AEW UK REIT (LSE:AEWU)has reported another quarter of robust performance, underpinned by disciplined asset management, counter-cyclical investing, and a long-standing value-led strategy. In a challenging environment for UK real estate, the company posted earnings of 2.36 pence per share alongside a NAV total return of just over 2%, extending its record of consistent delivery.
Speaking on The Watchlist, Laura Elkin, Portfolio Manager at AEW UK REIT, attributed the outperformance to the REIT’s sector-agnostic, value-focused approach.
“We are stock pickers and asset managers first and foremost,” Elkin said. “Being sector-agnostic allows us to look across the whole UK commercial property market and make counter-cyclical purchases and disposals. That’s how we’ve generated strong returns over the last ten and a half years.”
Asset Management Driving Income Growth
A core pillar of AEW UK REIT’s success has been active asset management. The company had achieved 11 consecutive quarters of valuation uplift and three years of income growth, even as the broader UK real estate market has remained relatively flat.
Much of this performance has been driven by hands-on initiatives such as refurbishments and lease restructuring. With projects like the Queen Square refurbishment underway, AEW UK REIT continues to focus on enhancing income and long-term shareholder value.
Elkin noted that this strategy is paying off:
“The income growth and valuation gains we’re seeing are predominantly coming from our hard work in active asset management. That’s what really excites me about the future performance of the portfolio.”
Capital Available for Attractive Buying Opportunities
Following the recent disposal of the Hitchin asset, AEW UK REIT now has approximately £6.8 million of capital available for reinvestment. According to Elkin, the current market offers compelling opportunities for value investors.
“Average commercial property values are at their lowest point since our IPO. That presents a lot of attractive buying opportunities, and we’re excited to take advantage of those to drive future value.”
This counter-cyclical positioning allows the REIT to deploy capital when pricing is most advantageous, reinforcing its long-term strategy.
High Income and Disciplined Capital Recycling
AEW UK REIT has also been able to reissue treasury shares at a premium to NAV, something few UK REITs have managed recently. Elkin believes this reflects strong investor confidence, driven by two key factors: income and capital discipline.
Firstly, the REIT has paid one of the highest dividends across UK diversified REITs for over a decade.
“We’ve delivered a consistently high level of income for ten and a half years. That consistency is being recognised in our share rating,” she said.
Secondly, the company actively recycles capital. Once an asset has reached the end of its business plan and its value has been maximised, AEW UK REIT looks to sell and reinvest.
“We crystallise profits and redeploy the capital into new opportunities. I think that gives the market greater confidence in our net asset value,” Elkin added.
Positioned for the Next Phase of Growth
With a proven strategy, strong income credentials, and capital ready to deploy into a value-rich market, AEW UK REIT appears well positioned to continue delivering for shareholders, even as the broader UK property sector remains under pressure.
As Elkin concluded, the combination of active asset management, disciplined capital recycling, and counter-cyclical investing remains central to AEW UK REIT’s ability to outperform over the long term.
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