Good morning, and welcome to the AEW UK REIT plc Investor Presentation. Throughout this recorded meeting, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated in the right-hand corner of your screen. Just click Q&A, scroll to the bottom, type your question, and press send. Due to the number of attendees today, the company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Henry Butt, Portfolio Manager. Good morning.
Thank you, Paul, and good morning, everyone. Just to sort of introduce myself again and my colleagues, most of you will probably be aware that Laura Elkin, the portfolio manager, is not with us today. Laura announced last time we did this presentation, back at the beginning of the year, that she was going off on maternity leave. So that is very much the case at the moment, and Laura will be back with us, in February, next year at the latest. My name is Henry Butt, Laura's Assistant Portfolio Manager, stepping in, for this year as interim caretaker manager, so to speak. This is George Elliott on my right-hand side, who runs the fund operations side of the business, very much under the bonnet of the company, taking care of all the numbers.
This is Richard Dunling on my left-hand side, who sort of spearheads a lot of the asset management for the company. So if you move to the next slide, please, Paul. Thank you. So this slide is one that I assume quite a lot of you have seen before. It's really a snapshot of what we do. High income and actively managed. That's really what we do in a nutshell, and when we are buying assets, we very much do so with a value investment hat on. And by that, what we're looking to do is try and generate countercyclical performance by acquiring mispriced assets. And when we are buying these assets, what we are essentially trying to do is maximize income.
So we are typically buying properties with net initial yields between 7%-10%, which sit on the investment criteria on the right-hand side of this slide. In doing so, we are very proud that we have paid out our GBP 0.02 per quarter dividend now for 34 consecutive quarters since Q1 2016. But we are also very much aware of the underlying bricks and mortar value of the assets that we're buying. And we are very sort of aware of alternative uses, vacant possession values, when we are buying these high-yielding assets, which ultimately give us our income return, and in doing so, that gives us our capital performance.
Asset management is very much sort of a theme of what we do, and we continue to say it's the sort of beating heart of our philosophy, and that naturally feeds through into unlocking capital upside. You'll see here we have an annualized 8.95-year total property return to March this year, and that is outstripping the MSCI benchmark, which we report to, by 6.8%. So that higher income and that asset management really driving our performance. As part of that, identifying mispriced assets and looking for countercyclical performance, what enables us to do that is that we are not sector constrained. We are not following the herd and going after industrial, the industrial sector, for example. We are looking at assets on a case-by-case basis.
We have stock selection a number of times a week, where we will look at lots of individual assets with the asset management team and the investment team, and we'll be looking at the specific assets and really sort of getting under the skin of the occupational side of things and looking at how we can add value while naturally buying those properties with good day one income. So just touching on the investment criteria on the right-hand side, as I said, we're sector agnostic. We typically buy core plus location property in the U.K., in strong locations with good occupational fundamentals. And that sort of fourth and fifth bullet point there, they're particularly important. They are two metrics that we've taken from the existing portfolio. You will see that we have an average book value of GBP 72 per sq ft.
Now, if you compare that to the cost of replacing buildings, let's say GBP 100 in excess for replacing an industrial or a warehouse building, or let's say building an office or high street retail unit in excess of GBP 200 a sq ft. Those existing book values look very, very competitive, and we are in a very good place, holding assets at that average GBP 72 per sq ft book value, with, of course, a very healthy running yield on top of that. You'll also see that the low passing average rent of GBP 6.46, this really illustrates the reversionary potential that is in the portfolio, and you'll see the penultimate bullet point here on the investment criteria, that we have a reversionary yield of 8.8%.
That really sort of encapsulates the rental growth that we're going after through asset management in the portfolio. Obviously, this all sort of feeds into the awards that we have recently received. We're very proud to have these awards and to be recognized by these publications. We've won the Citywire award now four years on the trot, that award is based on a three-year NAV total returns, and we were also winner of the Investment Week awards at the end of last year. Can we move on, please, Paul? This slide, you would have seen again before. It's very much a bird's-eye view of the company. Just to go through a few of these metrics, GBP 210 million valuation, 33 assets. It was 34 in the previous quarter. We've sold Blackpool, this quarter.
133 tenants, and there you'll see the net initial yield and reversion yield. So a net initial yield, just shy of 8% and a reversion of 8.77, again, showing that reversionary potential in the portfolio. I think what's an important metric here as well is the WALT 4.3 to break and 5.6 to expiry. Having shorter lease lengths enables us to engage with tenants and look to move on rents and add value through lease negotiations, whether that be a rent review or a lease regear, a tenant may be vacating and letting to a new tenant and establishing a new ERV for a property. That really enables us to add value through asset management.
