A high yielding Reit beating its benchmark

AEW UK Reit (AEWU:101p) continues to outperform the MSCI benchmark through a value-focused investment strategy that involves making cross-sector and often counter cyclical moves. Analysts at Liberum Capital calculate that the portfolio has outperformed the MSCI IPD benchmark by 10.2 per cent on an annualised basis in the six-month period to 30 September 2023, buoyed by timely disposals, strong asset management initiatives and robust property investments.

The disposal of two industrial assets in Leeds and Bradford achieved an average premium of 14 per cent to carrying value and were sold on NIY’s of 6.2 per cent. This was far below the 8.6 per cent average purchase yield achieved by recycling the capital into a carpark leased to NCP in York and a retail and office property in Bath city centre. The purchased properties offer reversionary yields of more than 10 per cent, so are expected to deliver NAV growth over the medium term. A third industrial property in Deeside was sold on an eight per cent premium to book value, too.