in Bath, increasing annual rental income by £141,586 per annum, thus demonstrating that counter-cyclical growth
can be captured in this testing sector. Occupational activity was present across all sectors in the Company’s portfolio, evidencing
the Investment Manager’s conviction in stock selection and highlighting the effectiveness of its active asset management strategy.
Quarterly earnings have increased from 1.75 pps in financial Q1 2024 to 1.88 pps in financial Q4 2024, resulting in dividend cover for
the year of 91%; a significant increase from the 71% cover in FY 2023. This quarterly earnings growth was particularly encouraging,
given the increase in the Company’s ongoing charges ratio, which arose due to the ongoing inflationary environment and downward
pressure on property valuations. The Company’s portfolio retains further income growth potential, as is evidenced by its year end
reversionary yield of 8.8% markedly exceeding its initial yield of 8.0%. Further asset management transactions in the coming quarters
are expected to assist realisation of this reversionary potential, thereby continuing to improve earnings performance.
Financial Results Summary
Year ended
31 March 2024
Year ended
31 March 2023
Operating profit before fair value changes (£’000) 13,363 11,096
Operating profit/(loss) (£’000)
10,861 (9,164)
Profit/(loss) before Tax (£’000)
9,090 (11,325)
Earnings/(loss) Per Share (basic and diluted) (pence)*
5.71 (7.15)
EPRA Earnings Per Share (basic and diluted) (pence)* 7.29 5.70
Ongoing Charges (%) 1.60 1.37
Net Asset Value per share (pence)* 102.73 105.48
EPRA Net Tangible Assets per share (pence)* 102.73 105.48
* See note 11 of the financial statements for calculation.
Financing
The Company had a £60.00 million loan facility, which was fully drawn as at 31 March 2024 (31 March 2023: £60.00 million facility; fully
drawn), producing the following measures of gearing:
Year ended
31 March 2024
%
Year ended
31 March 2023
%
Loan to NAV 36.87 35.91
Gross Loan to GAV 28.97 28.06
Net Loan to GAV (deducts cash balance from the outstanding loan value) 23.47 21.37
Chairman’s Statement (continued)
5
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Chairman’s Statement (continued)
Awards
I am delighted that the Company’s performance and business practices were recognised in four awards during the year. The Company
has once again been awarded by EPRA, the European Public Real Estate Association, a gold medal for its high standard of financial
reporting and a silver medal for standards of sustainability reporting. During the year, the Company won the Citywire investment
trust award in the 'UK Property' category, an award given to the trust displaying the highest NAV returns over a three-year period. The
Company won this award in 2020, 2021 and 2022, so we are thrilled to receive it for a fourth consecutive year. The Company also
won the ‘Property’ category at the Investment Week Investment Company of the Year awards. We are delighted that these awards and
nominations recognise the hard work and dedication put into running the Company by both my colleagues on the Board and the
Company’s Investment Manager, AEW.
ESG+R
AEW, as Investment Manager of the Company, has committed to abide by the UN Principles for Responsible Investment (PRI), where
these are consistent with operating guidelines, as outlined in its Socially Responsible Investment Policy. The Investment Manager
continually looks to improve its processes relating to environmental, social, governance and resilience (ESG+R) factors in line with
sector best practices as they evolve. As a result, within this Annual Report, the Company provides voluntary reporting against the Task
Force on Climate-related Financial Disclosures (‘TCFD’) for the fourth time. In recent periods, the Investment Manager made progress
by improving the integration of ESG+R into its investment, asset management and operations processes. The Company continues to
undertake greater analysis and scoring of assets at the time of purchase, along with a more comprehensive assessment of the asset’s
specific climate resilience.
During 2018, AEW established sustainability targets across its managed portfolio which, comprises service charged assets and vacant
accommodation, whose utilities the Company operationally controls. These targets include the reduction of Scope 1 and 2 greenhouse
gas emissions and waste disposal. As at December 2023, absolute energy usage had reduced by 26.5% and emissions had reduced
by 40.8% versus the 2018 baseline. Waste transferred to landfill had reduced to zero within the managed portfolio. We would like
to thank the Company’s very committed managing agents, Mapp, for their assistance in achieving these improvements. As a result
of the Company’s accomplishments against these targets, new targets have been set out within this report against current levels of
performance that the Company hopes will lead to further improvement in the sustainability of its activities.
GRESB is a global real estate benchmark that assesses Environmental, Social and Governance performance. The Company achieved two
stars out of five in its eighth submission year, maintaining its 2022 score to achieve an overall score of 67 out of 100, versus a peer group
average of 65. Much of the GRESB score relates to data coverage and due to the high percentage of assets in the Company’s portfolio
with tenant-procured utilities, the Company does not score as well as peers given its larger holding of multi-let managed assets.
Minimum Energy Efficiency Standards (MEES)
AEW is committed to ensuring compliance with MEES regulations which first came into effect from April 2018, when it became unlawful
to grant new leases of commercial property with an EPC of below an ‘E’ rating. From 1 April 2023, existing leases certified with an ‘F’ or
‘G’ rating also became unlawful, even if the lease was granted prior to the MEES Regulations coming into effect.
As at the end of the period, the Company had five units with draft EPC ‘G’ ratings, with almost all of the Company’s assets being MEES
compliant. Three of these five draft G-rated units are anticipated to become MEES compliant once M&E works have been undertaken
at a non-material cost to the Company. The remaining two units are currently vacant and are therefore not be in breach of MEES or
EPCregulations.
To mitigate future MEES risk, the Company will continue to undertake its gap analysis, identifying assets that fall below the MEES regulations,
and will either need an improvement plan implemented to achieve an ‘E’ rating or better, or an exemption lodged, where applicable.
The Company regards its relatively short WAULT (to break and expiry) as an opportunity to proactively engage with its existing tenants at
lease events to improve the energy performance of its assets, as well as in the event of a vacancy.
6
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Chairman’s Statement (continued)
Succession Planning
As announced previously, I am very pleased to have made the appointments of Mr Robin Archibald and Mrs Liz Peace as independent
Non-Executive Directors to the Board of the Company, effective 1 October 2023. As part of orderly succession planning, Robin has
been appointed as Chairman-elect and will succeed as Chairman of the Board upon my retirement at the Company’s 2024 AGM. Iam
delighted that Robin and Liz have joined the Board as their experience and range of skills will complement and further strengthen
the Board. Their collective extensive knowledge and experience in investment companies has already been of great benefit and I am
working closely with Robin to ensure a smooth handover in September 2024.
As also previously announced, Mr Bim Sandhu retired from the Board as Chairman of the Audit Committee on 30 September 2023,
having reached the end of his nine-year tenure as a Director of the Company. As first announced on 10 November 2022, Mr Mark
Kirkland was appointed as Chairman-designate of the Audit Committee and has now succeeded Mr Sandhu as Audit Committee
Chairman. On behalf of the Board, I thank Mr Sandhu for his invaluable contribution since IPO of the Company and wish him well for his
future endeavours.
Mrs Katrina Hart will assume the role of Chair of JPMorgan UK Small Cap Growth & Income plc with effect from 27 November 2024. As
a result of this additional commitment, it is currently anticipated that she will retire as a Non-Executive Director of the Company at the
AGM in September 2025.
Outlook
The Board and Investment Manager believe that the Company is both defensively and opportunistically positioned to take advantage of
and withstand the current market conditions. We are pleased by the resilience that the portfolio exhibited during a period of uncertainty
versus the performance that was achieved across the commercial property market as a whole. We also believe that the Company’s
investment strategy is well placed to benefit from current market conditions that allow it to be nimble in making cross sector and often
counter-cyclical moves that can deliver optimal value to our shareholders.
Earnings performance will be a continued focus over coming quarters. Lettings currently underway at assets such as Union Street,
Bristol, and The Railway Centre, Dewsbury, should enhance earnings in the future. There is also the likelihood of continued capital
recycling from sales of select lower yielding assets, or properties where asset management initiatives have been concluded, into higher
yielding assets which present stronger potential for value and income enhancement.
There has been considerable corporate activity within the listed property sector recently. The Board and Investment Manager will
continue to seek out potential opportunities to grow the Company, but it goes without saying that it is paramount that any opportunity
explored must be to the benefit of the Company’s existing shareholders.
In the near term, the Board and Investment Manager will continue to take a prudent approach towards the management of the
Company, given the ongoing economic uncertainty and upcoming General Election. Although the outlook for commercial property
values is now more positive than during the previous 12 months, the Investment Manager and the Board will continue to monitor
economic conditions closely.
Mark Burton
Chairman
1 July 2024
7
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Business Model and Strategy
Introduction
The Company is a real estate investment trust listed on the premium segment of the Official List of the FCA and traded on the London
Stock Exchange’s Main Market. As part of its business model and strategy, the Company has, and intends to maintain, UK REIT status.
HM Revenue and Customs has acknowledged that the Company has met the necessary qualifying conditions to conduct its affairs as a
UK REIT and the Company intends to continue to do so.
Investment Objective
As a real estate investment trust, the Company’s purpose is expressed in its investment objective, which 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 (offices, industrial/warehouses, retail warehouses, high street retail and alternatives) resulting in a diversified
tenant base.
Investment Restrictions
The Company invests and manages its assets with the objective of spreading risk through the following investment restrictions:
• the value of no single property, at the time of investment, will represent more than 15.00% of GAV;
• the Company may commit up to a maximum of 10.00% of its NAV (measured at the commencement of the relevant project) to
development activities;
• the value of properties, measured at the time of each investment, in any one of the following sectors: offices, industrial/warehouse,
retail warehouses, high street retail and alternatives will not exceed 60.00% of GAV;
• investment in unoccupied and non-income producing assets will, at the time of investment, not exceed 20.00% of NAV;
• the Company may commit up to a maximum of 10.00% of the NAV (at the time of investment) in the AEW UK Core Plus Property
Fund (the ‘Core Fund’). The Company disposed of its last remaining units in the Core Fund in May 2017 and it is not the current
intention of the Directors to invest in the Core Fund;
• the Company will not invest in other closed-ended investment companies; and
• if the Company invests in derivatives for the purposes of efficient portfolio and cash management, the total notional value of the
derivatives at the time of investment will not exceed, in aggregate, 35.00% of GAV.
The Directors currently intend, at all times, to conduct the affairs of the Company so as to enable the Company to qualify as a REIT for
the purposes of Part 12 of the Corporation Tax Act 2010 (‘CTA’) (and the regulations made thereunder).
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 and will not, at any time, conduct any trading activity which is significant in the
context of the business of the Company as a whole.
In the event of a breach of the investment policy and investment restrictions set out above, the Directors upon becoming aware of such
breach will consider whether the breach is material, and if it is, notification will be made to a Regulatory Information Service.
Any material change to the investment policy or investment restrictions of the Company may only be made with the prior approval
ofshareholders.
8
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Business Model and Strategy (continued)
Our Strategy
The Company exploits 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. In the current market environment, the focus is to
invest in properties which:
• typically have a value, on investment, of between £2.50 million and £15.00 million;
• have initial net yields, on investment, of typically between 7.50-10.00%;
• 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;
• have potential for asset management initiatives to include refurbishment and re-lettings; and
• have values underwritten by vacant possession, residual and alternative use values.
How we add value
An Experienced Team
The Investment Management team has over 10 years working together, reflecting stability and continuity.
Value Investing
The Investment Manager’s investment philosophy is based on the principle of value investing. The Investment Manager looks to acquire
assets with an income profile coupled with underlying characteristics that underpin long-term capital preservation. As value managers,
the Investment Manager looks for assets where today’s pricing may not correspond to long-term fundamentals.
Active Asset Management
The Investment Manager has an in-house team of dedicated asset managers with a strong focus on active asset management to
enhance income and add value to commercial properties.
Our Asset Management Process
Quarterly
joint reviews
by AM* &
*AM – Asset Management
Investment teams
for the “Hold
Sell” review
Business
Plan updated
each year
with quarterly
reviews
Business plans
for all
new
acquisitions
Fortnightly
asset
management
updates
Analysing local market trends and
supply/demand dynamics, we identify the
most profitable and deliverable strategies
Detailed implementation plan, marketing
and leasing programmes, capital
expenditure forecasts and cash flows
Ongoing income and value creation
Agency appointments, letting
meetings, tenant negotiations, lease
re-structuring, dilapidations, claims,
rent reviews and valuations
The Investment Manager’s Asset
Management process incorporates the
Company’s Environmental, Social and
Governance (‘ESG’) Policy, which is found
in the Directors’ Report on pages 65 and 66
The Company reports on its ESG
performance using EPRA Sustainability
Performance Measures on pages 134 to 147
9
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Strategy in Action
Central Six Retail Park, Coventry (retail warehousing)
Driving rental income and
enhancing tenant mix
• Acquired in November 2021 with 24% vacancy and
a WAULT to expiry of 4.3 years.
• Three new lettings to Aldi, MyDentist and The Food
Warehouse, as well as two lease renewals and a
lease regear, completed in the year.
• Net operating income increased by circa 50%
(£744,517 pa) and an improved WAULT to expiry of
7.6 years.
10
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Strategy in Action (continued)
148-154 High Street, Bromley (high street retail)
Strong trading performance
boosting rental income
• Acquired in November 2022 for £5.3 million,
reflecting an 8.7% NIY.
• Annual turnover rent was circa 78% higher than was
forecast at purchase.
11
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Strategy in Action (continued)
40 Queen Square, Bristol (office)
Continued rental growth in
a challenging sector
• Three outstanding rent reviews increased the rent
from £213,812 pa to £281,550 pa (circa 32% uplift).
• Completed a five-year lease to Environmental
Resources Limited at a rent of £69,230 pa.
12
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Strategy in Action (continued)
Northgate House, Bath (mixed-use)
Prompt realisation of
reversionary yield
• Acquired in November 2022 for £13.0 million,
reflecting an 8.5% NIY.
• Settlement of a backdated 2022 rent review with
The Regus Group at £491,400 pa, reflecting an
increase of £96,811 pa.
13
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Strategy in Action (continued)
Euroway, Bradford & Lockwood Court, Leeds
(industrial)
Crystallising valuation gains on disposals
• Disposal of two industrial assets for combined
proceeds of £16,100,000, reflecting a blended
NIY of 6.2% and a weighted average premium
toacquisition price of 31.2%.
• Sales prices exceeded the most recent
valuationprior to going under offer by
17.3%and9.7% respectively.
14
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
KPI AND DEFINITION PURPOSE AND RELEVANCE TO STRATEGY TARGET PERFORMANCE
1. EPRA NIY
A
A representation to the investor of
what their initial net yield would be at
a predetermined purchase price after
taking account of all associated costs,
e.g. void costs and rent free periods.
The Company’s EPRA NIY demonstrates the
ability to generate income from its portfolio
in the short term in order to meet its target
dividend.
7.50 – 10.00%
8.02%
at 31 March 2024
(31 March 2023:
7.65%)
2. True Equivalent Yield
A
The average weighted return a
property will produce according to the
present income and estimated rental
value (‘ERV’) assumptions, assuming
the income is received quarterly in
advance.
The Company’s True Equivalent Yield
demonstrates the Company’s ability to
generate income, both from its existing
leases and its ERVs, in order to meet its target
dividend.
7.50 – 10.00%
8.91%
at 31 March 2024
(31 March 2023:
8.89%)
3. Reversionary Yield
A
The expected return the property will
provide once rack-rented.
A Reversionary yield profile shows a potentially
sustainable income stream that can be
used to meet dividends past the expiry of a
property’s current leasing arrangements.
7.50 – 10.00%
8.77%
at 31 March 2024
(31 March 2023:
8.75%)
4. WAULT to Expiry
A
The average lease term remaining to
expiry across the portfolio, weighted
by contracted rent.
The Investment Manager believes that current
market conditions present an opportunity
whereby assets with a shorter unexpired
lease term are often mispriced. It is also the
Investment Manager’s view that a shorter
WAULT is useful for active asset management
as it allows the Investment Manager to
engage in direct negotiation with tenants
rather than via rent-review mechanisms.
> 3 years
5.60 years
at 31 March 2024
(31 March 2023:
4.33 years)
5. WAULT to Break
A
The average lease term remaining to
break, across the portfolio weighted
by contracted rent.
The Investment Manager believes that current
market conditions present an opportunity
whereby assets with a shorter unexpired
lease term are often mispriced. It is also the
Investment Manager’s view that a shorter
WAULT is useful for active asset management
as it allows the Investment Manager to engage
in direct negotiation with tenants rather than
via rent-review mechanisms.
> 3 years
4.27 years
at 31 March 2024
(31 March 2023:
3.05 years)
Key Performance Indicators
15
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
KPI AND DEFINITION PURPOSE AND RELEVANCE TO STRATEGY TARGET PERFORMANCE
6. NAV
NAV is the value of an entity’s assets
minus the value of its liabilities.
Provides stakeholders with the most relevant
information on the fair value of the assets and
liabilities of the Company.
Increase year
on year
£162.75 million
at 31 March 2024
(31 March 2023:
£167.10 million)
7. Leverage (Loan to GAV)
A
The proportion of the Company's total
assets that are funded by borrowings.
The Company intends to utilise borrowings
to enhance returns. A target of 25% Loan to
GAV is stated in the Company’s Investment
Guidelines.
25%
28.97%
at 31 March 2024
(31 March 2023:
28.06%)
8. Vacant ERV
A
The space in the property portfolio
which is currently unlet, as a
percentage of the total ERV of the
portfolio.
The Company’s aim is to minimise vacancy
of the properties. A low level of structural
vacancy provides an opportunity for the
Company to capture rental uplifts and
manage the mix of tenants within a property.
< 10.00%
6.38%
at 31 March 2024
(31 March 2023:
7.83%)
9. Dividend
A
Dividends declared in relation to the
year. The Company targets a dividend
of 8.00 pence per Ordinary Share per
annum. However, given the current
general economic uncertainty, regard
will be had to the circumstances
prevailing at the relevant time in
determining dividend payments.
The dividend reflects the Company’s ability
todeliver a sustainable income stream from
itsportfolio.
8.00 pps
8.00 pps
for the year ended
31 March 2024
(year ended
31 March 2023:
8.00 pps)
10. Ongoing Charges
A
The ratio of total administration
and operating costs expressed
as a percentage of average NAV
throughout the year.
The Ongoing Charges ratio provides a
measure of total costs associated with
managing and operating the Company,
which includes the management fees due
to the Investment Manager. The Investment
Manager presents thismeasure to provide
investors with a clear picture of operational
costs involved in running the Company.
< 1.50%
1.60%
for the year ended
31 March 2024
(year ended
31 March 2023:
1.37%)
Key Performance Indicators (continued)
16
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
KPI AND DEFINITION PURPOSE AND RELEVANCE TO STRATEGY TARGET PERFORMANCE
11. Profit/(Loss) Before Tax
(‘PBT’/‘LBT’)
PBT/LBT is a profitability measure
which considers the Company’s profit/
(loss) before the payment of income
tax.
The PBT/LBT is an indication of the Company’s
financial performance for the year in which its
strategy is exercised.
8.00 pps
£9.09 million/
5.74 pps
for the year ended
31 March 2024
(year ended
31 March 2023:
-£11.33 million/
-7.15 pps)
12. Shareholder Total Return
A
The percentage change in the
share price assuming dividends are
reinvested to purchase additional
Ordinary Shares.
This reflects the return seen by shareholders
on their shareholdings through share price
movements and dividends received.
8.00%
1.85%
for the year ended
31 March 2024
(year ended
31 March 2023:
-16.44%)
13. EPRA EPS
A
Earnings from core operational
activities. A key measure of a
company’s underlying operating
results from its property rental business
and an indication of the extent to
which current dividend payments are
supported by earnings. See note 11 of
the financial statements.
This reflects the Company’s ability to generate
earnings from the portfolio which underpins
dividends.
8.00 pps
7.29 pps
for the year ended
31 March 2024
(year ended
31 March 2023:
5.70 pps)
Key Performance Indicators (continued)
A
Alternative Performance Measure
This report provides Alternative Performance Measures (“APMs”) which are not defined or specified under the requirements of International
Financial Reporting Standards. We believe these APMs provide readers with important information on our business. Furtherexplanation of
APMsand why we use them is set out in EPRA unaudited performance measures.
17
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report
Economic Backdrop and Outlook
The UK continues to navigate a challenging economic climate as it recovers
from a technical recession in late 2023. The UK recorded two consecutive
quarters of negative growth in Q3 and Q4 of last year, being -0.1% and
-0.3% respectively. As a result, GDP growth for the whole of 2023 remained
subdued at just 0.1%. Nonetheless, economic activity is expected to pick-
up in 2024, as demonstrated by recent monthly GDP data. UK GDP rose by
0.2% month-on-month in February 2024, the highest level since September
2023, with increases in February and March 2024. Therefore, Oxford
Economics (“OE”) projects UK GDP to increase to 0.6% by 2024 year-end.
Despite this modest growth, disinflation in the UK continues largely due to
restrictive monetary policy. Headline inflation fell to 3.2% in March 2024, in
part owing to recent declines in energy, food and core goods prices. OE projects
inflation to fall further to 2.3% by 2024 year-end. Having receded markedly, markets now expect a sharper fall in interest rates. For now,
the Bank of England (“BoE”) has kept policy rates unchanged at 5.25%, to ensure inflation returns to its 2% target in a timely manner.
The timing of a potential rate cut is highly dependent on developments in the labour market. This is starting to show some signs of
cooling, as the unemployment rate continued to rise to 4.4% in the three months to April 2024. This is primarily due to inactivity and
a reduction in vacancies. Whilst strong wage growth, a key factor in determining rate cuts, has slightly weakened, the BoE requires a
more meaningful decline before lowering rates. A rate cut would strengthen near-term growth prospects and potentially accelerate
a recovery in living standards.
Property Market Backdrop and Outlook
The period was dominated by low investment volumes and less pricing transparency, as macroeconomic headwinds and a
consolidation of core capital into thematic sectors, such as prime logistics and residential, suppressed commercial valuation
movements across all sectors. Whilst we have seen a pause in the hiking of interest rates, with the BoE’s base rate reaching 5.25% in
August 2023, the expectation is that rates will remain elevated going into the second half of the calendar year. As debt costs start to
reduce, this will eliminate a significant barrier to transactional activity, thus encouraging investment volumes to gradually increase,
as well as acting as a catalyst for positive valuation movements. In April 2024, UK commercial real estate rental values increased at
the all property level. Low levels of development starts in 2023 and 2024 will put downward pressure on vacancy rates in all sectors,
and this will in turn deliver further rental growth and a more sustainable story around occupational markets going forwards.
Industrial
Investment volumes are expected to improve throughout 2024,
as stabilised values give buyers and sellers more comfort around
new price levels. Deal activity growth, however, will continue to be
gradual. The equivalent yield hardened slightly in March 2024, by
1bps, to 6.23%. Over the past year, however, yields have softened
26bps, from 5.97% in March 2023.
The Company completed three sales from the sector over the
period, with two of them for a blended net initial yield of 6.2%.
Where sales yields can be compressed significantly compared to
pipeline assets, select recycling of assets took place.
%
14
6
0
Benchmark*AEW UK REIT
Capital Growth
Income Return Total Return
2
10
12
4
8
AEW UK REIT Industrial Performance vs. Benchmark
Source: MSCI Year to 31 March 2024
* the Benchmark refers to MSCI/AREF PFI Balanced Funds
Quarterly Property Index.
Laura Elkin
Portfolio Manager
Henry Butt
Assistant Portfolio Manager
18
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Market Backdrop and Outlook (continued)
Average rents continue to grow, with the rate of annual growth in the year to March 2024 being 6.9%. Annual rental growth, however,
has been slowing since August 2022 when it reached a peak of 13.2%. While the month-on-month growth can be volatile, the monthly
MSCI figures so far this year show an acceleration, with 0.26% in January 2024, followed by 0.33% in February 2024 and 0.54% in March
2024. According to the latest Q1 2024 forecasts from RealFor, UK industrial rents are expected to increase by 4.7% this year. This marks
an upward revision from their Q4 2023 forecasts when 4.2% rental growth was anticipated. We believe that the Company's industrial
portfolio, with an average passing rent of £3.52 per sq. ft., will be well placed to benefit from this trend. The Company’s industrial
reversionary yield, as of March 2024, is 8.74%, compared with its initial yield of 7.68%.
The vacancy rate continues to soften due to a combination of development completions and second-hand space returning to the
market. Preliminary figures point to a vacancy rate of circa 6.4% at the end of Q1 2024, up from 5.5% at the end of last year. However,
development completions are slowing, and this will limit any further softening in vacancy.
The industrial sector is the portfolio’s largest sector holding, with 37.4% of the valuation. The Company’s industrial holding
outperformed the Benchmark, both in terms of income return, with a relative outperformance of 3.1%, and capital growth, with a
relative outperformance of 4.3%.
Retail
With a surge in inflation and the cost-of-living crisis eating away
at consumers’ buying power, UK retail sales volumes remained
below their 2019 (pre-Covid) levels throughout 2023. Despite this,
2023 annual sales grew a notable 5.1%, surpassing the 10-year
average (+3.5%), demonstrating that subdued consumer spending,
which was widely anticipated, failed to materialise. Sales figures
arecontinuing to show signs of improvement, a trend that is
forecast to accelerate as 2024 progresses. This is illustrated at the
Company’s high street asset in Bromley, where an annual turnover
top-up rent for the year to 28 September 2023 was agreed with
Next at circa 78% higher than what was forecast when the property
was purchased in November 2022.
The proportion of retail sales conducted online peaked during
the pandemic at 37%, with these now having broadly returned
to pre-pandemic levels at around 25%. Profit margins are set
to remain under pressure in the year ahead, with occupiers
encouraging consumers to utilise their physical store network
to maximise profitability, which bodes well for the Company’s
holdings.
Despite Wilko, one of the Company’s retail tenants, entering administration in August, the 2023 calendar year saw the lowest number
of stores affected by CVA or administration since 2015. This trend, however, was short-lived, with a spate of distress among well-known
brands, such as the Body Shop and Ted Baker in Q1 2024. The Company has made good progress in reletting the former Wilko store,
with it currently under offer to two prospective leisure tenants.
Retail warehousing won favour from consumers, operators and investors alike, with fundamentals of affordability, adaptability and
accessibility driving performance. The vacancy rate improved for the tenth consecutive quarter in Q1 2024 to reach 7.5%. These trends
have been mirrored by the Company’s holding in Coventry, where a number of asset management transactions completed during the
year, and in its immediate aftermath, have taken the property to full occupancy for the first time since its acquisition.
%
8
2
-6
Benchmark*AEW UK REIT
Capital Growth
Income Return Total Return
-4
-2
6
0
4
AEW UK REIT Retail Performance vs. Benchmark
Source: MSCI Year to 31 March 2024
* the Benchmark refers to MSCI/AREF PFI Balanced Funds
Quarterly Property Index.
19
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Market Backdrop and Outlook (continued)
Retail pricing will remain attractive versus other commercial sectors in the year ahead. We believe that the sector offers select
investment opportunities where tenant trade is robust and values are underpinned by alternative uses, such as the Company’s
acquisition of mixed-use (retail and office) Cambridge House in Bath, which completed in September 2023.
Retail represents the portfolio’s second largest sector holding, with 37.3% of the valuation. The Company’s retail holding outperformed
the Benchmark, both in terms of income return, with a relative outperformance of 1.2%, and capital growth, with a relative
outperformance of 2.4%.
Office
Excluding London and the South East, prime office yields
registered further softening for the majority of UK cities during
Q1 2024, with a year-on-year decline between 75bps and
200bps. Pricing, however, is now much closer to buyer and
seller expectations, which should improve transaction values
moving forward. With a dearth of investment activity and pricing
transparency, mispricing continues to be a theme for the sector,
which we see as a potential buying opportunity. An example of
this is Cambridge House in Bath which the Company bought
on 12 September 2023 for an attractive net initial yield of 8.0%
and a capital value of £223 per sq. ft. The Manager subsequently
settled an outstanding 2021 rent review at £362,400 per annum,
representing an increase of £44,775 per annum (circa 14%).
Occupational uncertainty remains across the sector, as businesses
continue to transition to new working patterns. Tenants have
also become more discerning in recent years, with occupiers now
wishing to benefit from strong sustainability credentials, as well as
surrounding amenities and top-quality space. This is particularly
the case for large corporate tenants, but it is increasingly
becoming a key factor for smaller businesses too.
Across the regions, the limited supply of best-quality stock is creating a supply and demand imbalance. Despite the rising occupier
preference for new grade A space, it accounted for only 50% of take-up in the first quarter of 2024, in line with the total of 2023,
signalling that further development is necessary to meet the current level of occupier demand. Consequently, we have seen prime rental
increases in the sector, with this trend expected to continue in 2024.
In March this year, updated Permitted Development Rights came into effect, providing more flexibility to convert office buildings into
residential use. The floorspace threshold of 15,000 sq. ft. and the need to demonstrate vacancy for three months prior to making an
application have been removed, thereby promoting conversion. This planning change could prove useful in the event of alternative uses
being actively pursued.
Offices are the portfolio’s smallest sector holding, with 11.9% of the valuation. The Company’s office holding outperformed the
Benchmark, both in terms of income return, with a relative outperformance of 1.8%, and capital growth, with a relative outperformance
of 4.7%.
%
10
-5
-20
Benchmark*AEW UK REIT
Capital Growth
Income Return Total Return
-10
-15
0
5
AEW UK REIT Office Performance vs. Benchmark
Source: MSCI 31 Year to 31 March 2024
* the Benchmark refers to MSCI/AREF PFI Balanced Funds
Quarterly Property Index.
20
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Market Backdrop and Outlook (continued)
Alternatives
Across the alternative sectors, such as leisure, hotels and
healthcare, visibility of performance in trading updates is key to
investor demand. Where these have remained robust, investment
volumes have held up, despite the squeeze on consumer
discretionary spend and an increase in operating costs, with Q1
2024 volumes higher (£71m) than the five-year quarterly average
(£66m), according to RCA data. Prime leisure park yields stood at
8% at the end of the year, with secondary yields as soft as 15%,
according to Knight Frank.
Leisure has historically fared relatively defensively during periods
of economic uncertainty. Operators carrying unsustainably high
levels of debt are seen as a concern.
Many operators remain in a fragile state, but inflation improvements
saw operating challenges ease and site closures moderate, giving
grounds for cautious optimism heading into 2024. Barclaycard
data showed good year-on-year spending growth across the
hospitality and leisure segment, predominantly led by bars, pubs
and clubs. This is evidenced by the progress that the Company has
made in reletting the former Mecca Bingo, Dewsbury, and the former
Wilko, Bristol, to three prospective leisure operators.
We find the sector attractive on a selective basis, particularly for assets that offer a superior income return and occupy larger land
holdings, or sites in urban areas that can often be underpinned by alternative use values, most likely residential as evidenced by the
Company’s acquisition of Tanner Row, a mixed-use asset within York city centre for £10.02 million, reflecting an attractive net initial yield
of 9.3%.
Alternatives represent the portfolio’s second smallest sector holding, with 13.5% of the valuation. The Company’s alternative holdings
outperformed the Benchmark in terms of income return, with a relative outperformance of 3.3%, but underperformed the benchmark
in capital return terms, with a relative underperformance of 1.1%.
%
10
6
0
-4
Benchmark*AEW UK REIT
Capital Growth
Income Return Total Return
-2
2
8
4
AEW UK REIT Alternatives Performance vs. Benchmark
Source: MSCI Year to 31 March 2024
* the Benchmark refers to MSCI/AREF PFI Balanced Funds
Quarterly Property Index.
21
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio
Investment Update
The Company made two property acquisitions during the year:
Tanner Row, York (mixed)
In July 2023, the Company completed the acquisition of Tanner Row, York, a mixed-use asset
within York city centre for £10.02 million, reflecting an attractive net initial yield of 9.3%.
The 99,769 sq ft asset is multi-let to five tenants. 74% of the income is received from National
Car Parks Ltd ("NCP"), who have occupied the 297-space car park since 2005 and have a
further nine years remaining on their lease. The lease benefits from a 2027 rent review which
will increase rent payable in line with the Retail Price Index, uncapped, resulting in a forecast
reversionary yield in excess of 10%. NCP is one of the UK's largest car park operators with
an estate of approximately 189,000 spaces over 642 sites. Another four tenants occupy the
ground and first floor retail and office accommodation fronting onto George Hudson Street.
The site totals 0.8 acres and is located inside the York City Wall, bordering the historic centre of the
city, within the Micklegate Quarter. It is situated in a prominent corner position on George Hudson
Street and Tanner Row, within a ten-minute walk of key visitor attractions, including York Minster,
the Yorkshire Museum and the York Dungeon. York's key retail provisions at Coppergate Shopping
Centre, Coney Street, Davygate and Parliament Street are all within a seven-minute walk.
Cambridge House, Bath (office)
In September 2023, the Company acquired Cambridge House, Bath, a mixed-use asset in Bath
city centre for £11.50 million, reflecting an attractive net initial yield of 8.0% and a capital value of
£223 per sq ft.
The property comprises a rare freehold island site totalling circa 0.4 acres and is located immediately
adjacent to the South Gate Shopping Centre which forms part of the city's core retail provision.
Bath Spa Train Station is less than a five-minute walk from the property, with other key tourist
attractions such as Bath Cathedral, the Roman Baths and Pulteney Bridge within a short distance.
The 51,632 sq ft asset is multi-let across office and retail accommodation. Income levels
are expected to improve via rent reviews in the short-term and through lease renewals and
re-lettings over the medium-term. Light refurbishment may also be considered in order to fully
capitalise on the building's prime location and prominence. We expect market conditions to
remain favourable in this location given the low level of available and consented supply, coupled
with strong demand for well-specified and well-located accommodation.
22
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
The Company made four property disposals during the year:
Excel 95, Deeside (industrial)
In May 2023, the Company completed the sale of its industrial holding in Deeside for
£4.75 million, reflecting a capital value of circa £49 per sq ft. The vacant asset was sold to an
owner-occupier, with the price reflecting an 8.0% premium to the 31 March 2023 valuation. By
disposing of the asset, the Company also avoided a speculative refurbishment project costing
approximately £1.00 million.
