AEW UK Real Estate Fund
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AEW UK Real Estate Fund Unaudited Half Yearly Report and Financial Statements for the period ended 30 June 2018 AEW UK Core Property Fund AEW UK Real Return Fund Contents Statement of Authorised Status of the Scheme 1 Basis of Reporting 1 Statement concerning the debts of the Company 1 Managing Director’s report 2-7 AEW UK Core Property Fund Fund Manager’s Report 9-16 Fund Objective 17 Investment Benchmark 17 Investment Policy 17 Investment Strategy 17 Investment Guidelines 18 Report of the Valuer 19-22 Portfolio Statement 23-26 Summary of Material Portfolio Changes 27 Fund Information 28-35 Statement of Total Return 36 Statement of Changes in Net Assets Attributable to Shareholders 36 Balance Sheet 37 Statement of Cash Flows 38 Notes to the Financial Statements 39-56 Distribution Tables 57 AEW Real Return Fund Fund Manager’s Report 59-66 Fund Objective 67 Reference Benchmark 67 Investment Policy 67 Investment Strategy 68 Investment Guidelines 68-69 Report of the Valuer 70-71 Portfolio Statement 72-74 Summary of Material Portfolio Changes 75 Fund Information 76-82 Statement of Total Return 83 Statement of Changes in Net Assets Attributable to Shareholders 83 Balance Sheet 84 Statement of Cash Flows 85 Notes to the Financial Statements 86-103 Distribution Tables 104 Depositary, ACD & Advisers 105 AEW UK Real Estate Fund • Half Yearly Report and Financial Statements • 30 June 2018 AEW UK Real Estate Fund Statement of Authorised Status of the Scheme The AEW UK Real Estate Fund (the ‘Company’) is an open-ended investment company which is a Property Authorised Investment Fund (‘PAIF’) registered in England and Wales under registered number IC000974. The Company is a Qualified Investor Scheme (‘QIS’) that is open to Eligible Investors as defined in the Collective Investments Schemes sourcebook (the ‘COLL Rules’) issued by the FCA. The Company is incorporated in England and Wales and is authorised by the FCA. Basis of Reporting The Company is structured as an umbrella Company and has two sub-funds in issue, the AEW UK Core Property Fund and the AEW UK Real Return Fund. Statement concerning the debts of the Company The Company is an Investment Company with Variable Capital (‘ICVC’). Shareholders of the ICVC are not liable for the debts of the ICVC. AEW UK Real Estate Fund • Half Yearly Report and Financial Statements • 30 June 2018 1 AEW UK Real Estate Fund Managing Director’s report of AEW UK Investment Management LLP AEW UK Investment Management LLP is a 50:50 joint venture between the UK Management Team and AEW. The AEW UK team has been providing solutions for institutional investors for over 20 years and has developed a range of funds and segregated accounts to meet their differing needs, from value add strategies to traditional core style total return, real return strategy and latterly a long lease strategy. The management team1 have worked together for an average of 18 years and are 50% equity owners in the business, this ownership over investment process and decision-making, helps deliver a consistent approach through different cycles. The AEW UK Core Property Fund was launched in Q1 2012 and is the top performing fund in the AREF/IPD UK Quarterly Property Fund Index – All Balanced Property Fund Index over 1, 3 and 5 years as at June 2018. In 2014 we launched the AEW UK South East Office Fund, a value add strategy focused on delivering enhanced returns from the South East office market. For Defined Contribution pension schemes and the increasing amount of Private Wealth money now classified as Retail, the AEW UK REIT was launched in May 2015, to effectively replicate the Core Fund strategy in a listed company, as an alternative to daily dealing open ended Retail Funds. At the start of 2016 the AEW UK Real Return Fund was launched largely as a solution for the increasing number of defined benefit schemes needing higher yielding real returns to match their cash flow liabilities and help scheme sponsors plug any deficit in funding that may exist. In June 2017 AEW launched a new real estate investment trust onto the Main Market of the London Stock Exchange. AEW UK Long Lease REIT is a long lease strategy with inflation linked growth, diversified across alternative property sectors in strong locations across the UK. With a focus on capital preservation; a minimum of 85% income to benefit from inflation linked growth and a minimum weighted average lease term (WAULT) of 18 years at acquisition. AEW2 is one of the world’s largest real estate asset managers. As at 30 June 2018, AEW has €62.1 billion in assets under management, with over €29.8 billion in Europe. The chart on page 5 shows how the business is split in terms of assets under management across North America, Europe and Asia. The second chart on page 6 shows the assets under management breakdown by sector and vehicles for AEW in Europe. 1. AEW UK Management Team comprises Richard Tanner, Rachel McIsaac, Nick Winsley and Dana Eisner. 