Good afternoon. Welcome to the AEW UK REIT PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Just click Q&A, type your question, and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today 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 Laura Elkin, portfolio manager. Good afternoon.
Thank you very much, Paul, and thank you everyone for joining us this afternoon. For those of you who haven't joined us before, I'm Laura Elkin. I'm the portfolio manager for AEW UK REIT, and I'm joined by Henry Butt, who is my assistant portfolio manager. Starting off with this slide shown on your screen, this is a reminder of our strategy. It's the same strategy that we've been running now since our IPO back in 2015. At AEW UK REIT, we are a value specialist, in our opinion. We are the only diversified REIT with a truly value focus. We are not sector constrained, and we think that that is incredibly important to delivering for our shareholders a value investment strategy. We can seek value as we best find it across the market.
We look to maximize income and capital. Hopefully that is demonstrated to you by our two pence per share per quarter dividends that we have paid out now for 30 consecutive quarters, so effectively immediately following our IPO. On the capital side, we of all U.K. diversified REITs, we have the highest NAV total return performance over six months, three years and five years. We are, I believe, joint over one year. How do we do that? We have a focus on strong geographical locations across the U.K. Whatever we are buying, we make sure that it is well-located for that asset type. We've often had a focus on shorter income streams. This really comes down to our very active asset management.
When we buy properties with shorter income streams, we often receive a yield premium on the way in for doing that. We then very actively manage the asset in our portfolio, and look to either improve those income streams, keep them delivering at a high level, or improve asset values. That is in a nutshell what we do. We still think the portfolio represents a value proposition today. Capital values remaining low at GBP 63 per sq ft on average across all sectors in the portfolio and our average passing rent at GBP 5.40. This slide shows you here a snapshot of the portfolio as at the March 31st. Starting with the pie charts on the right-hand side, you will see that our sector weightings and geographical locations, look broadly similar to how they have done for a little while now.
In our sector weightings, we continue to have a high exposure to the industrial sector. That is a position that we built up in the early years of running this REIT. We have not been buying industrial for quite some time now because we don't think that it has represented a relative value proposition compared to other sectors. We are still happy to continue to hold that sector as a general comment. The main reason for that is that our average passing rents on those industrials is well below GBP 4 per sq ft, so incredibly low, and we think that that is a good place to be at the moment.
In terms of sectors, our exposure to the office market is very light there, and something that I expect you will see us continue to have that light holding going forward. In terms of the portfolio, we've got 36 assets, 145 tenants. As at the end of March, that was an independently assessed net initial yield, assessed by our independent valuer Knight Frank. Initial yield at 7.2% and a reversionary yield at 8.8%. The difference in those two numbers reflecting the inherent ability in the portfolio to grow income. Of course, a percentage of that is reflected in our vacancy rate, which sits just below 7%.
A lot of that is reflected in true reversion that we expect to see coming through our business plans through growth in income as we continue to actively manage our assets. During the course of Q1, we saw our property valuations remaining mostly flat. That is of course in stark contrast to what we saw happen in commercial property valuations during the fourth quarter of last year. If anyone's seen our NAV announcement that we put out on Wednesday last week, this will have been fully covered in that.
Those values looking to have plateaued since Q4, which is what we had expected them to do, with any movement in valuations seen during this first quarter of the year being really as a result of any very specific assets, specific reasons due to asset management. When Henry talks about some case studies of some assets, he will explain some of those reasons. Any value movement during this quarter, not due to any wider market trends, more specific to each asset. We still think the portfolio is robustly positioned. As I've just touched on, that we have seen values very much plateau during the quarter. We still have our low cost of debt and significant headroom on our debt covenants.
Our LTV today of around 30%, of our LTV covenant kicks in at a level of around 60%. Significant headroom there. Touching on our rents collection, I've seen some recent major newspaper headlines suggesting that rent collection for commercial property was expected to be significantly lower this quarter than we had seen in previous quarters where we had still continued to see very high levels of collection across the industry. I would specifically say that that is not what we are seeing in the AEWU portfolio. Our rent collection levels have always been in the region of 98%-99%, and they continued to be at that level for the past quarter and for the current quarter. Very importantly for ourselves as an active asset manager, we continue to see occupational resilience.