Lockwood Court, Leeds & Euroway Trading Estate, Bradford (industrial)
In June 2023, the Company completed the sale of two industrial assets, being Euroway Trading
Estate, Bradford and Lockwood Court, Leeds, for combined proceeds of £16.10 million, reflecting
a blended net initial yield (NIY) of 6.2%.
Both sales realised significant profit for the Company's shareholders. For Euroway Trading Estate
and Lockwood Court respectively, their sales prices exceeded the most recent valuation prior to
going under offer by 17.3% and 9.7%, as well as their acquisition prices by 30.3% and 31.8%.
Commercial Road, Portsmouth (retail)
In October 2023, the Company completed the sale of its freehold high-street retail holding at
208-220 Commercial Road and 7-13 Crasswell Street, Portsmouth, for £3.90 million, reflecting a
net initial yield of 9.9% and a capital value of £251 per sq ft. A sale at this price reflected a 21.9%
premium to the 30 June 2023 valuation of £3.20 million.
Following the completion of two new lettings to Kokoro and Specsavers, the property was fully
let. This, coupled with the risk of the main tenant, Nationwide Building Society, being significantly
overrented, prompted the decision to sell. The value of the asset was likely to deteriorate as
Nationwide's lease becomes shorter, with the threat of the tenant leaving on expiry in 2029
creating the possibility of a long-term void.
Pricebusters Building, Blackpool (retail)
In March 2023, the Company completed the sale of its holding on Bank Hey Street in Blackpool
for £2.20 million, reflecting a net initial yield of 10.3%. The decision to sell the property followed
the service of Sports Direct’s break notice which is due to create approximately 70,000 sq. ft.
of vacant space within the building’s upper parts. In addition, the building’s condition and
unconventional layout became challenging for reletting or alternative uses, especially without
significant capital expenditure being incurred.
23
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Asset Management Update
The Company completed the following material asset management transactions during the year:
Central Six Retail Park, Coventry (retail warehousing) – the Company also completed a reversionary lease with existing tenant, Boots
UK Limited, for Unit 7. The tenant entered into a new five-year lease with effect from 28 February 2024 at a rent of £259,293 per annum,
equating to £14.25 per sq ft. The letting also includes seven and a half months’ rent free taken under the existing lease.
The Company completed the acquisition of the freehold interest in units 1-11, which had previously been held by way of long leasehold
from Friargate JV Projects Limited. The acquisition of the freehold interest is expected to increase the liquidity of the asset in case of
its future sale and also removes user restrictions within the long lease which are constrictive to lettings. In exchange for the freehold
interest, the Company granted to Friargate JV Projects an option to acquire the Company’s long leasehold interest in units 12 A & B over
a five-year period, commencing in two years’ time.
The Company completed a new 20-year lease to Aldi Stores Limited, following the completion of the agreement for lease in October
2022. The lease provides an annual rent of £270,166 per annum, reflecting £13 per sq ft, to be reviewed every five years based on
compounded annual RPI, collared and capped at 1% and 3% respectively. The lease provides Aldi with a 12-month rent-free incentive
and a tenant break option at year 15.
The Company completed a lease with new tenant, Iceland Foods Limited, trading as The Food Warehouse, for Units 6a & 6b (now
combined as one unit). The tenant has entered a new 11-year lease at a rent of £250,000 per annum, reflecting £16.51 per sq. ft. The
letting includes a three-month rent-free period and a £812,500 cash incentive.
The Company completed a lease regear with tenant, TJX UK, trading as TK Maxx, for Unit 1. The tenant entered a new lease, providing a
term certain until March 2034, at a rent of £234,527 per annum (£16.37 per sq. ft.), which is to be reviewed in September 2029 at open
market value, capped at £269,706 per annum. The renewal includes a 12-month rent free incentive, effective from September 2024.
The Company exchanged an agreement for lease with a new tenant, Salvation Army Trading Company Ltd, for Unit 12. The tenant will
enter into a new lease expiring on 2 November 2032 with a tenant only break in year five at a rent of £140,000 per annum, reflecting
£13.97 per sq ft. The letting includes nine months’ rent free. The letting is subject to the landlord securing vacant possession (now
secured), as the unit was occupied by Oak Furnitureland, who were paying an annual rent of £25,000 per annum, and carrying out
Landlord works at a contract cost of £79,178, plus fees. The lease completed post year-end.
The Company completed a lease with new tenant Whitecross Dental Care Limited, trading as MyDentist, for vacant Unit 4. The tenant
will enter into a new 15-year lease with a 10-year tenant break option, at a rent of £145,000 per annum, reflecting £14.29 per sq ft, to
be reviewed every five years based on open market value (upward only). The letting includes a £217,500 cash incentive and is subject to
landlord works at a contract cost of £213,394, plus fees.
Barnstaple Retail Park, Barnstaple (retail warehousing) – the Company completed an eight-year reversionary lease with B&Q from
29 September 2024 at the current passing rent of £348,000 per annum (£9.75 per sq ft). In return, the tenant has been granted a
six-month rent-free period.
40 Queens Square, Bristol (office) – the Company settled three outstanding rent reviews at the building dating back to 2021 and 2022
with the following tenants: Leonard Curtis Recovery Limited, Chapman Taylor LLP and TurleyAssociates. The outcome of the reviews
sees the annual rent from the three tenant’s increase from £213,812 per annum to £281,550, reflecting a 32% uplift.
The Company also completed a new five-year ex-Act lease to Environmental Resources Limited with a tenant break option at the end of
the third year at a rent of £69,230 per annum (£35 per sq ft). The tenant has the benefit of an initial six-month rent-free period, with a
further four months’ incentive if they do not serve their break option.
24
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Asset Management Update (continued)
Arrow Point Retail Park, Shrewsbury (retail warehousing) – the Company completed a three-year lease to Universal Consumer
Products Limited at a rent of £110,000 per annum (£8 per sq ft). The previous passing rent was £95,844 (£7 per sq ft). No lease incentive
was given.
Oak Park, Droitwich (industrial) – the Company completed a new three-year ex-Act lease on units 266-270 to Roger Dyson at a
stepped rent starting at £123,000 per annum in year one, £135,000 per annum in year two and £148,000 per annum in year three.
There is a mutual break option on the expiry of the second year. The tenant was granted a one-month rent free period.
The Company also completed a new three-year ex-Act lease to Adam Hewitt Ltd at units 263 and 265 at a rent of £70,000 per annum.
There is a tenant break option after the first year. No rent incentive was given.
Lastly, the Company completed a letting at units 272 and 273 to J Warwick Holdings Ltd for a new 15-year term, with rolling tenant
break options every three years at a rent of £79,000 per annum. The tenant has the benefit of a six-month rent-free period. The
property is now fully let.
Diamond Business Park, Wakefield (industrial) – the Company completed the settlement of an open market rent review with Tasca
Tankers, dating back to June 2022. The review will see the rent received increase from £209,000 to £229,900 per annum, reflecting an
uplift of 10%.
The Company settled Compac UK’s July 2023 RPI rent review at £53,517 per annum, representing an £11,517 per annum (circa 27%)
increase. The unit is still considered under-rented, with an ERV of £4.00 per sq ft, compared to the new passing rent of £3.90 per sq ft.
The Company also settled Economy Packaging Ltd’s August 2023 open market rent review at £79,065 per annum, representing
a £26,565 per annum (circa 50%) increase. This letting equates to £3.75 per sq ft and will provide good evidence for further asset
management activity.
Northgate House, Bath (retail) – the Company completed a new five-year ex-Act lease to Dimension Vintage limited at a rent of
£40,000 per annum. Four months’ rent-free has been granted.
The Company also settled Bath Northgate House Centre Limited’s (The Regus Group) outstanding 2022 rent review at £491,400 per
annum (£26.98 per sq ft), representing an increase of £96,811 per annum (circa 25%).
Having held over since June 2022, the Company completed Oska Ludlow Limited's lease renewal on a 10-year term with a tenant break
in year five. The rent agreed is £40,000 per annum. The renewal included a three-month rent-free incentive.
25
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Asset Management Update (continued)
The Railway Centre, Dewsbury (leisure) – Mecca Bingo, whose lease expired on 24 December 2023, surrendered their lease early
on 29 September 2023, paying all their rent, service charge and insurance to lease expiry. In doing so, the Company settled Mecca’s
dilapidations at £285,000. The full and final combined settlement totalled £365,126. The Company is in the process of agreeing terms
with an incoming tenant where landlord enabling works will be required.
Westlands Distribution Park, Weston-Super-Mare (industrial) – the Company completed a lease renewal with JN Baker who
extended their occupation of Unit 2A for a further two years from April 2023, with a mutual break option exercisable after nine months.
The agreed rent is £159,000 per annum, inclusive of insurance.
The Company has settled three outstanding April 2022 rent reviews with North Somerset Council at units 2, 5 and 6. The combined
rental increase is £35,864 per annum (circa 20%).
The Company settled Ford Fuels Ltd's rent review at £27,500 per annum (£46,600 per acre), representing an increase of £13,600 per
annum (circa 41%).
London East Leisure Park, Dagenham (leisure) – the Company completed a rent review with The Original Bowling Company Limited’s,
trading as Hollywood Bowl, with effect from September 2022 at £287,922 per annum (£9.38 per sq. ft.), representing an increase of
£27,142 per annum (circa 10%).
Carr Coatings, Redditch (industrial) – the Company settled Carrs Coatings Ltd’s August 2023 annual uncapped RPI rent review at
£294,348 per annum (£7.75 per sq ft), representing a £24,385 per annum (circa 9%) increase. The unit is single-let to Carrs Coatings Ltd
until August 2028. The lease was entered into as a sale and leaseback in 2008 at an initial starting rent of £170,300 per annum (£4.50 psf).
Cambridge House, Bath (office) – following arbitration, the Company settled Novia Financial plc’s outstanding 2021 rent review at
£362,400 per annum (£21.96 per sq ft), representing an increase of £44,775 per annum (circa 14%).
Post year-end, the Company completed a lease with new tenant, ITX UK Ltd, who will utilise the space for retail storage to support the
main Zara store within the nearby Southgate Shopping Centre. The tenant entered a new lease expiring in August 2038, with tenant
only break options on the expiry of years two, five and eight, at a rent of £60,000 per annum (£16.22 per sq. ft). The letting includes a
six-month rent-free incentive.
Next, Bromley (retail) – the Company agreed Next’s annual turnover top-up rent for the year to 28 September 2023 at £195,505,
in addition to the base rent of £350,000 per annum. This is £85,505 per annum (circa 78%) higher than what was forecast when the
property was purchased in November 2022.
Vacancy
As at year-end, the portfolio's overall vacancy was 6.38%.
26
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Financial Results
The Company’s NAV as at March 2024 was £162.75 million or 102.73 pps (31 March 2023: £167.10 million or 105.48 pps). This represents
a decrease of 2.75 pps or 2.6% over the 12-month period, with the underlying movement in NAV set out in the chart below:
EPRA EPS for the year was 7.29 pence which, based on dividends paid of 8.00 pps, reflects a dividend cover of 91.13%. The increase in
dividend cover compared to the prior 12-month period has largely arisen due to the Company recycling proceeds from the sale of lower
yielding properties into higher yielding ones. Earnings have also benefitted from numerous asset management initiatives across the
portfolio, most notably at Central Six Retail Park, Coventry.
The focus of the Company’s investment strategy continues to be building earnings towards full dividend cover. Income across the
tenancy profile has remained robust, despite the challenging macroeconomic environment.
NAV as at
1 April 2023
Dividends
paid
Tax
provision
Expenses
and net
finance costs
for the period
Income
earned for
the period
Change in
fair value of
investment
propert
y
NAV (PPS)
120
105
100
90
95
110
115
85
Portfolio
acquisition
costs
Gain on
disposal of
investment
propert
y
105.48
(5.62)
12.91
NAV as at
31 March
2024
102.73
(1.33)
(0.46)
(1.22)
0.97
(8.00)
27
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Financing
As at 31 March 2024, the Company has a £60.00 million loan Facility with AgFe, in place until May 2027, the details of which are
presented below:
31 March 2024 31 March 2023
Facility £60.00 million £60.00 million
Drawn £60.00 million £60.00 million
Gearing (Loan to GAV) 28.97% 28.06%
Gearing (Loan to NAV) 36.87% 35.91%
Interest rate 2.959%
fixed
2.959%
fixed
Notional Value of Loan Balance Hedged N/A N/A
Property Portfolio
The following tables illustrate the composition of the portfolio in relation to its properties, tenants and income streams:
Summary by Sector as at 31 March 2024
Sector
Number
of
assets
Valuation
(£m)
Area
(sq ft)
Vacancy
by ERV
(%)
WAULT
to break
(years)
Gross
passing
rental
income
(£m)
Gross
passing
rental
income
(£psf)
ERV
(£m)
ERV
(£psf)
Rental
income
(£m)
Like-
for-like
rental
growth*
(£m)
Like-
for-like
rental
growth
(%)
Industrial 14 78.72 1,881,201 4.21 3.30 6.63 3.52 7.98 4.24 6.94
0.43 6.86
Retail
Warehouse 5 46.80 444,973 9.18 4.09 3.73 8.38 4.38 9.85 4.16 (0.13) (3.98)
Standard
Retail 6 31.70 243,960 3.52 3.88 3.23 13.24 3.34 13.69 4.33 (0.01) (0.54)
Alternatives 5 28.42 197,491 0.00 7.10 3.04 15.39 2.48 12.53 2.72 0.04 2.26
Office 3 25.05 125,318 17.49 2.75 2.06 16.49 2.73 21.79 1.74
0.15 14.56
Portfolio 33 210.69 2,892,943 6.38 4.27 18.69 6.46 20.91 7.23 19.89
0.48 3.39
28
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
Summary by Geographical Area as at 31 March 2024
Geographical
area
Number
of
assets
Valuation
(£m)
Area
(sq ft)
Vacancy
by ERV
(%)
WAULT
to break
(years)
Gross
passing
rental
income
(£m)
Gross
passing
rental
income
(£psf)
ERV
(£m)
ERV
(£psf)
Rental
income
(£m)
Like-
for-like
rental
growth*
(£m)
Like-
for-like
rental
growth
(%)
South West 7 56.10 635,587 13.42 3.40 4.53 7.13 6.19 9.74 5.11 0.16 5.25
West Midlands 5 44.45 605,465 0.00 3.32 4.00 6.62 3.94 6.51 3.92 0.15 3.98
Yorkshire and
Humberside
7 32.37 570,563 13.51 4.26 2.87 5.04 3.60 6.31 2.96 0.22 15.38
Eastern 4 21.07 326,419 0.82 2.79 1.92 5.87 2.05 6.27 1.75 (0.15) (7.89)
North West 3 18.05 235,268 0.00 5.47 1.33 5.65 1.69 7.18 1.95 0.04 4.76
Wales 2 14.40 319,010 0.00 8.98 1.28 4.00 1.29 4.06 1.25 0.00 0.00
Rest of London 1 10.35 71,720 0.00 7.89 1.00 13.90 0.78 10.94 1.04 0.06 6.12
South East 2 8.10 74,351 0.00 1.53 1.13 15.27 0.77 10.32 1.30 0.00 0.00
East Midlands 1 3.70 28,219 0.00 3.16 0.41 14.56 0.38 13.44 0.40 0.00 0.00
Scotland
1 2.10 26,341 0.00 4.17 0.22 8.26 0.22 8.26 0.21 0.00 0.00
Portfolio
33 210.69 2,892,943 6.38 4.27 18.69 6.46 20.91 7.23 19.89 0.48 3.39
* Like-for-like rental growth is for the year ended 31 March 2024.
Source: Knight Frank/AEW, 31 March 2024.
29
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
Properties by Market Value as at 31 March 2024
Properties by Market Value as at 31 March 2024
Property Sector Region
Market Value
Range (£m)
Top 10:
1. Central Six Retail Park, Coventry Retail warehouses West Midlands 20.0 – 25.0
2. Northgate House, Bath Standard retail South West 10.0 – 15.0
3. Gresford Industrial Estate, Wrexham Industrial Wales 10.0 – 15.0
4. Cambridge House, Bath Offices South West 10.0 – 15.0
5. 40 Queen Square, Bristol Offices South West 10.0 – 15.0
6. London East Leisure Park, Dagenham Other Rest of London 10.0 – 15.0
7. Tanner Row, York Other Yorkshire and Humberside 10.0 – 15.0
8. Arrow Point Retail Park, Shrewsbury Retail warehouses West Midlands 7.5 – 10.0
9. Apollo Business Park, Basildon Industrial Eastern 5.0 – 7.5
10. Wyndeham, Peterborough Industrial Eastern 5.0 – 7.5
The Company’s top ten properties listed above comprise 53.1% of the total value of the portfolio.
Industrial
Offices
Alternative
Standard Retail
Retail Warehouse
Yorkshire and
Humberside
South East
Eastern
South West
West Midlands
East Midlands
North West
Wales
Rest of London
Scotland
Sector weighting by valuation –
high industrial
weighting and low exposure to offices
Geographical weighting by valuation –
highly diversified across the UK
37%
12%
15%
14%
22%
15%
4%
10%
27%
21%
8%
2%
7%
5%
1%
30
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
Property Sector Region
Market Value
Range (£m)
11. 15-33 Union Street, Bristol Standard retail South West 5.0 – 7.5
12. Cuerden Way, Preston Retail warehouses North West 5.0 – 7.5
13. Barnstaple Retail Park, Barnstaple Retail warehouses South West 5.0 – 7.5
14. Units 1001-1004, Sarus Court Industrial North West 5.0 – 7.5
15. Mangham Road, Rotherham Industrial Yorkshire and Humberside 5.0 – 7.5
16. Brockhurst Crescent, Walsall Industrial West Midlands 5.0 – 7.5
17. Westlands Distribution Park, Weston Super Mare Industrial South West 5.0 – 7.5
18. Walkers Lane, St Helens Industrial North West 5.0 – 7.5
19. Diamond Business Park, Wakefield Industrial Yorkshire and Humberside 5.0 – 7.5
20. Next, Bromley Standard retail South East 5.0 – 7.5
21. Oak Park, Droitwich Industrial West Midlands < 5.0
22. 710 Brightside Lane, Sheffield Industrial Yorkshire and Humberside < 5.0
23. Odeon Cinema, Southend Other Eastern < 5.0
24. Pearl House, Nottingham Standard retail East Midlands < 5.0
25. The Railway Centre, Dewsbury Retail warehouses Yorkshire and Humberside < 5.0
26. Cedar House, Gloucester Offices South West < 5.0
27. Pipps Hall Industrial Estate, Basildon Industrial Eastern < 5.0
28. Eagle Road, Redditch Industrial West Midlands < 5.0
29. 69-75 Above Bar Street, Southampton Standard retail South East < 5.0
30. Bridge House, Bradford Industrial Yorkshire and Humberside < 5.0
31. JD Gyms, Glasgow Other Scotland < 5.0
32. PRYZM, Cardiff Other Wales < 5.0
33. 11/15 Fargate, Sheffield Standard retail Yorkshire and Humberside < 5.0
31
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
UK property locations as at 31 March 2024
32
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
Top 10 Tenants as at 31 March 2024
Tenant Sector Property
Passing
Rental
Income
(£’000)
% of
Portfolio
Total
Passing
Rental
Income
1. Plastipak UK Ltd Industrial Gresford Industrial Estate, Wrexham 975 5.2
2. NCP Car Park Tanner Row, York 733 3.9
3. Next Retail Various 697 3.7
4. Matalan Ltd Retail
Warehouse
Cuerden Way, Preston 651 3.5
5. Wyndeham Peterborough Ltd Industrial Wyndeham, Peterborough 644 3.4
6. TJX UK Ltd Retail Various 608 3.3
7. Mecca Bingo Ltd Leisure London East Leisure Park, Dagenham 584 3.1
8. Odeon Cinemas Leisure Odeon Cinema, Southend-on-Sea 535 2.9
9. Bath Northgate House Centre Ltd Office Northgate House, Bath 491 2.6
10. Poundland Ltd Retail Various 486 2.6
The Company’s top ten tenants, listed above, represent 34.8% of the total passing rental income of the portfolio.
Source: Knight Frank valuation report as at 31 March 2024.
ESG Update
The Company has maintained its two stars Global Real Estate Sustainability Benchmark (‘GRESB’) rating for 2023 and maintained its
score of 67. A large portion of the GRESB score relates to performance data coverage, where, due to the high percentage of single-let
assets with tenant procured utilities, the Company does not score as well as Funds with a smaller holding of single-let assets and a higher
proportion of multi-let managed assets where the owner is responsible for the utilities and can therefore gather the relevant data.
We continue to implement our plan to improve overall data coverage and data collection for all utilities through increased tenant
engagement at our single-let assets and by installing automated meter readers (‘AMR’) across the portfolio. So far, we are in the process
of installing AMRs in several of our multi-let properties. We are also in discussions with the tenants of our top ten single-let FRI assets
(interms of floor area) regarding the installation of AMR.
We endeavour, where the opportunity presents itself through a lease event, to include green clauses in leases, covenanting landlord and
tenant to collaborate over the environmental performance of the property. Green clauses seek to improve data coverage by ensuring
tenants provide regular and appropriate utility consumption data. Alongside this, the Fund has engaged Perse, a third-party provider,
who specialises in data collection from tenant controlled and operated assets in the UK by obtaining data from centralised energy
administration platforms. This will be key to ensure the maintenance of GRESB data coverage scores and support external reporting.
We continue to assess and strengthen our reporting and alignment against the framework set out by the TCFD, with further disclosure
to be provided in the FY 25 Annual Report and accounts. We are pleased to report that the Company has maintained its EPRA Silver
rating for Sustainability Best Practice Recommendations (sBPR) for ESG disclosure and transparency.
33
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Property Portfolio (continued)
Each asset within the Company has an individual Asset Sustainability Action Plan (ASAP). This document tracks ESG initiatives across the
portfolio on an asset-by-asset basis for targeted/relevant and specific implementation of ESG improvements. All managed assets and
units have been contracted to High Quality Green Tariffs, ensuring the electricity supply is from renewable sources. All void and vacant
unit supplies have also been transferred to High Quality Green Tariffs.
We have implemented a number of initiatives across our portfolio, including new landscaping/biodiversity programmes at our retail
sites in Barnstaple, Coventry and Dewsbury. This included replacing the existing plants and shrubs with a greater diversity of appropriate
species, which in turn will attract a wider variety of insects and wildlife to the property. Our work at Barnstaple earned us a Green Apple
award, recognising the improvements made to biodiversity of the local area. Furthermore, we are actively engaging with tenants to seek
opportunities to decarbonise the portfolio. This includes ongoing conversations regarding the installation of solar PV at Dewsbury.
Lease Expiry Profile as at 31 March 2024
Source: Knight Frank valuation report as at 31 March 2024.
Approximately £1.81 million of the Company’s current contracted income stream is subject to an expiry or break within the 12-month
period commencing 1 April 2024. The Company is proactively looking to renew leases or to complete new lettings.
Alternative Investment Fund Manager (‘AIFM’)
AEW UK Investment Management LLP is authorised and regulated by the FCA as a full-scope AIFM and provides its services to the
Company.
The Company has appointed Langham Hall UK Depositary LLP (‘Langham Hall’) to act as the depositary to the Company, responsible for
cash monitoring, asset verification and oversight of the Company.
< 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5-6 years 6-7 years 7-8 years 8-9 years 9-10 years 15+ years10-15 years
4.5
AEW UK REIT Lease Income to Break
£m
4.0
3.5
2.5
3.0
2.0
1.5
1.0
0.5
0.0
Contracted Rent ERV (excl. vacancy)
34
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Information Disclosures under the AIFM Directive
Under the AIFM Directive, the Company is required to make disclosures in relation to its leverage under the prescribed methodology
of the Directive.
Leverage
The AIFM Directive prescribes two methods for evaluating leverage, namely the ‘Gross Method’ and the ‘Commitment Method’. The
Company’s maximum and actual leverage levels are as per below:
31 March 2024 31 March 2023
Leverage Exposure Gross Method
Commitment
Method
Gross Method
Commitment
Method
Maximum Limit 140% 140% 140% 140%
Actual 130% 137% 127% 136%
In accordance with the AIFM Directive, leverage is expressed as a percentage of the Company’s exposure to its NAV and adjusted in line
with the prescribed ‘Gross’ and ‘Commitment’ methods. The Gross method is representative of the sum of the Company’s positions
after deducting cash balances and without taking into account any hedging and netting arrangements. The Commitment method is
representative of the sum of the Company’s positions without deducting cash balances and taking into account any hedging and netting
arrangements. For the purposes of evaluating the methods above, the Company’s positions primarily reflect its current borrowings and NAV.
Remuneration
The AIFM has adopted a Remuneration Policy which accords with the principles established by AIFMD. AIFMD Remuneration Code Staff
includes the members of the AIFM’s Management Committee, those performing Control Functions, Department Heads, Risk Takers and
other members of staff that exert material influence on the AIFM’s risk profile or the AIFs it manages.
Staff are remunerated in accordance with the key principles of the firm’s remuneration policy, which include:
(1) promoting sound risk management;
(2) supporting sustainable business plans;
(3) remuneration being linked to non-financial criteria for Control Function staff;
(4) incentivising staff performance over longer periods of time;
(5) awarding guaranteed variable remuneration only in exceptional circumstances; and
(6) having an appropriate balance between fixed and variable remuneration.
35
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Investment Manager’s Report (continued)
Information Disclosures under the AIFM Directive (continued)
As required under section ‘Fund 3.3.5.R(5)’ of the Investment Fund Sourcebook, the following information is provided in respect of
remuneration paid by the AIFM to its staff for the year ended to 31 December 2023.
Year ended
31 December 2023
Total remuneration paid to employees during financial year:
a) remuneration, including, where relevant, any carried interest paid by the AIFM: £9,371,369
b) the number of beneficiaries 82
The aggregate amount of remuneration of the AIFM Remuneration Code staff, broken down by:
a) senior management £3,214,604
b) members of staff £6,156,765
Fixed
remuneration
Variable
remuneration
Total
remuneration
Senior management £1,788,918 £1,425,686 £3,214,604
Staff
£5,213,543 £943,222 £6,156,765
Total
£7,002,461 £2,368,908 £9,371,369
Fixed remuneration comprises basic salaries and variable remuneration comprises bonuses.
AEW UK Investment Management LLP
1 July 2024
36
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal Risks and Uncertainties
The Company’s assets consist of UK commercial property. Its principal risks are therefore related to the commercial property market in
general, but also to the particular circumstances of the individual properties and the tenants within the properties.
The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control which is
operated by the Investment Manager. The Company’s ongoing risk management process is designed to identify, evaluate and mitigate
the significant risks the Company faces.
At least twice a year, the Board undertakes a formal risk review with the assistance of the Audit Committee, to assess the adequacy
and effectiveness of the Investment Manager and other service providers’ risk management and internal control processes. The Audit
Committee is responsible for reviewing the principal and emerging risks facing the Company and, in liaison with the Investment
Manager, advises the Board on these risks. Stated movements in the probability or impact of risks is in comparison to the prior year end.
The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that would
threaten its business model, future performance, solvency or liquidity.
An analysis of the principal risks and uncertainties is set out below. The risks below do not purport to be exhaustive as some risks are not
yet known and some risks are currently not deemed material but could turn out to be material in the future.
Principal Risks Key
1. Property market
2. Property valuation
3. Tenant default
4. Asset management initiatives
5. Due diligence
6. Fall in rental rates
7. Breach of borrowing covenants
8. Availability and cost of debt
9. Dependence on the Investment Manager
10. Failure to meet objectives
11. Business interruption
12. Company REIT status
13. General political/economic environment
14. Environmental transition risk
15. Physical risk to buildings
The matrix above illustrates the Company’s assessment of the impact and probability of the principal risks identified.
Probability
High
Impact
Low
Low
High
148
1
2
6
11
10
13
9
4
12
7 3
15
5
37
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal risks and their potential impact How risk is managed Risk assessment
REAL ESTATE RISKS
1. Property market
Any property market recession or future
deterioration in the property market could,
inter alia, (i) cause the Company to realise its
investments at lower valuations; and (ii) delay
the timings of the Company’s realisations.
These risks could have a material adverse
effect on the ability of the Company to
achieve its investment objective.
The Company has investment restrictions in
place to invest and manage its assets with the
objective of spreading and mitigating risk.
Probability: High
Impact: Moderate to High
Movement: No change
2. Property valuation
Property and property-related assets are
inherently difficult to value due to the
individual nature of each property.
There may be an adverse effect on the
Company's profitability, NAV and the price
of Ordinary Shares in cases where property
valuations have been materially misstated.
The Company uses an independent
external valuer (Knight Frank LLP) to value
the properties at fair value in accordance
with accepted RICS appraisal and valuation
standards.
Probability: Low
Impact: High
Movement: No change
3. Tenant default
Failure by tenants to fulfil their rental
obligations could affect the income that
the properties earn and the ability of the
Company to pay dividends to its shareholders.
Comprehensive due diligence is undertaken
on all new tenants. Tenant covenant checks
are carried out on all new tenants where a
default would have a significant impact.
The asset management team conducts
ongoing monitoring and liaison with tenants
to manage potential bad debt risk.
Probability: High
Impact: Moderate to High
Movement: Increase
4. Asset management initiatives
Asset management initiatives, such as
refurbishment works, may prove to be more
extensive, expensive and take longer than
anticipated. Cost overruns may have a material
adverse effect on the Company’s profitability,
the NAV and the share price.
Costs incurred on asset management
initiatives are closely monitored against
budgets and reviewed in regular
presentations to the Investment
Management Committee of the
InvestmentManager.
Probability: Low to Moderate
Impact: High
Movement: No change
Principal Risks and Uncertainties (continued)
38
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal risks and their potential impact How risk is managed Risk assessment
REAL ESTATE RISKS (continued)
5. Due diligence
Due diligence may not identify all the risks
and liabilities in respect of an acquisition
(including any environmental, structural
or operational defects) that may lead to a
material adverse effect on the Company’s
profitability, the NAV and the price of the
Company’s Ordinary Shares.
The Company’s due diligence relies on
work (such as legal reports on title, property
valuations, environmental and building
surveys) outsourced to third parties who have
expertise in their areas. Such third parties
have professional indemnity cover in place.
Probability: Low
Impact: Moderate
Movement: No change
6. Fall in rental rates
Rental rates may be adversely affected by
general UK economic conditions and other
factors that depress rental rates, including
local factors relating to particular properties/
locations (such as increased competition).
Any fall in the rental rates for the Company’s
properties may have a material adverse effect
on the Company’s profitability, the NAV, the
price of the Ordinary Shares and the Company’s
ability to meet interest and capital repayments
on any debt facilities.
The Company builds a diversified property
and tenant base with subsequent monitoring
of concentration to individual occupiers and
sectors (geographical and sector exposure).
The Investment Manager holds quarterly
meetings with its Investment Strategy
Committee and regularly meets the Board
of Directors to assess whether any changes
in the market present risks that should be
addressed in the Company’s strategy.
Probability: Moderate
Impact: Moderate to High
Movement: No change
BORROWING RISKS
7. Breach of borrowing covenants
Material adverse changes in valuations and
net income may lead to breaches in the
Loan to Value (‘LTV’) and interest cover ratio
covenants.
The Company monitors the use of borrowings
on an ongoing basis through weekly cash
flow forecasting and quarterly risk monitoring
to monitor financial covenants.
It is acknowledged that significant headroom
currently exists for both loan covenants.
The Investment Manager will maintain a close
relationship with its loan finance provider,
AgFe, to ensure continuing dialogue around
covenants.
Probability: Low
Impact: Moderate to High
Movement: No change
Principal Risks and Uncertainties (continued)
39
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal risks and their potential impact How risk is managed Risk assessment
BORROWING RISKS (continued)
8. Availability and cost of debt
In tandem with any future growth of the
Company, additional debt funding would
be considered. It is acknowledged that
the current interest rate environment may
constrain the availability and financial viability
of further debt funding.
The Company maintains a good relationship
with the lender providing the term credit
facility.
The Company monitors the projected usage
and covenants of the credit facility on an
ongoing basis.
The Company actively monitors the loan term
and engages in loan extension negotiations
far in advance of expiry.
Probability: Low
Impact: Moderate
Movement: No change
CORPORATE RISKS
9. Dependence on the
InvestmentManager
The Company has no employees and is reliant
upon the performance of its Investment
Manager and other third party service
providers. Failure by the Investment Manager
and/or any service provider to carry out its
obligations to the Company in accordance
with the terms of its appointment could
have a materially detrimental impact on the
operation of the Company. The future ability
of the Company to successfully pursue its
investment objective and investment policy
may, among other things, depend on the
ability of the Investment Manager to retain its
existing staff and/or to recruit individuals of
similar experience and calibre.
The Investment Manager has endeavoured
to ensure that the principal members of its
management team are suitably incentivised.
The performance of service providers
in conjunction with their service level
agreements is monitored via regular calls and
face-to-face meetings and the use of key
performance indicators, where relevant.
Probability: Moderate to High
Impact: Moderate
Movement: No change
Principal Risks and Uncertainties (continued)
40
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal risks and their potential impact How risk is managed Risk assessment
CORPORATE RISKS (continued)
10. Failure to meet objectives
The Company may not meet its investment
objective to deliver an attractive total return to
shareholders from investing predominantly in
a portfolio of smaller commercial properties in
the United Kingdom.
Poor relative total return performance may
lead to an adverse reputational impact that
affects the Company’s ability to raise new
capital.
The Company may not pay its target dividend.
The Company has an investment policy to
achieve a balanced portfolio with a diversified
asset and tenant base. The Company
also has investment restrictions in place
to limit exposure to potential risk factors.
The Investment Manager has extensive
experience in navigating market volatility.
The Company has the ability to pay dividends
from current year revenue as well as revenue
reserves and realised capital.