So we typically like to buy shorter lease lengths rather than buying longer lease lengths, where all the value is locked in that longer lease length and the covenant that that tenant's let to. And that sort of feeds back to that theory of looking at the bricks and mortar value of our assets. Moving on to the cash and debt situation, we're fully allocated at the moment with our cash. We have around GBP 11 million cash, but that's been allocated to lots of, exciting asset management initiatives which are within the existing portfolio. And we like to sort of blow our trumpet about the debt facility that we secured, a year ahead of our previous debt facility, expiring with RBSI, where we have an in-house debt team who had their finger very much on the pulse with regards to debt markets.
So we refinanced a year earlier and locked in that 2.96% fixed cost of debt until May 2027. If we look at the top right-hand box here, our current NAV as of the 31st of March was GBP 162.75 million, breaking back to GBP 1.027 per share. The share price as at 31st of March was GBP 0.86, which was trading at a 16% discount. It's probably worth mentioning that our average discount over the past year has been about 7%, which is considerably superior to the next of our peers and the rest of the peer group, who are trading roughly at about an average discount over the same one-year period of about 20%.
It's obviously been a pretty sort of choppy period for the listed property sector recently, with sort of continued deliberation over when the interest rates are gonna come. And also there's been a lot of sort of M&A noise in the background. We would hope that as we get closer to some green shoots with regards to interest rates, that will naturally feed into some share price performance. Looking at our property performance, you'll see that we have a three- and five-year property total return of 8.9% and a five-year annualized NAV total return, which isn't at March, it's as of December, because we're still waiting for the data to come out, at 8.6%.
Just to finish on this slide, looking at the two-part pie charts on the right-hand side, I want to draw your attention to the one at the bottom. This is our sector weightings. I think it's very important to emphasize that our sector weightings are organic. We aren't deliberately trying to increase our exposure to a certain sector or reduce our exposure to another. Over recent years, we have reduced our industrial exposure from about 50%-60% down to 37%. That's really a consequence of us selling out of lower-yielding assets in sort of low 6%s and buying higher-yielding assets, retail, mixed-use assets in good, sort of, central locations and good cities.
Our retail weighting has naturally increased to 37%, but I've split that sector into retail warehousing and high street, because I really feel that those two sectors have diverged in recent years. Retail warehousing has benefited from planning changes to a relaxing of the use class system, and it sort of rode the wave that the industrial sector rode, sort of in the COVID and post-COVID era. I'm gonna hand over to George, who's just gonna touch on some of the Q1 highlights that we announced on Tuesday morning this week.
Thank you, Henry, and good morning, everyone. Can we page to Slide 5, please? So you will all see this is an extract from our recent NAV announcement, being the highlight section, and there are a few key themes here I wish to elaborate on. The first of which is the company had a very minor quarter-on-quarter reduction in its NAV per share, but we were still able to deliver a positive NAV return, and that was due to the payments of our dividend for the 34th consecutive quarter. Really emphasizing kind of the total return strategy of the portfolio. The next bullet point, the third one down, I'd wish to kind of elaborate on it, is very much what I see as the source of the river for this portfolio, being our like-for-like valuation increase in our portfolio.
Now, I'm aware the quantum isn't significant, but what I do deem to be significant is that for the wider quarterly MSCI index, its equivalent result was - 0.6% for the quarter. And it's that contrast of positive and negative that I think really resounds high. What really that is representation of is the company's ability to deliver positive property return as a result of its active asset management strategy in what is otherwise a very difficult wider market. Earnings per share, I'm very buoyed by the fact that we continue on our journey to rebuilding our earnings, standing at 1.88 for this quarter, having increased from 1.83 in the previous quarter, and we will come onto that more shortly.
The last bullet point here I'd wish to elaborate on slightly is the bottom bullet point, and to reiterate, asset management really is the beating heart of this strategy. We continue to have a raft of initiatives ongoing that I would hope to further build that earnings performance. If we could go on to Slide 7, please. Thank you. Now, I, I really like this slide because it embodies the company's journey over the last 18 months. To draw your attention to the far left in Q3, 2022, some of you may recall we had undertaken a number of disposals at that time and were sitting on around GBP 40 million worth of cash. And since that time, we've been undertaking a strategy of disposing of lower yielding assets and recycling those proceeds into higher yielding ones in order to rebuild our earnings stream.
My main comments on this would be, the journey isn't over, and we are still undertaking, as I say, a series of asset management initiatives, where my expectation would be that those earnings would grow further.
Yeah, and just sort of touching on this, you'll see that there's a sort of an array of disposals and purchases over this sort of 18-month time period. And just to touch on a few of these, you'll see sort of in the bottom left-hand corner of this graph that we bought Northgate House, Bath and Bromley, which we've touched on historically. But we bought those off net initial yields of 8.5% and 8.7% respectively. Going up the red line, we bought the Matalan in Preston, being one of Matalan's top 10 traders, the first Matalan in the U.K., off a 9.5% net initial yield. So they're the sort of the purchases that we've sort of conducted recently.