We are incredibly busy with our asset management team in-house, working our way through our asset business plans, mostly on track with where we expect them to be, and continuing to work through those in a positive way. This slide here really touches on the idea of that value correction really that we saw in Q4 last year. As a result of that pricing volatility, at the time of Q4 last year, we saw a sharp increase in the amount of mispricing in the markets. We were able to take advantage of significant opportunity at that time with the purchase of some assets, including Bath and Bromley.
Some really strong locations, and really strong assets that we were able to acquire at initial yields of between 8% and 9%. That is something that we have very much seen continue. We made a further purchase during this past quarter, in Preston. Henry has got a slide on this asset coming up, so I won't talk about it in too much detail now. A strong asset, resilient income stream, yielding us 9.5%. And when looking at that asset, the capital fundamentals look to be defensive as well in terms of low capital value per sq ft. The message is that we still very much see a lot of opportunity in the current market.
We have an attractive pipeline, and we'll come on to show you some of those assets shortly. You will have seen us make a couple of sales during the quarter, and I would expect in a quite selective basis for that recycling of capital out of some of our lower yielding assets into some attractive pipeline assets, in a selective way to be something that we continue to do. Turning back to our announcement made last Wednesday, we were very pleased for this quarter to see the improvements in our EPS continue in line with where we had expected it to be. This chart will show you that our earnings have been improving over the past 12 months, but quite markedly during the last quarter, and we're really happy to see that.
Here we're pointing out to you various key events, sales, purchases, and lettings that have led to that improvement over the past 12 months. More recently during the current quarter, with that theme of recycling out of some of our lower yielding assets into higher yielding assets with the sale of Milton Keynes and Hemel Hempstead during the quarter and the purchase of Matalan. This theme, we very much expect this to continue, as we look forward to quarters, and that is with our business plans, asset management business plans and assets continuing to progress with perhaps further recycling of assets, and as the portfolio returns to full investment. I'll hand you over to Henry now to talk through some of the more specific performance.
Thank you, Laura. Good afternoon, everyone. This first slide on performance is pretty self-explanatory really, and it tracks the NAV performance total return since fruition back in 2015. You can see, our performance is kind of moving away from our peer group in about mid-2019. That is principally off the back of asset management. For one, we have a shorter lease profile until break, being around 3 to 5 years. It's not surprising that the performance moves away there, where as an asset management team, we have the ability to negotiate improved terms with our tenants.
Also that's principally off the back of the success of the industrial sector, which did very well, sort of set against the backdrop of COVID with increasing e-commerce, and it was very much sort of the sector in trend at the time. As you will see, there was a downtick in the previous quarter. Valuations adjusted across the whole of the UK and Europe. We've seen a nice uptick this quarter with 2.42% NAV total return for the quarter. This next slide just compares our returns to our peer group. The box on the right-hand side is looking at NAV total return, the larger box in the middle is looking at our share price total return.
It's important to stress that the share price total return is as of March this year, whereas the NAV total return is as of December. You can see that the share price total return over five years is 8% and just north of 20% over three years. At NAV total return, three years of 16.3 and 12.8% over five years. This next slide looks at the strong dividend yield amongst the highest in the U.K. diversified REIT peer group. You can see we're paying a dividend yield of 8.2% currently, that's off a share discount of roughly 7.5%. It's probably worth noting that a lot of these peers are on bigger discounts to us, which naturally inflates the share dividend that they're paying.
For example, the 12.3% that Region are paying out, they're at a 20% share discount at the moment, which boosts that dividend. This final performance slide just compares our performance to the MSCI benchmark. As you can see, it's been a sort of a fairly tough 12 months set against the backdrop of the autumn budget and rising interest rates. Over 3 years and 5 years, we're favoring well against the benchmark, with a 5.46% outperformance of that benchmark over 5 years. I'm gonna hand back to Laura to cover the investment strategy. Thank you.
Thanks, Henry. We thought it would be interesting to just include some slides here, on our investment strategy, and then turning to our pipeline. The reason being is that, clearly we're going through a period of, particularly at the end of last year and perhaps going forward if we continue to recycle assets as I've discussed, a period of investment and having a particularly attractive pipeline. I thought I'd just sort of summarize here, the investment strategy, that we have and really how we apply that in practice. When we talk about value investment, what do we mean and really what does that mean to us? At very high level, we are looking for mispriced assets.