Probability: High
Impact: Moderate to High
Movement: No change
11. Business interruption
Cyber attacks on the Investment Manager’s
and/or other service providers’ IT systems
could lead to disruption, reputational
damage, regulatory (including GDPR) or
financial loss to the Company.
The Investment Manager and other service
providers’ staff are capable of working
remotely for an extended time period.
The Investment Manager’s and other service
providers’ IT systems are protected by anti-
virus software and firewalls that are updated
regularly.
Fire protection and access security
procedures exist at all the Company’s
managed properties, along with the offices
of its Investment Manager and other service
providers.
Probability: Low to Moderate
Impact: Moderate
Movement: No change
Principal Risks and Uncertainties (continued)
41
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal risks and their potential impact How risk is managed Risk assessment
TAXATION RISKS
12. Company REIT status
The Company has a UK REIT status that
provides a tax-efficient corporate structure. If
the Company fails to remain a REIT for UK tax
purposes, its profits and gains will be subject
to UK corporation tax.
Any change to the tax status or UK tax
legislation could impact on the Company’s
ability to achieve its investment objectives
and provide attractive returns to
shareholders.
The Company monitors REIT compliance
through the Investment Manager on
acquisitions; the Administrator on asset and
distribution levels; the Registrar and Broker
on shareholdings and the use of third-party
tax advisers to monitor REIT compliance
requirements.
Probability: Low
Impact: Moderate to High
Movement: No change
POLITICAL/ECONOMIC RISKS
13. General political/
economicenvironment
Political and macroeconomic events present
risks to the real estate and financial markets
that affect the Company and the business of
its tenants. The level of uncertainty that such
events bring has been highlighted in recent
times, most pertinently the effects of the
Ukraine war.
In addition, the current inflationary
environment continues to drive-up energy
and commodity prices.
This might further damage consumer and
investor sentiment as real income and wealth
levels are reduced.
The Board considers the impact of political
and macroeconomic events when reviewing
strategy.
Probability: High
Impact: Moderate to High
Movement: No change
Principal Risks and Uncertainties (continued)
42
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Principal risks and their potential impact How risk is managed Risk assessment
POLITICAL/ECONOMIC RISKS (continued)
14. Environmental transition risk
Failure to identify and mitigate the transition
risk for climate change could lead to the
Company holding stranded assets and lead
to a negative impact on its reputation. Failure
by the Company to meet required regulatory
standards could lead to increased stakeholder
concern and negative feedback.
The Company has engaged specialist
environmental consultants to advise the
Board on compliance with regulatory
requirements and adopting best practice
where possible. All prospective acquisitions
and asset management initiatives are
influenced by environmental assessments
undertaken by the Company, such as
ensuring they are in conformance with
the Minimum Energy Efficiency Standard
(‘MEES’) Regulations. All assets have an Asset
Sustainability Action Plan (‘ASAP’) initiative,
which tracks environmental initiatives
across the portfolio on an asset-by-asset
basis for targeted, relevant and specific
implementation of environmental
improvements.
Probability: Moderate
Impact: Moderate
Movement: No Change
15. Physical risk to properties
The risk of physical damage to properties
as a result of environmental factors such as
flooding and natural fires. In the long- term,
changes in climate and/or weather systems
may mean properties become unviable to
tenants.
The Company obtains environmental surveys
for all acquisitions, which mitigate the
short-term risk of climate-related damage to
properties owned. The Investment Manager’s
asset management team perform regular site
visits to the Company’s properties in order
to continually assess the physical risk posed
to them. This includes climate resilience
assessments.
Probability: Low
Impact: Moderate to High
Movement: No Change
Principal Risks and Uncertainties (continued)
43
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
s172 Statement
The Directors’ overarching duty is to promote the success of the Company for the benefit of its stakeholders, having regard to the
interests of its other stakeholders, as set out in section 172 of the Companies Act 2006 (the ‘Act’). The Directors have considered each
aspect of this section of the Act and consider that the information set out below is particularly relevant in the context of the Company’s
business as an externally managed investment company which does not have any employees or suppliers.
We set out in the table below our key stakeholders, the nature of their relationship with the Company and Board, their key interests and
how we engage with those stakeholders.
Our relationships with stakeholders are factored into Board discussions and decisions made by the Board will consider the impact on the
stakeholders, in accordance with s172 of the Act.
Stakeholder Interests Engagement
Investors
Our shareholders are impacted directly by
the financial performance of the Company
through dividends and share price
movements.
They also play an important role in
monitoring the governance of the
Company.
– Sustainable growth of the Company
and achieving target returns
– Good relationship with the Company
and Board
– Effective structure and control
framework
– Impact of the Company on the wider
community and environment
– Reputation of the Company
– AGM, Annual Report, regulatory
announcements
– Quarterly update report and other
key information published on the
website
– Roadshows, meetings and
presentations via the Investment
Manager
Service providers
Key functions of the Company are
outsourced to third-party suppliers,
including investment management,
property management, administration,
company secretarial, registrar, depositary
and legal services. It is important to
develop strong long-term working
relationships with these providers to
enhance the efficiency of the Company’s
operations, as well as that of the providers
themselves.
– Relationship with the Company and
Board
– Fair contract terms and service-level
agreements
– Reputation of the Company
– The Company’s performance and
long-terms prospects
– Effective and regular communication
– Service-level agreements
– Formal tender processes where
appropriate
Stakeholder Engagement
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Stakeholder Engagement (continued)
Stakeholder Interests Engagement
Tenants
The Company’s strategy in relation to its
individual assets will directly affect the
tenants in occupation of those assets.
– Good communication and relationship
with the Company as landlord
– Fair lease terms
– Long-term strategy for the asset in
line with the objectives of the tenant’s
activities
– Site visits and face-to-face meetings
through the Investment Manager
– Formal negotiations
– Ongoing communication through
the property manager
The wider community and environment
The Company’s physical real estate
assets have a direct impact on their local
communities depending on their primary
use and on the environment through their
emissions and energy usage.
– Impact of properties and their business
plans on the local economy
– Impact of properties on the
attractiveness and appeal of the local
area
– Energy efficiency and greenhouse gas
emissions
– Publishing of Sustainability Disclosure
Report and Greenhouse Gas
Emissions Statement
– Global Real Estate Sustainability
Benchmark (‘GRESB’) reporting
– Communication with local authorities
via Investment Manager
Principal decisions made by the Board
The principal decisions made by the Board during the year are summarised below.
Dividends The Board considered the Company’s target dividend of 8.00 pps per annum and
approved payment of it, continuing the Company’s track record in paying dividends at
this level.
Continued focus on sustainability
impact and GRESB score
The Board has continued its focus on responsible business practices. More details on
sustainability impact and GRESB score can be found in the Directors’ Report on pages
65 to 78. The Investment Manager meets regularly with MAPP and Evora, its ESG
consultants, to consider initiatives to improve the Company’s GRESB score.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Stakeholder Engagement (continued)
Principal decisions made by the Board continued
Oversight of Investment Manager and
Review of Investment Activities
The Board is responsible for the ongoing review of investment activity and performance
and the control and supervision of the Investment Manager. During the year, the
following key investment activities were reviewed by the Board:
– The acquisition of Tanner Road, York;
– The acquisition of Cambridge House, Bath;
– The disposal of Excel 95, Deeside;
– The disposal of Lockwood Court, Leeds & Euroway Trading Estate, Bradford
– The disposal of Commercial Road, Portsmouth; and
– The disposal of Pricebusters Building, Blackpool.
Further details of the property transactions can be found in the ‘Property Portfolio’ section
of the Investment Manager’s Report.
Appointment of
Non-Executive Directors
On 1 October 2023, as part of ongoing succession planning, the Board appointed
MsLizPeace as Non-Executive Director and Mr Robin Archibald as Non-Executive
Director and Chairman designate, following an extensive search, interview and
recruitment process.
With the assistance of Trust Associates, the Board shortlisted and interviewed potential
candidates and concluded that both Ms Peace and Mr Archibald were exceptional
candidates given their backgrounds and experience.
Further information on the Company’s engagement with stakeholders and its ESG policy can be found on pages 65 and 66.
Approval
The Strategic Report has been approved and signed on behalf of the Board by:
Mark Burton
Chairman
1 July 2024
46
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Board of Directors
Mark Burton, non-executive Chairman
(aged 75)
Mr Burton currently sits on the real estate advisory board for Norges Bank Investment Management. Mr Burton
qualified as a Chartered Surveyor, has been a member of the UK Government Property Advisory Group and was
formerly chairman of The Investment Property Forum and Urban Land Institute UK. In 2001, Mr Burton became
chief investment officer of the real estate department at Abu Dhabi Investment Authority, subsequently
performing the same role at Abu Dhabi Investment Council in 2007 from where he retired in 2010.
Appointed: 9 April 2015
Robin Archibald, non-executive Director/Chairman designate
(aged 65)
Mr Archibald was formerly Head of Corporate Finance and Broking at Winterflood until April 2014 when he
retired from his executive roles. He is a Chartered Accountant and worked as a Corporate Financier with a
number of leading city firms, Including SG Warburg Securities and NatWest Markets. Robin has concentrated for
much of his career on advising and managing transactions in the UK closed-ended funds sector. He is currently
Audit Chair and SID of Capital Gearing Trust, Shires Income Trust and Henderson European Focus Trust, having
been Chair of Albion Technology Venture Capital Trust and former Audit Chair and SID of Ediston Property
Investment Trust, roles he retired from early in 2023.
Appointed: 1 October 2023
Katrina Hart, non-executive Director
(aged 50)
Mrs Hart spent her executive career in corporate finance and equity research advising, analysing and commenting
on a broad range of businesses operating in the wealth and asset management sectors. During this period,
she accumulated an in-depth understanding of the commercial dynamics and operational drivers of asset
management and worked very closely with some of the most respected companies in the sector. Latterly, she
was a highly rated financials analyst at HSBC, Bridgewell Group Plc and headed up the financials research team
at Canaccord Genuity Inc. Mrs Hart is Chairman of BlackRock Frontiers Investment Trust plc, Senior Independent
Director of Keystone Positive Change Investment Trust plc, Chair designate of JP Morgan UK Small Cap Growth
and Income plc and a non-executive Director of Montanaro Asset Management Limited. Mrs Hart was Formerly
a non-executive Director of Premier Miton Group Plc and Polar Capital Global Financials Trust plc.
Appointed: 5 June 2017
Governance
47
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Board of Directors (continued)
Mark Kirkland, non-executive Director
(aged 56)
Mr Kirkland qualified as a Chartered Accountant with PricewaterhouseCoopers in London and has extensive
corporate experience gained over 30 years, having held several senior roles in both public and private
companies. Mr Kirkland's initial career was in corporate finance, predominately with UBS Limited. He has
been CFO of several public and private companies and latterly was CEO of Delin Property, a pan-European
logistics developer, investor and manager. He is currently an Executive Director of Kelso Group Holdings plc,
Non-Executive Director of Strix Group Holdings plc and TheWorks.co.uk plc.
Appointed: 9 November 2022
Liz Peace, non-executive Director
(aged 71)
Ms Peace spent her early career in Government in the Ministry of Defence, eventually becoming a key player
in the creation of QinetiQ plc in 2001. She then moved into the private sector, becoming Chief Executive
of the British Property Federation where she played a significant role in the creation of the UK’s Real Estate
Investment Trust structure. She was awarded a CBE in 2008 for services to the property industry. Ms Peace has
a non-executive portfolio career primarily focused on real estate, including NED roles at Howard de Walden
Estates Ltd, Greencore Homes Ltd, the Connected Places Catapult and the Royal Institution of Chartered
Surveyors where she is the Senior Independent Governor. She is chair of the Greater London Authority’s Old
Oak and Park Royal Development Corporation and of the University of Cambridge Property Board. She is also
chair of the Churches Conservation Trust, a secular organisation looking after 358 redundant Church of England
churches.
Appointed: 1 October 2023
Notes
48
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate Governance Statement
This Corporate Governance Statement comprises pages 48 to 53 and forms part of the Directors’ Report.
Statement from the Chairman
The Company is committed to maintaining high standards of corporate governance and considers that reporting against the principles
and recommendations of the AIC Code of Corporate Governance issued in February 2019 (the ‘AIC Code’), provides better information
to shareholders as it addresses all the principles set out in the 2018 UK Corporate Governance Code (the ‘UK Code’), as well as setting
out additional principles and recommendations on issues that are of specific relevance to investment trusts, and is endorsed by the
Financial Reporting Council (the ‘FRC’). The terms of the FRC’s endorsement mean that AIC members who report against the AIC Code
fully meet their obligations under the UK Code and the related disclosure requirements contained in the Listing Rules. The AIC Code is
available from the AIC website at theaic.co.uk. A copy of the UK Code can be obtained at frc.org.uk.
The Board recognises the importance of a strong corporate governance culture and has established a framework for corporate
governance which it considers to be appropriate.
The UK Code includes provisions relating to:
• the role of the chief executive; and
• executive directors’ remuneration.
For the reasons set out in the AIC Code, the Board considers these provisions not relevant to the position of the Company, being an
externally managed REIT. In particular, all of the Company’s day-to-day management and administrative functions are outsourced to
third parties. As a result, the Company has no executive directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions.
The Board has reviewed the principles and recommendations of the AIC Code and considers that the Company has complied with these
throughout the year, except as disclosed below:
• given the size of the Board, it is not considered necessary to appoint a senior independent director; and
• given the structure and size of the Board, the Board does not consider it necessary to appoint separate management engagement,
nomination and remuneration committees. The roles and responsibilities normally reserved for these committees are matters for
theBoard.
The Board of Directors
Under the leadership of the Chairman, the Board of Directors is collectively responsible for the long-term sustainable success of the
Company. It provides overall leadership, sets the strategic aims of the Company and ensures that the necessary resources are in place
for the Company to meet its objectives and fulfil its obligations to shareholders within a framework of high standards of corporate
governance and effective internal controls. The Directors are responsible for determining of the Company’s investment policy and
investment strategy and have overall responsibility for the Company’s activities, including the review of investment activity and
performance and supervision of the Investment Manager.
The Board consisted of four non-executive Directors up to Mr Sandhu’s retirement on 30 September 2023 and consisted of five
Directors following the appointment of Mr Archibald and Ms Peace on 1 October 2023. It seeks to ensure that it has an appropriate
balance of skills and experience, and considers that, collectively, the Directors have substantial recent and relevant experience of the
property sector, investment trusts and financial and public company management.
The terms and conditions of the appointment of Directors are formalised in letters of appointment, copies of which are available for
inspection from the Company’s registered office. None of the Directors has a contract of service with the Company. On appointment,
non-executive Directors undertake that they will have sufficient time to meet the expectations of the role. Directors are not entitled to
any compensation for loss of office.
49
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate Governance Statement (continued)
Chairman
The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company. He promotes a culture of
openness and debate and facilitates constructive Board relations and the effective contribution of all Directors. In liaison with the
Company Secretary, he ensures that the Directors receive accurate, timely and clear information.
The Chairman was independent on appointment and is deemed by his fellow Board members to be independent in character and
judgement and free of any conflicts of interest. He considers himself to have sufficient time to spend on the affairs of the Company.
Mr Burton has no significant commitments other than those disclosed in his biography on page 46.
The document setting out the responsibilities of the Chairman is available on the Company’s website. The Board’s policy is that the
Chairman will serve for a maximum of nine years in order to be consistent with the requirement for regular Board refreshment and diversity.
Board Operation
The Board has adopted a formal schedule of matters reserved for decision by the Board, a copy of which is available on the Company’s
website. These matters include:
• responsibility for the determination of the Company’s investment objective and policy;
• overall responsibility for the Company’s activities, including the review of investment activity, gearing, performance and supervision
of the Investment Manager;
• approval of Annual and Half-Yearly Reports and Financial Statements and accounting policies, prospectuses, circulars and other
shareholder communications;
• raising new capital and approval of financing facilities;
• approval of the valuation of the Company’s portfolio of assets;
• approval of the NAV of the Company;
• Board appointments and removals; and
• appointment and removal of the Investment Manager, Auditor and the Company’s other service providers.
Board Meetings
The Company has four scheduled Board meetings a year with additional meetings held to approve NAV announcements and
dividends and other meetings arranged as necessary. At each Board meeting, the Directors follow a formal agenda which is circulated
in advance by the Company Secretary. The Administrator, Investment Manager and the Company Secretary regularly provide the
Board with financial information, together with briefing notes and papers in relation to changes in the Company’s economic and
financial environment, statutory and regulatory changes and corporate governance best practice. A description of the Company’s risk
management and internal control systems is set out on page 53.
The Company’s main functions are delegated to a number of service providers, each engaged under separate contracts. The
management of the Company’s portfolio is delegated to the Investment Manager, who manages the assets in accordance with the
Company’s investment objective and policy. At each Board meeting, representatives from the Investment Manager attend to present
reports to the Directors covering the Company’s current and future activities, portfolio of assets and its investment performance over
the preceding period. The Board and the Investment Manager operate in a fully supportive, co-operative and open environment and
communication with the Board is maintained between scheduled meetings.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate Governance Statement (continued)
Board Committees
The Company has one Committee, the Audit Committee. Given the composition and the size of the Board, the roles and responsibilities
normally reserved for the management engagement, nomination and remuneration committee are instead matters for the Board. The
Audit Committee’s delegated responsibilities are clearly defined in formal terms of reference, which are available on the Company’s website.
The Audit Committee comprises all the non-executive Directors and is chaired by Mr Kirkland, who has recent and relevant financial
experience. Mr Sandhu chaired the Committee until his retirement on 30 October 2023. Given the size and nature of the Board, it is felt
appropriate that all Directors are members of the Audit Committee. The Board is satisfied that the combined knowledge and experience
of its members is such that the Committee discharges its responsibilities in an effective, informed and challenging manner. The
Committee as a whole has competence relevant to the investment trust sector. Further details about this Committee and its activities
can be found on pages 54 to 57.
Meeting Attendance
The table below sets out the number of scheduled Board and Committee meetings attended by each Director during the year ended
31 March 2024. The Board met on a number of occasions during the year, outside the normal cycle of board meetings, to discuss
corporate issues affecting the Company.
Board meetings Audit Committee meetings
Number of
meetings
Number
attended
Number of
meetings
Number
attended
Mark Burton 4 4 2 2
Bim Sandhu* 4 2 2 1
Katrina Hart 4 4 2 2
Mark Kirkland 4 4 2 2
Liz Peace** 4 2 2 1
Robin Archibald** 4 2 2 1
* Retired on 30 October 2023. Mr Sandhu attended all meetings he was eligble to attend.
** Appointed on 1 October 2023. Ms Peace and Mr Archibald attended all meetings they were eligible to attend.
Performance Evaluation
The Board has a formal process to evaluate its performance annually. The Chairman acts on the results of the evaluation by recognising
the strengths and addressing any weaknesses of the Board, as appropriate. The evaluation of the Chairman is carried out by the other
Directors of the Company, led by the Audit Committee Chairman. The evaluation covers:
• the performance of the Board and the Audit Committee, including how Directors work together as a whole;
• the balance of diversity, skills, experience, independence and knowledge of the Directors; and
• individual performance, particularly considering whether each Director continues to make an effective contribution.
The Board seeks to ensure that it has an appropriate balance of skills and experience, and considers that, collectively, it has substantial
recent and relevant experience of investment trusts, the UK real estate sector, and financial and capital markets.
Directors’ Independence
The Board considers and reviews the independence of each non-executive Director on an annual basis as part of the Directors’
performance evaluation. In carrying out the review, consideration is given to factors such as their character, judgement, commitment
and performance on the Board and Audit Committee. Following review, all Directors are considered to be independent of the Investment
Manager and free from any business or other relationship that could materially interfere with the exercise of his or her independent
judgement. The Board leads the appointment process for any new Directors via the use of an independent search firm.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate Governance Statement (continued)
Diversity
Board Diversity
The Board’s policy on diversity is to ensure that the Directors on the Board have a broad range of experience, skills and knowledge, with
diversity of thinking, background and perspective. Appointments to the Board are made on merit against objective criteria, having
regard to the benefits of diversity and the current and future needs of the business and the other factors set out in the AIC Code.
Diversity, including, but not limited to, gender, social background, ethnicity, age, sexual orientation, disability and professional and
industry specific knowledge, is an important consideration in ensuring that the Board and its committees have the right balance of skills,
experience, independence and knowledge necessary to discharge their responsibilities. The Board notes the FCA rules on diversity and
inclusion on company boards, namely, that from accounting periods starting on or after 1 April 2022:
(a) At least 40% of individuals on the Board to be women;
(b) At least one senior Board position to be held by a woman; and
(c) At least one individual on the Board to be from a minority ethnic background.
The Board continues to develop its succession planning in line with these recommendations. In accordance with Listing Rule 9
Annex2.1, the below tables, in prescribed format, show the gender and ethnic background of the Directors at the date of this Report.
Number
of Board
members
Percentage
onthe
Board
Number
of senior
positions on
the Board
Men 3 60% 1
Women 2 40% –
Not specified/prefer not to say – – –
Number
of Board
members
Percentage
onthe
Board
Number
of senior
positions on
the Board
White British or other White (including minority white groups) 5 100% 1
Mixed/Multiple ethnic groups – – –
Asian/Asian British – – –
Black/African/Caribbean/Black British – – –
Other ethnic group, including Arab – – –
Not specified/prefer not to say – – –
The data in the above tables was collected through self-reporting by the Directors.
As at 31 March 2024 the Board comprised of five members. The gender breakdown is as follows: 2 female (40%); 3 male (60%). Each
Board member is also a Director of the Company’s subsidiary, AEW UK REIT 2015 Limited.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate Governance Statement (continued)
Director Induction and Training
All Directors receive an induction on joining the Board and other relevant training as necessary. As the business environment changes,
it is important to ensure the Directors’ skills and knowledge are refreshed and updated regularly. Accordingly, the Company Secretary
ensures that updates on corporate governance, regulatory and technical matters are provided to Directors at Board meetings. In this
way, Directors keep their skills and knowledge relevant so as to enable them to continue to fulfil their duties effectively. Each Director
has access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures
are followed and that applicable rules and regulations are complied with. Ms Peace and Mr Archibald were appointed to the Board on
1 October 2023 and were provided with a full induction programme. The programme covered the Company’s investment strategy,
policies and practices. Ms Peace and Mr Archibald were also given key information on the Company’s regulatory and statutory
requirements, including information on the role of the Board, matters reserved for its decision, the terms of reference for the Board
Committees, the Company’s corporate governance practices and procedures and the latest financial information.
Directors’ Conflicts of Interest
Directors have a statutory duty to avoid situations in which they have or may have interests that conflict with those of the Company,
unless that conflict is first authorised by the Board. This includes potential conflicts that may arise when a Director takes up a position
with another company. The Company’s Articles of Association allow the Board to authorise such potential conflicts and there is a
procedure in place to deal with any actual or potential conflict of interest. The Board deals with each appointment on its individual merit
and takes into consideration all relevant circumstances. A register of conflicts is maintained by the Company Secretary and is reviewed
at Board meetings to ensure that any authorised conflicts remain appropriate. The Directors are required to confirm at these meetings
whether there has been any change to their position.
Re-election and Tenure of Directors
The Board recognises the value of regular refreshment of its composition and remains committed to ensuring that it has the right mix
of skills and experience that are aligned with the evolution and strategic plans of the Company, while maintaining its independence of
character and judgement.
In accordance with the requirements of the AIC Code, the Board has adopted a policy whereby all Directors stand for annual re-election
and no Director will serve for a period of more than nine years.
On the basis of the performance evaluation process, the Board considers that all Directors continue to be effective, committed to their
roles and have sufficient time available to perform their duties. The Board therefore believes that it is in the best interests of shareholders
that each of the Directors is re-elected at the forthcoming AGM.
Succession Planning
The composition of the Board and succession planning are kept under review by the Board and reviewed annually as part of the Board
evaluation process in order to ensure an orderly refreshment of the Board. Succession planning was a key focus of the Board during
the year following its assessment of the tenure of current Board members. During the year under review, the Board engaged Trust
Associates, an independent external search consultancy, with no connection to the Company or its Directors, to assist with recruitment.
With the assistance of Trust Associates, and following an extensive external search, the Board appointed Liz Peace and Robin Archibald
as Non-Executive Directors with effect from 1 October 2023. Mr Archibald was appointed Chairman designate and will become
Chairman of the Board upon Mr Burton’s retirement at the 2024 AGM. The Board shortlisted and interviewed potential candidates and
concluded that both Liz Peace and Robin Archibald were exceptional candidates given their backgrounds and experience. Mrs Katrina
Hart will assume the role of Chair of JPMorgan UK Small Cap Growth & Income plc with effect from 27 November 2024. As a result of
this additional commitment, it is currently anticipated that she will retire as a Non-Executive Director of the Company at the AGM in
September 2025.
Culture
The Directors are aware that establishing and maintaining a healthy culture amongst the Board and in its interaction with the
Investment Manager, other service providers, shareholders and other stakeholders will support the delivery of the Company’s purpose,
values and investment strategy. The Board seeks to promote a culture of openness, transparency and integrity through ongoing
dialogue and engagement with its stakeholders, principally the Investment Manager.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate Governance Statement (continued)
The Company has a number of policies and procedures in place to assist with maintaining a culture of good governance including those
relating to diversity, Directors’ conflicts of interest and Directors’ dealings in the Company’s shares. The Board assesses and monitors
compliance with these policies as well as the general culture of the Board regularly through Board meetings and in particular during the
annual evaluation process.
The Board seeks to appoint the best possible service providers and evaluates their services on a regular basis as described on page 64.
The Board considers the culture of the Investment Manager and other service providers, including their policies, practices and behaviour,
through regular reporting from these stakeholders and in particular during the annual review of the performance and continuing
appointment of all service providers.
Internal Control Review
The Board is responsible for the systems of internal controls relating to the Company, including the reliability of the financial reporting
process, and for reviewing the systems’ effectiveness. The Directors have reviewed and considered the guidance supplied by the FRC
on risk management, internal control and related finance and business reporting, and an ongoing process is in place for identifying,
evaluating and managing the principal and emerging risks faced by the Company. This process, together with key procedures
established with a view to providing effective financial control, was in place during the year under review and at the date of this report.
The internal control systems are designed to ensure that proper accounting records are maintained, that the financial information on
which business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded.
The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve
the Company’s objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against
material misstatement or loss.
The Directors have carried out a review of the effectiveness of the systems of internal control as they have operated over the period and
up to the date of approval of the Annual Report and Financial Statements. There were no matters arising from this review that required
further investigation and no significant failings or weaknesses were identified.
Internal Control Assessment Process
Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Company’s overall
investmentobjective.
The following are the key internal controls which the Company has in place:
• a risk register has been maintained against which identified and emerging risks, as well as the controls in place to mitigate those
risks, can be monitored. The risks of any failure of internal controls are identified in the risk matrix, which is regularly reviewed by the
Board through the Audit Committee and the impact of such risks is also assessed. The principal and emerging risks and uncertainties
identified from the risk matrix can be found in the Strategic Report on pages 36 to 42;
• a procedure to monitor the compliance status of the Company to ensure that it can continue to be approved as a REIT;
• the Investment Manager and the Administrator prepare forecasts and management accounts which allow the Board to assess
performance; and
• the controls employed by the Investment Manager and other third party service providers, as evidenced by their ISAE 3402 or
equivalent reports, are periodically reviewed by the Audit Committee and there are agreed and defined investment criteria, specified
levels of authority and exposure limits in relation to investments, leverage and payments.
Over and above the ongoing process, as part of the year-end reporting process, the Board receives letters of comfort from the
Investment Manager, Company Secretary, Administrator and Registrar regarding their internal controls, accompanied by their ISAE 3402,
or equivalent reports, if available. Following the review of these submissions from service providers, the Board has determined that the
effectiveness of the systems of internal control was satisfactory.
AGM
The Company’s AGM will take place on 4 September 2024. The notice of this meeting and details of the resolutions to be put to the
AGM are contained in the circular sent to shareholders with this report and are available on the Company’s website.
54
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Report of the Audit Committee
I am pleased to present the Report of the Audit Committee for the year ended 31 March 2024.
Meetings
The Audit Committee met twice during the year and once following the year-end. Details of the composition of the Audit Committee
are set out in the Corporate Governance Statement on page 50 along with details on how the Committee’s evaluation process
wasconducted.
Role of the Audit Committee
The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external audit and internal
controls, including:
• monitoring the integrity of the financial statements of the Company, including its Annual and Half-Yearly Reports, and reviewing
significant financial reporting issues and judgements which they contain;
• reviewing the content of the Annual Report and Financial Statements and advising the Board on whether, taken as a whole, it is
fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and
performance, prospects, business model and strategy;
• keeping under review the adequacy and effectiveness of the Company’s risk management systems, reviewing the principal and
emerging risks facing the Company; and reviewing and approving the statements to be included in the Annual Report concerning
internal controls and risk management;
• reviewing the scope and effectiveness of the audit process undertaken by the Auditor;
• conducting the tender process and making recommendations to the Board in relation to the appointment, re-appointment or
removal of the Auditor and approving its remuneration and terms of engagement;
• reviewing and monitoring the Auditor’s independence, objectivity and effectiveness; and
• reviewing any non-audit services to be provided by the Auditor and monitoring the level of fees payable in that respect.
Matters Considered During the Year
The Audit Committee receives reports from external advisers and from the Investment Manager, as required, to enable it to discharge
itsduties.
The main activities undertaken during the year, and to the date of this Annual Report, were that the Audit Committee:
• reviewed the internal controls and risk management systems of the Company and its third party service providers;
• agreed the plan and fees with the Auditor in respect of the review of the Half-Yearly Report for the six months ended 30 September
2023 and the statutory audit of the Annual Report for the year ended 31 March 2024, including the principal areas of focus;
• received and discussed with the Auditor its report on the results of the review of the Half-Yearly Report and the year-end audit;
• reviewed the Annual and Half-Yearly Reports and recommended these to the Board for approval;
• reviewed the performance and effectiveness of the Auditor and considered its fees;
• reviewed the non-audit services provided by the Auditor and the associated fees incurred; and
• reviewed Knight Frank’s valuation of investment properties.
55
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Report of the Audit Committee (continued)
Significant Issues Considered by the Audit Committee
Valuation of Investment Properties
The Audit Committee determined that the key area of risk in relation to the financial statements of the Company was the valuation
of the investment properties. The 33 properties in the portfolio as at 31 March 2024 were externally valued by qualified independent
valuers, using the internationally accepted Royal Institution of Chartered Surveyors (‘RICS’) Valuation – Professional Standards, and
whilst comparable market transactions provide valuation evidence, there are assumptions which involve significant levels of judgement.
The Audit Committee considered the quarterly and year-end valuations of the Company’s portfolio which were discussed with the
Investment Manager and the Auditor during the audit of the financial statements.
Internal Controls
The Audit Committee carefully considers the internal control systems by regularly monitoring the services and controls of its third party
service providers.
The Audit Committee reviewed and, where appropriate, updated the risk matrix during the year to take account of principal and
emerging risks. It received reports on internal control and compliance from the Investment Manager and the Company’s other service
providers and no significant matters of concern were identified.
Internal Audit
The Company does not have an internal audit function. During the year, the Audit Committee reviewed whether an internal audit
function would be of value and concluded that this would provide minimal additional comfort at considerable extra cost to the
Company. While the Audit Committee believes that the existing system of monitoring and reporting by third parties remains appropriate
and adequate, it will actively continue, on an annual basis, to consider possible areas within the Company’s control environment which
may need to be reviewed in detail.
Maintenance of REIT Status
The Audit Committee monitored the compliance status of the Company and considered the requirements for the maintenance of
REITstatus, including all applicable tax legislation.
Going Concern and Long-term Viability of the Company
The Audit Committee considered the Company’s financial requirements for the next 12 months and concluded that it has sufficient
resources to meet its commitments. Consequently, the financial statements have been prepared on a going concern basis. The Audit
Committee also considered the longer-term viability statement covering a five-year period, and the underlying factors and assumptions
which contributed to the Committee deciding that this was an appropriate length of time to consider the Company’s long-term viability.
The Company’s going concern statement and the viability statement can be found on pages 62 and 63.
56
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Report of the Audit Committee (continued)
Audit Fees and Non-audit Services
The Audit Committee has sole responsibility for agreeing the audit fee in consultation with the Investment Manager, based on the
scope of the audit. The total audit fees for the year ended 31 March 2024 can be found in note 5 to the Financial statements. During the
year ended 31 March 2024, the Audit Committee reviewed the policy on the engagement of the Auditor to supply non-audit services,
taking into account the recommendations of the FRC. All non-audit services are reviewed by the Audit Committee, which makes
recommendations to the Board for the provision of each non-audit service and ensures that the statutory auditor is not engaged to
perform work that is prohibited under UK law.
The Auditor is permitted to provide non-audit related services where the work involved is closely related to the work performed in the audit.
These include:
• reviews of interim Financial information;
• reporting on internal Financial controls when required by law or regulation;
• reporting required by law or regulation to be provided by the Auditor; and
• prospectus/capital markets reporting.
The policy was reviewed and its application monitored by the Audit Committee during the year and it was agreed that the policy
remained appropriate for the Company.
Year ended
31 March 2024
Year ended
31 March 2023
Audit
Statutory audit of Annual Report and Financial Statements
£190,000 £168,000
£190,000 £168,000
Non-audit
ISRE 2410 (interim review fee)
£36,000 £31,000
£36,000 £31,000
Total fees paid to BDO LLP
£226,000 £199,000
Percentage of total fees attributed to non-audit services 16% 16%
57
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Report of the Audit Committee (continued)
Independence and Objectivity of the Auditor
It is the Audit Committee’s responsibility to monitor annually the performance, objectivity and independence of the Auditor. In
evaluating BDO LLP’s (‘BDO’) performance, the Audit Committee examined five main criteria – robustness of the audit process,
independence and objectivity, quality of delivery, quality of people and service, and value-added advice.
Having carried out the above review, the Audit Committee was satisfied with the Auditor’s performance and that the engagement of
BDO to provide the non-audit services was appropriate, and did not compromise its objectivity and independence.