In terms of sales, we sold in Milton Keynes an industrial asset, having done some asset management for GBP 6.3 million. We sold a vacant industrial building to a special purchaser and owner-occupier in Deeside, which obviously was yielding zero at the time we sold it. We sold Lockwood Court and Eurow ay, two industrial assets in Yorkshire, for a blended net initial of 6.2%. Finally, we bought in York a multi-story car park let to the NCP with an uncapped inflation-linked increase for 9.3% and another asset in Bath for 8%. So you can really see we are selling, we are selling industrial assets in the low to mid-6s, and we're recycling that into assets which are yielding in excess of 8%. It's important to emphasize these assets are in no way inferior.
They are obviously not in the same sectors. You know, it's sort of an important point to note that larger institutions have been reducing their exposure to retail and offices just because they're being forced to. We fish in a smaller lot size pond, and we're really seeing some really good opportunities and some really strong mispricing in these assets. They're very good quality. There's asset management, and as you can see, their yielding is exactly what we want on day one.
Thank you, Henry, and moving on to Slide 8, please. Now, relating earnings to what is very much a hot topic in the industry, dividend cover. The first point I really wish to highlight is, yes, the company has been uncovered in recent years, but since incorporation, our cover has stood at over 90%. And what this graph, I think, really emphasizes is the notion of our total return strategy. Yes, our earnings have been uncovered, but they have been supplemented by a whole series of profitable disposals since incorporation of the company, the cash from which we have consistently utilized to top up that dividend. A few examples of these, in fact, all of them, can be seen chronologically on Slide 9.
So if we move, yeah, so if we move on to Slide 9, as George says, these are sort of our 18 sales, which we have executed throughout the history of the company. And a lot of you will be aware of some of these sales, but just sort of going across this chart from sort of left to right. And just as a reminder, you know, we sold Corby and Solihull a while ago now, but just as a reminder, we bought Corby, which was a 30-acre car park storage facility. We bought that for GBP 12.4 million off a net initial yield of 10%. We held it for a couple of years, and we ended up selling it for GBP 18.8 million. So you can really see a great result there.
We actually ended up selling it to an owner-occupier, a special purchaser, British Car Auctions, who were on the adjacent side of the road, and they could get this property back for their own occupation. You know, because they knew that, because the lease was outside the act, and they obviously were prepared to pay such a steamy price for it. Solihull, this was an office building let to the government. We bought it off a net initial yield of 11%, GBP 5.4 million. We re-geared the lease to the Secretary of State, a longer lease with inflation-linked increases. There was a lot of money chasing those longer RPI increases at the time. We ended up selling it for GBP 10.5 million, so almost doubling our money.
The Oxford example is obviously exceptional, where we bought that asset for GBP 8.2 million, sold at a net initial yield of 9.4%, and sold it for GBP 29 million. That was really much an alternative use play, where we decided to take it away from a more box-standard office use and convert it into a sort of lab, life sciences, healthcare use, having crystallized that use through a lease to a cancer care tenant. And then more recently, we, as I said, we've been selling out of lower-yielding industrial assets, where we have carried out the asset management and recycling that money into higher-yielding assets. I think it's probably worth just saying, yes, there are some red bar charts here. For example, you know, Pricebusters building and Portsmouth more recently.
It's probably worth noting that they are much smaller ticket sizes. So Portsmouth was GBP 3.5 million, and the Pricebusters building this quarter of GBP 2.2 million. So in comparison to those larger sales, they're obviously much smaller ticket sizes. And, you know, we have decided to sell these assets to weed out a few assets in the portfolio where we really don't really feel like there's that much asset management that we can get excited about going forward. Portsmouth, the classic example, we had fully let that building. There wasn't really any more asset management upside, so we decided to take our chips off the table on that one. And Blackpool, we didn't really have the appetite to expend lots of speculative CapEx, chasing new tenants with the news that Sports Direct were vacating in April.
Thank you, Henry. Moving on to Slide 10, please. Thank you. To reiterate, the company's five-year annualized NAV total return has stood at 8.6% as at December. Why I particularly like this graph is not only does it show that the company's outperformance has been consistent for almost five years now, but actually the degree of that outperformance is growing. That, to me, really highlights one of the key benefits of this company and its strategy, its defensive nature, and its ability to drive further outperformance even in difficult economic times. If we move to Slide 11, please. This looks at a variety of performance metrics in a tabular method against what we deem to be our immediate peer group.
Now, of course, in the far right columns, you can see the NAV total return, which I've just alluded to, where we have delivered the highest NAV total return over one, three, and five years, and the second highest in the last six months. As Henry alluded to earlier, M&A activity in the market has caused some unusual short-term share price performance in some of our peers, most notably in relation to UKCM, and I'm sure some of you will recognize some of the other names on this table being those involved. However, when I look at our share price performance, I think with a longer-term hat on, I also think when REITs were first implemented in this country, what were they there for?