2. AEW comprises AEW SA and AEW Capital Management, L.P. and their respective subsidiaries as well as AEW UK Investment Management LLP. AEW SA and AEW Capital Management, L.P. are subsidiaries of Natixis Investment Management (NIM) SA. Data as at 30 June 2018. 2 AEW UK Real Estate Fund • Half Yearly Report and Financial Statements • 30 June 2018 AEW UK Real Estate Fund Managing Director’s report of AEW UK Investment Management LLP (continued) UK Platform AEW Europe and the AEW UK Management Team have created a joint venture vehicle, AEW UK Investment Management LLP, which is the Authorised Corporate Director (ACD) and the Authorised Fund Manager (the “Manager”) of the AEW UK Real Estate Fund. Its board members for the period were: Richard Tanner Managing Director, AEW UK Rachel McIsaac Executive Director, AEW UK Louise Staniforth Executive Director, AEW UK Jeff Furber Global CEO, AEW Rob Wilkinson European CEO, AEW Russell Jewell Head of Private Equity Real Estate, AEW Europe LLP As a joint venture company with a large global, multi boutique, asset manager, it benefits from the global strength and resource and access to investors you might expect, together with the true autonomy and culture of an employee owned business. Ownership is spread through our staff partners and consultants. AEW UK: Funds and Separate Accounts Assets under management and capital raised Total Assets Under Management Institutional Funds Separate Accounts £1.56bn £839m £717m EXPECTED RETURN/ VOLITILITY AEW UK South East Office Fund • Closed-ended • Sector specific • Target IRR of 12-20% AEW UK Core Property Fund AEW UK REIT • Open-ended • Listed on LSE • Diversified • Diversified • GAV £283m • GAV £200m • Distribution yield 5.4% • Dividend 8p/share p.a. AEW UK Real Return Fund • Open-ended • Alternative real estate • GAV £113m • Distribution yield 5.2% AEW UK Long Lease REIT • IPO 31 May 2017 • Listed on LSE GAV £107m • EXPECTED RISK FREE RISK RATE Source: AEW UK, on GAV basis as at 30 June 2018 1 AEW UK Real Estate Fund • Half Yearly Report and Financial Statements • 30 June 2018 3 AEW UK Real Estate Fund Managing Director’s report of AEW UK Investment Management LLP (continued) AEW UK Organisational Structure AEW UK Board Jeff Furber Rob Wilkinson Russell Jewell Richard Tanner Rachel McIsaac Louise Staniforth Global CEO European CEO Head of Private Equity Real Estate Managing Director Executive Director Executive Director AEW AEW AEW Europe LLP AEW UK AEW UK AEW UK AEW UK Management Committee Richard Tanner 1 Rachel McIsaac 1 Nick Winsley 1 Dana Eisner 1 Louise Staniforth Rob Wilkinson Russell Jewell Managing Director Executive Director Executive Director Executive Director Executive Director Chief Executive Officer Managing Director AEW UK AEW UK AEW UK AEW UK AEW UK AEW Europe LLP AEW Europe LLP AEW UK Investment & Portfolio Fund Operations & Client Management & Asset Management Consultants Management Risk Management Capital Raising Rachel McIsaac 1 Richard Tanner Louise Staniforth Dana Eisner James Hyslop Executive Director Portfolio Manager, Core Executive Director Executive Director External Consultant Nick Winsley Charles Royle Andrew Strang 1 Portfolio Manager, SEOF Director Jon Saxton Director Douglas Rowlands External Consultant Ian Mason Michael Shears Director Portfolio Manager, Real Return Director George Henshilwood 2 Anish Shah Alex Short Kari Clarke Independent Chairman of Andrew Playfer Associate Director Portfolio Manager, REITs Associate Director Associate Governance Committees Laura Elkin Henry Butt Tom Houston Nicki Gladstone Director Associate Director Associate Marketing & Communications Spencer Corkin Warren Meech Consultant Associate Director Associate Francesca Hawkins Operations administrator Lauren Kirby Ed Long Emily Grant Investor Relations Assistant Associate Director Asset Management administrator AEW Europe LLP Resources Client Management / Legal, Compliance and Research Investment Asset Management Debt Capital Raising Corporate Hans Vrensen Rob Wilkinson Simon Barrett Marcus Davidson- Wright Alex Griffiths Ed North Head of Research Chief Executive Officer Executive Director Managing Director Executive Director Head of Legal and Compliance Jason Langley Fabrizio De Corato Eleanor Champion Lucinda Seddon Russell Jewell Director Associate Jonathan Cherel Head of Private Equity Funds Director Human Resources Client Management – NIM Research Analyst Martin Finke Director Nikolas Koulouras Will Fox-Robinson Ramesa Moghal Dennis Schoenmaker Executive Director Josephine Flattery Finance Associate Director Fred McNeil Alexander Strassburger Philippe Dewevre Executive Director Director Carlos Vilares 1 Evergreen Member LLP shareholder 2 Remunerated by the Funds as at June 2018 4 AEW UK Real Estate Fund • Half Yearly Report and Financial Statements • 30 June 2018 AEW UK Real Estate Fund Managing Director’s report of AEW UK Investment Management LLP (continued) AEW NNorthORTH AME America,RICA, EURO EuropePE AND A SandIA PA AsiaCIFIC Pacific . Over 30 years’ real estate NORTH AMERICA Boston EUROPE Paris Luxembourg Los Angeles London Milan investment management • 260+ staff • 390+ staff • 2 offices • 9 offices Düsseldorf Madrid experience Frankfurt Prague Warsaw .