External Audit Process
The Audit Committee reviews the effectiveness of the external audit carried out by the Auditor on an annual basis. At least twice a year,
the Audit Committee meets with the Auditor, once at the planning stage before the audit and once after the audit at the reporting
stage. The Auditor provides a planning report in advance of the annual audit, a report on the annual audit and a report on its review of
the interim financial statements. The Audit Committee has an opportunity to question and challenge the Auditor in respect of each of
these reports.
During the year under review BDO carried out the half year review for the Company. The Chairman of the Audit Committee maintains
regular contact with the audit partner throughout the year. In addition, at least once a year, the Audit Committee has an opportunity
to discuss any aspect of the Auditor’s work with the Auditor in the absence of the Investment Manager. After each audit, the Audit
Committee reviews the audit process and considers its effectiveness. The review of the 2024 audit concluded that the audit process had
generally worked well and no significant issues were identified specifically in relation to the Company.
We consider that the audit team assigned to the Company by BDO has a good understanding of the Company’s business which
enables it to produce a detailed, high-quality, in-depth audit and permits the team to scrutinise and challenge the Company’s financial
procedures and significant judgments. We asked the Auditor to explain the key audit risks and how these have been addressed. We also
considered BDO’s internal quality control procedures and transparency report and found them to be sufficient. Overall, the Committee is
satisfied that the audit process is transparent and of good quality and that the Auditor has met the agreed audit plan.
Mark Kirkland
Audit Committee Chairman
1 July 2024
58
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Remuneration Report
Statement from the Chairman
Given the structure and size of the Board, the Board does not consider it necessary to appoint a separate Remuneration Committee.
The Board consists entirely of non-executive Directors and the Board as a whole is responsible for determining the remuneration of
each Director and each Director abstains from voting on their own individual remuneration. Directors’ fees from 1 July 2023 to 31 March
2024 were at a level of £38,000 per annum for the Chairman, £35,000 per annum for the Audit Committee Chairman and £30,000 per
annum for the other Directors. The Directors' remuneration is considered on an annual basis.
The Board met on 19 June 2024 and considered the level of Directors' remuneration for the year ended 31 March 2025. No changes
were proposed to the levels of remuneration.
The Company’s Articles of Association permit the Company to provide pensions or similar benefits for Directors and employees of the
Company. However, no pension schemes or other similar arrangements have been established and no Director is entitled to any pension
or similar benefits. The Directors are not entitled to any compensation for loss of office. No Director is entitled to any other monetary
payment or any assets of the Company. Accordingly, the Single Total Figure table on page 59 does not include columns for any of these
items or their monetary equivalents.
An ordinary resolution to approve the Directors’ remuneration report will be put to shareholders at the forthcoming AGM to be held on
4 September 2024. No significant changes are proposed to the way in which its current Directors’ Remuneration Policy, approved by
shareholders in 2023, will be implemented during the course of the next financial year.
Voting at AGM
The Directors’ remuneration report for the year ended 31 March 2023 and the Directors’ remuneration policy were approved by
shareholders at the AGM held on 14 September 2023. The results taken on a poll were as follows:
Remuneration Report 2023
Number of
votescast
Percentage of
votes cast
For
28,883,800 99.06
Against
274,328 0.94
Total votes cast
29,158,128
Number of votes withheld
114,384
Remuneration Policy 2023
For
28,871,860 99.02
Against
286,268 0.98
Total votes cast
29,158,128
Number of votes withheld
114,384
59
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Remuneration Report (continued)
Performance of the Company
The chart below compares the share price total return (assuming all dividends re-invested) to shareholders compared with the total
return on the FTSE 350 and FTSE 350 Real Estate Indices over the period since the inception of the Company. These indices have been
chosen as they are considered to be an appropriate benchmark against which to assess the relative performance of the Company.
Source: Bloomberg
Directors’ Remuneration for the Year Ended 31 March 2024 (audited)
Fees paid Total
Name of Director
Year ended
31 March
2024
Year ended
31 March
2023
Year ended
31 March
2024
Year ended
31 March
2023
% change in
Directors’
fees
Mark Burton £38,000 £35,000 £38,000
£35,000 8.57
Bim Sandhu* £17,500 £32,500 £17,500
£32,500 N/A
Katrina Hart £30,000 £27,500 £30,000
£27,500 9.09
Mark Kirkland** £32,500 £10,894 £32,500 £10,894 N/A
Robin Archibald*** £15,000 N/A £15,000 N/A N/A
Liz Peace***
£15,000
N/A
£15,000
N/A N/A
£148,000 £105,894 £148,000 £105,894
* retired on 30 September 2023.
** appointed on 9 November 2022.
*** appointed on 1 October 2023.
There are no further fees to disclose as the Company has no employees or executive directors. The figures detailed in the Directors’
Remuneration Report disclose Director remuneration only. There are no variable elements payable to the Directors.
The Company is committed to ongoing shareholder dialogue and any views which are expressed by shareholders on the fees being paid
to Directors would be taken into consideration by the Board when reviewing the Directors’ Remuneration Policy and in the annual review
of Directors’ fees.
pence
Cumulative Share Price Total Return
AEW UK REIT pl
c
FTSE 350
FTSE 350 Real
Estate
50
100
150
200
250
Apr
2015
Aug
2015
Dec
2015
Apr
2016
Aug
2016
Dec
2016
Apr
2017
Aug
2017
Dec
2017
Apr
2018
Aug
2018
Dec
2018
Apr
2019
Aug
2019
Dec
2019
Apr
2020
Aug
2020
Dec
2020
Apr
2021
Aug
2021
Dec
2021
Apr
2022
Aug
2022
Dec
2022
Apr
2024
Apr
2023
Aug
2023
Dec
2023
60
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Remuneration Report (continued)
Annual percentage change in Directors’ remuneration
The following table sets out the annual percentage change in Directors’ fees for the previous four years to 31 March 2024.
Director
Year ended
31 March
2024
Year ended
31 March
2023
Year ended
31 March
2022
Year ended
31 March
2021
% Change
in total
remuneration
between 2023
and 2024
% Change
in total
remuneration
between 2022
and 2023
% Change
in total
remuneration
between 2021
and 2023
Mark Burton £38,000 £35,000 £35,000 £35,000
8.57 – –
Bim Sandhu* £17,500 £32,500 £32,500 £32,500 N/A
– –
Katrina Hart £30,000 £27,500 £27,500 £27,500
9.09 – –
Mark Kirkland** £32,500 £10,894 N/A N/A N/A
– –
Robin Archibald*** £15,000 N/A N/A N/A N/A N/A N/A
Liz Peace*** £15,000 N/A N/A N/A N/A N/A N/A
* retired 30 September 2023.
** appointed 9 November 2022.
*** appointed 1 October 2023.
Relative Importance of Spend on Pay
The table below sets out, in respect of the year ended 31 March 2024:
(a) the remuneration paid to the Directors;
(b) the management fee and expenses which have been included to give shareholders a greater understanding of the relative
importance of spend on pay; and
(c) distributions to shareholders by way of dividends.
Year
ended
31 March
2024
Year
ended
31 March
2023
Directors’ fees
£148,000
£105,894
Management fee and expenses £1,391,335 £1,548,059
Dividends paid
£12,673,980
£12,673,980
Note: the items listed in the table above are as required by the Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 ss.20, with the exception of the management fee and expenses, which has been included
because the Directors believe that it will help shareholders’ understanding of the relative importance of the spend on pay. The
figures for this measure are the same as those shown in note 5 to the financial statements.
61
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Remuneration Report (continued)
Statement of Directors’ Shareholdings and Share Interests (audited)
Neither the Company’s Articles of Association nor the Directors’ Letters of Appointment require a Director to own shares in the
Company. The interests of the Directors and their persons closely associated in the equity of the Company at 31 March 2024 are shown
in the table below:
Number of Ordinary Shares % of Total Voting Rights
Director 2024 2023 2024 2023
Mark Burton 75,000 75,000 0.05 0.05
Katrina Hart 19,145 19,145 0.01 0.01
Mark Kirkland – – – –
Robin Archibald
–
– – –
Liz Peace –
–
–
–
The Company has not been informed of any changes to the above interests between 31 March 2024 and the date of this report. Both
Mr Archibald and Ms Peace have indicated to the Board their intention to acquire shares in the Company when it is practical to do so.
Approval
The Directors’ Remuneration Report has been approved by the Board of Directors and signed on its behalf by:
Mark Burton
Chairman
1 July 2024
62
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report
The Directors’ Report, prepared in accordance with the requirements of the Companies Act 2006 and the FCA’s Listing Rules and
Disclosure Guidance and Transparency Rules, comprises pages 62 to 80 and incorporates the Corporate Governance Statement on
pages 48 to 53.
Dividends
The Company pays dividends on a quarterly basis.
The interim dividends paid by the Company are set out in note 12 of the financial statements. No final dividend is being proposed.
Directors
The Directors of the Company are listed on pages 46 and 47. All served throughout the year under review, with the exception of
Mr Archibald and Ms Peace who were appointed on 1 October 2023. Mr Sandhu retired from the Board on 30 September 2023.
Power of Directors
The Directors’ powers are determined by UK legislation and the Company’s Articles of Association. The Articles of Association may be
amended by a special resolution of the members. The Directors may exercise all of the Company’s powers provided that the Articles of
Association or applicable legislation do not stipulate that any such powers must be exercised by the members.
Indemnity Provisions
Save for such indemnity provisions in the Company’s Articles of Association, there are no qualifying third party indemnity provisions
in force. The Board has agreed to a procedure by which Directors may seek independent professional advice, if necessary, and at the
Company’s expense. The Company has also arranged for appropriate provision of Directors’ and Officers’ Liability Insurance.
Going Concern
The Directors assessed the Company’s ability to continue as a going concern, which takes into consideration current economic
uncertainty, as well as the Company’s cashflows, financial position, liquidity and borrowing facilities.
As at 31 March 2024, the Company had £11.40 million of cash at bank. The Company’s loan is held with AgFe and is a £60.00m facility
with a five-year term. This is priced as a fixed rate loan with a total interest cost of 2.959% and associated 10% projected debt yield and
60% loan to value (“LTV”) covenants. The Company reported an LTV of 31.99% at year-end. This provides room for an £87.57 million fall
in portfolio valuation before breaching the 60% hard LTV covenant. Moreover, based on the £60.00m of debt drawn as at year-end, the
Company had a projected debt yield of 26.82%, comfortably in excess of the 10% covenant.
The Company benefits from a secure, diversified income stream from a tenancy profile which is not overly reliant on any one tenant or
sector, which reduces risk. The Directors also noted that:
• The Company’s rent collection has been strong, with 98% of contracted rent either having been collected, or payment plans agreed,
for the March 2024 quarter.
• Based on the contracted rent as at 31 March 2024, a reduction of 62.71% in net rental income could be accommodated before
breaching the debt yield covenant in the Company’s re-financed debt arrangements.
• Based on the property valuation at 31 March 2024, the Company had room for an £87.57 million fall in portfolio valuation before
breaching the maximum LTV hard covenant in the Company’s re-financed debt arrangements.
• The Company’s cash flow can also be significantly managed through the adjustment of dividend payments, to the extent that this
does not breach the REIT regime requirements for distributions.
63
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Going Concern (continued)
Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months from the date of approval of these
financial statements, including a worst-case plausible downside scenario which makes the following assumptions:
• a reduction in net rental income of 30%;
• no new lettings or renewals, other than those where terms have already been agreed;
• a 20% fall in property valuations; and
• no new acquisitions or disposals.
In the above scenario, the Company is forecast to generate a positive cash flow before dividend payments, however it would generate
a cash flow much lower than its target dividend of 8 pps per annum. Moreover, the Company is forecast to pass the debt yield covenant
during the 12-month period with a minimum projected yield of 18%, compared with the limit of 10%, assuming that no repayments of
the facility were to be made.
Given the Company’s substantial headroom against its borrowing covenants, the Directors believe that the Company is well placed to
manage its financing and business risks. The Directors are confident that the Company will have sufficient funds to meet its liabilities as
they fall due for at least 12 months from the date of approval of the financial statements and therefore the financial statements have
been prepared on a going concern basis.
Viability Statement
The Directors have also assessed the prospects of the Company over a period longer than the 12 months required by the ‘Going
Concern’ provisions. The Board has considered the nature of the Company’s assets, liabilities and associated cash flows, and has
determined that five years up to 31 March 2029 is the maximum timescale over which the performance of the Company can be forecast
with a material degree of accuracy and so is an appropriate period over which to assess the Company’s viability. Considerations in
support of the assessment of the Company’s viability over a five-year period include:
• The Company’s loan is held with AgFe and is a £60.00m facility with a five-year term, maturing in May 2027. This is priced as a fixed
rate loan with a total interest cost of 2.959%;
• the Company’s property portfolio has a WAULT of 5.58 years to expiry, representing a secure income stream for the period under
consideration;
• the Company benefits from a portfolio which is diversified in terms of sector and location, mitigating the risk of tenant default during
the period; and
• most leases contain a five-year rent review pattern and therefore an assessment over five years allows the Directors to assess the
impact of the portfolio’s reversion arising from rent reviews.
In assessing the Company’s viability, the Board has carried out a thorough review of the Company’s business model, including future
performance, REIT compliance, liquidity, dividend cover and banking covenant tests over a five-year period. The business model is subject
to annual sensitivity analysis, which involves flexing a number of key assumptions underlying the forecasts both individually and in
aggregate for normal and stressed conditions. The five-year review also considers whether financing facilities will be renewed as required.
The following scenarios were tested, both individually and combined, in an effort to represent a severe but plausible scenario:
• a reduction in net rental income of 30%;
• a 20% fall in portfolio valuation; and
• increased periods of vacancy.
Based on the result of this analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the five-year period of their assessment.
64
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Subsidiary Company
Details of the Company’s dormant subsidiary, AEW UK REIT 2015 Limited, can be found in note 20 to the financial statements.
Management Arrangements
AEW UK Investment Management LLP is the Company’s Investment Manager and has been appointed as the AIFM. Under the terms of
the Investment Management Agreement, the Investment Manager is responsible for the day-to-day discretionary management of the
Company’s investments subject to the investment objective and policy of the Company and the overall supervision of the Directors. The
Investment Manager is entitled to receive a quarterly management fee in respect of its services, calculated at the rate of one-quarter
of 0.9% of the prevailing NAV (excluding uninvested proceeds from fundraisings). There is no performance fee. Any investment by the
Company into the Core Fund is not subject to management fees or performance fees otherwise charged to investors in the Core Fund
by the Investment Manager. The Investment Management Agreement may be terminated by the Company or the Investment Manager
giving 12 months’ written notice.
Continuing Appointment of the Investment Manager
The Board has reviewed the appropriateness of the continuing appointment of the Investment Manager, ensuring the terms and
conditions of the Investment Management Agreement align with the investment policy and investment objective of the Company.
It is satisfied that the terms of the Investment Management Agreement remain fair and competitive, and in the best interests of
shareholders.
In the opinion of the Directors, the continuing appointment of the Investment Manager is in the interests of shareholders as a whole.
This is due to the Investment Manager successfully managing the Company’s portfolio and continuing to apply the Company’s
investment policy, thereby allowing the Company to continue paying dividends in accordance with the targeted investment objective.
Review of Service Providers
The Board reviews the ongoing performance and the continuing appointment of all service providers of the Company on an annual
basis. The Board also considers any variation required to the terms of all service providers’ agreements.
A review of all the other service providers was undertaken during the year which concluded that the services provided to the Company
were satisfactory and that their continued appointments were in the best interests of the shareholders.
Financial Risk Management
The financial risk management objectives and policies can be found in note 23 to the financial statements.
Social, Community and Employee Responsibility
The Company is an externally managed REIT and has no direct employees. The management of the portfolio has been delegated to
the Investment Manager who provides the employees that support the Company. All other functions of the Company have also been
outsourced and as the Company has no employees, there is no further reporting in respect of these provisions.
The Investment Manager is an equal opportunities employer who respects and seeks to empower each individual and the diverse
cultures, perspective, skills and experiences within its workforce. For further information on the Investment Manager’s principles in
relation to people including diversity, gender pay, employee satisfaction surveys, wellbeing and retention, please refer to the ESG link
within the Corporate Responsibility area at www.aewukreit.com.
The Company is not required to produce a statement on slavery and human trafficking pursuant to the Modern Slavery Act 2015 as it
does not satisfy all the relevant triggers under that Act that required such a statement. The Company does, however, closely monitor the
policies of its suppliers to ensure that proper provisions are in place.
AEW UK Investment Management LLP, the Investment Manager to the Company, is part of the Natixis Group whose statement on
Slavery and Human Trafficking has been published in accordance with the Modern Slavery Act 2015.
https://www.im.natixis.com/uk/ resources/slavery-and-human-trafficking-statement.
65
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
How We Engage With Stakeholders
Investors
The Investment Manager maintains an open dialogue with shareholders and analysts. All feedback is provided to the Board on a
regularbasis.
The Company provides investors with regular updates on its business activity and financial performance. These quarterly factsheets
are available, along with Annual/Half Year accounts and London Stock Exchange RNS announcements, on the Company’s website at
www. aewukreit.com.
Shareholders are encouraged to contact the Investment Manager to raise any matters of concern and to attend the AGM where possible
to meet and discuss the Company’s operations with the Board.
The Chairman is available to meet with shareholders to understand their views on governance and the Company’s performance where
they wish to do so. With assistance from the Investment Manager, during the year the Chairman sought meetings with shareholders
who wished to meet with him.
Tenants
The Investment Manager, more specifically the Asset Management team, maintain an ongoing dialogue with tenants either directly
or through its appointed property manager. The property manager issues an annual satisfaction survey to all tenants which provides
qualitative feedback on their relationship with the property manager and Investment Manager.
Shareholder engagement and investor meetings
During the year, the Company held 8 meetings with approximately 24 potential and existing institutional shareholders. These
engagements were attended by the Investment Manager and Liberum, Broker to the Company. Quarterly, the Company also engaged
with its retail investors through virtual presentations held on the Investor Meet Company platform.
2024 AGM
The Company’s AGM will take place on 4 September 2024. The notice of this meeting and details of the resolutions to be put to theAGM
are contained in the circular sent to shareholders with this report and are available on the Company’s website. The voting results of the
AGM will be published on the Company’s website www.aewukreit.com.
MIFID II
As an externally managed REIT with a premium listing under Chapter 6 of the FCA’s Listing Rules, the PRIIPS (Packaged Retail and
Insurance-based Investment Products) regulation applies to the Company. The Company is required to publish a Key Information
Document (‘KID’) that is updated on a semi-annual basis on the Company’s website www.aewukreit.com.
Environmental, Social and Governance Policy
The Investment Manager is committed to creating long-term value for shareholders and adheres to a policy of sustainable and
responsible investment (‘SRI’). The Investment Manager’s SRI policy can be found within the Corporate Responsibility area on the
Company's website www.aewukreit.com. The Investment Manager reviews its Sustainability Policy on an annual basis and it is approved
by the Management Committee of the Investment Manager.
Over the coming years, we believe that both occupiers and investors will increasingly focus on the way in which ESG issues are
managed. In turn, this is expected to impact on building obsolescence, lettability, rates of lease renewals and ultimately the rental and
capital values for individual assets. In recognition of this, the Board believes in open disclosure of ESG performance, including through
participation in the annual Global Real Estate Sustainability Benchmark (‘GRESB’) survey.
GRESB is the dominant global standard for assessing ESG performance for real estate funds and companies. GRESB requires the
Company to report against a wide array of ESG matters and highlights areas for improvement and opportunities for growth.
66
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Environmental, Social and Governance Policy (continued)
The Company uses the annual outcome from GRESB as a benchmark to assess its own sustainability performance.
The Company was awarded two stars from GRESB for 2023, maintaining its score of 67 (peer group average 65).
A large portion of the GRESB score relates to data coverage. Due to the high percentage of single-let assets with tenant procured
utilities, the Company does not score as well as funds with a larger holding of managed multi-let assets.
Within GRESB, the Company is benchmarked against two dimensions:
(1) Management – relating to strategy and leadership management, policies, risk management and stakeholder engagement
completed at an entity level. The Company achieved a score of 29 out of 30. This section is dependent on fund level policies and
initiatives which are directly applicable to the Company (e.g. Environmental, Governance and Employee Policies).
(2) Performance – relating to the measurement of the fund’s asset portfolio performance. The Company achieved a score of 39 out of
70. This score is representative of the fund composition as the Performance dimension is heavily influenced by the level of control
landlords have across issues such as energy management, service charge budgets and access to environmental data.
The Investment Manager is in the process of submitting the Company’s GRESB assessment for the year from 1 April 2023 to 31 March
2024 and expects to receive the results of the assessment in September 2024.
The Company is committed to improving its transparency of ESG performance and has adopted the European Public Real Estate
Association (‘EPRA’) Best Practice recommendations on Sustainability Reporting 2017.
The progress that the Company has made on ESG issues during the period has been recognised externally, most notably by being
awarded the EPRA Sustainability Best Practice Recommendations Silver Award and receiving its Most Improved Award for 2020. This was
awarded in addition to the EPRAGoldMedal for Financial Reporting received in the year.
Further information on the Company’s engagement with stakeholders can
be found on pages 43 to 45 and the full ESG disclosures for the Company,
including Streamlined Energy and Carbon Reporting disclosures, can be found
in the EPRA Sustainability Performance Measures on pages 134 to 147.
Our fiduciary duty to shareholders will always come first in all investment
decision-making. The Investment Manager offers clients long-term value-
based real estate investment solutions. This is delivered via stock selection
and asset management of UK commercial real estate. It is the Investment
Manager’s belief that this financial objective can be achieved simultaneously
with a constructive engagement with environmental and social concerns.
The Board believes environmentally responsible fund management means being active, on the ground every day. As such, the Company
operates an Environmental Management Systems (‘EMS’) which is designed to be aligned with ISO4001, to integrate sustainability
objectives into the overall business strategy. Our property managers, MAPP, also apply their own internal EMS to all managed assets across
the portfolio. All members of the Investment Manager’s team have a sustainability objective within their annual performance objectives.
Greenhouse Gas Emissions
Refer to the EPRA Sustainability Performance Measures on pages 134 to 147 for Greenhouse Gas Emissions disclosures.
67
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures
The Board and the Investment Manager recognise the importance of understanding the risks and opportunities presented by climate
change, including the potential impact on its business and the value of investments under its management. The following disclosures
are intended to provide decision-useful information in a manner consistent with the TCFD. Accordingly, the disclosures are organised
thematically, addressing Governance, Strategy, Risk Management, Metrics and Targets. In future reporting periods the Board and the
Investment Manager will seek to incorporate TCFD sector-specific guidance.
This is the Company’s third year of voluntary reporting against the TCFD framework; we remain committed to further improvements, in
terms of both the quality of disclosures and degree of alignment with the TCFD recommendations. In future reporting periods the Board
and the Investment Manager expect that the Company’s TCFD framework will demonstrate continual refinement of climate-related
assessments, as well as integrating more sophisticated and comprehensive risk management practices in day-to-day operations.
1. Governance
Board oversight of climate-related risks and opportunities
The Board is ultimately responsible to stakeholders for the Company’s activities and for oversight of climate-related risks and
opportunities. The Board receives quarterly updates from the Investment Manager regarding climate-related issues, activities and
initiatives, and progress reports against climate related goals and targets.
As part of the Audit Committee’s review of ongoing performance and continuing appointment of key service providers, consideration is
given to key service providers’ ESG credentials and expertise. The Audit Committee remains responsible for reviewing and approving the
content of the Company’s TCFD disclosure. Following Mark Kirkland's appointment as non-Executive Director on 9 November 2022, the
Board nominated him as the Board’s “ESG Champion”. The ESG Champion will regularly meet with the Investment Manager to discuss
ESG issues including climate-related risks and opportunities facing the Company and will report back to the wider Board as necessary.
The knowledge of the Board on ESG-related matters continues to be enhanced through interaction with the Investment Manager
and training. In January 2023, the Board undertook further TCFD training provided by the Investment Manager and AEW’s Head of
Sustainable Responsible Investment in Europe to support their understanding of climate change, climate resilience assessment and
other ESG risks and opportunities.
The Investment Manager’s role in assessing and managing climate-related risks and opportunities
AEW Global Governance:
AEW’s approach to Environmental, Social, Governance and Resilience issues (“ESG+R”), which includes climate-related risks and
opportunities, is integrated into its broader governance practices. AEW’s governance relies on a committee structure where responsibility
for oversight of AEW’s operations has been delegated to senior management teams that meet on a regular and formalised basis. The
organisation chart below illustrates how the AEW group integrates climate-related considerations at a UK, European and global level.
The Global ESG+R Steering Committee and its subcommittee structure play a central role in assessing and managing climate-related
risks and opportunities for AEW, both at the enterprise level and within investment activities.
AEW UK REIT Board
Global ESG+R Steering Committee
European Executive Committee
European ESG+R
Committee
European Risk Committee
AEW UK Investment Management LLP (Investment Manager)*
UK ESG+R Working Group Portfolio Management Review Committee
* AIFM & Investment Manager
UK
Europe
Global
68
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
1. Governance (continued)
European Governance:
AEW’s European Executive Committee (“ExCom”) is ultimately responsible for climate-related risks at the European level and delegates
to a number of sub-committees including:
• European ESG+R Committee (“ESG+R Com”) – responsible for delivering the sustainability strategy in Europe, the coherence of
policies relating to climate risks and the implementation climate risk policy. ESG+R Com meets every two months.
• European Risk Committee (“ERC”) – the principal European-wide risk management forum, where all sustainability risks can be
considered according to an established framework. ERC meets quarterly.
The ERC and ESG+R Com includes senior-level employees such as the European CEO, Head of Socially Responsible Investment, country
and function representatives (investment, asset management, portfolio management, fund financial management, legal, compliance
and risk). Individual members are allocated responsibility for specific climate risks and resilience matters, including physical risks,
regulatory risk, market risk, insurance risk and reputational and liability risk.
The ESG+R Com and the ExCom receive periodic reports on the status of defined indicators in order to monitor the progress of the
climate policy objectives and targets.
UK Governance (Investment Manager Board’s oversight of climate-related risks and opportunities)
The Investment Manager’s Board is responsible for assessing climate-related risks and opportunities for the Investment Manager and its
fund mandates. The Investment Manager Board membership is as follows: two independent non-executive directors; AEW Europe CEO;
Head of AEW UK; Head of Operations and Risk Management; Head of Separate Accounts.
At each meeting the Investment Manager’s Board receives updates on the firm’s activities, initiatives and progress against climate-
related goals from sub-committees and working groups including:
• Portfolio Management Review Committee (“PMRC”) – this is the principal UK-focused risk management forum, where all
sustainability risks can be considered according to an established framework.
• UK ESG+R Working Group (“WG”) – which oversees ESG+R projects and management of climate-related risks and opportunities in
the UK, to ensure risk management objectives are met and aligned with the overall risk management framework.
The Investment Manager’s Board undertakes regular training on ESG-related matters including TCFD and climate resilience assessment
to support their understanding of climate change and other ESG risks and opportunities. The Investment Manager will have regard for
climate-related issues when considering the Fund’s business model and strategy and risk management policies.
The Investment Manager’s approach to the governance and management of environmental impacts is outlined within its Climate
Adaptation Policy. The WG works closely with the European ESG+R Committee membership and acts as a body to ensure the Fund
identifies and considers climate-related risks and opportunities. In light of emerging trends and new regulations, the WG or sub-group
evaluates targets and advises on actions to help mitigate climate-related risks.
Climate-related issues and risks are reviewed for the Fund at the PMRC, which includes Head of Operations and Risk Management, Head
of Compliance and Head of AEW UK. The PMRC reports to the Investment Manager’s Board and Investment Management Committee,
with any material matters escalated to the ERC and ExCom. Through the work of PMRC, WG and third-party specialist climate
consultants, the Investment Manager ensures it needs with respect to training and professional advice are met.
The Investment Manager is responsible for monitoring trends and developments in climate related issues. The Investment Manager
reports quarterly to the Company’s Board on ESG matters.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy
Strategy – disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy,
and financial planning where such information is material
The Investment Manager anticipates that investors and valuers will increasingly factor climate-related risks into market pricing if
transition and physical risks are not appropriately managed. We will therefore increasingly assess climate-related impacts on liquidity
and market pricing as a consequence of environmental obsolescence and depreciation. The Investment Manager assesses climate-
related risks and opportunities against short-term (3 years or less), medium-term (3 to 7 years) and long-term (over 7 years) time
horizons to align with the proposed changes to Minimum Energy Efficiency Standards (MEES).
In accordance with TCFD, the Investment Manager identifies the two principal categories of risks associated with climate change as:
• Transition Risk – associated with the transition to a low carbon economy e.g. policy, legal, technological and market changes to
address mitigation and adaptation requirements.
• Physical Risk – this includes acute (event driven e.g. more severe floods) and chronic (longer-term shifts such as sustained higher
temperatures causing chronic heatwaves) risks.
Climate-related risks and opportunities the organisation has identified over the short, medium and long term:
Risks Specific Risk Potential Financial Impact Strategy Time Horizon
Policy &
Legal – EPC
Compliance
The Minimum Energy
Efficiency Standards
Regulations (“MEES”)
proposed changes to
mandate increasing
the minimum Energy
Performance Certificate
(“EPC”) rating to ‘E’ by 2023,
‘C’ by 2027 and to ‘B’ by 2030.
MEES would prevent the
Company from leasing
non-compliant space,
potentially resulting in an
asset becoming ‘stranded’ or
requiring significant capital
expenditure.
Loss of revenue for unlettable
space or lower rental income.
Impact on valuation.
Increase in capital
expenditure to meet
minimum requirements.
Non-compliance fines are
potentially significant.
Risk monitoring of
EPC ratings across the
portfolio, contributing to
the development of Asset
Sustainability Action Plans
(“ASAPs”) quantifying capital
expenditure requirements
or the existence of relevant
MEES exemptions.
Short to
medium term
risk
Policy & Legal –
Carbon Pricing
Costs could increase as
carbon pricing is factored
into construction and
operating costs (from
embodied carbon and costs
of carbon intensive energy
for occupiers).
Direct costs associated with
emissions pricing.
Increased capex costs
during construction and
refurbishment.
Develop calculation of carbon
footprint for the portfolio and
implement action plan to
reduce GHG emissions.
Medium to
long term
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Risks Specific Risk Potential Financial Impact Strategy Time Horizon
Market –
Occupier
Occupiers may vacate assets
that are unable to meet
their energy efficiency or
greenhouse gas (“GHG”)
emission tolerance.
Increased void costs.
Increased capital
expenditure.
Impact on valuation.
Occupier engagement
to ascertain occupier’s
commitment to transition
to low carbon economy
and net zero targets.
EPC management, asset
sustainability action plans
(ASAPs) to improve resilience
and energy efficiency of
assets.
Medium term
Market –
Energy costs
High energy and utility
consumption may increase
exposure to energy price
fluctuations exacerbated by
climate change.
Potential impact on service
charge affordability for
tenants.
Occupier engagement
particularly for assets with
energy-intensive use.
Engage regularly with
occupiers to identify low-
carbon solutions which may
reduce energy consumption,
costs and improve energy
performance.
Pilot on-site renewable
energy generation and
storage project with selected
tenants.
Short to
medium term
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy (continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Risks Specific Risk Potential Financial Impact Strategy Time Horizon
Market –
Investors
Investors and valuers may
price less energy efficient
assets more conservatively to
reflect the potential cost and
risks.
Existing and prospective
Company investors may
attach onerous conditions on
the Investment Manager and
Company to meet their own
standards, regulations and
requirements.
Impact on valuation.
Impact on the Company's
ability to raise new or retain
existing capital.
Continual review of asset
business plans with
consideration to lease expiry,
EPC ratings and opportunity
to implement energy
efficiency solutions.
AEW will assess the additional
costs and benefits of climate-
related initiatives with respect
to liquidity and pricing.
Focus on investor
engagement, develop
improved communication
and presentation of ESG
strategy.
In 2024/25 the Company will
assess further the pathway to
net zero and will report this to
investors in future reporting
periods.
Medium term
Technology
– Lower
emissions
UK Government requirement
to transition to lower GHG
emissions technology (e.g.
from natural gas boilers
to low-carbon heating
technologies such as air and
ground source heat pumps).
Potential material capital
expenditure to meet
requirements.
AEW will continue to
assess the additional costs
of climate-related issues
compared to any assessment
of reduced liquidity and
market pricing due to
environmental obsolescence
and depreciation.
EPC management and asset
sustainability action plans to
improve resilience and energy
efficiency over time.
Medium term
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy (continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Risks Specific Risk Potential Financial Impact Strategy Time Horizon
Reputational –
Occupiers and
Investors
Fall in demand from tenants
for properties with inefficient
building performance or
concern over the Company's
reputation with regard to
climate risks.
Increased stakeholder
concern and poor investor
relations.
Potential risk of stranded
assets, leading to reduced
valuation.
Impact on the Company's
ability to raise new or retain
existing capital.
Focus on key stakeholder
engagement, develop
improved communication
and presentation of ESG
strategy (and the effective
delivery of it).
Medium term
Acute (floods,
windstorms,
cold weather,
heatwaves)
Increased frequency
and intensity of extreme
weather events leading to
property damage, increased
maintenance and repair
costs.
Requirement for protection
measures – e.g. flood
protection and drainage
measures.
Cost of maintaining and
repairing assets.
Increased insurance costs.
Impact on valuation and
potential inability to sell or
lease property.
Undertake asset-level climate
resilience audits and develop
pre-investment due diligence
process to identify vulnerable
investments.
Short to
medium term
Chronic
(sustained
higher or lower
temperatures)
Rising temperatures leading
to increased utility costs
and investment in cooling
equipment and solutions.
Reduced thermal comfort
of occupiers resulting in lack
of demand from potential
occupiers.
Potential impact on service
charge affordability for
tenants.
Cost of installing cooling
and heating equipment and
solutions.
Loss of revenue for unlettable
space or lower rental income.
Impact on valuation.