It was to be a longer-term hold, and that's why I am particularly encouraged that we have delivered the highest five-year share price total return and among the highest for three years. Now, of course, one of the benefits of a widening discount, and as Henry said earlier, our one-year average discount has been at around 7%. The average for the remainder of these peers has been 23%, and our next nearest competitor is around 16% or 17% discount. So we are most certainly anomalous to what has been the wider trend impacting these other companies. I particularly wish to focus on dividend yield. If we could page to Slide 12, please. This graphically demonstrates how our dividend yield compares to our peers.
Now, putting regional to one side, one can see that our current dividend yield is at least 1% higher than our nearest competitor, and I feel that is a very encouraging statistic and makes the portfolio particularly attractive at the moment. Lastly, if we could move to Slide 13, please. So yes, this really is the source of the company's REIT property total return. Now, you can see in this graph, over all stated time periods, we have significantly outperformed the MSCI benchmark. Even more encouragingly, to draw your attention to the five-year annualized bars, you may recall that as at the end of last quarter, our outperformance stood at about 6.65%. This has now actually widened to 6.82%. Testament to both the consistency and defensive nature of the company's strategy. And if we could move to Slide 14.
What this shows is the company's sector performance versus the benchmark over the last 12 months. As you can see, the company has outperformed the benchmark in all stated sectors. Most interestingly, industrials are the only sector to have delivered a positive capital return in the last 12 months. What that really highlights to me is that the source of our outperformance is very much in relation to income return, and that, of course, is a direct reflection of our asset, active asset management approach and the value that that has delivered.
Cool. Thanks, George. Just moving to the next slide. This is just a bit more of a deep dive on the one investment transaction that happened last quarter. I think Henry's alluded to it earlier in the presentation. This is Pricebusters building in Blackpool, sold last quarter for GBP 2.2 million. There's two kind of key elements as to the rationale behind this disposal, and that's linking to the Sports Direct break notice, which was served, and then the CapEx, which would have needed to be invested into the asset. And as Henry alluded to, we understood the occupational market here and didn't want to take the risk in terms of investing that fairly significant CapEx to get it into a condition that would be suitable for a further occupier.
So the running yield on sale with the Sports Direct vacating was at 4%, and once you factored in the vacant business rates, it got down to zero. Just moving to the next slide. It's just a wider piece on the U.K. property transaction volumes over the last few years, and I think what you'll see is that 2023 and the year to date for 2024 is at the lowest it has been in recent years. It's actually the lowest it has been since the GFC. And even lower than 2016, which was the year of Brexit, and 2020, and 2021, which hit COVID.
I think what this provides is we're at such a low point in time where, or a point in time where there's such low transaction volumes, there's a huge amount of mispricing, a huge amount of price discovery still ongoing in the market, and that kind of fits back into the countercyclical nature of our investment strategy.
Yeah, we hope that this really shows sort of an opportunity for us. I was reading something the other day saying that the quarter that we've just seen is kind of the first quarter, where actually net initial yields, and in general, I think sort of 65% of net initial yields are actually hardening. Which kind of shows that the bottom of the market is behind us. But as Richard said, there is less pricing transparency due to the lack of volumes of transactions, and with that market improving, you know, we hope that there will be some opportunities in the pipeline for us, when there comes a point that we will be looking to acquire some new assets, having recycled a few assets out of the portfolio. Can we move on to the next slide, please, Paul?
We decided to include this slide because obviously, industrial still make up a significant proportion of our sector weighting, 37%. And just touching on some of these metrics, which I touched on earlier on, for the entire portfolio, but specifically to the industrial. We have a WALT to expiry of 5.67 years, so that's not assuming breaks. And that shows that we really do have kind of a medium-term opportunity to look to sort of add value on our industrial assets. And if you look at that, net initial yield of 6.768% in comparison to a reversion of 8.74%, that really illustrates the potential for rental growth within the industrial sector, within the portfolio.
And you'll see the last bullet point here, you know, there's been a very strong rental growth story in the U.K. for the past sort of 20 years, more recently so, in the last five years, 10.5%, 12 months in 2022, and 7.6% in 2023, and we have really benefited from that. I think it's important to emphasize that our industrial holdings, if our tenants were to vacate, they would be probably paying rents, which are triple what they're currently paying in new, shiny, sort of big box space. They wouldn't necessarily have the space that they require for carrying out their function.
For example, they might not have the cranage that they have in some of our units, and there really has still been some very sort of strong occupational and rental performance in industrial assets such as ours. It's, you know, it's a healthy occupier market, and just touching on these three assets here, these are three existing assets within the built portfolio. Starting on the left-hand side, Bradford, we bought this in December 2017 at a rent of GBP 3.50 per sq ft. We subsequently increased the rent to GBP 4.50 per sq ft in 2021, and there's very much an alive and kicking negotiation with the tenant at the moment, who you'll see have been, are rather wedded to the site, having been there for 35 years.