That's one of the reasons why at the current time we are seeing a lot of opportunity. We tend to find that when there is less transparency on pricing or at times when general investment volumes in commercial property are lower and there is a greater propensity for mispricing. It was that less sort of more, more opaque, less transparent pricing that we saw at the end of last year. This year still investment volumes remaining below average. Therefore we are finding more opportunity and less competition than we would generally see for the types of assets that we like to buy. We focus on value investment as a downside protection for our shareholders.
How that sort of plays out in practice is when we're looking to buy an asset, we are often very focused on its capital value per square foot. That's remaining low for the type of asset that we're buying. The reason why that's very important to us is that we will be comparing that capital value per square foot to our or to the expected vacant possession values of an asset or to its alternative uses. If we think that a capital value per square foot looks high during an asset's life cycle, for example, if a new 10-year lease has just been signed, and that value is peaking for that reason, the capital value per square foot will be high versus where you would expect to see that asset trade over the long term.
This is one that we will less likely be buying. Not to say that we would rule it out, but it makes it less likely that we would buy it because we would always be comparing that purchase price on a capital basis to the long-term fundamentals and where we do expect that asset to trade value-wise over the long term. That leads us to often having numerous business plans for an asset. That is again, something that we really like. We are conscious of the fact that we hold properties over quite a few years. Sometimes that can be as short as a year or sometimes many years. We hold assets over a long time period where, yes, things can change.
Being nimble and buying those assets at a low capital value per square foot allows us to have those numerous business plans that we've fully costed, be a bit more nimble if things are changing or if values are moving as of course they always do in the market. That is really what value investment means to us, and we continue to apply that to our pipeline today. We've shown you a few pipeline assets here. Excuse me. We've said at the top here that we've got a sort of GBP 50 million plus pipeline. You know, that kind of figure changes broadly every day as we are analyzing assets for purchase and we on a daily basis are receiving new introductions of assets that we are analyzing for purchase.
Fifty million is sort of on any given day where that is sort of currently looking in terms of high quality assets that we're analyzing. There are many more that we are analyzing before that. Within that size, the average sort of weighted net initial yield that we are currently seeing is in excess of 8%. A healthy place to be in terms of delivering this strategy over the medium term. Just looking at some of these assets here, they are all, top 10, top 20 UK cities. In terms of sectors, few industrials here, that has been a factor of our pipeline now for some years and continues to be so.
When we saw a lot of value loss across commercial property, the industrial and warehousing sector at the very prime end was obviously sort of almost the most or the first to be called into question when we saw that happening in the sort of mid to the third quarter of last year. We have seen or are starting to see some recovery at that prime end. We may have a few industrial assets, isolated industrial assets in our pipeline, but I would not expect to be that sector to be a large focus of our pipeline going forward.
We are focusing at the moment on sectors where we see greater value, and that tends to be in retail, both across high street and retail warehousing, being very, very selective on location, particularly on the high street, and I cannot stress that enough. I think that our purchases at the end of last year in Bath and in Bromley really go to show that, both of those locations, in the capital values being underpinned by alternative use, in the way that I have just described, more widely in our investment strategy. Yeah, very much sort of more of the same of what you have seen us acquiring recently. Yeah. Other sectors, offices, I would expect offices to have, again, a fairly light representation in our pipeline going forward.
We tend to never say never in terms of completely ruling out a sector, but that is a representation of where we are seeing value at the moment. Across this pipeline, similar WAULT to that we hold in the existing portfolio, but some very strong locations arising, particularly in the retail sectors. I'll hand back to Henry to talk through some of the specific assets.
Thank you. This slide covers our most recent purchase, a retail warehousing unit single let to Matalan in Preston. I've touched in the past on why we like retail warehousing, but I will just recap on that again. The reason we like it is because they're modern purpose-built units. They're in good locations on the edges of good towns and city centers. They typically have low site covers, which means you can more intensively use those sites through the redevelopment of drive-through coffee pods or restaurant units. They're very good for repurposing if the retail warehousing angle does fail.
I.e., you could turn them into last mile logistics or trade counter, or you could do something a bit more wholesale scale than that and knock them down and build residential, for example, or other alternative uses like residential. Specifically looking at Matalan in Preston, we bought this property for GBP 6.45 million, GBP 110 a sq ft, yielding a net initial yield of 9.5%. There is a fixed uplift in 2027, which will take the reversionary yield to 10.7%. A fantastic income profile for AEWU. As you can see, it's a high-yielding asset. It's let to Matalan for 9.2 years.
