REG - Schroder Real Estate - Announcement of NAV and Dividend

Schroder Real Estate Investment TrustAnnouncement

01/03/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220301:nRSA1137Da&default-theme=true

RNS Number : 1137D  Schroder Real Estate Inv Trst Ld  01 March 2022

 

Schroder Real Estate Investment Trust Limited

('SREIT' or the 'Company')

 

ANNOUNCEMENT OF NAV AND DIVIDEND FOR THE QUARTER TO 31 DECEMBER 2021

Schroder Real Estate Investment Trust ('SREIT' or the 'Company'), the actively
managed UK-focused REIT, announces its net asset value ('NAV') and dividend
for the quarter to 31 December 2021.

Highlights

·      NAV of £345.9 million (30 September 2021: £323.4 million).

·      NAV per share increase of 7.0% and total return of 8.1%.

·      6.3% increase to the quarterly dividend to 0.772 pence per share
('pps').

·      This reinstates the dividend back to its pre-pandemic level.

·      £19.85 million off-market acquisition of four industrial assets
in the northwest of England in December reflecting a 6.9% net initial yield,
delivered a 4.3% valuation increase as at 31 December 2021.

·      Rent collection levels stabilising at pre-pandemic levels, with
96% of rent due for the quarter ending 31 March 2022 collected, in line with
the equivalent date in the previous quarter.

·      Post quarter end disposal of a Nottingham office building for
£13.0 million, representing a 39% premium to the 31 December 2021 valuation
and a 4.5% net initial yield.

Nick Montgomery, Fund Manager of SREIT, commented: "This performance is
testament to the speed of recovery of the market alongside the strategic steps
we have taken to pivot the portfolio towards higher growth sub-sectors. Having
restored the dividend to the pre-pandemic level, our focus is on delivering
our pipeline of portfolio activity, progressing our ambitious sustainability
strategy and continuing to grow net income."

Net asset value

The unaudited NAV as at 31 December 2021 was £345.9 million or 70.4 pps. This
reflects an increase of 7.0% per share compared with the NAV as at 30
September 2021. Taking into account the quarterly dividend of 0.726 pps paid
in December 2021 and relating to the quarter to 30 September 2021, the NAV
total return for the quarter was 8.1%. A breakdown is set out below:

 

                                                                                £m     pps    Comments
 NAV as at 30 September 2021                                                    323.4  65.8
 Unrealised net increase in the valuations of the direct real estate portfolio  25.6   5.2    Portfolio like-for-like valuation movement, net of capital expenditure, of
 and Joint Ventures                                                                           +5.0% over the quarter to 31 December 2021
 Capital expenditure (direct portfolio and share of Joint Ventures)             (1.7)  (0.3)  Includes asset management activity across the  multi-let industrial portfolio
                                                                                              to capture rental growth (Stacey Bushes, Milton Keynes and Millshaw Industrial
                                                                                              Estate, Leeds)
 Acquisition costs                                                              (1.3)  (0.3)  Transaction costs incurred relating to the industrial portfolio acquired in
                                                                                              December 2021.
 Net revenue                                                                    3.3    0.7    Quarterly EPRA earnings.
 Dividend paid                                                                  (3.6)  (0.7)  Dividend for the quarter ended 30 September 2021 paid in December 2021 (at
                                                                                              0.726 pence per share). Fully covered over the quarter on a cash basis.
 Others                                                                         0.2    -      All other items.
 NAV as at 31 December 2021                                                     345.9  70.4   Calculation based on 491,080,301 shares.

 

As previously announced, the Company has completed the disposal of an office
building, The Arc in Nottingham, for £13.0 million, which compares with the
31 December 2021 valuation of £9.35 million. The asset produced net income of
£622,210 per annum and the price reflected a net initial yield of 4.5%.

Dividend payment

The Company announces an interim dividend of 0.772 pence per share ('pps') for
the period 1 October 2021 to 31 December 2021.

This reflects a 6.3% increase compared with the prior quarter's dividend and
equates to 100% of the pre-Covid dividend on a pps basis. The dividend will
continue to be reviewed by the Board targeting a sustainable and progressive
dividend policy.

The dividend payment will be made on 25 March 2022 to shareholders on the
register at the record date of 11 March 2022. The ex-dividend date will be 10
March 2022.

The dividend of 0.772 pps will be wholly designated as an interim property
income distribution ('PID').

Performance versus MSCI Benchmark Index

Over the quarter to 31 December 2021, the underlying portfolio produced a
total return of 6.4%. This compares favourably with the total return for the
MSCI Benchmark Index (the 'Benchmark') of 6.2%. The portfolio's quarterly
income return of 1.5% compared with the Benchmark at 1.0%.

For the calendar year 2021, the underlying portfolio produced a total return
of 19.2% compared with the Benchmark of 16.6%, resulting in relative
outperformance of 2.6%, driven by an income return of 6.5% compared with the
Benchmark of 4.2%. The Company has outperformed the Benchmark over one, three,
five, 10 years and since IPO in 2004.