At Sarus Court in Runcorn, you will have read that CJ Services, one of our tenants, went into administration and has vacated the unit. Now, that's not necessarily a bad thing, because actually, you know, it's not necessarily bad to have a bit of churn in some of these very high-performing, well-located industrial estates, and we see that actually as an opportunity. We can spend a bit of money on the unit, we can improve its environmental performance, and we can obviously enhance its rental value. And we're being advised by agents that we could get rents of around GBP 7.50, even as high as GBP 8 per sq ft on this unit, when the previous tenant was paying GBP 5.50. So, you know, that's encouraging and making the best out of a bad situation.
Then finally, St Helens, this is a very well-located unit. The tenant provides machinery for the agricultural industry. This is their U.K. HQ. Their parent company is a sort of a joint venture between a Scandinavian and a Japanese business. As we've got a very strong ultimate parent company, we bought this off a passing rent of GBP 3.22. We subsequently, in October 2022, I mean, moved that rent to GBP 4.16, and we've got a lease event on the horizon. If the tenant were to go, I think we'd have a very encouraging reletting story here, but my gut feel is that the tenant will probably stay, and you know, that is obviously good news.
We'll hopefully push on the rent as we have done so throughout the whole period of this asset already. Just one final point, sorry, which I forgot to mention. If you look at the penultimate bullet point, which sit above these three properties, that's the average book value of our industrial holdings, GBP 41 per sq ft. Now, if you compare that to what it costs to build an industrial unit of this size, around GBP 100 per sq ft. So, you know, we are sitting on an industrial portfolio, 37% of the portfolio, at an average value of GBP 41 per sq ft.
More than half what it would cost to build these units, and those units are yielding 7.68%, with further rental growth, with that reversion of 8.7, and that is a very good position to be in. The next slide just covers this rental growth story. As I said, you can see that it has become a steeper curve in the last four years. Obviously, the industrial sector fared very well, you know, in the sort of COVID era, and has done so since, you know, off the back of e-retailing.
You know, more recently, actually, with interest rates increasing, it's meant that developers and funders have been less bullish on new sites, which has obviously fared well for existing stock, and hence why we're seeing occupational growth because the supply of new space has decreased from where it was a couple of years ago.
Moving on to the next slide. Thanks, Henry. So this kind of carries on the theme about low book values. We've got four examples here where the book values are anywhere between GBP 80- GBP 235 per sq ft. But you'll see that not only that, there's also the cover that we get from the net initial yield. So we purchased these assets at 8% or softer, which obviously backs up the cover that we need to pay out the dividends. But just moving back to the book values, we've got book values, say, on Bromley of GBP 100 per sq ft, but almost at Plan B underwrite of residential values at anywhere between GBP 550-GBP 650 per sq ft.
Kind of further backing up what Henry's already said earlier in the presentation. Just moving on to the next slide and on to Coventry Central Six. I think this is just one asset which has been admittedly talked about quite a lot in fairly recent years. It's an asset we bought back in Q4 2021 for GBP 16.41 million. At the time, it was 24% vacant and just post-quarter end this year, we've reduced that down to zero. There has been three key lettings in the last quarter, namely The Food Warehouse, mydentist, and The Salvation Army, which have contributed to over GBP 535,000 increase in rental income per annum.
There's been a number of asset management transactions happened since purchase, kind of namely regears, lease renewals, but the biggest key letting, I think, was Aldi in July of last year, which has really enabled this to kind of kick on, and enable the letting, further lettings of The Food Warehouse and mydentist, as further mentioned. There's also some key ESG initiatives that have been ongoing. EPCs in the presentation, it says it's currently one E, one C. That is now, as of this week, being moved up to a B. So all EPCs, which I'll come on to later, are MEES 2030 compliant, and there's two further initiatives, including solar PV, and EV charging, which is currently being looked at. Just moving on to the next slide in terms of EPCs.
It's obviously a fairly hot topic, but this, the purpose of this slide is to kind of just show where the portfolio sits at the moment, and just to highlight two key dates of 2027 and 2030. So by 2027, there needs to be, EPCs of A, B, and C rating. You'll see that there are Ds, Es, and some Gs.
However, linking back to a comment that Henry mentioned earlier in terms of the WALT to break and WALT to expiry of 4.3 and 5.6, respectively, not only does this enable, as Henry said, us to negotiate rental growth at lease expiries or, tenant break options, et cetera, it also enables us to engage at that point in time with tenants to almost put the emphasis on them to improve the condition of the unit, to increase that EPC rating, as opposed to having the landlord burden of those costs, where we've got a 20-year lease in it, we have to invest our own CapEx. I think there's a further slide, which is.
I don't think there's actually a slide in this pack, no. But we have historically given the classic example of what we did at Rotherham, where we had a vacant industrial unit and we let it to a new tenant, a strong tenant, on a 10-year lease outside the act. We moved on the rent by 50%, and we spent roughly GBP 1 million on the roof, improved the insulation. It was at the tenant's request, obviously enhanced the value of the asset, but we saw some really strong environmental performance from that initiative and that letting, where we took the EPC from a low C to a high B.