Incorporate climate change
scenarios within investment
framework that are suitable
for real estate investment
strategies.
Medium to
long term
Chronic (rising
sea levels and
water stress)
Risk of sustained flooding
and requirement for
protection measures –
e.g. flood mitigation and
drainage projects.
Risk asset becomes stranded.
Cost of installing,
maintaining and repairing
assets.
Increased insurance costs or
asset becoming uninsurable.
Loss of revenue for unlettable
space or lower rental income.
Impact on valuation.
Incorporate climate change
scenarios within investment
framework that are suitable
for real estate investment
strategies.
Medium to
long term
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy (continued)
73
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Risks Specific Risk Potential Financial Impact Strategy Time Horizon
Resource
efficiency
Reduce energy and water use.
Reduce carbon emissions
and improve energy efficient
buildings e.g. installation of
LED lighting.
Improve occupier resilience
and efficiency alongside
comfort and well-being.
Potential material capital
expenditure.
Reduce operating
expenditure through
efficiency gains.
Reduce GHG emissions and
possible future carbon taxes.
To commission EPC+ reports
on selected assets, energy
efficiency audits and net zero
pathway assessments on
selected assets.
Where appropriate, prepare
larger buildings to become
subject to public disclosure
framework.
Short to
medium term
Energy source Investment in lower emissions
sources of energy and use of
new technologies.
Investment in on-site
renewable energy generation
and storage e.g. installation of
solar PV and batteries.
Potential material capital
expenditure.
Additional revenue through
sale of renewable energy to
customers and the grid.
Protect against energy cost
volatility for our tenants.
Cost of improvement.
Deploy where possible on-site
renewable energy generation
and storage assets in
partnership with tenants.
In the short term this will
include pilot projects with
tenants prior to undertaking
feasibility studies on other
assets.
Short to
medium term
Products and
Services
Improve building amenities
(e.g. EV charging, install LED
lights).
Improve the marketability of
a property including rental
value and valuation.
Continued review and
development of ASAPs.
Engagement with tenants
to understand their
requirements.
Short to
medium term
Resilience The development of net zero
carbon assets could future-
proof the portfolio against
tightening regulation e.g.
MEES standards.
Increased market value of
properties through resilience
planning.
To consider further during
2023/24 the potential
pathway to net zero. Consider
adopting net zero target and
pathway.
Medium to
long term
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy (continued)
74
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy and financial planning
Having identified relevant risks and opportunities, the Board and the Investment Manager describe below how these influence and are
incorporated into strategic and financial planning. With respect to its business activities, the Investment Manager is seeking to improve
investment, asset management and risk monitoring processes to avoid transition and physical risks having unforeseen impacts on real
estate portfolios. Similarly, the Investment Manager seeks to capitalise on any advantages that can be obtained from optimising its
decision-making, which necessarily must take account of climate-related impacts on markets. It should be noted that, once strategies
have been agreed, we work with a range of specialist advisors to ensure their timely delivery. During the period, our UK efforts were
focused principally on transition risk related to MEES/EPC compliance and adapting to the physical risks of climate disruption.
With respect to the latter, climate risks are now systematically integrated into AEW UK’s investment process. We have incorporated
a comprehensive ESG+R acquisition assessment into our due diligence process for reviewing and evaluating the potential risks
and opportunities of our assets. Material ESG+R due diligence findings, if any, will be referred back to the Investment Management
Committee (“IMC”) for further consideration.
With the exception of MEES, where an EPC provides a measurable data point, our approach in assessing the potential impact of
climate-related risks and opportunities remains qualitative. We aim to enhance our assessment for future reporting periods to be more
quantitative as more data and information becomes available. We assess climate resilience with a climatologist, having undertaken a
review of the entire portfolio in 2022 and are undertaking climate resilience audits on selected assets where potential material risks
are present. The resilience audit findings will be used to assess the potential impact of the risk and cost to reduce the vulnerabilities of
identified buildings.
In relation to the MEES/EPC regime, during the period the Investment Manager undertook a gap analysis of the portfolio to identify any
assets posing a non-compliance risk. Those investments were then re-assessed and action plans created where necessary. Assessment
continues to progress for all lease expiries by Estimated Rental Value (“ERV”) within each EPC grade boundary to understand the risk and
potential cost to achieve the next MEES minimum requirements of ‘C’ by 2027 and a ‘B’ by 2030. Where EPC certificates expire or fall
below the MEES 2027 or 2030 requirements, analysis will be undertaken to ascertain the cost of remedial works. As Investment Manager
we will actively engage on an ongoing basis with tenants in properties with EPC certificates below a ‘C’ rating to identify opportunities
where EPC improvement works can be undertaken. The Investment Manager will also consider whether some properties can benefit
from an exemption where that can be done responsibly.
Determining the impact of climate-related risks and opportunities on the business, strategy and financial planning will be an iterative
process over future reporting periods. We will utilise the findings of on-going projects and assessments, EPC improvement plans and
climate resilience audits to quantify impacts on specific assets and to inform our qualitative assessment of physical and transition risk
and opportunities.
Climate-related opportunities are considered to be principally connected with resource efficiency, energy sourcing, property services
and resilience. The Investment Manager is tasked with developing these opportunities through on-going asset management initiatives
and assessment of opportunities through Asset Sustainability Action Plans.
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy (continued)
75
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
2. Strategy (continued)
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2 degree
Celsius or lower scenario
The ESG+R Com considered various climate scenarios and determined AEW’s approach is currently to consider the high emissions
scenario of ‘Business as Usual’ Representative Concentration Pathway (“RCP”) 8.5 and assess portfolio resilience on this basis. The RCP
8.5 scenario refers to the concentration of carbon that delivers global warming at an average of 8.5 watts per square meter across
theplanet.
The RCP 8.5 pathway delivers a temperature increase of about 4.3˚C by 2100, relative to pre-industrial temperatures. It should be
noted that this is not aligned with the TCFD requirement to at least model the impact of a 2 degree Celsius or lower scenario as we have
focused our efforts on the higher risk scenario which has the greater potential impact on the portfolio. In future reporting periods the
Investment Manager intends to disclose its interpretation of both 2 degree Celsius and RCP 8.5 scenarios.
AEW has worked with the Climate Company to qualitatively assess the climatic risks exposure of all portfolio assets on an urban micro-
scale for the next two decades. The assessment includes qualitative assessment against thresholds of:
• thermal situation (temperature rise, heat and cold waves)
• hydrological situation (flood risks (river and runoff))
• precipitation risk (average evolution, extreme)
• marine submersion risk (sea level rises)
• drought risk (episodes and tendency)
• wind situation (windstorm and average evolution)
• urban situation (heat islands)
Certain assets within the portfolio exceeded one or more of the thresholds. We have selected a sample of assets to subject to further
climate resilience audits and to develop action plans and quantify costs, if appropriate, to reduce their vulnerability. The results of these
audits will be used in future reporting periods to inform AEW and the Board of potential vulnerability of the portfolio and potential costs.
3. Risk management
Describe the organisation’s processes for identifying and assessing climate-related risks
AEW brings a disciplined, holistic approach to risk monitoring and control. Our risk management process is designed to identify,
evaluate, manage and mitigate (rather than eliminate) the significant risks we face. The Investment Manager maintains a risk register
which includes the principal climate-related risks of (i) Transition risks associated with the transition to a low or ultra-low economy and
(ii) Physical risks associated with tangible impacts of climate change.
As both occupiers and investors increasingly focus on the environmental impact and energy efficiency of assets, this will increasingly
impact building obsolescence, lease renewals and ultimately the rental values for individual assets. As Investment Manager, we therefore
consider and assess the risks of the additional costs compared to the risks of reduced liquidity and market pricing due to environmental
obsolescence and depreciation.
The ESG+R Com allocates responsibility to individual members for specific climate risks and resilience matters, including physical risks,
regulatory risk, market risk, insurance risk and reputational and liability risk. Members assess risks at the European level through pilot
studies and work with third-party specialists. The UK Risk Manager works closely with members of the ESG+R Com and the European SRI
team to identify relevant risks and determine appropriate strategies to assess the risk UK real estate assets are exposed to.
In addition to the governance framework described above, the Portfolio Manager is responsible for managing climate-related risks at
the fund and asset level with the support of the asset management team. All investment staff are engaged in consideration of ESG+R
risks and opportunities alongside other financial value drivers. The Portfolio Manager is supported by the Risk Manager and UK ESG
Working Group in the management of climate-related risks.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
3. Risk management (continued)
Describe the organisation’s processes for managing climate-related risks
The Investment Manager’s IMC approves all acquisitions and any material climate-related due diligence findings, if any, will be referred
back to the IMC for further consideration. The PMRC considers portfolio-level assessments of environmental and energy issues and
evaluates these assessments and climate-related risks as part of the bi-annual review of the Company. Any material findings are
escalated at the local level to the Investment Manager’s UK Board and the Company’s Board. The Company’s Board and the Investment
Manager’s Board needs to be informed of all material risks and issues so as to be in a position to approve the appropriate course of
action to ensure that these risks are mitigated. Where a particular climate-related risk is deemed to have a potentially material adverse
impact then this would be further escalated to AEW’s ERC, ESG+R Com and ExCom as well as the Company’s Board.
Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk
management
AEW recognises the importance of identifying, assessing and managing climate-related risks. Indeed, as an FCA-authorised Alternative
Investment Fund Manager, it is a core regulatory requirement to engage meaningfully with risks. Risk assessment is therefore a vital
aspect of AEW’s investment operating model and it takes place on a continuous basis.
Climate-related risk is integrated into AEW’s risk management process; this includes monitoring and reporting to the AEW UK Board,
European Committees and participation in the wider Enterprise Compliance Programme operated by its parent company Natixis
Investment Managers. This programme seeks to foster a comprehensive risk management and control environment to limit operational
and non-compliance risk, as follows:
• First level of control where risk management controls are integrated into the operating processes of the Investment Manager and
formalised in clearly defined and documented procedures which are reviewed by a number of committees.
• Second level of control carried out by the compliance department through the permanent control programme.
• Third level of control carried out by the annual internal audit programme undertaken with Natixis Investment Manager’s internal
audit department and their independent external consultants.
• Fourth level of control carried out through audits undertaken by Natixis and the BPCE Group’s internal audit teams together with
independent external consultants.
The Board considers climate change a principal risk to the Company and assesses transition and physical risk as part of the Board’s
formal risk review with the assistance of the Audit Committee.
4. Metrics and targets
A core requirement of TCFD is to establish and develop suitable metrics and targets. The Investment Manager’s focus in 2023/24 was:
• Continued reduction of landlord-controlled greenhouse gas emissions and energy usage.
• Undertaking initial portfolio climate resilience assessment using a “business as usual” warming scenario.
• EPC management across the portfolio.
• Review of metrics and targets.
In 2024/25, the Investment Manager’s focus will be:
• Continued reduction of landlord-controlled greenhouse gas emissions and energy.
• Climate resilience audits at selected assets.
• Climate opportunity projects at selected assets.
• Continuing to develop our assessment of the potential impact of the identified climate-related risks and opportunities on the
Company’s business operations, strategy and financial performance.
• Continued enhancement of risk assessment as improved data and metrics enable us to move from qualitative to quantitative
assessment over time.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
4. Metrics and targets (continued)
The table below summarises key metrics and targets used to assess climate-related risks and opportunities:
Metric
Category Metric Previous Target 2024 Data Current Target
GHG emissions Absolute Scope 1 GHG
Emissions
15% reduction in Scope 1
GHG emissions within the
Managed Portfolio by 2030
as compared to the 2018
baseline
223.0 tonnes
(19% reduction
vs. 2018 baseline
(275.7 tonnes))
40% reduction in absolute
Scope 1 GHG emissions
within the Managed Portfolio
by 2030 as compared to the
2018 baseline
Absolute Scope 2 GHG
Emissions
15% reduction in Scope
2 GHG emissions within
the Managed Portfolio
as compared to the 2018
baseline
417.9 tonnes
(50% reduction
vs. 2018 baseline
(841.61 tonnes))
40% reduction in absolute
Scope 2 GHG emissions
within the Managed Portfolio
by 2030 as compared to the
2018 baseline
Renewable
energy
Percentage of landlord-
controlled assets with
renewable electricity supplies
100% (with exception of
new acquisitions during first
12months of ownership)
100% 100% (with exception of
new acquisitions during first
12months of ownership)
Transition risk Percentage of assets with
EPC A-C (by ERV)
N/A 62.5% 100% EPC to at least C grade
by 2027 and to B by 2030
(unless exempt)
Physical risks Percentage of assets with
climate resilience assessment
100% 100% for
existing
Portfolio
completed
100%
Number of assets with a
specific climate resilience
audit and plan
N/A 3 3 to be completed during
2023/24
Number assets with a net
zero assessment pathway
N/A 6 2 assets selected for net zero
assessment pathway during
2023/24
Climate related
opportunities
On-site renewable energy
generation and storage
projects
N/A N/A 2 assets selected subject
to additional feasibility and
tenant engagement during
2023/24
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Taskforce on Climate-Related Financial Disclosures (continued)
4. Metrics and targets (continued)
As a Real Estate Investment Trust, the majority of the Company’s emissions arise through assets that are owned and leased. At multi-let
properties, the Company (in its capacity as landlord) has control and influence over the whole building and/or shared services (including
refrigerant leakage), external lighting and void spaces. The position with FRI leases is significantly different, as described in the GHG
disclosure section.
These metrics, however, will evolve over time as for example, in relation to Scope 3 GHG emissions, given a landlord has limited
operational control, the Investment Manager will initially focus on improving data collection. Over time the Company, via the Investment
Manager, will actively engage with tenants to reduce their GHG emissions, with improvement plans aiming to increase a building’s
operational performance, reduction in energy usage and feasibility of on-site renewable energy generation or storage.
Metrics for climate-related opportunities focus on projects e.g. trialling of on-site renewable energy generation (and potentially
storage), with results requiring further assessment and feasibility studies before targeting further assets. As we transition to a low carbon
economy the targets and metrics for the Company will be reviewed and may be amended annually as the Investment Manager’s strategy
for managing climate-related risks and opportunities evolves. The PMRC and the UK ESG Working Group and sub-committees monitor
progress against targets.
Disclose Scope 1, Scope 2 and if appropriate, Scope 3 greenhouse gas emissions and the related risk
Emissions sources listed on page 136 relate to the managed portfolio only and the following sources of energy consumption within
eachsector:
• Office: whole building
• Retail, High Street: whole building, tenant space and common areas
• Retail, Warehouse: tenant space and external lighting
• Leisure: external lighting, tenant space and common areas
• Industrial: tenant space, common areas and external lighting
Emissions outside of operational control:
The Company was not responsible for emission from gas and/or electricity use at any other owned asset or for head office operations.
The Company is not directly responsible for any GHG emissions/energy usage at single let/FRI assets nor at multi-let assets where the
tenant is counterparty to the energy contract. As these emissions are outside of the Company’s direct control, they form part of the
wider value chain (i.e. ‘Scope 3’) emission, which are not monitored at present.
Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets
The Company has reviewed the existing targets and is in the process of setting new targets in consultation with its external advisors.
Targets are reviewed at least annually and will be amended where appropriate as our management of climate related risks and
opportunities evolves over future reporting periods.
Targets are reported in table on page 77, where no targets had previously been set this is reported as N/A.
79
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Share Capital
Share Issues
At the Company’s AGM held on 14 September 2023, the Company was granted the authority to allot Ordinary Shares up to an
aggregate nominal amount of £158,424.74 on a non pre-emptive basis. The Company was also granted authority to allot further
Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis. No Ordinary Shares have been
allotted under either authority during the year and both authorities will expire at the conclusion of the 2024 AGM. A resolution to renew
the Company’s authority to allot Ordinary Shares up to an aggregate nominal amount of £158,424.74 on a non pre-emptive basis will
be put to shareholders at the 2024 AGM alongside a resolution to allot further Ordinary Shares up to an aggregate nominal amount of
£158,424.74 on a non pre-emptive basis.
As at 31 March 2024, and the date of this report, the Company had 158,774,746 Ordinary Shares in issue, of which 350,000 (2023:
350,000) were held in treasury and therefore the total voting rights attaching to Ordinary Shares are 158,424,746.
Purchase of Own Shares
At the Company’s AGM on 14 September 2023, the Company was granted authority to purchase up to 23,747,869 Ordinary Shares
(being 14.99% of the Company’s Ordinary Shares in issue). No shares have been bought back under this authority during the year,
which expires at the conclusion of the Company’s 2024 AGM. A resolution to renew the Company’s authority to purchase (either for
cancellation or for placing into treasury) up to 23,747,869 Ordinary Shares (being 14.99% of the issued Ordinary Share capital (excluding
treasury shares) as at the date of this report), will be put to shareholders at the 2024 AGM. Any purchase will be made in the market and
prices will be in accordance with the terms laid out in the Notice of AGM (enclosed separately and available on the Company’s website).
The authority will be used where the Directors consider it to be in the best interests of shareholders.
Rights attached to Ordinary Shares
a) Income Entitlement
The profits of the Company (including accumulated revenue reserves) available for distribution and resolved to be distributed shall be
distributed in proportion to the amount paid up per share by way of interim and, where applicable, special or final dividends among the
holders of Ordinary Shares.
b) Capital Entitlement
After meeting the liabilities of the Company on a winding-up, the surplus assets shall be paid to the holders of different classes of
members and distributed among such holders rateably according to the amounts paid up or credited as paid up on their shares.
c) Voting Entitlement
Each Ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary Share held. The Notice
of AGM and Form of Proxy stipulate the deadlines for the valid exercise of voting rights and, other than with regard to Directors not
being permitted to vote their Ordinary Shares on matters in which they have an interest, there are no restrictions on the voting rights of
Ordinary Shares.
There are no restrictions concerning the transfer of securities in the Company or on voting rights; no special rights with regard to control
attached to securities; no agreements between holders of securities regarding restrictions on the transfer of securities or voting rights
known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid.
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable section of the Annual Report or a cross
reference table indicating where the information is set out. The Directors confirm that there are no disclosures required in relation to
Listing Rule 9.8.4.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors’ Report (continued)
Substantial Shareholdings
As at 31 March 2024, the Company had been notified under Disclosure Guidance and Transparency Rule (‘DTR’) 5 of the following
significant holdings of voting rights in its Ordinary Shares. These holdings may have changed since notification, however notification of
any change is not required until the next applicable threshold is crossed.
Shareholder
Number of Ordinary
Shares held
% of total
voting rights
The Royal Bank of Scotland Group plc 13,570,464 8.6
Old Mutual plc 11,087,801 7.0
Momentum Global Investment Management Limited 7,856,028 5.0
Close Asset Management Limited 7,836,451 4.9
Schroders plc 7,643,485 4.8
Investec Wealth & Investment Limited 4,813,400 3.0
NatWest Group plc 4,747,598 3.0
The Company has not been notified of any changes to the above interests between 31 March 2024 and the date of this report. The
Board is aware that a significant proportion of the Company’s shares are owned by private investors through investor platforms.
Related Party Transactions
Related party transactions during the year ended 31 March 2024 can be found in note 25 to the financial statements.
Post Balance Sheet Events
Post balance sheet events can be found in note 27 to the financial statements.
Statement of Disclosure of Information to Auditor
So far as each Director is aware, there is no relevant audit information, which would be needed by the Company’s Auditor in connection
with preparing its audit report (on pages 83 to 91), of which the Auditor is not aware; and each Director, in accordance with section
418(2) of the Companies Act 2006, has taken all reasonable steps that they ought to have taken as a Director to make themselves aware
of any such information and to ensure that the Auditor is aware of such information.
Auditor
BDO LLP has expressed its willingness to continue as the Company’s Auditor. As outlined in the Report of the Audit Committee on page
54, resolutions proposing the Auditor’s re-appointment and to authorise the Audit Committee to determine its remuneration will be
proposed at the forthcoming AGM.
The Directors’ Report has been approved by the Board of Directors and signed on its behalf by:
Mark Burton
Chairman
1 July 2024
81
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Statement of Directors’ Responsibilities in respect of the Annual
Report and Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with UK adopted international
accounting standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to
prepare the Company’s financial statements in accordance with UK adopted international accounting standards. Under company law,
the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss for the Company for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material
departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in
business; and
• prepare a Directors’ Report, a Strategic Report and Directors’ Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and Financial statements,
taken as a whole, is fair, balanced, and understandable and provides the information necessary for shareholders to assess the Company’s
performance, prospects, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial
statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the
financial statements contained therein.
82
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Statement of Directors’ Responsibilities in respect of the Annual
Report and Financial Statements (continued)
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• The financial statements have been prepared in accordance with the applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the Company.
• The Annual Report includes a fair review of the development and performance of the business and the financial position of the
Company, together with a description of the principal risks and uncertainties that it faces.
The Directors consider that this Annual Report and Financial Statements, taken as a whole, is fair, balanced, and understandable and
provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
This Statement of Responsibilities was approved by the Board and signed on its behalf by:
Mark Burton
Chairman
1 July 2024
83
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Independent Auditor’s Report to the Members of AEW UK REIT plc
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Company’s affairs as at 31 March 2024 and of its profit for the
year then ended;
• have been properly prepared in accordance with UK adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of AEW UK REIT plc (the ‘Company’) for the year ended 31 March 2024 which comprise the
Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash
Flows and notes to the financial statements, including a summary of material accounting policy information. The financial reporting
framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit
opinion is consistent with the additional report to the Audit Committee.
Independence
Following the recommendation of the Audit Committee, we were appointed by the Board of Directors on 8 September 2021 to audit
the financial statements for the year ended 31 March 2022 and subsequent financial periods. The period of total uninterrupted
engagement is 3 years, covering the years ended 31 March 2022 to 31 March 2024. We remain independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that standard were not provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue
to adopt the going concern basis of accounting included:
• using our knowledge of the Company and its market sector together with the current general economic environment to assess the
Directors’ identification of the inherent risks to the Company’s business and how these might impact the Company’s ability to remain
a going concern for the going concern period, being the period to 1 July 2025, which is at least 12 months from when the financial
statements are authorised for issue;
• obtaining an understanding of the Directors’ process for assessing going concern including an understanding of the key
assumptions used;
• obtaining the Directors’ going concern assessment and:
– assessing the Company’s forecast cash flows with reference to historic performance and challenging the Directors’ forecast
assumptions in comparison to the current performance of the Company;
– agreeing the key inputs into the forecasts to supporting documentation for reasonableness based on contractual agreements,
where available;
– agreeing the Company’s available borrowing facilities and the related terms and covenants to loan agreements;
• obtaining forecast covenant calculations to check for any potential future covenant breaches;
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
• analysing the sensitivities applied by the Directors’ stress testing calculations and challenging the assumptions made using our
knowledge of the business and of the current economic climate, to assess the reasonableness of the downside scenarios selected;
• considering board minutes, and evidence obtained throughout the audit and challenging the Directors on the identification of any
contradictory information in the forecasts and the impact on the going concern assessment;
• analysing the Directors’ stress testing calculations and challenging the assumptions made using our knowledge of the business and
of the current economic climate, to assess the reasonableness of the downside scenarios selected and the appropriateness of the
Directors’ mitigating actions; and
• reviewing the disclosures in the financial statements relating to going concern to check that the disclosure is consistent with the
circumstances.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
thisreport.
Overview
Coverage
100% (2023: 100%) of profit before tax
100% (2023: 100%) of revenue
100% (2023: 100%) of total assets
Key audit matters Valuation of
investment properties
2024
✓
2023
✓
Materiality Company financial statements as a whole
£2.32m (2023: £2.34) based on 1% (2023: 1%) of total assets
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system
of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Climate change
Our work on the assessment of potential impacts on climate-related risks on the Company’s operations and financial
statementsincluded:
• enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their
potential impacts on the financial statements and adequately disclose climate-related risks within the Annual Report;
• our own qualitative risk assessment taking into consideration the sector in which the Company operates and how climate change
affects the real estate sector; and
• review of the minutes of board and audit committee meetings and other papers related to climate change and performed a risk
assessment as to how the impact of the Company’s commitment as set out in pages 67 to 78 may affect the financial statements
and our audit.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
85
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and
commitments have been reflected, where appropriate, in the Directors’ going concern assessment and viability assessment.
We also assessed the consistency of management’s disclosures included as ‘other information’ on pages 128 to 147 with the
financial statements and with our knowledge obtained from the audit.
Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially impacted by climate-related
risks and related commitments.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of investment
properties
As detailed in note 13 to the
financial statements, the
Company owns a portfolio of
investment properties which
are held at their fair value.
The Company’s accounting
policy for these properties is
described in note 2.5 to the
financial statements.
The key judgements and
estimates in arriving at the
fair values are set out in notes
2.2 and 13 to the financial
statements.
The Company has an
investment property portfolio
of commercial property
across a number of sectors
in the United Kingdom.
This comprises completed
investment property which
is let, or available to let and
is valued using the income
capitalisation method,
in accordance with RICS
methodology and IFRS 13 Fair
Value Measurement.
The valuation of investment
property requires significant
judgement and estimates
by the Directors and their
independent external valuer
and is therefore considered
a significant risk due to the
subjective nature of certain
assumptions inherent in each
valuation.
Our audit procedures included the following:
Experience of valuer and relevance of their work
We obtained the valuation report prepared by the independent
external valuer and with the assistance of our internal real
estate experts, discussed the basis of the valuations with them,
read the valuation reports and confirmed that all valuations
had been prepared in accordance with applicable valuation
guidelines and the requirements of the applicable accounting
standards (IFRS13 Fair Value Measurement) and were therefore
appropriate for determining the carrying value in the Company’s
financial statements.
We assessed the external valuer’s competence and
qualifications and read their terms of engagement with the
Company, to identify any matters that could have affected their
independence and objectivity or imposed scope limitations
upon them.
We obtained a copy of the instructions provided to the
independent valuer and reviewed these for any limitations in
scope or for evidence of management bias.
Data provided to the valuer
We validated the underlying data provided to the valuer by
Investment Manager. This data included inputs such as current
rent and lease term, which we agreed on a sample basis to the
executed lease agreements as part of our audit work.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
86
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Key audit matter How the scope of our audit addressed the key audit matter
Any input inaccuracies or
unreasonable bases used in
the valuation judgements
(such as in respect of estimated
rental value and yield profile
applied) could result in a
material misstatement of
the Company’s financial
statements.
There is also a risk of fraud that
the Directors may influence
the judgements and estimates
in respect of property
valuations in order to achieve
property valuations and other
performance targets to meet
market expectations.
The valuation of investment
properties was therefore
considered to be a key audit
matter.
Assumptions and estimates used by the valuer
With assistance from BDO in-house RICS qualified valuers,
we developed yield expectations on each property using
available independent industry data, reports and comparable
transactions in the market around the period end. Our in-house
valuers also attended the audit meetings with the Company’s
valuers to assist us in assessing that explanations provided were
appropriate and in line with market knowledge.
We compared the key valuation assumptions against our
independently formed market expectations (by reference
to market data based on the location and specifics of each
property).
We discussed the assumptions used and the valuation
movement in the period with the independent valuer. Where
the valuation was outside of our expected range we challenged
the independent valuer on specific assumptions and reasoning
for the yields applied and corroborated their explanations where
relevant, including agreeing to third party documentation.
Key observations
Based on the procedures performed, we did not identify any
indicators to suggest that the judgements and estimates made
in the valuation of the Company’s investment properties were
inappropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of
reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will
not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
87
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Company financial statements Company financial statements
2024 2023
Materiality £2.32 million £2.34 million
Basis for determining materiality 1% of Total Assets
Rationale for the benchmark applied
We determined that total assets would be the most appropriate basis for determining
overall materiality as we consider it to be one of the principal considerations for users
of the financial statements in assessing the financial performance of the Company.
Performance materiality £1.74 million £1.64 million
75% of Materiality
Basis for determining performance
materiality
Overall performance materiality for the Company has been set at 75% (2023: 70%) of
materiality. This was on the basis of our risk assessment, together with our assessment of
the Company’s overall control environment and the expected total value of known and
likely misstatements and the level of transactions in the year.
Specific materiality
We also determined that for other account balances and classes of transactions that impact the calculation of European Public Real
Estate Association (“EPRA”) earnings a misstatement of less than materiality for the financial statements as a whole, specific materiality,
could influence the economic decisions of users. We consider EPRA earnings to be a key performance measure of the Company. EPRA
earnings excludes the impact of the net surplus on revaluation of investment properties, profit on disposal of investment properties
and changes in the fair value of interest rate derivatives. As a result, we determined specific materiality for these items to be £0.58m
(2023:£0.45m), based on 5% of EPRA earnings (2023: 5%). We further applied a performance materiality level of 75% (2023: 70%) of
specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £115,000 (2023: £70,000)
and for those items impacting the calculation of EPRA earnings £29,000 (2023: £13,000). We also agreed to report differences below
these thresholds that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
88
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and
longer-term viability
• The Directors' statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified on pages 62
and 63; and
• The Directors’ explanation as to their assessment of the Company’s prospects, the
period this assessment covers and why the period is appropriate on page 63.
Other Code provisions • Directors' statement on fair, balanced and understandable pages 81 and 82;
• Board’s confirmation that it has carried out a robust assessment of the emerging
and principal risks on pages 36 to 42;
• The section of the annual report that describes the review of effectiveness of risk
management and internal control systems on page 53; and
• The section describing the work of the audit committee on pages 54 to 57.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial
year for which the financial statements are prepared is consistent with the financial
statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Company and the Company
and its environment obtained in the course of the audit, we have not identified material
misstatements in the Strategic report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
89
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Matters on which we are required to
report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Company financial statements and the part of the Directors’ remuneration
report to be audited are not in agreement with the accounting records and returns;
or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s and the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Company or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
• our understanding of the Company and the industry in which it operates;
• discussion with management and those charged with governance; and
• obtaining an understanding of the Company’s policies and procedures regarding compliance with laws and regulations;
we considered the significant laws and regulations to be UK company law, UK tax legislation (including the REIT regime requirements)
and the UK Listing Rules, and we considered the extent to which non-compliance might have a material effect on the Company’s
financial statements.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
90
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Our procedures in respect of the above included:
• agreeing the financial statement disclosures to underlying supporting documentation where relevant;
• reviewing legal expenditure accounts to understand the nature of expenditure incurred;
• the review of Board and Committee meeting minutes and enquiries with management and the Directors as any known or suspected
instances of non-compliance with laws and regulations; and
• in order to address the risk of non-compliance with the REIT regime, considering a report from the Company’s external adviser,
detailing the actions that the Company has undertaken to ensure compliance. This paper was reviewed, and the assumptions
challenged, with the assistance of our own internal valuations expert.
Irregularities including fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures
included:
• enquiry with Directors and those charged with governance regarding any known or suspected instances of fraud;
• obtaining an understanding of the Company’s policies and procedures relating to:
– detecting and responding to the risks of fraud; and
– internal controls established to mitigate risks related to fraud.
• review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
• discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be potential manipulation of journals affecting
revenue, investment property valuations, and management override of controls.
Our procedures in response to the above included:
• analysing and substantively testing unusual journals combinations to revenue to determine if they were appropriate;
• work performed in the investment property balance which is set out in the key audit matters section above; and
• testing a sample of journal entries processed during the year which met a defined risk criteria, agreeing to supporting
documentation and evaluating whether there was evidence of bias by management or the Directors that represented a risk of
material misstatement due to fraud.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were
deemed to have the appropriate competence and capabilities, and remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected
in the financial statements, the less likely we are to become aware of it.
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
91
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
haveformed.
Richard Levy (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
1 July 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Independent Auditor’s Report to the Members of AEW UK REIT plc
(continued)
92
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Financial Statements
Statement of Comprehensive Income
for the year ended 31 March 2024
Notes
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Income
Rental and other income 3 24,345 20,724
Property operating expenses 4 (6,861) (6,911)
Impairment loss on trade receivables
(1,208)
(214)
Net rental and other income 16,276 13,599
Other operating expenses 5 (2,751) (2,386)
Directors’ remuneration 6
(162)
(117)
Operating profit before fair value changes 13,363 11,096
Change in fair value of investment properties 13 (4,350) (30,004)
Realised gains on disposal of investment properties 13
1,848 9,744
Operating profit/(loss) 10,861 (9,164)
Realised loss on disposal of interest rate derivatives – (88)
Change in fair value of financial assets through profit and loss 7
(12)
45
Finance income
8
177 –
Finance expense 9
(1,936)
(2,118)
Profit/(loss) before tax 9,090 (11,325)
Taxation 10
(42) –
Profit/(loss) after tax 9,048 (11,325)
Other comprehensive income
–
–
Total comprehensive income/(loss) for the year
9,048 (11,325)
Earnings/(loss) per share (pence per share) (basic and
diluted)
11
5.71 (7.15)
The notes on pages 96 to 127 form an integral part of these financial statements.
93
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Statement of Changes in Equity
for the year ended 31 March 2024
For the year ended
31 March 2024 Notes
Share capital
£’000
Share
premium
account
£’000
Capital
reserve and
retained
earnings*
£’000
Buyback
reserve
£’000
Total capital
and reserves
attributable to
owners of the
Company
£’000
Balance at 1 April 2023 1,587 56,578 109,201 (265) 167,101
Total comprehensive
income – – 9,048 – 9,048
Other distribution 10 – – (723) – (723)
Dividends paid 12
– – (12,674) –
(12,674)
Balance at 31 March 2024
1,587 56,578 104,852 (265) 162,752
For the year ended
31 March 2023 Notes
Share capital
£’000
Share
premium
account
£’000
Capital
reserve and
retained
earnings*
£’000
Buyback
reserve
£’000
Total capital
and reserves
attributable to
owners of the
Company
£’000
Balance at 1 April 2022 1,587 56,578 133,200 (265) 191,100
Total comprehensive loss – – (11,325) – (11,325)
Dividends paid 12
– – (12,674) – (12,674)
Balance at 31 March 2023
1,587 56,578 109,201 (265) 167,101
* The capital reserve has arisen from the cancellation of part of the Company’s share premium account and is a distributable reserve subject to
realised profits.