Some people might question Matalan as a covenant strength. We were very buoyed by the fact that they recently refinanced, which puts them in a stronger financial position. It's also worth mentioning that this is Matalan's first ever store in the U.K. That is good news, and it's in their top 10 U.K. traders. Just touching on that alternative use angle, you'll see from these photos here that this could very easily be turned into last mile logistics or trade counter. You could easily sub-subdivide it. As you can see, there's a lot of car parking, so there's a low site coverage. We could look to bring in some drive-through units or possibly redevelop the site more intensively going forward.
I think it's important to point out with this asset too that, we have received investment introductions of other Matalan premises, at a perhaps a similar yield profile and similar pricing metrics, and we have rejected them. This one we very much liked in contrast, because we knew how much capital the tenant was turning over from this specific site. It's the knowledge of how much cash we know that the tenant is generating here. We know that is incredibly important to their business. It's that which has allowed us to really take a view on what we're seeing here.
This is our most recent disposal, Clark Road in Milton Keynes, an industrial asset, and it very much is a good case study of what Laura mentioned earlier on about how we are selling out of lower yielding industrial assets which have performed well for the company. Just to have a quick canter through these details. As you can see, we bought it in October 2015, and we bought it off a price of GBP 50 a sq ft with a net initial yield of 8.3%. We sold it in March for GBP 2.75 million, GBP 91 a sq ft at a net initial yield of 6.3%. A low net initial yield for a portfolio looking to pay out an 8% dividend.
The reason we took the decision to sell this asset other than it being below AEWU's target income return is because we had completed the asset management initiatives on this property, definitely for the medium to short to medium term. This asset actually was originally bought in a portfolio of three assets. Actually we've sold the other two which were in Swindon, another one on the outskirts of Manchester, over the course of the last couple of years. This asset, the tenant went into administration, but the tenant here actually had a pretty good business at this specific site. The company which bought the tenant who went into administration, agreed to take a new ten-year lease with us.
We essentially got a new lease to a stronger covenant on a longer term, and we managed to increase the rent. We kind of felt like there wasn't really much else to do in terms of asset management. We felt like we had maximized the value of this asset. The next sort of step in that asset management process would be taking our profits off the table, crystallizing those profits, and selling the asset. As you can see, we sold it for 6.6% above valuation and about 8% above the acquisition price. We're delighted with the performance of this asset over its hold period.
Perhaps I'm really laboring the point here, but that asset management story that you've just described, that we went through on Milton Keynes, is sort of the basis of what I was sort of trying to describe with Matalan in Preston. We had a knowledge on buying this asset that the tenant traded very strongly, and it's because of that you can go through a worst case scenario of a tenant going into administration, which is of course not what we intend to have happen. If you know that a tenant is trading very well from that specific location, you can be about as sure as you can be that that business will in some form continue as it has done here with a stronger tenant covenant.
This slide touches on some asset management that we've been currently doing. We did actually cover this slide in the previous quarter, but I thought I'd do this slide again because we are sort of further through the process. Just to recap, we bought this property back in, sorry, Q4 2021 for GBP 16.41 million, GBP 117 a sq ft, which is similar to the Matalan we just bought in Preston. Yielding us a net initial yield of 7.8% with some good reversion down the line. That was principally because we had a number of vacant units. This quarter it's been valued at GBP 19.3 million, GBP 138 a sq ft.
You can see we've already sort of made some significant progress on enhancing the value of this asset. The property this quarter was up 4% from the December quarter. That is really all based off asset management rather than a sector uplift, which shows that this is kind of a countercyclical valuation shift. The main reason for that, and I touched on this in the previous quarter, but just to remind you, is that we've agreed 2 agreements for leases with Aldi and Iceland, which are subject to works and planning. As we're further down that process with planning and doing those works, the value is starting to reflect that in the valuation. That's why we've seen the uptick of 4% this quarter.
