Diversified commercial property trust AEW UK REIT (LON:AEWU) racked up another portfolio valuation gain in Q2 through its strategy of active management. That extends its record of back-to-back valuation increases to 13 of the last 14 quarters.
Active management lifts valuation
For the three months to June, the investment trust reported an NAV (net asset value) total return of 1.31% compared with 0.96% in Q1. The shareholder total return for Q2 was 7.47% compared with -6.31% for Q1.
Thanks to its actively-managed approach, the portfolio valuation increased by 0.11% over the quarter. Three industrial transactions resulted in an uplift of £427,000 in yearly contractual income. Also, the trust sold an asset in Cardiff after the end of the quarter for £1.475 million, a 42% premium to its March 2026 valuation.
Earnings per share were 1.89p against 1.71p the previous quarter. Once again the trust stuck to its 2p per share quarterly dividend in line with its 8p annual target.
No intention to bid for AIRE
Alongside the Q2 update, AEW UK REIT announced it no longer intended to bid for Alternative Income REIT (LON:AIRE) despite support from the latter’s board. The decision came after AEWU was unable to garner support from AIRE’s major shareholder Glenstone.
With 25.4% of the shares, Glenstone’s approval is essential for any scheme or offer to combine the two REITs. Glenstone itself has made a cash offer for AIRE at a substantial discount to NAV.
AEWU has demonstrated yet again how its strategy of actively managing its assets can enhance valuations. The market has clearly been paying attention as the shares now trade just a couple of percent below NAV.
As Winterflood’s Emma Bird notes, AEWU’s active management is a key strength of the trust. ‘The managers are clearly focused on capturing future rental growth opportunities to improve income and capital values’, says Bird.
While a deal with AIRE would have been EPS accretive for AEWU, without the support of AIRE’s major shareholder there was little point pushing for a deal. However, if AEWU can achieve a premium rating and issue new shares, increased scale ‘will be positive for existing shareholders and may help put AEWU on the radar of more investors’ adds Bird.