The notes on pages 96 to 127 form an integral part of these financial statements.
94
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Statement of Financial Position
as at 31 March 2024
Notes
31 March 2024
£’000
31 March 2023
£’000
Assets
Non-current assets
Investment property 13 181,040 206,240
Receivables and prepayments 14
3,267 2,997
184,307 209,237
Current assets
Investment property held for sale 13 26,086 4,400
Receivables and prepayments 14 10,625 5,805
Other financial assets held at fair value 15 – 12
Cash and cash equivalents
11,397 14,315
48,108 24,532
Total assets
232,415 233,769
Non-current liabilities
Interest bearing loans and borrowings 16 (59,663) (59,553)
Lease obligations 18
(174) (174)
(59,837) (59,727)
Current liabilities
Payables and accrued expenses 17 (9,813) (6,928)
Lease obligations 18
(13) (13)
(9,826) (6,941)
Total liabilities
(69,663) (66,668)
Net assets
162,752 167,101
Equity
Share capital 21 1,587 1,587
Buyback reserve 21 (265) (265)
Share premium account 22 56,578 56,578
Capital reserve and retained earnings
104,852 109,201
Total capital and reserves attributable to equity holders
162,752 167,101
Net Asset Value per share (pps) 11
102.73 105.48
EPRA Net Tangible Assets per share (pps) 11
102.73 105.48
The financial statements were approved by the Board of Directors on 1 July 2024 and were signed on its behalf by:
Mark Burton
Chairman
AEW UK REIT plc (Company number: 09522515)
The notes on pages 96 to 127 form an integral part of these financial statements.
95
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Statement of Cash Flows
for the year ended 31 March 2024
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Cash flows from operating activities
Profit/(loss) before tax
9,090 (11,325)
Adjustment for non-cash items:
Finance income (177)
–
Finance costs 1,936
2,118
Loss/(gain) from change in fair value of other financial assets 12 (45)
Loss from change in fair value of investment property 4,350 30,004
Realised gains on disposal of investment properties (1,848) (9,744)
Realised loss on disposal of interest rate derivative – 88
Increase in other receivables and prepayments
(3,458) (1,884)
Increase in other payables and accrued expenses
1,821 608
Net cash flow generated from operating activities
11,726 9,820
Cash flows from investing activities
Purchases and capital expenditure (25,135) (36,714)
Disposal of investment properties
24,528
43,652
Finance income
177 –
Net cash (used in)/generated from investing activities
(430) 6,938
Cash flows from financing activities
Net loan drawdown –
60,000
Loan repayment – (54,000)
Arrangement loan facility fee paid – (513)
Collateral paid – (870)
Received on sale of interest rate cap –
743
Finance costs
(1,823) (1,619)
Dividends paid
(12,391) (12,953)
Net cash flow used in from financing activities
(14,214) (9,212)
Net (decrease)/ increase in cash and cash equivalents (2,918)
7,546
Cash and cash equivalents at start of the year
14,315 6,769
Cash and cash equivalents at end of the year
11,397 14,315
The notes on pages 96 to 127 form an integral part of these financial statements.
96
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Notes to the Financial Statements
for the year ended 31 March 2024
1. Corporate information
AEW UK REIT plc (the ‘Company’) is a closed ended Real Estate Investment Trust (‘REIT’) incorporated on 1 April
2015 and domiciled in the UK. The registered office of the Company is Central Square, 29 Wellington Street,
Leeds LS1 4DL.
The Company’s Ordinary Shares were listed on the Official List of the FCA and admitted to trading on the Main
Market of the London Stock Exchange on 12 May 2015.
The nature of the Company’s operations and its principal activities are set out in the Strategic Report on
pages 2 to 45.
2. Accounting policies
2.1 Basis of preparation
These financial statements are prepared and approved by the Directors in accordance with UK adopted
international accounting standards.
These financial statements have been prepared under the historical cost convention, except for
investment property and interest rate derivatives that have been measured at fair value.
The financial statements are presented in Sterling and all values are rounded to the nearest thousand
pounds (£’000), except when otherwise indicated.
The Company is exempt by virtue of Section 402 of the Companies Act 2006 from the requirement to
prepare group financial statements. These financial statements present information solely about the
Company as an individual undertaking.
New standards, amendments, and interpretations
The Company has considered and applied the following new standards and amendments to existing
standards which are required for the accounting period beginning on 1 April 2023:
• Amendments to IAS 1 and IFRS Practice Statement 2 Presentation of Financial Statements clarifies that
significant accounting policies has been replaced with material accounting policies;
• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clarifies the
distinction between accounting policies and accounting estimates and also replaces the definition
of accounting estimates. Under the new definition, estimates are “monetary amounts in financial
statements that are subject to measurement uncertainty”;
• Amendments to IFRS 16 Lease Liability in a Sale and Leaseback specifies the requirements that a seller-
lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the
seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains.
There were no material effects from the adoption of the above-mentioned amendments to IFRS effective
in the period.
97
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
2. Accounting policies (continued)
2.1 Basis of preparation (continued)
There are no other standards that are not yet effective that would be expected to have a material impact
on the Company in the current or future reporting periods and on the foreseeable future transactions.
2.2 Significant accounting judgements and estimates
The preparation of financial statements in accordance with IFRS requires the Directors of the Company
to make judgements, estimates and assumptions that affect the reported amounts recognised in the
financial statements. However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.
There are not considered to be any judgements which have a significant effect on the amounts
recognised in the financial statements, however, there is an estimate that will have a significant effect on
the amounts recognised in the financial statements:
i) Valuation of investment property
The Company’s investment property is held at fair value as determined by the independent external valuer
on the basis of fair value in accordance with the internationally accepted RICS Appraisal and Valuation
Standards. Details of the considerations made in respect of the estimation are further detailed in note 13.
2.3 Segmental information
The Board of Directors retains overall control of the Company, but the Investment Manager (AEW UK
Investment Management LLP) has certain authorities and fulfils the function of allocating resource to,
and assessing the performance of the Company’s operating segments and is therefore considered to be
the Chief Operating Decision Maker (‘CODM’). In accordance with IFRS 8, the Company considers each
of its properties to be an individual operating segment. The CODM allocates resources, and reviews
the performance of, the Company’s portfolio on a property-by-property basis and discrete financial
information is available for each individual property.
These operating segments have similar economic characteristics and, as such, are aggregated into one
reporting segment, being investment in property and property-related investments in the UK.
2.4 Going concern
The Directors assessed the Company’s ability to continue as a going concern, which takes into
consideration current economic uncertainty, as well as the Company’s cashflows, financial position,
liquidity and borrowing facilities.
As at 31 March 2024, the Company had £11.40 million of cash at bank. The Company’s loan is held with
AgFe and is a £60.00m facility with an initial five-year term, which expires in 2027. This is priced as a
fixed rate loan with a total interest cost of 2.959% and associated 10% projected debt yield and 60% loan
to value (“LTV”) covenants. The Company reported an LTV of 31.99% at year-end. This provides room
for an £87.57 million fall in portfolio valuation before breaching the 60% hard LTV covenant. Moreover,
based on the £60.00m of debt drawn as at year-end, the Company had a projected debt yield of 26.82%,
comfortably in excess of the 10%covenant.
98
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
2. Accounting policies (continued)
2.4 Going concern (continued)
The Company benefits from a secure, diversified income stream from a tenancy profile which is not overly
reliant on any one tenant or sector, which reduces risk. The Directors also noted that:
• The Company’s rent collection has been strong, with 98% of contracted rent either having been
collected, or payment plans agreed, for the March 2024 quarter.
• Based on the contracted rent as at 31 March 2024, a reduction of 62.71% in net rental income could
be accommodated before breaching the debt yield covenant in the Company’s re-financed debt
arrangements.
• Based on the property valuation at 31 March 2024, the Company had room for an £87.57 million fall in
portfolio valuation before breaching the maximum LTV hard covenant in the Company’s re-financed debt
arrangements.
• The Company’s cash flow can also be significantly managed through the adjustment of dividend
payments, to the extent that this does not breach the REIT regime requirements for distributions.
Taking this into consideration, the Directors have reviewed a number of scenarios over 12 months from
the date of approval of these financial statements, including a worst-case plausible downside scenario
which makes the following assumptions:
• a reduction in net rental income of 30%;
• no new lettings or renewals, other than those where terms have already been agreed;
• a 20% fall in property valuations; and
• no new acquisitions or disposals.
In the above scenario, the Company is forecast to generate a positive cash flow before dividend payments,
however it would generate a cash flow much lower than its target dividend of 8 pps per annum. Moreover,
the Company is forecast to pass the debt yield covenant during the 12-month period with a minimum
projected yield of 18%, compared with the limit of 10%, assuming that no repayments of the facility were
to be made.
Given the Company’s substantial headroom against its borrowing covenants, the Directors believe that
the Company is well placed to manage its financing and business risks. The Directors are confident
that the Company will have sufficient funds to meet its liabilities as they fall due for at least 12 months
from the date of approval of the financial statements and therefore the financial statements have been
prepared on a going concern basis.
99
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
2. Accounting policies (continued)
2.5 Summary of material accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
a) Presentation currency
These financial statements are presented in Sterling, which is the functional and presentational currency
of the Company. The functional currency of the Company is principally determined by the primary
economic environment in which it operates. The Company did not enter into any transactions in foreign
currencies during the year.
b) Revenue recognition
i) Rental income
Rental income receivable under operating leases is recognised on a straight-line basis over the
leaseterm. A rental adjustment is recognised from the rent review date in relation to unsettled rent
reviews, where the Directors are reasonably certain that the rental uplift will be agreed.
Lease incentives, including rent free periods and payment to tenants, are also allocated to the
Statement of Comprehensive Income on a straight-line basis over the lease term. The value of
resulting accrued rental income is deducted from the valuation as provided by the valuer to arrive
at the carrying value.
A modification to an operating lease in the form of a new lease incentive is accounted for as a new
lease from the effective date of the modification. Any lease incentive existing on a modified lease
will then be spread evenly over the new remaining life of the lease.
Contingent rental income is calculated based off tenant reported actual turnover and is recognised
when the “rental demand” is raised.
Amounts received from tenants to terminate leases or to compensate for dilapidations are
recognised in the Statement of Comprehensive Income when the right to receive them arises.
Service charge income receivable under operating leases is charged based on budgeted service
charge expenditure for a given property over a given service charge year. This income is recognised
on a straight-line basis over the service charge year and any balance credits or charges on
reconciliation following the end of the service charge year are recognised at the time they arise.
Insurance income is recognised in the accounting period in which the services are rendered.
ii) Deferred income
Deferred income is any rental income that has been invoiced to the tenant but relates to future
periods. It is reported as a current liability in the Statement of Financial Position.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
100
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
2. Accounting policies (continued)
2.5 Summary of material accounting policies (continued)
c) Financing income and expenses
Financing income comprises interest receivable on funds invested. Financing expenses comprise interest
and other costs incurred in connection with the borrowing of funds. Interest income and interest payable
are recognised in profit or loss as they accrue, using the effective interest method.
d) Investment property
Property is classified as investment property when it is held to earn rentals or for capital appreciation
or both. Investment property is measured initially at cost including transaction costs. Transaction costs
recognise transfer taxes and professional fees to bring the property to the condition necessary for it
to be capable of operating. The carrying amount also includes the cost of replacing part of an existing
investment property at the time that cost is incurred if the recognition criteria are met.
Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from
changes in the fair values are included in profit or loss.
Investment properties are valued by the independent external valuer on the basis of a full valuation with
physical inspection at least once a year, in accordance with the current issue of RICS Valuation – Professional
Standards (the ‘Red Book’).
The determination of the fair value is based upon the income capitalisation approach. This approach
involves applying capitalisation yields to current and future rental streams net of income voids arising
from vacancies or rent-free periods and associated running costs. These capitalisation yields and
estimated rental values are based on comparable property and leasing transactions in the market using
the valuer’s professional judgement and market observation. Other factors taken into account in the
valuations include the tenure of the property, tenancy details, capital values of fixtures and fittings,
environmental matter and the overall repair and condition of the property.
For the purposes of these financial statements, the assessed fair value is:
• reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives; and
• increased by the carrying amount of leasehold obligations.
Investment property is derecognised when it has been disposed of or permanently withdrawn from use
and no future economic benefit is expected after its disposal or withdrawal.
The profit on disposal is determined as the difference between the net sales proceeds and the carrying
amount of the asset at the commencement of the accounting period plus capital expenditure in the period.
Any gains or losses on the retirement or disposal of investment property are recognised in the profit or
loss in the year of retirement or disposal.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
101
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
2. Accounting policies (continued)
2.5 Summary of material accounting policies (continued)
e) Investments in subsidiaries
AEW UK REIT 2015 Limited is the subsidiary of the Company. The subsidiary was dormant during the
current and previous reporting period. The investment in the subsidiary is stated at cost less impairment
and shown in note 20.
The Company has taken advantage of the exemption as permitted by Section 402 of the Companies
Act 2006, therefore the subsidiary is not consolidated as its inclusion is not material for the purposes of
giving a true and fair view.
f) Investment property held for sale
Investment property is classified as held for sale when it is being actively marketed at year-end and it is
highly probable that the carrying amount will be recovered principally through a sale transaction within
12months.
Investment property classified as held for sale is included within current assets within the Statement of
Financial Position and measured at fair value.
g) Derivative financial instruments
Derivative financial instruments, comprising interest rate caps for hedging purposes, are initially
recognised at fair value and are subsequently measured at fair value, being the estimated amount
that the Company would receive or pay to terminate the agreement at the period end date, taking
into account current interest rate expectations and the current credit rating of the Company and its
counterparties. Premiums payable under such arrangements are initially capitalised into the Statement of
Financial Position.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data is available to measure fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs significant to the fair value measurement as a whole. Changes
in fair value of interest rate derivatives are recognised within operating costs in profit or loss in the period
in which they occur.
h) Cash and cash equivalents
Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and short-
term deposits with an original maturity of three months or less.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
102
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
2. Accounting policies (continued)
2.5 Summary of material accounting policies (continued)
i) Receivables
Rent and other receivables are initially recognised at fair value and subsequently at amortised cost.
Impairment provisions are recognised based upon an expected credit loss model. The Company has
made an assessment of expected credit losses at each period end, using the simplified approach where
a lifetime expected loss allowance is recognised over the expected life of the financial instrument. Any
adjustment is recognised in profit or loss as an impairment gain or loss.
Expected credit losses are assessed based on the Company’s historical credit loss experience, adjusted
for factors which are specific to the tenant and current and forecast economic conditions in general. If
confirmation is received that a trade receivable will not be collected, the carrying value of the asset will be
written off against the associated impairment provision.
j) Capital prepayments
Capital prepayments are made for the purpose of acquiring future property assets and held as receivables
within the Statement of Financial Position. When the asset is acquired, the prepayments are capitalised
as a cost of purchase. Where a purchase is not successful, these costs are expensed within profit or loss as
abortive costs in the period.
k) Other payables and accrued expenses
Other payables and accrued expenses are initially recognised at fair value and subsequently held at
amortised cost.
l) Rent deposits
Rent deposits represent cash received from tenants at inception of a lease and are subsequently
transferred to the rent agent to hold on behalf of the Company.
m) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest method. Borrowing costs are amortised over the lifetime of the facilities
through profit or loss.
When the lifetime of a floating rate facility is extended, and this is considered to be a non-substantial
modification, the effective interest rate is revised to reflect changes in market rates of interest.
n) Provisions
A provision is recognised in the Statement of Financial Position when the Company has a present legal
or constructive obligation as a result of a past event, that can be reliably measured and is probable that
an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
103
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
2. Accounting policies (continued)
2.5 Summary of material accounting policies (continued)
o) Dividend payable to shareholders
Equity dividends are recognised when they become legally payable.
p) Share issue costs
The costs of issuing or reacquiring equity instruments (other than in a business combination) are
accounted for as a deduction from equity.
q) Leases
Leases where the Company is lessee are capitalised at the lease commencement, at present value of the
minimum lease payments, using the Company’s incremental borrowing rate as the discount rate, and
held as both a right-of-use asset and a liability within the Statement of Financial Position.
r) Taxes
Corporation tax is recognised in profit or loss except to the extent that it relates to items recognised
directly in equity, in which case, it is recognised in equity.
As a REIT, the Company is exempt from corporation tax on the profits and gains from its investments,
provided it continues to meet certain conditions as per REIT regulations.
Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and
deferred tax. Current tax is expected tax payable on any non-REIT taxable income for the period, using tax
rates applicable in the period.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax
that is provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the period end date.
s) European Public Real Estate Association
The Company has adopted European Public Real Estate Association (‘EPRA’) best practice recommendations,
which it expects to broaden the range of potential institutional investors able to invest in the Company’s
Ordinary Shares. For the year to 31 March 2024, audited EPS and NAV calculations under EPRA’s methodology
are included in note 11 and further unaudited measures are included on pages 128 to 147.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
104
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
2. Accounting policies (continued)
2.5 Summary of material accounting policies (continued)
t) Capital and reserves
Share capital
Share capital is the nominal amount of the Company’s Ordinary Shares in issue.
Buyback reserve
Buyback reserve represents the cost of the Company’s Ordinary Shares reacquired by the Company
including directly attributable transaction costs. This reserve is not distributable.
Share premium
Share premium relates to amounts subscribed for share capital in excess of nominal value less associated
issue costs of the subscriptions.
Capital reserve
The capital reserve represents the cancelled share premium less dividends paid from this reserve. This is a
distributable reserve.
Retained earnings
Retained earnings represent the profits of the Company less dividends paid from revenue profits to
date. Unrealised gains on the revaluation of investment properties contained within this reserve are not
distributable until they crystallise on the sale of the investment property. The cumulative unrealised loss
contained within this reserve at 31 March 2024 is £7.47 million (31 March 2023: cumulative unrealised
loss of £3.12 million).
3. Rental and other income
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Rental income
19,888 17,709
Service charge income 2,899 1,895
Insurance income
1,171 923
Dilapidation income received
323 81
Lease surrender income 55 44
Other property income
9 72
Total Revenue
24,345 20,724
All rental and other income is derived from within the UK. No single tenant accounts for more than 10% of
rental income.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
105
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
4. Property operating expenses
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Recoverable service charge expense 2,899 1,895
Other property expenses 1,802 3,440
Recoverable insurance expense 1,171 923
Non-recoverable service charge expense
989 653
Total property operating expenses
6,861 6,911
5. Other operating expenses
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Investment management fee 1,391 1,548
Operating costs 1,134 639
Audit remuneration
226 199
Total other operating expenses
2,751 2,386
Details on how the investment management fees are calculated are disclosed in note 25.
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Audit
Statutory audit of Annual Report and Financial Statements
190 168
190 168
Non-audit
ISRE 2410 review (interim review fee)
36 31
36 31
Total fees paid to BDO LLP 226 199
Percentage of total fees attributed to non-audit services
16% 16%
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
106
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
6. Directors’ remuneration
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Directors' remuneration 148 106
Tax and social security
14 11
Total remuneration
162 117
A summary of the Directors’ remuneration is set out in the Directors’ Remuneration Report on page 59.
There are no other members of key management personnel other than the Directors.
7. Change in fair value of other financial assets
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Change in fair value of other financial assets
(12)
45
Total
(12) 45
8. Finance income
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Income receivable from cash and short-term deposits
177 –
Total
177 –
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
107
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
9. Finance expenses
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Interest payable on loan borrowings 1,780 1,729
Amortisation of loan arrangement fee 127 355
Bank charges
1 2
Commitment fees payable on loan borrowings
–
4
1,908 2,090
Interest expense on lease liabilities
28 28
Total
1,936 2,118
10. Taxation
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Tax charge comprises:
Corporation tax paid on interest received
42 –
Analysis of tax charge in the year
Profit/(loss) before tax
9,090 (11,325)
Theoretical tax at UK corporation tax standard rate of 25.00%
(31 March 2023: 19.00%)
2,273 (2,152)
Adjusted for:
Exempt REIT income (2,898) (1,698)
Non taxable investment losses 625
3,850
Corporation tax paid on interest received
42
–
Total tax charge
42 –
Other distribution
During the year, the Company identified that certain historic dividends had been declared as ordinary dividends
when they should have been declared as Property Income Distributions (“PIDs”). A provision for notional
withholding tax of £723,000 has therefore been included in shareholder reserves for the charges it may suffer
as a result. The Investment Manager has (without admission of liability) agreed to fully indemnify the Company
in return for an assignment of any claims the Company has against other parties. However, the benefit of the
indemnity is not reflected in this year’s net asset value, as it was entered into following the year-end and, as
such, will be reflected in next year’s net asset value. Due to the Investment Manager agreeing to indemnify the
Company, the Company’s NAV will not ultimately be impacted.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
108
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
10. Taxation (continued)
Factors that may affect future tax charges
Due to the Company’s status as a REIT and the intention to continue meeting the conditions required to obtain
approval as a REIT in the foreseeable future, the Company has not provided deferred tax on any capital gains
and losses arising on the revaluation or disposal of investments.
11. Earnings per share and NAV per share
Year ended
31 March 2024
Year ended
31 March 2023
Earnings per share:
Total comprehensive income/(loss) (£’000)
9,048 (11,325)
Weighted average number of shares
158,424,746 158,424,746
Earnings/(loss) per share (basic and diluted) (pence)
5.71 (7.15)
EPRA earnings per share:
Total comprehensive income/(loss) (£’000) 9,048 (11,325)
Adjustment to total comprehensive income/(loss):
Change in fair value of investment properties (£'000) 4,350 30,004
Realised gain on disposal of investment properties (£'000) (1,848) (9,744)
Realised loss on disposal of interest rate derivatives
– 88
Total EPRA Earnings (£'000)
11,550 9,023
EPRA earnings per share (basic and diluted) (pence)
7.29 5.70
Net assets (£'000) 162,752 167,101
Ordinary Shares in issue
158,424,746 158,424,746
NAV per share (pence)
102.73 105.48
Earnings per share (‘EPS’) amounts are calculated by dividing profit for the year attributable to ordinary equity
holders of the Company by the weighted average number of Ordinary Shares in issue during the year.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
109
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
11. Earnings per share and NAV per share (continued)
As at 31 March 2024
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS NAV attributable to shareholders 162,752 162,752 162,752
Real estate transfer tax and other purchasers’ costs
1
– 13,906 –
Adjustment for the fair value of bankborrowings
– – (4,641)
At 31 March 2024
162,752 176,658 158,111
Number of Ordinary Shares
158,424,746 158,424,746 158,424,746
NAV per share
102.73p 111.51p 99.80p
As at 31 March 2023
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS NAV attributable to shareholders 167,101 167,101 167,101
Real estate transfer tax and other purchasers’ costs
1
– 14,112 –
Adjustment for the fair value of bankborrowings
– – (4,771)
At 31 March 2023
167,101 181,213 162,330
Number of Ordinary Shares
158,424,746 158,424,746 158,424,746
NAV per share
105.48p 114.38p 102.47p
1
EPRA Net Tangible Assets (‘EPRA NTA’) and EPRA Net Disposal Value (‘EPRA NDV’) are calculated using property values in line with
IFRS, where values are net of Real Estate Transfer Tax (‘RETT’) and other purchasers’ costs. RETT and other purchasers’ costs are added
back when calculating EPRA Net Reinstatement Value (‘EPRA NRV’) and have been estimated at 6.6% of the net valuation provided by
KnightFrank.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
110
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
12. Dividends paid
Dividends paid during the year
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Represents four interim dividends of 2.00 pps each
12,674 12,674
Dividends relating to the year
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Represents four interim dividends of 2.00 pps each
12,674 12,674
Dividends paid during the period relate to Ordinary Shares only. The Statement of Cash Flows for dividends paid
excludes £283,000 withholding tax which is payable as at 31 March 2024. No withholding tax was payable as at
31 March 2023.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
111
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
13. Investment property
13.a) Investment property
31 March 2024 31 March 2023
Investment
property
freehold
£’000
Investment
property
leasehold
£’000
Total
£’000
Investment
property
freehold
£’000
Investment
property
leasehold
£’000
Total
£’000
UK investment property
As at beginning of the year 156,325 57,500 213,825 196,500 43,675 240,175
Purchases in the year 22,984 – 22,984 34,134 – 34,134
Capital expenditure in the year 380 1,771 2,151 1,061 1,537 2,598
Disposals in the year (24,300) – (24,300) (33,212) – (33,212)
Revaluation of investment properties
(1,049) (2,921) (3,970) (29,158) (712) (29,870)
Valuation provided by Knight Frank
154,340 56,350 210,690 169,325 44,500 213,825
Adjustment to carrying value for lease incentive debtor (3,751) (3,372)
Adjustment for lease obligations*
187 187
Total investment property
207,126 210,640
Classified as:
Investment property held for sale** 26,086 4,400
Investment property
181,040 206,240
207,126 210,640
Change in fair value of investment property
Change in fair value before adjustments for lease
incentives (3,970) (29,870)
Adjustment for movement in the year:
in value of lease incentive debtor
(380) (134)
(4,350) (30,004)
Gains on disposal of the investment property
Net proceeds from disposals of investment property
during the year*** 26,148 42,956
Fair value at the beginning of period
(24,300) (33,212)
Realised gain on disposal of investment property
held for sale
1,848 9,744
* Adjustment in respect of minimum payment under head leases separately included as a liability within the Statement of Financial Position
** Central Six Retail Park, Coventry and Oak Park, Droitwich have been classified as held for sale as at 31 March 2024.
*** Net proceeds include deductions for topped up rents and rent free periods of £555,000 (31 March 2023: £654,000).
112
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
13. Investment property (continued)
13.a) Investment property (continued)
Valuation of investment property
Valuation of investment property is performed by Knight Frank LLP, an accredited external independent valuer
with recognised and relevant professional qualifications and recent experience of the location and category of
the investment property being valued.
The valuation of the Company’s investment property at fair value is determined by the external valuer on the
basis of market value in accordance with the internationally accepted RICS Valuation – Professional Standards
(incorporating the International Valuation Standards).
The determination of the fair value is based upon the income capitalisation approach. This approach involves
applying capitalisation yields to current and future rental streams net of income voids arising from vacancies or
rent-free periods and associated running costs. These capitalisation yields and estimated rental values are based on
comparable property and leasing transactions in the market using the valuer’s professional judgement and market
observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details,
capital values of fixtures and fittings, environmental matter and the overall repair and condition of the property.
13.b) Fair value measurement hierarchy
The following table provides the fair value measurement hierarchy for investments:
Quoted prices in
active markets
(Level 1)
£’000
Significant
observable
inputs
(Level 2)
£’000
Significant
unobservable
inputs
(Level 3)
£’000
Total
£’000
Assets measured at fair value
31 March 2024
Investment property
– – 207,126 207,126
31 March 2023
Investment property
– – 210,640 210,640
Explanation of the fair value hierarchy:
Level 1 – Quoted prices for an identical instrument in active markets;
Level 2 – Prices of recent transactions for identical instruments and valuation techniques using observable
market data; and
Level 3 – Valuation techniques using non-observable data.
There have been no transfers between Level 1 and Level 2 during either period, nor have there been any
transfers in or out of Level 3.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
113
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
13. Investment property (continued)
13.b) Fair value measurement hierarchy (continued)
Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair
value hierarchy of the entity’s portfolio of investment property are:
1) ERV
2) Equivalent yield
Increases/(decreases) in the ERV (per sq ft per annum) in isolation would result in a higher/(lower) fair value
measurement. Increases/(decreases) in the discount rate/yield in isolation would result in a lower/(higher) fair
value measurement.
The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair
value hierarchy of the portfolio of investment property are as follows:
Fair Value Significant Unobservable Inputs
Sector £’000 ERV range (per sq ft per annum) Equivalent Yield range
As at 31 March 2024
Industrial 78,720 £0.50 – £10.00 6.81% – 10.94%
Retail 78,500 £4.00 – £85.00 6.93% – 11.34%
Alternatives 28,420 £4.50 – £41.00 7.60% – 9.77%
Office 25,050 £8.50 – £40.00 8.57% – 8.92%
Portfolio* 210,690 £0.50 – £85.00 6.81% – 11.34%
As at 31 March 2023
Industrial 94,600 £0.50 – £10.00 6.38% – 10.88%
Retail 83,800 £4.00 – £85.00 6.80% – 11.13%
Alternatives 20,125 £8.00 – £29.60 7.75% – 9.69%
Office 15,300 £8.50 – £40.00 7.74% – 8.73%
Portfolio* 213,825 £0.50 – £85.00 6.38% – 11.13%
* Valuation per Knight Frank LLP.
Where possible, sensitivity of the fair values of Level 3 assets are tested to changes in unobservable inputs
against reasonable alternatives.
Gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of
the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property
held at the end of the reporting period.
With regards to investment property, gains and losses for recurring fair value measurements categorised within
Level 3 of the fair value hierarchy, prior to adjustment for rent free debtor and rent guarantee debtor where
applicable, are recorded in profit or loss.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
114
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
13. Investment property (continued)
13.b) Fair value measurement hierarchy (continued)
Change in ERV Change in equivalent yield
£’000 £’000 £’000 £’000
Sensitivity analysis +5% -5% +5% -5%
31 March 2024
Resulting fair value of investment property
219,442 202,048 199,884 222,599
31 March 2023
Resulting fair value of investment property
223,280 205,317 204,098 225,214
Change in ERV Change in equivalent yield
£’000 £’000 £’000 £’000
Sensitivity analysis +10% -10% +10% -10%
31 March 2024
Resulting fair value of investment property
228,232 193,461 190,083 235,859
31 March 2023
Resulting fair value of investment property
232,439 196,550 194,983 237,533
Change in ERV Change in equivalent yield
£’000 £’000 £’000 £’000
Sensitivity analysis +15% -15% +15% -15%
31 March 2024
Resulting fair value of investment property
237,129 184,959 181,139 250,684
31 March 2023
Resulting fair value of investment property
241,600 187,803 186,663 251,301
Given the current volatility in the property market, the above levels of sensitivity of unobservable inputs are
considered to demonstrate plausible scenarios in the near future and a reasonable resulting range of movement
in valuation.
13.c) Real estate risk
The Company has considered the risks specific to its investment property within note 23.2 Financing Management.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
115
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
14. Receivables and prepayments
– Non Current
31 March 2024
£’000
31 March 2023
£’000
Receivables
Lease incentive debtor
3,267 2,997
Total
3,267 2,997
– Current
31 March 2024
£’000
31 March 2023
£’000
Receivables
Rent agent float account 2,505 1,712
Completion proceeds due on sale of property 2,175 –
Rent receivable
1,956 1,437
Recoverable service charge receivable 1,427 1,271
Recoverable insurance debtor
1,408 356
Other receivables
989
980
Allowance for expected credit losses
(2,177) (969)
8,283 4,787
Lease incentive debtor*
484 375
8,767 5,162
Prepayments
Property related prepayments 1,818 596
Other prepayments
40 47
1,858 643
Total
10,625 5,805
* Lease incentive asset amounting to £3,372,000 as at 31 March 2023 (2022: £3,238,000) was previously classified as a current asset
rather than allocated between current and non-current assets in line with their expected recovery.
The comparatives have been represented accordingly to present the allocation between current and non-current assets. As such,
£2,997,000 of these amounts are classified as non-current assets and £375,000 as current assets as at 31 March 2023 (2022:
£2,984,000 and £254,000 respectively). There is no effect on the profit or net assets in any period presented.
The lease incentive debtor recognised from rent smoothing adjustments are not considered to be financial assets as the amounts are
not yet contractually due. As such, the requirements of IFRS 9 (including the expected credit loss assessment) are not applicable to
these balances. The credit risk associated with the tenant is considered in the determination of the fair value of the related property.
The carrying value of trade and other receivables classified at amortised cost approximates fair value.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
116
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
14. Receivables and prepayments
– Current (continued)
The aged debtor analysis of receivables is as follows:
31 March 2024
£’000
31 March 2023
£’000
Less than three months 7,797 4,091
Between three and six months 486 696
Between six and twelve months
– –
Total
8,283 4,787
The Company applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis,
trade receivables are assessed on an individual tenant-by-tenant basis. The risk of credit loss applied to
each tenant is assessed based on information including, but not limited to: external credit ratings; financial
statements; press information; previous experience of losses or late payment; discussions with the property
manager and the tenant.
The expected loss rates are based on the Company’s historical credit losses experienced over the three-year
period prior to the year-end. The historical loss rates are then adjusted for current and forward-looking
information on macroeconomic factors affecting the Company’s customers. The expected credit loss provision
as at 31 March 2024 was £2.2 million (31 March 2023: £1.0 million). The reason for the large year-on-year
increase in the expected credit loss provision is due to a small number of tenants entering administration
during the year, most notable of which was Wilko at the Company’s asset on Union Street, Bristol. No reasonably
possible changes in the assumptions underpinning the expected credit loss provision would give rise to a
material expected credit loss.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
31 March 2024
£’000
31 March 2023
£’000
Opening provision for impairment of trade receivables
969 756
Increase during the year 1,552 345
Receivable written off during the year as uncollectible (331) (132)
Unused amounts reversed
(13) –
Movement in provision for impairment during the year
1,208 213
At the end of the year
2,177 969
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
117
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
15. Other financial assets at fair value
31 March 2024
£’000
31 March 2023
£’000
Other financial assets at FVTPL
– 12
At the end of the year
– 12
Fair value hierarchy
The following table provides the fair value measurement hierarchy for interest rate derivatives:
Valuation date
Quoted prices in
active markets
(Level 1)
£’000
Significant
observable input
(Level 2)
£’000
Significant
unobservable
inputs
(Level 3)
£’000
Total
£’000
31 March 2024 – – – –
31 March 2023 – – 12 12
The fair value of these contracts are recorded in the Statement of Financial Position as at the year-end.
There have been no transfers between Level 1 and Level 2 during the year, nor have there been any transfers
between Level 2 and Level 3 during the year.