So it really was kind of exactly what we want to be doing through asset management, growing the rent, extending the lease term, improving the environment, environmental performance, and that all naturally fed into the value of the asset. And that's an asset that we still hold in the portfolio. So I think we can move on to the conclusion. So obviously, sort of going over a lot of the themes that I've touched on, we've touched on throughout the presentation, we're buoyed by consistent earnings, which have increased this quarter, as George alluded to earlier on. We have some really exciting asset management initiatives within the existing portfolio, and we cover a few of those in the NAV announcement that we made on Tuesday morning.
And there are a number of asset management initiatives, as I say, which, which very much are sort of at the forefront of what exactly what we're trying to do in terms of driving these property returns. We have a healthy, cash holding at the moment, which is enabling us to, to have our eyes peeled for asset management, opportunities. It's probably worth noting that that cash is held in an interest-bearing bank account with an interest rate of 5.1%, so, that is a nice, add-on to that cash holding. There is significant reversionary potential in the portfolio of 8.8%, and that is the asset management that we're essentially going after.
We continue to sleep sort of easy at night knowing that we have a low average book value of GBP 72 per sq ft, which enables us to access Plan B, Plan C. We have optionality in the portfolio to go after different asset management initiatives in the event that Plan A doesn't sort of unfold. As I said, we always have our eye on those alternative use values, and that has fed into our performance over recent years. We have a strong track record of crystallizing profits on sales, a 38% average sale to purchase price premium. We're proud of that, and we would expect that theme to continue going forward.
We have a low cost of debt of 2.96% until May 2027, and all of these factors are really sort of feeding into the performance, which we are proud of, and we are delighted that we are recognized for that performance, from the publications that I mentioned, earlier on in the presentation. Thank you.
Fantastic. Thank you very much, Henry, and thank you to the team. Ladies and gentlemen, do please continue to submit your questions just using the Q&A tab situated on the right-hand corner of your screen. Just while the team take a few moments to review those questions submitted today, I'd like to remind you that a recording of the presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Henry, as you can see, we've received a number of questions, both pre-submitted and throughout today's presentation, and thank you to all the investors who submitted those.
If I may just ask you to click on that Q&A tab, and where appropriate to do so, if you could read out the question, and give your response or direct it to a member of the team, and I'll pick up from you at the end.
Yes. Thanks, Paul. So our first question: How many of your properties are being converted from commercial to residential? Do you encounter much resistance from local authority planning departments when you apply? So currently, we are not actually converting any of our assets from commercial use to residential. Obviously, we've had a slide which specifically touches on this. You know, it's probably important to note that, you know, we are not a developer. We are not looking to expend lots of sort of cash on those conversions, and actually, when we are like typically going after an alternative use angle, it will typically be through planning gain. So to use the example of Oxford again, we did one letting there, where we crystallized that change of use through that letting.
Rather than then go and respectively do lots of very hefty life sciences and lab refurbishments, we decided to basically put that in the market. Now, in terms of these assets, which we covered earlier on with the residential alternative use angle, all of those assets are well let of strong running yields. I think in the event that tenants were to vacate, I think what we would do is we would naturally go after the planning, try and crystallize that, and we've done it on a number of our assets. For example, the Gloucester one, we got permitted development consent to convert that into residential. So it's very much a Plan B, and then we would probably sell that on to someone who would execute that rather than do it ourselves.
You know, as I say, we don't really want to kind of be seen as a developer. Our focus is on commercial asset management, really, but we always have that alternative angle as a backup. We have another question here, which is rather lengthy, but it touches on rent-free incentives and capital contributions, and it's saying, it's asking about why they are so significant in retail warehousing. CapC ons and incentives are more significant in retail warehousing. Like, if we use Coventry, for an example, we were doing lettings on much longer terms, and the tenants that are coming into that asset have quite high fit-out costs in comparison to when you're sort of letting out office space or industrial space, the fit-out costs aren't as high.
So, for example, Aldi and Iceland are fitting out a supermarket, and therefore, the CapCons and the incentives have to be bigger to encourage those tenants to come. And naturally, they take longer leases, and there's value in those leases because they need to pay back that, that cost, that fit-out over a longer period, hence why they take longer leases. So that's ultimately why we have larger CapCons in those sectors.
Yeah, Richard, you go into that.
Just to paint a bit more color on the Aldi and the Food Warehouse deals. So they've obviously been reported previously in previous naps. On Aldi, the amount of money that was spent was split into two, so a traditional landlord works package, which was CapEx, with no CapCon, just a rent-free period of 12 months to Aldi. On Food Warehouse, it was a slightly different approach. There wasn't any CapEx spent by the landlord, and there was a relatively small rent-free provided of only three months to the tenant. What you will have seen is there appears to be quite a large CapCon given to the tenants. I guess the detail behind that CapCon was kind of split into two elements as well.