We've also, over the course of the past six months, completed lease deals with existing tenants, being Next and Caspian Food Services, trading as Burger King. We're in the process of looking to bring in a new tenant, mydentist. You'll sort of gather by, you know, those various deals which I've just sort of gone through, along with the tenants which are listed in the bottom left-hand side of this slide, being TK Maxx, Poundland, Sports Direct and Furniturel and. That there really is sort of an elaborate mix of occupiers, tenants now at this property. That reflects the loosening planning system where instead of just having bulky goods or fashion-led retail warehousing parks, we're now bringing in different uses, like a dentist, like a discount food store, to sit beside these fashion and these bulky good traders.
You'll see in this picture as well that we have a TUI, so a travel agent, and a Boots. Some of these retail warehouses are really starting to reflect what the old high streets are. That is brilliant because it drives footfall, which means tenants are more encouraged to come to these sites. Rents increase, and obviously that all feeds through into investment pricing. It's really sort of good in terms of the total performance of this property. Just to finish, you will see on that chart on the top right-hand side, that we managed to sort of move the income by over GBP 1 million since we bought the property, and that's net operating income. Why net operating income is important here is because we did have vacant units.
Obviously now that those units are let, not only are we receiving rent, but we will also be covering the non-recoverable void costs, which we would have been receiving as a landlord, which would have been empty rates and service charge costs on vacant units. We really have seen a boost in this asset's income profile over the course of the asset management that we've been doing since we owned it back at the end of 2001. Finally, I'm just touching on Rotherham. This slide actually has appeared previously in our asset management section, but I'm just drawing particular focus to it in the ESG section of this presentation. The reason being that we managed to carry out a cracking asset management deal here. We moved on the rent by just shy of 50%.
We secured a new tenant on a 10-year lease, a well-known business in the Yorkshire area, associated with the production of aluminum for the construction industry. In doing so, we moved the valuation from GBP 4 million, which was GBP 49 a square foot, to GBP 5.75 million at GBP 70 a square foot, yielding us 6.7% odd. In doing so, we spent money on this asset and we improved the overall feel of the asset, but the majority of that money was spent on the roof. In doing so, we significantly enhanced the environmental performance of the asset. We took it from a mid to low C EPC rating to a B 44 EPC rating.
We've improved the environmental performance, that is particularly important at the moment set against the backdrop of MEES, and that has filtered through into its pricing. A great asset management deal, but one which also has made a building greener. Just to conclude that point, we like this because we do run a shorter lease profile at AWU. If we had properties, let's say, which are let for 10 plus years, the ability to improve the environmental performance of assets is restricted because there is no negotiating point with the tenant. There is no ability to spend money on that building and look to improve its environmental performance.
Having a shorter WAULT from three-five years allows us to do that, at the point that we are looking to bring in new tenants or renegotiate these terms with existing tenants. I'll hand back to Laura, who is going to conclude. Thank you very much.
Thanks, Henry. Thanks everyone for joining us today. Of course, we've got Q&A coming up as well. I hope that you have enjoyed today's presentation and taken home some main points really, which of which I see them to be a significant improvement in our earnings cover over the past 12 months, but also particularly in the last quarter, really due to progress with business plans, ongoing recycling of assets, from lower yielding into high yielding, and as the portfolio returns to full investment. We expect that trend to continue in future quarters. We really do see a very exciting pipeline of assets, for the, for this strategy at the moment. We're keen to take advantage of some of those where we selectively can through that recycling strategy.
We hope that we have demonstrated that to you with some recent, high-quality acquisitions, and we hope to make more in coming quarters.
That's fantastic, Laura, Henry. Thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions using the Q&A tab situated just in 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 the recording of the presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Laura, Henry, as you can see, we've received a number of questions throughout today's presentation. Thanks to all the investors for submitting those. If I may, could I just click on that Q&A tab, and where appropriate to do so, just read out the question and give your response, and I'll pick up from you at the end. Thank you.
Yeah, sure. Thank you, Paul. We've got a question here, which notes that our dividend is sometimes not covered by earnings. Do we intend to continue with this policy? I think firstly, I would say that, yes, it's obviously correct that our dividend is not always covered, and that's specifically been the case over the past, sort of 18 months, really, as we have, particularly been through some sort of heavy asset management with two assets in particular that were sold last summer being Oxford and Glasgow, which saw some very low levels of income, but led to, well, going down some business plans which led to the maximization of their sales, proceeds. The portfolio has been going through a time of flux.