The carrying amount of all assets and liabilities, detailed within the Statement of Financial Position, is
considered to be the same as their fair value.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
118
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
16. Interest bearing loans and borrowings
31 March 2024
£’000
31 March 2023
£’000
At the beginning of the year 60,000 54,000
Bank borrowings drawn in the year – 60,000
Bank borrowings repaid in the year
– (54,000)
Interest bearing loans and borrowings
60,000 60,000
Unamortised loan arrangement fees
(337) (447)
At the end of the year
59,663 59,553
Repayable between two and five years 60,000 60,000
Undrawn facility at the year-end
– –
Total facility
60,000 60,000
The Company has a £60.00 million credit facility with AgFe, a leading independent asset manager specialising
in debt-based investments. As of 31 March 2024, the Company had utilised £60.00 million (31 March 2023:
£60.00 million). The loan is a fixed rate loan with a total interest cost of 2.959% and has a 5 year term maturing
in May 2027.
The Company has a target gearing of 35% Loan to NAV. As at 31 March 2024, the Company’s gearing was
36.87% Loan to NAV (31 March 2023: 35.91%).
Borrowing costs associated with the credit facility are shown as finance costs in note 9 to these financial
statements.
Borrowing costs associated with the credit facility are shown as finance costs in note 9 to these financial statements.
31 March 2024 31 March 2023
Facility
£60.00 million
£60.00 million
Drawn
£60.00 million
£60.00 million
Loan at fair value £55.36 million £55.23 million
Gearing (Loan to GAV) 28.97% 28.06%
Gearing (Loan to NAV) 36.87% 35.91%
Interest rate
2.959%
fixed
2.959%
fixed
Notional Value of Loan Balance Hedged N/A N/A
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
119
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
16. Interest bearing loans and borrowings (continued)
Reconciliation to cash flows from financing activities
31 March 2024
£’000
31 March 2023
£’000
Balance at the beginning of the year 59,553 53,757
Changes from financing cash flows
Loan draw down – 60,000
Loan repayment – (54,000)
Interest paid (1,793) (1,607)
Loan arrangement fees
– (513)
Total changes from financing cash flows
(1,793) 3,880
Other changes
Amortisation of loan arrangement fees 127 355
Interest expense 1,780 1,729
Changes in loan interest payable 13 (122)
Release of prepaid arrangement fee
(17) (46)
Total other changes
1,903 1,916
Balance at the end of the year
59,663 59,553
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
120
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
17. Payables and accrued expenses
31 March 2024
£’000
31 March 2023
£’000
Deferred income 5,403 3,739
Other creditors
2,070
1,138
Accruals 1,199 1,341
Recoverable insurance payable 863
33
Recoverable service charge payable
278
677
Total
9,813 6,928
18. Lease obligations as lessee
Leases as lessee are capitalised at the lease’s commencement at the present value of the minimum lease
payments. The present value of the corresponding rental obligations are included as liabilities.
The following table analyses the minimum lease payments under non-cancellable leases:
31 March 2024
£’000
31 March 2023
£’000
Current 13 13
Non Current
174 174
Total
187 187
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
121
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
19. Lease obligations as lessor
The Company has entered into commercial property leases on its investment property portfolio. These
non-cancellable leases have a remaining term of between zero and 27 years.
Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2024 are as follows:
31 March 2024
£’000
31 March 2023
£’000
Within one year 13,249 16,829
After one year but not more than five years 25,000 37,734
More than five years
8,571 20,943
Total
46,820 75,506
During the year ended 31 March 2024, there were contingent rents totalling £400,233 (year ended 31 March
2023: £146,289) recognised as income.
20. Investment in subsidiary
The Company has a wholly-owned subsidiary, AEW UK REIT 2015 Limited:
Name and company number
Country of registration
andincorporation Principal activity Ordinary Shares held
AEW UK REIT 2015 Limited
(Company number 09524699) England and Wales Dormant 100%
AEW UK REIT 2015 Limited is a subsidiary of the Company incorporated in the UK on 2 April 2015. At 31 March
2024, the Company held one share, being 100% of the issued share capital. AEW UK REIT 2015 Limited is
dormant and the cost of the subsidiary is £0.01 (31 March 2023: £0.01). The registered office of AEW UK REIT
2015 Limited is Central Square, 29 Wellington Street, Leeds LS1 4DL.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
122
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
21. Issued share capital
31 March 2024 31 March 2023
£’000
Number of
Ordinary Shares £’000
Number of
Ordinary Shares
Ordinary Shares (nominal value £0.01 per
share) authorised, issued and fully paid
At the beginning of the year
1,587 158,774,746 1,587 158,774,746
At the end of the year
1,587 158,774,746 1,587 158,774,746
Treasury Shares
At the beginning of the year
(265) 350,000 (265) 350,000
At the end of the year
(265) 350,000 (265) 350,000
Total Ordinary Share capital excluding
treasury shares
1,587 158,424,746 1,587 158,424,746
The allotted, called up and fully paid shares at 31 March 2023 consisted of 158,774,746 Ordinary Shares.
22. Share premium account
31 March 2024
£’000
31 March 2023
£’000
The share premium relates to amounts subscribed for share capital in
excess of nominal value:
Balance at the beginning of the year
56,578 56,578
Balance at the end of the year
56,578 56,578
123
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
23. Financial risk management objectives and policies
23.1 Financial assets and liabilities
The Company’s principal financial assets and liabilities are those derived from its operations: receivables
and prepayments, cash and cash equivalents and payables and accrued expenses. The Company’s other
principal financial liabilities are interest bearing loans and borrowings, the main purpose of which is to
finance the acquisition and development of the Company’s property portfolio.
Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial
instruments that are carried in the financial statements.
31 March 2024 31 March 2023
Book Value
£’000
Fair Value
£’000
Book Value
£’000
Fair Value
£’000
Financial assets
Receivables
1
8,283 8,283 4,787 4,787
Cash and cash equivalents 11,397 11,397 14,315 14,315
Other financial assets held at
fairvalue – – 12 12
Financial liabilities
Interest bearing loans
andborrowings 59,663 55,359 59,553 55,229
Payables and accrued expenses
2
3,886 3,886 2,691 2,691
Lease obligations
187 187 187 187
1 Excludes lease incentive debtor and prepayments.
2 Excludes tax, VAT liabilities and deferred income.
Interest rate derivatives are the only financial instruments classified as fair value through profit and loss.
All other financial assets and financial liabilities are measured at amortised cost. All financial instruments
were designated in their current categories upon initial recognition.
Fair value measurement hierarchy has not been applied to those classes of asset and liability stated above
which are not measured at fair value in the financial statements. The difference between the fair value
and book value of these items is not considered to be material.
23.2 Financing management
The Company’s activities expose it to a variety of financial risks: market risk, real estate risk, credit risk
and liquidity risk.
The Company’s objective in managing risk is the creation and protection of shareholder value. Risk is
inherent in the Company’s activities but it is managed through a process of ongoing identification,
measurement and monitoring, subject to risk limits and other controls.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
124
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
23. Financial risk management objectives and policies (continued)
The principal risks facing the Company in the management of its portfolio are as follows:
Market price risk
Market risk is the risk that the fair values of financial instruments will fluctuate because of changes
in market prices. The financial instruments held by the Company that are affected by market risk are
principally the Company’s cash balances and bank borrowings.
The Company entered into a fixed rate 5 year loan with AgFe in May 2022, with a total interest cost of
2.959% mitigating the market risk associated with bank borrowings.
Real estate risk
Real estate risk is the risk that future values of investments in direct property and related property
investments will fluctuate due to changes in market prices. To manage market price risk, the Company
diversifies its portfolio geographically in the United Kingdom and across property sectors.
The disciplined approach to the purchase, sale and asset management ensures that the value is maintained
to its maximum potential. Prior to any property acquisition or sale, detailed research is undertaken to
assess expected future cash flow. The Investment Management Committee of the Investment Manager
meets twice monthly and reserves the ultimate decision with regards to investment purchases or sales.
In order to monitor property valuation fluctuations, the Investment Manager meets with the independent
external valuer on a regular basis. The valuer provides a property portfolio valuation quarterly, so any
movements in the value can be accounted for in a timely manner and reflected in the NAV every quarter.
Property investments are illiquid assets and can be difficult to sell, especially if local market conditions
are poor. Illiquidity may also result from the absence of an established market for investments, as well as
legal or contractual restrictions on resale of such investments. In addition, property valuation is inherently
subjective due to the individual characteristics of each property, and thus, coupled with illiquidity in the
markets, makes the valuation in the investment property difficult and inexact.
No assurances can be given that the valuations of properties will be reflected in the actual sale prices
even where such sales occur shortly after the relevant valuation date.
There can be no certainty regarding the future performance of any of the properties acquired for the
Company. The value of any property can go down as well as up. Property and property-related assets are
inherently subjective as regards value due to the individual nature of each property. As a result, valuations
are subject to uncertainty.
Real property investments are subject to varying degrees of risk. The yields available from investments in
real estate depend on the amount of income generated and expenses incurred from such investments.
There are additional risks in vacant, part vacant, redevelopment and refurbishment situations, although
these are not prospective investments for the Company.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
125
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
23. Financial risk management objectives and policies (continued)
Credit risk
Credit risk is the risk that the counterparty (to a financial instrument) or tenant (of a property) will cause a
financial loss to the Company by failing to meet a commitment it has entered into with the Company.
It is the Company’s policy to enter into financial instruments with reputable counterparties. All cash
deposits are placed with an approved counterparty, The Royal Bank of Scotland International Limited
which has an A3 long term credit rating.
In respect of property investments, in the event of a default by a tenant, the Company will suffer a rental
shortfall and additional costs concerning re-letting the property. The Investment Manager monitors
tenant arrears in order to anticipate and minimise the impact of defaults by occupational tenants.
The table below shows the Company’s exposure to credit risk:
As at
31 March 2024
£’000
As at
31 March 2023
£’000
Receivables (excluding incentives and prepayments) 8,283 4,787
Cash and cash equivalents
11,397 14,315
Total
19,680 19,102
Liquidity risk
Liquidity risk arises from the Company’s management of working capital, the finance charges and
principal repayments on its borrowings. It is the risk that the Company will encounter difficulty in
meeting its financial obligations as they fall due, as the majority of the Company’s assets are investment
properties and therefore not readily realisable. The Company’s objective is to ensure it has sufficient
available funds for its operations and to fund its capital expenditure. This is achieved by continuous
monitoring of forecast and actual cash flows by management.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
126
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
23. Financial risk management objectives and policies (continued)
Liquidity risk (continued)
The table below summarises the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments:
31 March 2024
On
demand
£’000
< 3
months
£’000
3–12
months
£’000
1–5
years
£’000
> 5
years
£’000
Total
£’000
Interest bearing loans and borrowings – 443 1,333 63,750 – 65,526
Payables and accrued expenses – 3,886 – – – 3,886
Lease obligation
– – 14 56 1,708 1,778
– 4,329 1,347 63,806 1,708 71,190
31 March 2023
On
demand
£’000
< 3
months
£’000
3–12
months
£’000
1–5 years
£’000
> 5
years
£’000
Total
£’000
Interest bearing loans and borrowings – 444 1,331 65,866 – 67,641
Payables and accrued expenses – 2,691 – – – 2,691
Lease obligation
– – 14 56 1,722 1,792
– 3,135 1,345 65,922 1,722 72,124
24. Capital management
The primary objectives of the Company’s capital management are to ensure that it continues to qualify for UK
REIT status and complies with its banking covenants.
To enhance returns over the medium term, the Company utilises borrowings on a limited recourse basis for each
investment or all or part of the total portfolio. The Company’s policy is to target a borrowing level of 35.00%
Loan toNAV.
Alongside the Company’s borrowing policy, the Directors intend, at all times, to conduct the affairs of the Company
so as to enable the Company to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations
made thereunder). The REIT status compliance requirements include: 90% distribution test, interest cover ratio and
75% assets test, all of which the Company remained compliant with in this reporting year.
The monitoring of the Company’s level of borrowing is performed primarily using a Loan to Value ratio and is
reported to the lender on a quarterly basis against the financial covenants of the facility. At the year-end, the
Company had a Loan to Value ratio of 31.99% (31 March 2023: 32.73%).
Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings.
During the year under review, the Company did not breach any of its loan covenants, nor did it default on any of
its other obligations under its loan agreements.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
127
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
25. Transactions with related parties
As defined by IAS 24 Related Parties Disclosures, parties are considered to be related if one party has the
abilityto control the other party or exercise significant influence over the other party in making financial or
operational decisions.
For the year ended 31 March 2024, the Directors of the Company are considered to be the key management
personnel. Details of amounts paid to Directors for their services can be found within note 6, Directors’ remuneration
and the Director’s remuneration report on page 59. During the year the Directors who served in the year received
£47,765 gross in dividend payments (31 March 2023: £87,999).
AEW UK Investment Management LLP is the Company’s Investment Manager and has been appointed as AIFM.
Under the terms of the Investment Management Agreement, the Investment Manager is responsible for the
day-to-day discretionary management of the Company’s investments subject to the investment objective and
investment policy of the Company and the overall supervision of the Directors.
The Investment Manager is entitled to receive a quarterly management fee in respect of its services calculated
at the rate of one-quarter of 0.9% of the prevailing NAV (excluding uninvested proceeds from fundraisings).
During the year, the Company incurred £1,391,335 (31 March 2023: £1,548,204) in respect of investment
management fees and expenses, of which £339,647 (31 March 2023: £349,351) was outstanding as at
31 March 2024.
26. Segmental information
The Board of Directors retains overall control of the Company but the Investment Manager (AEW UK Investment
Management LLP) has certain authorities and fulfils the function of allocating resource to, and assessing the
performance of the Company’s operating segments and is therefore considered to be the Chief Operating Decision
Maker (‘CODM’). In accordance with IFRS 8, the Company considers each of its properties to be an individual
operating segment. The CODM allocates resources, and reviews the performance of, the Company’s portfolio on a
property-by-property basis and discrete financial information is available for each individualproperty.
These operating segments have similar economic characteristics and, as such, are aggregated into one
reporting segment, being investment in property and property-related investments in the UK.
27. Events after reporting date
Dividend
On 14 May 2024, the Board declared its fourth interim dividend of 2.00 pps in respect of the period from
1 January 2024 to 31 March 2024. This was paid on 14 June 2024, to shareholders on the register as at 24 May
2024. The ex-dividend date was 23 May 2024.
Property sale
In May 2024, the Company exchanged on the sale of Oak Park, Droitwich, for £6.30 million. The sale is expected
to complete in July 2024.
Notes to the Financial Statements (continued)
for the year ended 31 March 2024
128
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA disclosures are widely used across the listed property sector and, as such, have been presented below to aid comparison with
other companies in this sector.
Detailed below is a summary table showing the EPRA performance measures of the Company
All EPRA performance measures have been calculated in line with EPRA Best Practices Recommendations Guidelines which can be
found at www.epra.com.
MEASURE AND DEFINITION PURPOSE PERFORMANCE
1. EPRA Earnings
Earnings for operational activities. A key measure of a company’s underlying
operating results and an indication of the
extent to which current dividend payments are
supported by earnings.
£11.55 million/7.29 pps
EPRA earnings for year to
31 March 2024 (31 March 2023:
£9.02 million/5.70 pps)
2. EPRA Net Tangible Assets (‘NTA’)
Assumes that entities buy and sell
assets, thereby crystallising certain
levels of unavoidable deferred tax.
The EPRA NAV set of metrics make adjustments
to the NAV per the IFRS financial statements
to provide stakeholders with the most relevant
information on the fair value of the assets and
liabilities of a real estate investment company,
under different scenarios.
£162.75 million/102.73 pps
EPRA NTA as at
31 March 2024 (31 March 2023:
£167.10 million/105.48 pps)
3. EPRA Net Reinstatement Value
(‘NRV’)
Assumes that entities never sell assets
and aims to represent the value
required to rebuild the entity.
£176.66 million/111.51 pps
EPRA NRV as at
31 March 2024 (31 March 2023:
£181.21 million/114.38 pps)
4. EPRA Net Disposal Value (‘NDV’)
Represents the shareholders’ value
under a disposal scenario, where
deferred tax, financial instruments
and certain other adjustments are
calculated to the full extent of their
liability, net of any resulting tax.
£158.11 million/99.80 pps
EPRA NDV as at
31 March 2024 (31 March 2023:
£162.33 million/102.47 pps)
5. EPRA Net Initial Yield (‘NIY’)
Annualised rental income based on
the cash rents passing at the balance
sheet date, less non-recoverable
property operating expenses,
divided by the market value of the
property, increased with (estimated)
purchasers’ costs.
A comparable measure for portfolio valuations.
This measure should make it easier for
investors to judge themselves, how the
valuation of portfolio X compares with
portfolioY.
8.02%
EPRA NIY as at 31 March 2024
(31 March 2023: 7.65%)
EPRA Unaudited Performance Measures
129
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
MEASURE AND DEFINITION PURPOSE PERFORMANCE
6. EPRA ‘Topped-Up’ NIY
This measure incorporates an
adjustment to the EPRA NIY in
respect of the expiration of rent-free
periods (or other unexpired lease
incentives such as discounted rent
periods and step rents).
A comparable measure for portfolio valuations.
This measure should make it easier for
investors to judge themselves, how the
valuation of portfolio X compares with
portfolioY.
8.30%
EPRA ‘Topped-Up’ NIY as at 31 March
2024 (31 March 2023: 8.07%)
7. EPRA Vacancy Rate
Estimated Market Rental Value
(‘ERV’) of vacant space divided by
ERV of the whole portfolio.
A ‘pure’ (%) measure of investment property
space that is vacant, based on ERV.
6.38%
EPRA Vacancy Rate as at 31 March
2024 (31 March 2023: 7.83%)
8. EPRA Cost Ratio
Administrative and operating costs
(including and excluding costs of
direct vacancy) divided by gross
rental income.
A key measure to enable meaningful
measurement of the changes in a company’s
operating costs.
34.57%
EPRA Cost Ratio (including direct
vacancy costs) as at 31 March 2024
(31 March 2023: 37.46%)
26.67%
EPRA Cost Ratio (excluding direct
vacancy costs) as at 31 March 2024
(31 March 2023: 26.45%)
9. EPRA Capital Expenditure
Property which has been held at both
the current and comparative balance
sheet dates for which there has been
no significant development.
A measure used to illustrate change in
comparable capital values.
£25.13 million for the year ended
31 March 2024 (31 March 2023:
£36.73 million)
10. EPRA Like-for-like Rental
Growth
Net growth generated by assets
which were held by the Company
throughout both the current and
comparable periods which there has
been no significant development
which materially impacts upon
income.
A measure used to illustrate change in
comparable income values.
£0.48 million/3.39% for the year
ended 31 March 2024 (31 March
2023: £0.12 million/ 0.98%)
11. EPRA Loan to Value
Debt divided by the market value of
property.
A measure to assess the gearing of shareholder
equity of a real estate company.
22.63% for the year ended 31 March
2024 (31 March 2023: 21.18%)
EPRA Unaudited Performance Measures (continued)
130
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Calculation of EPRA NTA, EPRA NRV and EPRA NDV
The Company considers EPRA NTA to be the most relevant NAV measure for the Company and we are now reporting this as our primary
NAV measure, replacing our previously reported EPRA NAV and EPRA NNAV per share metrics. EPRA NTA excludes the cumulative fair
value adjustments for debt-related derivatives which are unlikely to be realised.
As at 31 March 2024
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS NAV attributable to shareholders 162,752 162,752 162,752
Real estate transfer tax and other
purchasers’ costs
1
– 13,906 –
Adjustment for the fair value of bank borrowings
– – (4,641)
At 31 March 2024
162,752 176,658 158,111
Number of Ordinary Shares (‘000) 158,424,746 158,424,746 158,424,746
NAV Per share
102.73p 111.51p 99.80p
As at 31 March 2023
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS NAV attributable to shareholders 167,101 167,101 167,101
Real estate transfer tax and other
purchasers’ costs
1
– 14,112 –
Adjustment for the fair value of bank borrowings – – (4,771)
At 31 March 2023
167,101 181,213 162,330
Number of Ordinary Shares (‘000)
158,424,746 158,424,746 158,424,746
NAV Per share
105.48p 114.38p 102.47p
1
EPRA NTA and EPRA NDV are calculated using property values in line with IFRS, where values are net of Real Estate Transfer Tax (RETT) and other
purchasers’ costs. RETT and other purchasers’ costs are added back when calculating EPRA NRV, and have been estimated at 6.6% of the net
valuation provided by Knight Frank.
EPRA Unaudited Performance Measures (continued)
131
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Calculation of EPRA Net Initial Yield (‘NIY’) and EPRA ‘topped-up’ NIY
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Investment property – wholly-owned 210,690 213,825
Allowance for estimated purchasers’ costs at 6.6%
13,906 14,112
Grossed-up completed property portfolio valuation (B)
224,596 227,937
Annualised cash passing rental income 18,694 18,399
Property outgoings (674) (960)
Annualised net rents (A)
18,020 17,439
Rent from expiry of rent-free periods and fixed uplifts*
612 949
‘Topped-up’ net annualised rent (C)
18,632 18,388
EPRA NIY (A/B) 8.02% 7.65%
EPRA ‘topped-up’ NIY (C/B) 8.30% 8.07%
* Rent-free periods expire by July 2024.
EPRA NIY basis of calculation
EPRA NIY is calculated as the annualised net rent, divided by the grossed-up value of the completed property portfolio valuation.
The valuation of the grossed-up completed property portfolio is determined by the Company’s external valuers as at 31 March 2024,
plus an allowance for estimated purchaser’s costs. Estimated purchaser’s costs are determined by the relevant stamp duty liability, plus
an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is
based on the Company’s valuers’ assumptions on future recurring non-recoverable revenue expenditure.
In calculating the EPRA ‘topped-up’ NIY, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods
and future contracted rental uplifts.
Calculation of EPRA Vacancy Rate
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Annualised potential rental value of vacant premises (A) 1,334 1,671
Annualised potential rental value for the complete property portfolio (B)
20,912 21,343
EPRA Vacancy Rate (A/B)
6.38% 7.83%
EPRA Unaudited Performance Measures (continued)
132
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Unaudited Performance Measures (continued)
Calculation of EPRA Cost Ratios
Year ended
31 March 2024
£’000
Year ended
31 March 2023
£’000
Administrative/operating expense per IFRS income statement 6,912 6,810
Less: ground rent costs
(56) (282)
EPRA costs (including direct vacancy costs) (A) 6,856 6,528
Direct vacancy costs (see Glossary on page 150 for further details)
(1,567) (1,918)
EPRA costs (excluding direct vacancy costs) (B)
5,289 4,610
Gross rental income less ground rent costs (C)
19,832 17,427
EPRA Cost Ratio (including direct vacancy costs) (A/C) 34.57% 37.46%
EPRA Cost Ratio (excluding direct vacancy costs) (B/C) 26.67% 26.45%
The Company has not capitalised any overhead or operating expenses in the accounting years disclosed above.
Only costs directly associated with the purchase or construction of properties as well as all subsequent value-enhancing capital
expenditure are capitalised.
Like-for-like rental growth
The table below sets out the like-for-like for rental growth of the portfolio, by sector, in accordance with EPRA Best
PracticesRecommendations.
Sector
Rental
income from
like-for-like
portfolio
2024
£m
Rental
income from
like-for-like
portfolio
2023
£m
Like-for-like
rental growth
£m
Like-for-like
rental growth
%
Industrial 6.70 6.27 0.43 6.86
Retail Warehouse 3.14 3.27 (0.13) (3.98)
Standard Retail 1.83 1.84 (0.01) (0.54)
Alternatives 1.81 1.77 0.04 2.26
Office
1.18 1.03 0.15 14.56
Total
14.66 14.18 0.48 3.39
The like-for-like rental growth is based on changes in rental income for those properties which have been held for the duration of both
the current and comparative reporting. This represents a portfolio valuation, as assessed by the valuer of £159.97 million (31 March
2023: £159.03 million).
133
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Unaudited Performance Measures (continued)
Capital Expenditure
The table below sets out the capital expenditure of the portfolio in accordance with EPRA Best Practice Recommendations.
Sector
2024
£’000
2023
£’000
Acquisitions 23,214 34,147
Investment properties – no incremental lettable space
1,921 2,585
Total purchases and capital expenditure
25,135 36,732
EPRA Loan to Value
The table below sets out the loan to net value in accordance with EPRA Best Practice Recommendations:
EPRA Loan-to-Value
31 March
2024
£’000
31 March
2023
£’000
Borrowings from financial institutions 60,000 60,000
Cash and cash equivalents
(11,397) (14,315)
EPRA Net debt (A)
48,603 45,685
Investment properties at fair value 210,690 213,825
Net receivables
4,079 1,874
Total property value (B)
214,769 215,699
EPRA LTV (A/B)
22.63% 21.18%
Net receivables comprises
Receivables and prepayments 13,892 8,802
Payables and accrued expenses
(9,813) (6,928)
Total
4,079 1,874
134
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Sustainability Performance Measures (unaudited)
The Company has chosen to disclose sustainability information where material in accordance with EPRA Best Practice
Recommendations on Sustainability Reporting (sBPR) 2017.
EPRA use the following 28 performance measures as indicated, by code, in the table below:
Code Performance Measure
Environmental
Elec-Abs Total electricity consumption
Elec-LfL Like-for-like total electricity consumption
DH&C-Abs Total district heating & cooling consumption
DH&C-LfL Like-for-like district heating & cooling consumption
Fuels-Abs Total fuel consumption
Fuels-LfL Like-for-like total fuel consumption
Energy-LfL Building energy intensity
GHG-Dir-Abs Total direct greenhouse gas (GHG) emissions
GHG-Indir-Abs Total indirect greenhouse gas (GHG) emissions
GHG-Int Greenhouse gas (GHG) emissions intensity from buildings
Water-Abs Total water consumption
Water-LfL Like-for-like total water consumption
Water-Int Building water intensity
Waste-Abs Total weight of waste by disposal route
Waste-LfL Life-for-like total weight of waste by disposal route
Cert-Tot Type and number of sustainably certified assets
Social
Diversity-Emp Employee gender diversity
Diversity-Pay Gender pay ratio
Emp-Training Employee training and development
Emp-Dev Employee performance appraisals
Emp-Turnover New hires and turnover
H&S-Emp Employee Health & Safety
H&S-Asset Asset Health & Safety assessments
H&S-Comp Asset Health & Safety compliance
Comty-Eng Community engagement, impact assessment and development programs
Governance
Gov Board Composition of the highest governance body
Gov Selec Process for nominating and selecting the highest governance body
Gov CoI Process for managing conflicts of interest
135
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Sustainability Performance Measures (Environmental)
The Company has chosen to report GHG emissions using the ‘Operational Control’ approach for its reporting boundary (as opposed to
financial control’ or ‘equity share’). ‘Operational control’ has been selected as the reporting boundary as this reflects the portion of the
portfolio where the Company can influence operational procedures and, ultimately, sustainability performance. The operational control
approach is the most commonly applied within the industry. This boundary includes owned assets where the Company, acting as the
landlord, is directly responsible for electricity and/or gas supplies and/or has control of air conditioning equipment.
The following sources of emissions have been considered as part of this review:
Scope 1
• Direct emissions from controlled gas boilers (converted from kWh usage)
• Fugitive emissions from air conditioning systems under landlord control (converted from kg refrigerant releases). The Company’s
property manager, Mapp, have confirmed that no fugitive emission (through refrigerant gases) were reported in 2023/24.
• Business travel through company owned vehicles (not relevant as the Company does not own any vehicles)
Scope 2
• Indirect emissions from electricity purchased by the Company and consumed within real estate assets owned by the Company
(converted from kWh usage)
• Greenhouse Gas (GHG) emissions from electricity (Scope 2) are reported according to the ‘location-based’ approach
As a property company, the majority of the Company’s emissions arise through assets that are owned and leased. At multi-let properties,
the Company, acting as the landlord, has control and influence over the whole building and/or shared services (including refrigerant
leakage), external lighting and void spaces. In this reporting year, the Company was responsible for Scope 1 and/or Scope 2 emissions at
the following assets:
Asset name Sector Scope 1 – Gas Scope 2 – Electricity
Included in
like-for-like
40 Queen Square Office Ye s Yes Ye s
69-75 Above Bar Street Retail No Yes Yes
11/15 Fargate Retail No Yes No
Pricebusters Building Retail No Yes Yes
Barnstaple Retail Park Retail Warehouse No Yes No
Diamond Business Park Industrial Yes Yes Ye s
Apollo Business Park Industrial Yes Yes Yes
London East Leisure 1 Leisure No Ye s Yes
15-33 Union Street Retail No Yes No
Railway Station Centre Retail No Yes No
Central Six Retail Park Retail Warehouse Yes Yes No
Westlands Distribution Park Industrial No Yes Yes
Arrow Point Retail Park Retail Warehouse No Ye s No
Northgate House Office No Yes No
EPRA Sustainability Performance Measures (unaudited)
(continued)
136
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Sustainability Performance Measures (unaudited)
(continued)
Emission sources listed in the above table relate to the managed portfolio only and the following sources of energy consumption within
each sector:
– Office; Whole building and common areas (1 asset)
– Retail; Whole building, tenant space and common areas
– Retail Warehouse; Tenant space and external lighting
– Leisure; External lighting, tenant space and common areas
– Industrial; Tenant space, common areas and external lighting
Emissions outside of operational control
The Company was not responsible for emissions from gas and/or electricity use at any other owned asset or for head office operations.
The Company is not directly responsible for any GHG emissions/energy usage at single let/FRI assets nor at multi-let assets where the
tenant is counterparty to the energy contract. As these emissions are outside of our direct control, they form part of our wider value
chain (i.e. ‘Scope 3’) emissions, which are not monitored at present.
Water Consumption & Waste Production
Alongside GHG emissions/energy usage, the Company has chosen to report water and waste consumption of assets where the
Company, acting as the landlord, is directly responsible for them.
Asset name Sector Water Waste
40 Queen Square Office Yes Ye s
Diamond Business Park Industrial Ye s Yes
London East Leisure 1 Leisure Ye s No
Westlands Distribution Park Industrial Ye s No
Central Six Retail Park Retail Warehouse No Yes
Intensity Ratios
In addition to reporting relevant absolute GHG emissions (per scope and per sector), the Company has chosen to report intensity ratios,
where appropriate.
The denominator determined to be most relevant to the business is metres squared of the area served by the meter. The intensity ratio is
expressed as kilograms carbon dioxide equivalent per metre square (of area served by the meter) per year, or, kg CO
2
e/m
2
/yr.
Like-for-like intensity ratios have only been determined on relevant emissions, where each of the following conditions is met:
• An asset was in ownership for 24 months from 1st April 2022 to 31st March 2024
• No major renovation or refurbishment has taken place i.e. affecting more than 50% of the building by area or number of occupants
• At least 12 months data is available at meter level in both years
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Assets excluded from the like-for-like analysis include:
• Northgate House
• Units A-H Arrowpoint Retail Park
Assets disposed during the 2022/2023 reporting period and are therefore excluded from any 2023/2024 absolute and like-for-like
data, but are included in 2022/2023 absolute figures:
• Pearl House
• 225 Bath Street
• Eastpoint Business park – Meridian House
• Eastpoint Business Park – Orion House
• Vantage Point
Company Targets
GHG Reporting Guidelines recommend establishing a target as a matter of good practice. Energy targets are typically measured via
changes to KWh usage and/or greenhouse gas emissions (in the form of carbon dioxide equivalent) compared to a baseline. Energy
targets help:
• Support identification of asset improvement opportunities
• Drive improvements in operational efficiency (and potentially lower costs)
• Futureproof asset against increased legislation and ‘brown discounting’ (on sale)
• Support overall good asset management
• Support GRESB
The Company has established absolute targets for energy, greenhouse gas emissions and waste covering the whole portfolio based on a
2018 baseline. The targets are outlined below:
• Energy consumption: 40% reduction in absolute energy by 2030 based on the 2018 baseline
• GHG emissions: 40% reduction in absolute energy by 2030 based on the 2018 baseline
• Waste: 100% waste diverted from landfill was achieved by 2020. The fund aims to maintain this target
Environmental information in this report has been provided by EVORA Global, retained sustainability and energy management
consultants to the Investment Manager.
EVORA’s consultant statement is included below:
EVORA Global Limited has been appointed by the Company to collate and report energy consumption data, greenhouse gas (GHG)
emissions, water and waste data presented within this report.
EPRA Sustainability Performance Measures (unaudited)
(continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Methodology
Utility data is reported to EVORA by the Company’s property manager (MAPP) based on invoiced data.
EVORA checked the Sustainability Performance Data using our proprietary software tool SIERA. In summary, the following steps
wereapplied:
Step 1: Confirmation of asset set up (data coverage and responsibility for procurement)
Step 2: Input of asset characteristics and utility data (e.g. energy kWh)
Step 3: Initial data reliability checks were performed in the SIERA tool to identify:
• Consumption / tonnage data gaps
• Periods of overlapping consumption/tonnage data
• Significant consumption/tonnage variance between comparable periods
Step 4: Check of data and results utilising the inbuilt function of SIERA with specialist EVORA consultant review. Like-for-like analysis
was used to assess, review and quantify year-on year performance changes. Variances of -/+ 10% were identified and reviewed by
EVORA consultants.
About EVORA
EVORA is an independent, pan-European sustainability consultancy and software provider, specialising in the commercial real estate sector.
Rebecca Mastrogiannis
Managing Consultant, EVORA Global Ltd
1 July 2024
EPRA Sustainability Performance Measures (unaudited)
(continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Total energy consumption (Elec-Abs; Fuels-Abs, DH&C-Abs)
The table below sets out total landlord obtained energy consumption from the Company’s managed portfolio by sector.