So we gave the unit, we gave the tenant two separate units, where they carried out what would otherwise have been known as landlord works. So when we kind of appraise that deal, you can take the CapCon out into two separate elements, part landlord work, which the tenant actually carried out on our behalf, as well as then a contribution to their fit-out. The unit wasn't ready and kind of ready for them to take immediate occupation and start fitting out. They had to do a lot of kind of enabling works to get to that position.
Thanks, Richard. So there's two questions here, one from Oliver C., and one from Richard P., both on our cash holding, and asset management and potential purchases. So, to summarize, you'll have seen that in the NAV announcement, we said that we had a number of asset management initiatives ongoing. We have the former Wilko's in Bristol, where we're working on asset management, an asset management plan for that at the moment, and hoping to bring in two new tenants there. Obviously, those, those lettings involve some CapEx and some CapCons. We also have a letting that we're working on, at our retail warehousing park in Dewsbury, where Mecca Bingo vacated, and we are working on an exciting asset management initiative there. Sports Direct also vacated our retail warehousing park in Barnstaple, so that's another asset management initiative.
We have some refurbishment projects ongoing at our office asset in Bristol. I mentioned the CJ Services example earlier on, where we are looking to refurbish that industrial space, at a cost of between about, I think it's about GBP 750,000. But, you know, we're very happy to do that because the occupational market is strong, and we really hope to go after some strong rental growth in doing so. So that really touches on an array of asset management initiatives. I think it's also probably worth noting that everything that Richard has been doing at Coventry, has had, you know, a capital drain. You know, we've taken that asset from 25% vacancy to fully let. There are landlord works that are required to do that and capital incentives.
In terms of, acquisitions going forward, you know, we alluded to this earlier on with the transaction volume slide. We do have one sale that we're working on at the moment. And subject to that sort of going through, we will be looking to, recycle capital into new assets, over the sort of next three to six months. So there will be, I would imagine, some sales going forward. So it's not all going into asset management. Just having a look at some other questions. So there's two questions, one from Perran R. and, another from, oh, who was it? Ben K., about sort of our size and what's obviously being read about a lot in the press about M&A activity.
Look, we obviously always will have our sort of eyes sort of peeled at potential opportunity. You know, I think it's very important to sort of emphasize that we would not do anything that wasn't for the benefit of the company in its entirety and its shareholders. And not forgetting that, you know, we have a board that are sort of acting on behalf of the shareholders and the company. You know, fortunately for us, our performance has been strong, so sort of we would like to think that we are on the front foot if we were to explore those opportunities.
You know, Laura and I have, you know, would love to see the company grow, but, you know, we're very, very sort of, conscious that we need to continue to do what we do best, and that, you know, and deliver the returns for our shareholders. So we make sure that we are not distracted by all the noise in the M&A sector, whilst at the same time, obviously, looking at opportunities. There's a slide from Mark C., saying, "Are these slides available to download? I would like a copy. Many thanks." I know that the presentation is on the Investor Meet Company website. I'm not sure, Paul, whether or not the slides are available to download.
They are, they are indeed, Henry.
Oh, thank you.
Just scroll down the slide, you'll be able to click on that and download. Thank you.
So there's a question from Chris B. about missing the first 10 minutes and what is the dividend cover? So yeah, I mean, George touched on this. We have grown the cover this quarter from 1.88 from 1.83 in the previous quarter. You know, we've mentioned a lot of exciting asset management opportunities within the existing portfolio. We've also touched on the theme of selling out some lower-yielding assets and recycling that into higher-yielding assets. Appreciate that that is something that we're not currently working on. It's something that we have been doing over the past 18 months.
But, you know, those initiatives, the recycling into higher yielding out of lower yielding and continued asset management, you know, that is what we remain focused on every day as a means of driving those earnings back to full cover. But I think it's also very important, as George said earlier on, to emphasize our total return strategy. You know, quite often, if we are going after a strategy to maximize the value of that asset, it actually might impact earnings. You know, for example, at Oxford, we didn't, we wanted to actually have a larger vacancy because that ultimately was gonna drive a stronger price in terms of an ultimate sale. Again, going back further, we sold that asset in Glasgow to a student developer.
If that office asset had been fully let, which would obviously benefited earnings, it would have not enabled the redevelopment of the asset and obviously the sale to that developer. So we are always thinking about total property return. Sometimes that is at the detriment of earnings, but obviously earnings is very much the forefront of what we're trying to do. So we have a question here from KT on voids as a percentage of the portfolio. This metric is covered on Slide 4. So the current vacancy rate is 6.3%, KT. It's probably worth noting that, you know, that feels about normal. We always naturally have a little bit of churn in the portfolio. I mentioned CJ Services earlier on.
