Acquisition of high-yielding retail warehouse unit

27 March 2023

AEW UK REIT plc

Acquisition of high yielding retail warehousing unit in Preston

AEW UK REIT plc (LSE: AEWU) ("AEWU" or the "Company") is pleased to announce that it has completed the purchase of a freehold solus retail warehousing unit in Bamber Bridge, Preston for 6,450,000, reflecting a low capital value of £110 per sq ft and an attractive net initial yield of 9.5%.

The 58,696 sq ft unit is single-let to Matalan Retail Limited and has another 9.2 years left on the lease. Matalan is known to trade strongly from the location, with the store being one of its top 10 performers, as well as being the retailer's first ever store in the U.K. The lease benefits from a 2027 rent review to the higher of open market value, or 2.5% per annum compounded, resulting in a minimum reversionary yield of 10.7%.

The site totals 4.39 acres, providing a low site cover of 30%. It is well located on Cuerden Way which connects to the A6, half a mile from Junction 1 of the M65. Neighbouring tenants include Aldi and Sainsburys to the south, with predominantly industrial uses to the north. There is the potential to repurpose the unit for trade counter or industrial use, and to extend the accommodation, subject to planning, if required in future. 

In January, Matalan announced the completion of a refinancing, reducing its gross debt by 43% from £593 million to £336 million. The new debt facility will mature in 2027. The refinancing also provides £100 million for business growth over the next three years, with a return to profitability anticipated in FY 2024.

Commenting on the purchase, Laura Elkin, Portfolio Manager of AEW UK REIT said : "We are pleased to have purchased this retail warehousing unit that provides a very attractive day one yield that is set to increase at review in the future. Our due diligence has shown that Matalan trades well from the location, giving us confidence in its continued occupation, and in the stability of the income stream. As we look to return the portfolio to full investment, we continue to analyse an interesting pipeline of potential acquisitions, and expect to make further purchase announcements in the coming months."

ENDS

Notes to Editors

About AEW UK REIT

AEW UK REIT plc (LSE: AEWU) aims to deliver an attractive total return to shareholders by investing predominantly in smaller commercial properties (typically less than 15 million), on shorter occupational leases in strong commercial locations across the United Kingdom. The Company is currently invested in office, retail, industrial and leisure assets, with a focus on active asset management, repositioning the properties and improving the quality of income streams.  AEWU is currently paying an annualised dividend of 8p per share. 

The Company was listed on the Official List of the Financial Conduct Authority and admitted to trading on the Main Market of the London Stock Exchange on 12 May 2015.   www.aewukreit.com

LEI:  21380073LDXHV2LP5K50

About AEW UK Investment Management LLP

AEW  UK  Investment Management LLP employs a well-resourced team comprising 29 individuals covering investment, asset management, operations and strategy. It is part of AEW Group, one of the world's largest real estate managers, with 84.9bn of assets under management as at 31 December 2022. AEW Group comprises AEW SA and AEW Capital Management L.P., a U.S. registered investment manager and their respective subsidiaries. In Europe, as at 31 December 2022, AEW Group managed 38.5bn of real estate assets on behalf of a number of funds and separate accounts with over 470 staff located in 10 locations.