Absolute Energy Usage (kWh)
Sector Energy Source 2023/24 2022/23
Office Gas 144,356 326,910
Electricity 267,747 492,832
Energy 412,103 819,742
Retail Gas – 145,178
Electricity 390,840 403,083
Energy 390,840 548,261
Retail Warehouse Gas – –
Electricity 135,983 119,883
Energy 135,983 119,883
Leisure Gas – –
Electricity 35,177 35,983
Energy 35,177 35,983
Industrial Gas 1,074,441 671,372
Electricity 1,188,379 1,218,922
Energy 2,262,820 1,890,294
Total Gas 1,218,797 1,143,460
Electricity 2,018,126 2,270,703
Energy 3,236,923 3,414,163
The Company does not have any responsibility over any managed assets that consume energy from district heating or district cooling
sources. Therefore, the EPRA sBPR DH&C-Abs indicator is not applicable and not presented in this report.
EPRA Sustainability Performance Measures (unaudited)
(continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Like-for-like energy consumption (Elec-LfL; Fuels-LfL; DH&C-LfL, Energy-Int)
The table below sets out the like-for-like landlord obtained energy consumption from the Company’s managed portfolio by sector.
Like-for-like (kWh) Like-for-like Intensity (kWh/m
2
)
Sector Energy Source 2023/24 2022/23 Change 2023/24 2022/23 Change
Office Gas 144,356 130,338 11% 32 29 11%
Electricity 267,747 271,306 (1%) 60 60 (1%)
Total 412,103 401,644 3% 92 89 3%
Retail Gas N/A N/A N/A N/A N/A N/A
Electricity 277,840 293,012 (5%) 16 17 (5%)
Total 277,840 293,012 (5%) 16 17 (5%)
Retail
Warehouse
Gas N/A N/A N/A N/A N/A N/A
Electricity 101,861 96,615 5% 145 137 5%
Total 101,861 96,615 5% 145 137 5%
Leisure Gas N/A N/A N/A N/A N/A N/A
Electricity 35,177 35,983 (2%) 26 27 (2%)
Total 35,177 35,983 (2%) 26 27 (2%)
Industrial Gas 1,074,441 671,372 60% 55 34 60%
Electricity 1,188,379 1,218,922 (3%) 53 54 (3%)
Total 2,262,820 1,890,294 20% 108 88 20%
Total Gas 1,218,797 801,710 52% 50 33 52%
Electricity 1,871,003 1,915,837 (2%) 40 41 (2%)
Energy 3,089,800 2,717,547 14% 90 74 14%
The Company does not have any responsibility over any managed assets that consume energy from district heating or cooling sources.
Therefore, the EPRA sBPR DH&C-LfL indicator is not applicable and not presented in this report.
EPRA Sustainability Performance Measures (unaudited)
(continued)
141
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Greenhouse gas emissions (GHG-Dir-Abs; GHG-Indir-Abs; GHG-Int)
The table below sets out the absolute, like-for-like and intensity of the GHG emissions per sector and for the Company overall.
Absolute Tonnes
of Carbon Dioxide
Equivalent (
t
CO
2
e)
Like-for-like
Tonnes of Carbon Dioxide
Equivalent (
t
CO
2
e)
Like-for-like
Carbon Intensity (kg/CO
2
e/m
2
)
Sector Scope 2023/24 2022/23 2023/24 2022/23 Change 2023/24 2022/23 Change
Office Scope 1 – Gas 26.4 59.7 26.4 23.8 11% 5.9 5.3 11%
Scope 2 –
Electricity
55.4 95.3 55.4 52.5 6% 12.4 11.7 6%
Retail Scope 1 – Gas N/A 26.5 N/A N/A N/A N/A N/A N/A
Scope 2 –
Electricity
80.9 77.9 43.1 56.7 (24%) 3.3 4.3 (24%)
Retail
Warehouse
Scope 1 – Gas N/A – N/A N/A N/A N/A N/A N/A
Scope 2 –
Electricity
28.2 23.2 21.1 18.7 13% 15.4 13.7 13%
Leisure Scope 1 – Gas N/A – N/A N/A N/A N/A N/A N/A
Scope 2 –
Electricity
7.3 7.0 7.3 7.0 5% 4.5 4.3 5%
Industrial Scope 1 – Gas 196.5 122.5 196.5 122.5 60% 8.8 5.5 60%
Scope 2 –
Electricity
246.1 235.7 246.1 235.7 4% 11.0 10.5 4%
Total Scope 1 – Gas 223 208.7 223.0 146.7 52% 8.3 5.4 52%
Scope 2 –
Electricity
417.9 439.1 373.0 370.5 1% 8.7 8.6 (1%)
Total 640.9 647.8 596.0 517.2 15% 13.9 12.0 15%
Emissions Factors
• All energy consumption and GHG emissions reported occurred at the Company’s assets all of which are located in the UK.
• Energy consumption data is reported according to automatic meter reads, manual meter reads or invoice estimates. Historic energy
and consumption data have been restated where more complete and or accurate records have become available.
• The Company’s GHG emissions are calculated according to the principles of the Greenhouse Gas (GHG) Protocol Corporate
Standard.
– The Company’s Greenhouse Gas Emissions are reported as tonnes of carbon dioxide equivalent (
t
CO
2
e), which includes the
following emissions covered by the GHG Protocol (where relevant and available greenhouse gas emissions factors allow): carbon
dioxide (CO
2
), methane (CH
4
), hydrofluorocarbons (‘HFCs’), nitrous oxide (N
2
0), perfluorocarbons (‘PFCs’), sulphur hexafluoride
(SF
6
) and nitrogen trifluoride (NF
3
).
– GHG emissions from electricity (Scope 2) are reported according to the ‘location-based’ approach.
EPRA Sustainability Performance Measures (unaudited)
(continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Sustainability Performance Measures (unaudited)
(continued)
The following greenhouse gas emissions conversion factors and sources have been applied:
Utility Type Year
GHG Emissions
Factor per kWh Emissions Factor Data Source
Electricity 2022 0.19338
UK BEIS, Greenhouse gas reporting: conversion factors 2022
Gas 2022 0.1825
Electricity 2023 0.207074289
UK BEIS, Greenhouse gas reporting: conversion factors 2023
Gas 2023 0.182928926
Water (Water-Abs; Water-LfL; Water-Int)
The table below sets out the absolute, like-for-like and intensity value water consumption from the Company’s managed portfolio by
sector. No assets met the criteria for like-for-like analysis.
Absolute Water Usage
(m
3
)
Like-for-like Water Usage
(m
3
) Like-for-like Intensity
Sector 2023/24 2022/23 2023/24 2022/23 Change 2023/24 2022/23 Change
Office 792.1 2,314.8 792.1 725.5 9% 0.18 0.16 9%
Industrial 23,945.4 27,897.7 23,945.4 27,897.7 (14%) 0.48 0.55 (14%)
Leisure 97.2 108.8 97.2 108.8 (10%) 0.01 0.01 (10%)
Total 24,834.7 30,321.3 24,834.7 28,732.0 (16%) 0.40 0.46 (14%)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Sustainability Performance Measures (unaudited)
(continued)
Waste (Waste-Abs; Waste-LfL)
The table below sets out the waste managed (absolute waste production and like-for-like) by the Company by disposal route and
by sector. Absolute waste production figures are estimated using a bespoke waste estimation tool that takes bin size and number of
collections to calculate the amount of waste produced. The waste estimation tool has been externally validated and is accepted as
evidence for GRESB submissions. This does not include waste disposal services procured directly by tenants. Whilst zero waste is sent
directly to landfill, a residual component of the ‘recycled’ and ‘incineration with energy recovery’ waste streams may end up in landfill.
The approach taken follows guidance provided by EPRA Best Practice Recommendations on Sustainability Reporting 2017.
Absolute Waste
(Tonnes)
Like-for-like
(Tonnes)
Sector Destination 2023/24 2022/23 2023/24 2022/23 Change
Office Landfill – – - - n/a
Anaerobic Digestion 8.9 4.8 8.9 4.8 86%
Incineration with energy recovery 13.5 22.7 13.5 13.6 0%
Recycled 18.2 27.5 18.2 18.3 0%
Industrial Landfill – – – – n/a
Anaerobic Digestion – – – – n/a
Incineration with energy recovery 2.0 2.1 2.0 2.1 (2%)
Recycled 5.8 4.8 5.8 4.8 21%
Retail, Warehouse Landfill – – – – n/a
Anaerobic Digestion – – – – n/a
Incineration with energy recovery 20.8 20.8 20.8 20.8 0%
Recycled 1.2 1.2 1.2 1.2 (1%)
Total Landfill – – – – n/a
Anaerobic Digestion 8.9 4.8 8.9 4.8 86%
Incineration with energy recovery 36.3 45.5 36.3 36.4 0%
Recycled 25.2 33.5 25.2 24.3 4%
Total 70.4 83.8 70.4 65.5 8%
Recycling Rate % 36% 40% 36% 37% (4%)
We present property energy, greenhouse gas (“GHG”), water and waste data on both an absolute (“abs”) and life-for-like (“LfL”) basis,
covering assets in our UK based portfolio.
Our organisational boundary for environmental disclosure is based on the principle of operational control, and therefore includes all
property assets where we are responsible for the procurement of energy, water and waste services.
A total of 14 assets in the portfolio reported GHG emissions for the 2023/2024 reporting period (year ended 31 March 2023: 16
assets). 4 assets reported water consumption for the 2023/2024 reporting period, and 3 assets reported waste services (year ended
31 March 2023: 8 assets).
AEW has set a target to reduce absolute Scope 1 GHG emissions by 40% within the Managed Portfolio by 2030 as compared to the
2018 baseline. Additionally, a target has been set to reduce absolute Scope 2 GHG emissions by 40% within the Managed Portfolio
by 2030 as compared to the 2018 baseline. This target is inclusive of the decarbonisation of the UK electricity grid over recent years.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
The reporting scope for electricity consumption covers 100% of the portfolio on a floor area basis (Gross Internal Area) across
2022/2023 and 2023/2024. Scope 1 GHG emissions were reported for 27% of the portfolio, and Scope 2 GHG emissions were
reported for 100% of the portfolio (year ended 31 March 2023: 44%).
During the reporting year, the company procured 3.1 million kWh (year ended 31 March 2023: 3.5 million kWh) of like-for-like
energy for use across the managed portfolio, which is 14% more like-for-like energy use than the prior year.
The Scope 1 and 2 GHG emissions for the year totalled 640 tonnes CO2e (2023: 664.1 tonnes CO2e). The absolute Scope 1 and 2
decreased by 1% from 2022/2023 to 2023/2024 and the two year like-for-like emissions increased by 15% respectively.
During the period, the total reported waste amounted to 70 tonnes (year ended 31 March 2023: 83.6 tonnes), of which none (year
ended 31 March 2023: none) was sent directly to landfill. In like-for-like terms, the amount of waste generated increased from
2022/2023 to 2023/2024 by 7.6%, and the recycling rate decreased by 3.5%.
Sustainability certification (Cert-Tot): Green building certificates
The Company has chosen not to pursue certification of any of its assets under measures such as BREEAM (the Building Research
Establishment Environmental Assessment Methodology) or Green building certification. This decision will be reviewed periodically
on an ongoing basis in the course of the Company’s usual asset management activity.
Sustainability certification (Cert-Tot): Energy performance certificates
The Minimum Energy Efficiency Standards (MEES) Regulations stem from the Energy Act 2011, which has made it unlawful from April
2018 to let or renew leases at non-domestic properties in England & Wales with an Energy Performance Certificate (EPC) rating lower
than an E, subject to certain exemptions. A ‘hard backstop’ which brings into the MEES standards existing leases will be introduced
from 2024, again, subject to certain exemptions.
The below table sets out the EPC rating by Estimated Rental Value (ERV). An A rating reflects the most efficient rating with a G being
the least efficient. 63% (by ERV) of the assets within the Companies portfolio have efficient A-C EPC ratings:
Portfolio by ERV (%)
Energy performance certificate rating 2023/24 2022/23
A-C 63% 72%
D 25% 13%
E 8% 8%
F – –
G – –
Exempt 3.6% –
No EPC/Expired 0.4% 7%
Coverage 100% 100%
EPRA Sustainability Performance Measures (unaudited)
(continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Sustainability Performance Measures (Social)
EPRA’s Sustainability Best Practices Recommendations Guidelines 2017 (“EPRA’s Guidelines”) include Social and Governance reporting
measures to be disclosed for the entity i.e. the Company. The Company is an externally managed real estate investment trust and has
no direct employees. A number of these Social Performance measures relate to entity employees and therefore these measures are
not relevant for reporting at the entity level. The Investment Manager to the Company, AEW UK Investment Management LLP has
responsibility for the employees that support the Company. The Company aims to comply with EPRA’s Guidelines and therefore has
included Social and Governance Performance Measure disclosures in this report.
Employee gender diversity (Diversity-Emp)
As at 31 March 2024 the Company Board comprised five members: 2 (40%) female; 3 (60%) male.
For further information on the Investment Manager’s employee gender diversity please refer to the ESG link within the Corporate
Responsibility area at www.aewukreit.com/
1
.
Gender pay ratio (Diversity-Pay)
The remuneration of the Company Board is set out on page 59 of this Annual Report.
For further information on the Investment Manager’s gender pay ratio please refer to the ESG link within the Corporate Responsibility
area at www.aewukreit.com/
1
.
Training and development (Emp-Training)
Please refer to the Director Induction and Training section in the Corporate Governance Statement (page 52) for details on training
for the Company’s Board members.
The Investment Manager requires employees to complete mandatory internal training and encourage all staff with professional
qualifications to maintain the training requirements of their respective professional body.
All employees of the Investment Manager that work on the Company’s activities hold professional qualifications and have completed
the relevant CPD for their respective professional bodies.
The Investment Manager also provides training to its employees to ensure that they understand and abide by the Anti-Bribery,
Insider Trading and GDPR regulations.
Employee performance appraisals (Emp-Dev)
The Investment Manager’s performance appraisal process requires annual performance objective setting and reviews for all staff.
For further information on the Investment Manager’s performance appraisal statistics please refer to the ESG link within the Corporate
Responsibility area at www.aewukreit.com/
1
.
The Investment Manager confirms that performance appraisals were completed for 100% of staff relevant to the Company in 2024.
Employee turnover and retention (Emp-Turnover)
For further information on the Investment Manager’s employee turnover and retention please refer to the ESG link within the Corporate
Responsibility area at www.aewukreit.com/
1
.
There have been no changes in the Investment Manager’s staff that work on the Companies activities during the year.
1
For direct link use: https://www.aewukreit.com/~/media/Files/A/AEW-UK-Reit/documents/aew-esg-flyer.pdf
EPRA Sustainability Performance Measures (unaudited)
(continued)
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Employee health and safety (H&S-Emp)
For further information on the Investment Manager’s employee health & safety (being the absenteeism rate) please refer to the ESG link
within the Corporate Responsibility area at www.aewukreit.com/
1
.
Asset health and safety assessments (H&S-Asset)
All sites were inspected by MAPP's during the reporting period and further Health & Safety audits were carried out at those sites that are
multi-let.
Asset health and safety compliance (H&S-Comp)
No incidents of non-compliance with regulations/and or voluntary codes were identified during the reporting period.
Community engagement, impact assessments and development programmes (Comty-Eng)
The Company, in conjunction with Mapp, participated in the KidsOut Charity ‘Giving Tree’ initiative. This initiative aims to provide
children living in local refuge homes with a present to open on Christmas Day. To facilitate this, decorative tags with a child’s name, age
and suggested gift are placed on Christmas Trees in the receptions of participating offices throughout the Company’s portfolio. Tenants
of the offices can then use the details given on the tags to make a donation (£5-£10) to the KidsOut charity.
Sustainability Performance Measures (Governance)
Composition of the highest governance body (Gov-Board)
The Board of the Company comprised 4 non-executive independent Directors (no executive board members) as at 31 March 2023.
• The average tenure of the five Directors to 31 March 2024 is 3 years and 8 months (31 March 2023 average tenure of four Directors
is 5 years and 6 months)
• The number of Directors with competencies relating to environmental and social topics is one and his experience can be seen in his
biography (31 March 2023: one Director)
Process for nominating and selecting the highest governance body (Gov-Select)
The Company does not have a separate nomination committee, this role being carried out by the whole Board as chaired by Mark
Burton. The Board will consider and make recommendations on its composition so as to maintain an appropriate balance of skills,
experience and diversity, including gender, and to ensure progressive refreshing of the Board.
Before the appointment of a new Director, the Board prepares a description of the role and capabilities required for a particular
appointment. Whilst the Board is dedicated to selecting the best person for the role, it aims to promote diversification and the Board
recognises the importance of diversity. The Board agrees that its members should possess a range of experience, knowledge, professional
skills and personal qualities as well as the independence necessary to provide effective oversight of the affairs of the Company.
Process for managing conflicts of interest (Gov-Col)
The Company maintains a Conflicts of Interest register that is managed by the Company Secretary and is reviewed at each quarterly
Board meeting.
Please refer to the Director’s Conflicts of interest section in the Corporate Governance Statement (page 52) for further details.
1
For direct link use: https://www.aewukreit.com/~/media/Files/A/AEW-UK-Reit/documents/aew-esg-flyer.pdf
EPRA Sustainability Performance Measures (unaudited)
(continued)
147
AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
EPRA Sustainability Performance Measures (unaudited)
(continued)
Targets and progress
During the period we set the following long-term targets to support our strategic ESG objectives. Each year these will be reviewed, with
progress being regularly reported to the Board by the Investment Manager.
Area of focus Target Metric of Measure Year Progress
Health & Safety To ensure all incidents are
resolved within the required
timeframe.
Number of incidents per year. Yearly MAPP track all instances via ‘risk
wise’ with priority 1 issues being
closed immediately.
Wellbeing To promote health and wellbeing
initiatives across all managed
assets.
100% of managed assets to
have a health and wellbeing
tracker in year 1.
Yearly Wellbeing tracker in place.
Social Value To develop a tenant and
community engagement
programme.
Number of managed assets to
have community engagement
programmes per year.
Yearly AEW initiatives working towards
giving up to 2 working days for
community engagement for
each AEW staff member.
ESG Disclosure
& Transparency
To achieve a Gold award for
disclosure in line with EPRA sBPR.
Gold Rating EPRA. 2023 Silver in 2023.
To continuously improve the
GRESB rating year on year.
GRESB star rating and score. Yearly Achieved two stars in 2023
GRESB assessment and improved
score from 65 in 2021 to 67.
To strengthen alignment with
the TCFD recommendations.
Align the TCFD by 2023 and
provide full publication by 2024.
2024 Updated in this Annual Report
in alignment with TCFD
recommendations. See pages 67
to 78.
Managing
environmental
impacts
To develop sustainability action
plans for all managed assets.
100% of all managed assets to
have a sustainability action plan
by 2023.
Yearly Completed for all existing assets.
Target for new assets.
To maintain renewable electricity
for all landlord-controlled areas.
100% of all procured electricity
to be from renewable sources.
Yearly Achieved, all suppliers providing
electricity from renewable
sources.
Energy consumption:
To achieve a 40% reduction in
absolute energy by 2030 based
on the 2018 baseline.
40% reduction 2030 See page 140.
GHG emissions:
To achieve a 40% reduction in
absolute energy by 2030 based
on the 2018 baseline.
40% reduction 2030 See page 142.
To improve the recycling rates on
all managed assets.
Sum of waste recycled as
opposed to incinerated with
energy recovery.
Yearly 65% recycling rates on all office
managed assets (2023: 57%).
74% recycling rates on all
industrial managed assets (2023:
70%).
To maintain zero waste to landfill
on all waste managed.
100% of waste diverted from
landfill on all waste managed
assets.
Yearly Currently 100%.
To ensure there are no properties
in the portfolio with an EPC
below an E rating.
All non-compliant EPC’s to be
improved to a minimum E rating.
Yearly Five units have no valid EPC (due
to recent expiries). All of these
units are expected to be G rated.
However, all are currently subject
to ongoing improvement plans
to achieve MEES compliance.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Company Information
Share Register Enquiries
The register for the Ordinary Shares is maintained by Link Group. In the event of queries regarding your holding, please contact the
Registrar on +44 (0)371 664 0391 or email: shareholderenquiriess@linkgroup.co.uk.
Changes of name and/or address must be notified in writing to the Registrar, at the address shown on page 149. You can check your
shareholding and find practical help on transferring shares or updating your details at www.signalshares.com. Shareholders eligible to
receive dividend payments gross of tax may also download declaration forms from that website.
Share Information
Total Voting Rights 158,424,746
SEDOL Number BWD2415
ISIN Number GB00BWD24154
Ticker/TIDM AEWU
Share Prices
The Company’s Ordinary Shares are traded on the premium segment of the Main Market of the London Stock Exchange.
Frequency of NAV publication:
The Company’s NAV is released to the London Stock Exchange on a quarterly basis and is published on the Company’s website.
Annual and Half-Yearly Reports
Copies of the Annual and Half-Yearly Reports are available from the Company’s website.
Financial Calendar
4 September 2024 Annual General Meeting
30 September 2024 Half-year end
November 2024 Announcement of half-yearly results
31 March 2025 Year-end
June 2025 Announcement of annual results
Dividends
The following table summarises the amounts distributed to equity shareholders in respect of the period:
£
Interim dividend for the period 1 April 2023 to 30 June 2023
(payment made on 31 August 2023) 3,168,495
Interim dividend for the period 1 July 2023 to 30 September 2023
(payment made on 28 November 2023) 3,168,495
Interim dividend for the period 1 October 2023 to 31 December 2023
(payment made on 20 February 2024) 3,168,495
Interim dividend for the period 1 January 2024 to 31 March 2024
(payment made on 7 June 2024)
3,168,495
Total
12,673,980
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Directors
Mark Burton (Non-executive Chairman)
Katrina Hart (Non-executive Director)
Mark Kirkland (Non-executive Director)
Liz Peace (Non-executive Director)
Robin Archibald (Non-executive Director)
Registered Office
Central Square
29 Wellington Street
Leeds LS1 4DL
Company Website
www.aewukreit.com
Investment Manager and AIFM
AEW UK Investment Management LLP
8 Bishopsgate
London EC2N 4BQ
Tel: 020 7016 4801
Website: www.aew.com
Property Manager
MAPP
180 Great Portland Street
London W1W 5QZ
Corporate Broker
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
Legal Adviser
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
Depositary
Langham Hall UK LLP
8
th
Floor
1 Fleet Place
London EC4M 7RA
Administrator
Link Alternative Fund Administrators Limited
(A Waystone Group Company)
Broadwalk House
Southernhay West
Exeter EX1 1TS
Company Secretary
Link Company Matters Limited
Central Square
29 Wellington Street
Leeds LS1 4DL
Registrar
Link Group
10
th
Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Auditor
BDO LLP
55 Baker Street
London W1U 7EU
Valuer
Knight Frank LLP
55 Baker Street
London W1U 8AN
Company Information (continued)
Copies of the Annual Report and Financial Statements
Printed copies of the Annual Report will be sent to shareholders shortly and will be available on the Company’s website.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism (‘NSM’) and will be
available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Glossary
AEW UK Core Plus
Property Fund AEW UK Core Plus Property Fund, a property authorised investment fund (‘PAIF’) and a sub-fund of the
(the 'Core Fund') AEW UK Real Estate Fund, an open-ended investment company.
AIC Association of Investment Companies. This is the trade body for closed-ended Investment companies
(www.theaic.co.uk).
AIC Code The AIC Code of Corporate Governance, as published in February 2019. A framework of best practice
guidance for investment companies.
AIFMD Alternative Investment Fund Managers Directive.
AIFM Alternative Investment Fund Manager. The entity that provides portfolio management and risk
management services to the Company and which ensures the Company complies with the AIFMD. The
Company’s AIFM is AEW UK Investment Management LLP.
AIF Alternative Investment Fund. Alternative Investment Funds are funds that are not regulated at EU level
by the UCITS Directive.
Company AEW UK REIT plc.
Company Secretary Link Company Matters Limited.
Company website www.aewukreit.com
Contracted rent The annualised rent adjusting for the inclusion of rent subject to rent-free periods.
Covenant strength The strength of a tenant’s financial status and its ability to perform the covenants in the lease.
Direct vacancy costs Property expenses that are directly related to the property including the following: rates/property taxes;
service charge; insurance premiums; carbon tax; any other costs directly billed to the unit.
DTR Disclosure Guidance and Transparency Rules, issued by the FCA.
Earnings Per Share (‘EPS’) Profit for the period attributable to equity shareholders divided by the weighted average number of
Ordinary Shares in issue during the period.
EPC Energy Performance Certificate.
EPRA European Public Real Estate Association, the industry body representing listed companies in the real
estate sector.
EPRA cost ratio (including The ratio of net overheads and operating expenses against gross rental income (with both amounts
direct vacancy costs) excluding ground rents payable). Net overheads and operating expenses relate to all administrative and
operating expenses.
EPRA cost ratio (excluding The ratio calculated above, but with direct vacancy costs removed from net overheads and operating
direct vacancy costs) expenses balance.
EPRA Earnings Per Share Recurring earnings from core operational activities. A key measure of a company’s underlying operating
results from its property rental business and an indication of the extent to which current dividend
payments are supported by earnings.
EPRA Loan to Value The ratio of net debt (including net payables) divided by the market value of property operating
(‘EPRA LTV’) (including net receivables).
EPRA NAV Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude
certain items not expected to crystallise in a long-term investment property business.
EPRA NNNAV EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation
onrevaluations.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Glossary (continued)
EPRA Net Initial Yield Annualised rental income based on the cash rents passing at the balance sheet date, less non-
(‘EPRA NIY’) recoverable property operating expenses, divided by the fair value of the property, increased with
(estimated) purchasers’ costs.
EPRA Net Disposal Value This measure represents the shareholders’ value under a disposal scenario, where deferred tax, financial
(‘EPRA NDV’) instruments and certain other adjustments are calculated to the full extent of their liability, net of any
resulting tax.
EPRA Net Reinstatement Value NAV adjusted to assume that entities never sell assets and aims to represent the value required to rebuild
(‘EPRA NRV’) the entity.
EPRA Net Tangible Asset NAV adjusted to assume that entities buy and sell their assets, thereby crystallising certain levels of
(‘EPRA NTA’) unavoidable deferred tax.
EPRA Topped-Up Net Initial Yield This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free
periods (or other unexpired lease incentives such as discounted rent periods and step rents).
EPRA Vacancy Rate Estimated Rental Value (‘ERV’) of vacant space as a percentage of the ERV of the whole portfolio.
Equivalent Yield The internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review or
lease expiry. No future growth is allowed for.
Estimated Rental Value (‘ERV’) The external valuers’ opinion as to the open market rent which, on the date of the valuation, could
reasonably be expected to be obtained on a new letting or rent review of a property.
External Valuer An independent external valuer of a property. The Company’s external valuer is Knight Frank LLP.
Fair Value The estimated amount for which a property should exchange on the valuation date between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing and where parties had
each acted knowledgeably, prudently and without compulsion.
Fair value movement An accounting adjustment to change the book value of an asset or liability to its fair value.
FCA The Financial Conduct Authority.
FRI lease A lease which imposes full repairing and insuring obligations on the tenant, relieving the landlord from
all liability for the cost of insurance and repairs.
GRESB Global Real Estate Sustainability Benchmark.
Gross Asset Value The aggregate value of the total assets of the Company as determined in accordance with IFRS.
Gross passing rental income The rent receivable from the portfolio’s leases at a particular reporting date. Allows the user to assess the
cash receipts the Company is entitled to receive.
Group BPCE Ultimate owner of AEW
IASB International Accounting Standards Board.
IFRS International accounting standards in conformity with the requirements of the Companies Act 2006
(‘Adopted IFRSs’).
Investment Manager The Company’s Investment Manager is AEW UK Investment Management LLP.
IPD Investment Property Databank. An organisation supplying independent market indices and portfolio
benchmarks to the property industry.
IPO The admission to trading on the London Stock Exchange’s Main Market of the share capital of the
Company and listing of Ordinary Shares to the premium segment of the Official List of the FCA, on
12 May 2015.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Glossary (continued)
Lease incentives Incentives offered to occupiers to enter into a lease. Typically this will be an initial rent-free period, or
a cash contribution to fit-out. Under accounting rules, the value of the lease incentive is amortised
through the Statement of Comprehensive Income on a straight-line basis until the lease expiry.
Lease surrender An agreement whereby the landlord and tenant bring a lease to an end other than by contractual expiry
or the exercise of a break option. This will frequently involve the negotiation of a surrender premium by
one party to the other.
LIBOR The London Interbank Offered Rate, a globally accepted key benchmark interest rate that indicates
borrowing between banks.
Like-for-like The like-for-like valuation movement compares the valuation (as provided by the external valuer and
before adjustments for lease incentives) of properties at the end of the period in question with the
valuation at the start of the period. This measure only compares movements for those properties which
were held at both the start and end of the period, so excludes the effects of acquisitions and disposals.
Loan to NAV The loan balance drawn expressed as a percentage of the Company’s Net Asset Value. Allows the user
to assess the Company’s gearing and is relevant, as this is the measure tested the Company’s borrowing
covenant.
Loan to GAV The loan balance drawn expressed as a percentage of the combined value of the Company’s investment
(also Gross Loan to GAV) property portfolio (as assessed by the valuer) and the Company’s investments. Allows the user to assess
the Company’s gearing and is relevant, as this is the measure used under the Company’s Investment
Guidelines.
Loan-to-Value (‘LTV’) The value of outstanding loans and borrowings (before adjustments for issue costs) expressed as a
percentage of the combined valuation of the property portfolio (as provided by the external valuer) and
the fair value of other investments.
MEES Minimum Energy Efficiency Standard.
Net Asset Value (‘NAV’) Net Asset Value is the equity attributable to shareholders calculated under IFRS.
NAV per share Equity shareholders, funds divided by the number of Ordinary Shares in issue. This measure allows a
comparison with the Company’s share price to determine whether the Company’s shares are trading at a
premium or discount to its NAV calculated under IFRS.
NAV total return The percentage change in NAV, assuming that dividends paid to shareholders are reinvested at NAV
to purchase additional Ordinary Shares. This is an alternative performance measure that the Company
tracks, as it is a direct indicator of the value produced by the Company's operations.
Net equivalent yield Calculated by the Company’s External Valuers, net equivalent yield is the internal rate of return from
an investment property, based on the gross outlays for the purchase of a property (including purchase
costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure
but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears.
Net initial yield (‘NIY’) The initial net rental income from a property at the date of purchase, expressed as a percentage of the
gross purchase price including the costs of purchase.
Net Loan to GAV Measure of gearing calculated as follows: (l-c)/v, where “l” is the loan balance drawn, “c” is the
Company’s cash and cash equivalents and “v” is the combined value of the Company’s investment
property portfolio (as assessed by the valuer) and the Company’s investments. Allows the user to assess
the potential effect on gearing of using the Company’s cash to repay a portion of its loan balance.
Net Operating Income (‘NOI’) The Company’s gross operating income minus its operating expenses.
Net rental income Rental income receivable in the period after payment of ground rents and net property outgoings.
Non-PID Non-Property Income Distribution. The dividend received by a shareholder of the Company arising from
any source other than profits and gains of the Tax Exempt Business of the Company.
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AEW UK REIT plc • Annual Report and Financial Statements • 31 March 2024
Ongoing charges A measure, expressed as a percentage of NAV, of the regular, recurring costs of running an investment
company which is calculated in line with AIC methodology.
Ordinary Shares Ordinary Shares of £0.01 each in the capital of the Company. Ordinary Shares are the main type of equity
capital issued by conventional Investment Companies. Shareholders are entitled to their share of both
income, in the form of dividends paid by the Company, and any capital growth.
Over-rented Space where the passing rent is above the ERV.
Passing rent The gross rent, less any ground rent payable under head leases.
PID Property Income Distribution. A dividend received by a shareholder of the Company in respect of profits
and gains of the tax exempt business of the Company.
Projected debt yield Measure of risk, calculated by dividing the projected 12 month net operating income by the outstanding
principal balance of the debt secured by the Company.
Rack-rented Space where passing rent is the same as the ERV.
REIT A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation tax Act 2010.
Subject to the relevant UK REIT criteria being met continually, the profits from the property business of a
REIT, arising from both income and capital gains, are exempt from corporation tax.
RETT Real Estate Transfer Tax. The tax payable by the buyer on the purchase of a property. The RETT payable is
calculated at a rate depending on the consideration paid for the property.
Reversion Increase in rent estimated by the Company’s external valuer, where the passing rent is below the ERV.
Reversionary yield The anticipated yield, which the initial yield will rise (or fall) to once the rent reaches the ERV.
Share price The value of a share at a point in time as quoted on a stock exchange. The Company’s Ordinary Shares
are quoted on the Main Market of the London Stock Exchange.
Shareholder total return The share price movement and dividends (pence per share) received during a period, expressed as a
percentage of the opening share price for the period. Calculated as follows: (b - a + d)/a, where “a” is the
opening share price, “b” is the closing share price and “d” is dividends per share.
SRI Socially Responsible Investment.
SONIA Sterling Overnight Index Average.
Total returns The returns to shareholders calculated on a per share basis by adding dividends paid in the period to the
increase or decrease in the share price or NAV. The dividends are assumed to have been reinvested in the
form of Ordinary Shares or net assets.
Under-rented Space where the passing rent is below the ERV.
UK Corporate Governance Code A code issued by the Financial Reporting Council which sets out standards of good practice in relation
to board leadership and effectiveness, remuneration, accountability and relations with shareholders.
All companies with a premium listing of equity shares in the UK are required under the Listing Rules to
report on how they have applied the Code in their annual report and accounts.
Voids The amount of rent relating to properties which are unoccupied and generating no rental income.
Stated as a percentage of ERV.
Weighted Average Unexpired The average lease term remaining for first break, or expiry, across the portfolio weighted by contracted
Lease Term (‘WAULT’) rental income.
Yield compression Occurs when the net equivalent yield of a property decreases, measured in basis points.
Glossary (continued)
United States of America
Two Seaport Lane
Boston MA 02210
United States
+1 617 261 9334
www.aew.com
United Kingdom
8 Bishopsgate
London
EC2N 4BQ
+44 20 7016 4801
www.aew.com
AEW Offices
France
22 rue du Docteur Lancereaux
75008 Paris
France
+33 1 78 40 92 00
www.aew.com