We are looking to return that earnings cover to some significant stability, and we have made a lot of progress in doing that, which hopefully we have demonstrated to you with our announcement last Wednesday. In terms of the policy going forward, of course, our dividend policy is set by our board. I would just say at high level, though, is that we very much intend over the long term for our dividends to be as highly covered as possible. However, over the long term, when we are running a very active strategy, there will of course, be times that our dividend is not covered. I'm pointing in particular to times when we are not at full investment.
Now, given the level of profits that we have taken from some of our sales, the board have taken the decision to continue to pay out that 2 pence because the 2 pence can be covered, if not by earnings, then by profits made on sales. It is that. The board have taken the decision to use that to pay out the dividend over that time period. Now, that is what we've done to date. I would say to you that I would expect that to be the case going forward. Short answer, we would very much over the long term aim to have our dividend as covered as possible.
Another question, are we seeing any consolidation issues, which is across the sector? Sorry, I'm ad-libbing that question slightly. Any consolidation across the sector, referring to, I presume, diversified REITs, which is important bearing in mind our size. Of course, we have seen that brought into question perhaps fairly recently with a peer of ours, Ediston REIT having publicly announced their strategic review. Yes, you know, it's clear that many commentators to the sector do discuss consolidation.
You know, I think I would just say that we consider all strategic options for this REIT as long as they are in the best interest of shareholders, and we will continue to do so, and that includes corporate actions. There is a question here which states that they note an investor noted that a potential car park acquisition was included in our pipeline. Could the addition of electric charging points increase income from an asset like that? Yes is the simple answer to that question. To be honest, I think that asset in particular already has some EV charging points. Whether or not it would improve the income from that asset, remains to be seen.
Just taking this question more widely though is the addition of EV charging points is something that we do consider across our assets because there is potential for an income stream. Yes. We are considering this where it is possible to do so across all of our portfolio. Another investor has asked a very similar question as the previous question in electric charging points in car parks, also relating to solar panels on roofs. Again, we are considering that. Of course there are benefits for additional income streams, but also for the improvement of ESG ratings and EPC ratings on assets for both of those things.
Perhaps the key difference between those two initiatives is that your initial capital outlay for electric vehicle charging is much lower than for solar panels on roofs. It is an easier route to go down. But where it is financially viable, we are considering both of those options and I would say others where we can both improve the income streams from our assets, but also have a win-win situation of improving the ESG profile of the asset also.
It's probably worth also mentioning on solar power panels, you quite often reach deadlock with the National Grid. In many cases the panels will produce excess electricity and if the grid doesn't have the capacity to absorb that electricity which is not being used by the site, then you have to look at basically bringing in battery storage facilities. Now something like multi-story car park where the site coverage will be very high, putting in battery storage, which obviously is pretty heavy, might be problematic. That's always worth bearing in mind when you're looking at PV. It's also probably worth noting that actually we've all seen all the offshore wind farms in the U.K.
At periods when we have a lot of wind, which is principally throughout all our autumn, winter and spring, we have the ability to create so much electricity energy. Actually the grid in the UK is going very green anyway. There is an argument amongst some people that actually solar is perhaps not as necessary as it perhaps once was when we're producing so much green electricity already. There's a question here from David T about the cash incentive on the letting with Iceland. It seems like a lot he says for a lease with at GBP 250,000 per annum.
It is a lot, but that money is has been put on the table to obviously as an incentive to bring the tenants in and it will be used to reconfigure that unit into a supermarket and contribute to all of the tenant's fit out. When you have tenants that are taking 10-year leases and they're of the covenant strength of Iceland, there's obviously a lot of value creation in doing those deals and the tenants are very knowledgeable to that. They need incentivizing and obviously this was a stripped out bog standard retail warehousing unit. It needs to be fitted out in conjunction with a planning application and therefore there was a large cash incentive to attract that tenant. You'll see that there's only three months rent free.
More typically you would probably agree a 12, an 18, maybe a 24 month rent free with no cash incentive. In this instance it's a very low rent free with a larger cash incentive.
I think I would just say on that as well, that the value upside that we expect to eventually be realized once that lease is fully completed, from the signing of that lease, to significantly outweigh that incentive. Yes, it absolutely is a very large sum of money to be paying out. It's one that is needed to be paid in order to gain tenants of this quality and this type of property. We're very aware of that. The tenants are very aware of that. It's market standard, but overall the deal is still capital and income accretive to shareholders. There's a question asking, do we consider future refinancing at this point, or is it too far away? Yes, it's too far away.