Property portfolio

As at 31 December 2021, and adjusting for the disposal of The Arc office
building in Nottingham, the underlying portfolio comprised 42 properties
valued at £500.0 million. At the same date the portfolio produced a rent of
£29.5 million per annum reflecting a net initial yield of 5.5% which compares
with the Benchmark of 4.1%. The portfolio estimated rental value is £33.3
million per annum, reflecting a reversionary yield of 6.7%, which compares
with the Benchmark of 4.7%.

The void rate was 6.9% calculated as a percentage of rental value, of which
1.2% is under offer. The average unexpired lease term, assuming all tenants
vacate at the earliest opportunity, is 5.4 years. The tables below summarise
the portfolio information as at 31 December 2021, adjusted for the Nottingham
disposal:

 Sector weightings                     Weighting (%)
                                       SREIT    MSCI Benchmark Index*
 Industrial                            46.5     33.1
 Offices                               28.1     25.0
 Retail warehouse                      11.5     9.0
 Retail                                7.6      12.5

     Retail ancillary to main use      4.4

     Retail single use                 3.2
 Other                                 6.3      16.6
 Unattributable                        -        3.7

 

 Regional weightings                 Weighting (%)
                                     SREIT    MSCI Benchmark Index*
 Central London                      7.9      16.1
 Southeast excluding Central London  20.1     38.0
 Rest of South                       10.7     14.9
 Midlands and Wales                  21.7     12.9
 North                               37.3     13.7
 Scotland                            2.3      4.3
 Northern Ireland                    0.0      0.2

 

* Figures may not sum to 100.0 due to rounding.

Portfolio activity

Since 30 September 2021, the Company has completed 21 new lettings, renewals
and reviews across 128,600 sq ft of space. These transactions were completed
at 4% ahead of 30 September 2021 ERVs, generating £1.1 million per annum of
contracted rent, which represents an additional £500,000 per annum of rental
income compared to the previous position.

Transactions

As previously reported, in December 2021 the Company acquired an off-market
portfolio of four industrial assets in the northwest of England for £19.85
million. Combined, the assets generate initial rental income of £1.5 million
per annum, equating to a 6.9% net initial yield and a low capital value
equating to £53 per sq ft. The portfolio was revalued at £20.7 million as at
31 December 2021, reflecting a 4.3% uplift.

The portfolio comprises a well located, multi-let industrial estate in
Birkenhead valued at £12.5 million as at 31 December 2021, together with
single let assets in Haydock and Sandbach with a combined value of £8.2
million as at 31 December 2021. The assets are let off an average rent of
£3.40 per sq ft, which provides scope for growth and good initial progress
has been made with lettings under offer at Birkenhead. The portfolio
acquisition increases SREIT's industrial weighting from 42% as at 30 September
2021 to 47%, with the majority of this in good quality, multi-let estates.
Following the disposal of the Nottingham office, a number of potential
acquisitions are under consideration.

Balance sheet and debt

As at 31 December 2021, the Company had cash of £12.5 million and a loan to
value ratio, net of cash, of approximately 32%. Following the disposal of
Nottingham, the net LTV has reduced to approximately 30%.

The Company has two loan facilities, a £129.6 million term loan with Canada
Life and a £52.5 million revolving credit facility ('RCF') with Royal Bank of
Scotland International. As at 31 December 2021, £45.7 million of the RCF was
drawn. Fully drawn, the facilities have an average duration of approximately
11 years and an average interest cost of 2.3%.

Sustainability

Three Green Stars awarded in annual GRESB survey

The Company retained its three star rating in the 2021 GRESB global
sustainability benchmark assessment for real estate assets. Participation in
the GRESB survey is part of the Company's broader ESG and positive impact
strategy which is fully integrated at all stages of our investment process.

Further information can be found within the Company's latest SREIT Annual
Sustainability Report (for year ended 31 March 2021) at:

https://www.schroders.com/en/sysglobalassets/investment-trusts/sereit/sreit_sustainability_report_march-2021.pdf
(https://www.schroders.com/en/sysglobalassets/investment-trusts/sereit/sreit_sustainability_report_march-2021.pdf)
.

Net Zero Carbon pathway

The Company, together with Schroder Real Estate as Investment Manager, is
focussed on delivering continued improvements in the sustainability
performance of the portfolio. In December 2020, Schroders issued its Net Zero
Carbon Pathway, a commitment made in September 2019 as part of the UK Better
Buildings Partnership Climate Commitment.

The Company will publish its own net zero carbon pathway in 2022 to align the
fund with Schroders' commitment and the Paris 1.5°C ambition.

Further information can be found within the Schroder Real Estate Pathway to
Net Carbon Zero document at:

 https://www.schroders.com/en/sysglobalassets/email/uk/realestate/2020/schroder-real-estate-net-zero-carbon-pathway-december-2020_1621372_v1.pdf
(https://www.schroders.com/en/sysglobalassets/email/uk/realestate/2020/schroder-real-estate-net-zero-carbon-pathway-december-2020_1621372_v1.pdf)
.

-ENDS-

 

For further information:

 

 Schroder Real Estate Investment Management Limited:  020 7658 6000

Nick Montgomery / Bradley Biggins / Matthew Riley
 FTI Consulting:                                      020 3727 1000

 Dido Laurimore / Richard Gotla / Ollie Parsons

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  STRBKFBQKBKBABB