We don't necessarily mind having vacancy because it gives us the ability to improve our tenant mix and grow the rent. I also mentioned the three asset management initiatives that we're working on, which we're all encouraged about. It's probably worth noting that we do have a few tenants that are in CVA and administration. Now, those units aren't considered as vacant because an administrator is in charge of the lease and paying the rates, for example. And in the event of our nightclub in Cardiff, we allude to this in the NAV announcement, the administrator is actually paying the full rent on behalf of the tenant in administration, whilst we work on negotiations to assign that lease. And if you factor in those administrations, our vacancy rate is actually at 10%.
But as I say, you know, the CJ Services falls into that as well, which we see as an opportunity. We continue to have a few more questions on tenant incentives, and so I hope that I've answered those already. We've had another one on the void rate from Guy M., so I hope I've answered that question. So we've had a question here from Ashley R.: You mentioned the interaction between the investment and PM teams. Can you expand on this, please, and explain how you benefit from being part of the wider AEW Group? Roughly, can you, is there an opportunity to, have a pipeline compared now than the last few years? So, yeah, I mean, at AEW, what we typically have, we have a portfolio management team that is Laura and myself.
Obviously, with Laura being away, it's kind of the three of us at the moment. We have in-house asset management and investment teams, and how those teams specifically operate is the investment team will be very much kind of at the coalface of the investment market. They will be receiving opportunities to buy assets that are on the market. We will discuss those with the investment team weekly, if not twice weekly. So we always have very much sort of our eyes peeled for opportunities. And then in terms of the asset management team, we have four asset managers within the portfolio. Richard's one. My actual background is asset management, so I am specifically looking after a number of assets in the portfolio as well.
And we have two other, one being Mike Shears, who actually heads up the asset management team at AEW. We sit down, fortnightly, and we go through the entire portfolio, we bounce ideas off each other, we discuss our assets, and I think, you know, it's, it's very important to us. As I said, you know, it is very much the beating heart of what we do, so it's not a surprise that we are meeting frequently to discuss the individual assets and sharing ideas, and sort of all feeding into that to obviously drive that performance. Gerald T., we've got a question here saying: What are the main opportunities for improvement in the portfolio in the next year or two? Well, Gerald, I'd, I, I'd like to say that we, we hope to sort of continue on the same theme that we're at.
I think it's probably fair to say that the property market, we would expect to sort of pick up, going forward, appreciating that we are about to sort of fall into summer, and then we've got a bookend of a general election. But, with interest rates cooling, hopefully, we should see more transactional activity, that should hopefully feed into valuation performance. It's probably worth noting that we feel very sort of encouraged by the occupier market. You know, I've said time and time again on this presentation that there's a lot going on, and that's not really sort of mirroring the lack of activity that we're seeing in the investment side of things.
So that's probably one of the other reasons why we're very much focusing on asset management at the moment, because there isn't that much going on in the investment side of things. So very much just continuing on the course that we're at, trying to build those earnings, focusing on asset management, and we hope that when conditions are right, that we will look to sort of sell out of some assets and buy some new, exciting opportunities. Just one final question here on the nightclub. So we touched on this in the NAV announcement. Yeah, so, the tenant had gone into administration. It's one of Cardiff's best-known nightclubs.
More recently, they've had a rebound, and it is trading better, but I think it's fair to say that the nightclubbing sector has experienced some difficulties with the cost of living crisis, a slight change in trend as to sort of what younger people want to do, not to mention sort of inflation. As I say, the administrators are currently paying us the rent that the tenant was historically paying us, while we're negotiating with a an assignment from the administrator to a new tenant. So, you know, on the ground, it doesn't really appear that anything will be changing, and we hope that sort of going forward, the nightclub will pick up, and as the cost of living crisis cools, it will be a positive story.
I think it's also probably worth noting that we bought that nightclub very much with our value investment hat on and with a lower book value, higher yielding. So there would be alternative use angles that we could explore in tandem with obviously keeping the income coming in, and focusing on that as sort of Plan A. Well, I think that's, that's pretty much everything.
Fantastic, Henry. Thank you very much indeed, and thank you for answering all those questions. Of course, the company can review all questions submitted to them, publish responses where appropriate, to do so on the Investor Meet Company platform. Before redirecting investors to provide you with their feedback, which is particularly important to you and the team, Henry, could I just ask you for a few closing comments, please?
Yes, well, just want to thank everyone for joining and asking the questions. I hope that we provided a sort of thorough update, and you feel that you have a good understanding of what's going on in the company. As I said, you know, we continue to very much work on the portfolio, the 33 properties within the portfolio, and we continue to stay on the same theme of driving our performance and being recognized for that. So thank you again for joining, and we will hopefully see a lot of you next quarter.
Fantastic. Thank you all for updating investors today. Could I please ask investors not to close the session? You should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete, I'm sure it's greatly valued by the company. On behalf of the team at AEW UK REIT plc, we'd like to thank you for attending today's presentation. That concludes today's session, and good morning to you all.
Thank you.