We have just passed the one year anniversary of our signing of our refinancing, which was completed last May. We have a five-year fixed interest rate at just under 3%. We will be addressing that in future. We have an in-house debt team here at AEW who are, you know, working across various strategies and assets that are run in-house here by various teams. The reason for making that point is that they are effectively at all times in touch with lenders across the market and are aware of movement in the cost of debt at various points in time.
You know, I think it is really credit to our debt team, that we took the decision some 18 months ago to start that refinancing earlier than we would needed to do, at that time. We significantly benefited in the rate that we received because of the debt team's proactivity in doing that with us. Yes, we're very happy with where the cost of debt sits today. I can see that someone else has queried the rate. It's 2.96%, and that is fixed for another 4 years.
I see there's a few questions on MEES, which is Minimum Energy Efficiency Standards, for those who don't know. You'll see there's a MEES slide attached at the appendix, which kind of explains legislation. The question in particular mentions the 2030 deadline, where the EPC ratings of properties need to be by a B. It's important to mention that there is another deadline which is 2025, where they need to be a C. That is what we are currently working to. With regards to the current situation where landlords cannot hold F and Gs, we only have 6 units across the portfolio which are a G and F rating. We're in the process of sorting those out.
The majority of those units are very small units, and they're in a vacant, well, a 95% vacant office building at our industrial holding in Wakefield. We're looking at potential exemptions, but we might also demolish that office and look to redevelop it as smaller industrial units. We have 1 F rating, which is at an industrial asset in Basildon, where we are in negotiations with the tenant to improve the environmental performance of that asset alongside a lease regear. Those six units which currently don't meet the MEES agenda, we are very much working with at the moment, and then we will look to improve EPC ratings which are E and D towards C between now and 2025.
Thanks. I'll just pick up a question, somebody has asked which sites have rent reviews coming up. Apologies. I'm gonna talk in the round as I answer this question. With 155 tenants across our portfolio, I think it's fair to say that we very regularly have rent reviews coming up on a whole range of assets in the portfolio. You'll see that if you read our NAV announcement from last Wednesday, that we have in particular talked about one of these, where we have settled a rent review at a fairly healthy increase, because it was an uncapped RPI review.
The reason why we've talked about that pretty publicly is A, because it's good news, but B, because the rent review is subject to a very simple calculation based upon the level of RPI at set date. We unfortunately will be less likely to talk about other rent reviews. We have settled a number of rent reviews recently, I'm thinking of one asset in particular, which have led to an increase in the income stream. One of the reasons why we haven't talked about that publicly and in lots of detail is because we also have another unit in the building which is currently vacant, although it is under offer to a tenant.
Clearly, if we were to make public announcements about the outcome of those rent reviews, the incoming tenants or the tenants that we are trying to market that unit to would be very aware of where they would expect their rent to be, and it would rather prejudice our negotiations with those incoming tenants. I think apologies, I'm probably not answering that question as fully as you would like me to be. We are always very alive to not prejudicing ongoing conversations, which can of course, be very easy to happen in multi-let buildings. I hope you very much take the message that we are on top of all of our rent reviews and they keep us very busy on an ongoing basis.
Guys, I think you've pretty much covered off all the questions you can from investors. Of course, any further questions that do come through, the team will be able to review those, and we'll be able to publish responses, where appropriate to do so on the Investor Meet Company platform. Laura, perhaps just before redirecting investors to provide you with their feedback, which I know is particularly important to you and the team, I could just ask you just for a few final closing comments, if I may.
Yeah. Thank you, Paul, and thanks everyone again for joining today. We feel really pleased with where the portfolio sits today. We feel very positive about its future, both in terms of NAV total return, which we have clearly proved to be very resilient in the past. Now with our increasing earning levels as well, we hope that you take away a positive message from that also.
That's fantastic, Laura. Thank you and Henry for updating investors today. Could I please ask investors not to close this 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 and is greatly valued by the company. On behalf of the management team of AEW UK REIT PLC, we'd like to thank you for attending today's session. That concludes today's presentation. Thank you and good afternoon to you all.