REG - Schroder Euro Real - Half-year Report
26/06/2025 07:00
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RNS Number : 4600O Schroder Eur Real Est Inv Trust PLC 26 June 2025
26 June 2025
SCHRODER EUROPEAN REAL ESTATE INVESTMENT TRUST PLC
("SEREIT"/ the "Company" / "Group")
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2025
Positive NAV total return, robust balance sheet and fully covered dividend
Schroder European Real Estate Investment Trust plc, the company investing in
European growth cities and regions, announces its half year results for the
six months ended 31 March 2025.
Positive NAV total return; strategic disposals supporting robust balance sheet
· Underlying EPRA earnings of €3.9 million(1) is largely offset
by negative capital items (valuation and capital expenditure), resulting in a
marginal IFRS loss of €0.1 million
· Total dividends declared for the six months totalled 2.96 cps,
100% covered by EPRA earnings(1), offering an attractive dividend yield of
c7.3% based on the closing share price of 67.2 pps as at 20 June 2025
· Net Asset Value ("NAV") of €158.9 million, or 120.1 cps, (30
September 2024: €164.1 million or 122.7 cps), with a reduction in capital
values particularly for European offices
· Positive NAV total return of 0.3% driven by the commencement of a
share buyback programme, despite a marginal IFRS loss (31 March 2024: -1.3%
total return)
· Post period end, completed the strategic disposal of the
Frankfurt grocery asset for €11.8 million, in line with the 30 September
2024 valuation
· Net loan-to-value ("LTV") ratio reduces to c.18%(2), with an
available cash balance of approximately €25 million and no further debt
expiries until June 2026
· Tax disclosure update: As previously announced, the Group
received a notice of adjustment from the French Tax Authority amounting to c.
€14.4 million including interest and penalties. The Group remains in
correspondence with the French Tax Authority and is seeking a formal review of
the notice. Having taken professional advice, the Board remains of the opinion
that an outflow is not probable; consequently, no provision has been
recognised.
1 EPRA earnings were €3.9 million before exceptional items and €3.7
million after exceptional items for the six months to 31 March 2025
2 Net LTV on completion of the Frankfurt sale which occurred in April
2025
Asset management initiatives and exposure to winning sectors continue to
support earnings and valuation resilience
· Direct property portfolio independent valuation declined
marginally by 1.3% to €205.6 million (net of capex), with a 4% increase in
industrial portfolio valuations continuing to offset declines in other
sectors, primarily driven by shortening lease terms
· Concluded six new leases and re-gears generating €0.3 million
of annual contracted rent, at a weighted lease term of six years
· Post-period end, agreed a 12 year lease re-gear with DIY
specialist Hornbach in Berlin above ERV, representing the second largest
tenant in the Company's portfolio by income (11%)
· Portfolio benefits from a high occupancy level of 95%, with an
average portfolio lease term of c.4 years
· 100% of rent due collected
Sir Julian Berney Bt., Chairman, commented:
"Despite the Company's fundamentals being solid, supported by strong asset
management that has consistently enabled the provision of high stable income
for shareholders, the Company's shares are continuing to trade at a persistent
discount to NAV, as equity markets continue to disadvantage smaller listed
vehicles, regardless of management quality or the suitability of strategies.
We continue to review all potential options to address the discount and
maximise shareholder returns. Whilst considering the right strategy to
maximise value for shareholders, the Investment Manager will remain highly
focused on delivering a pipeline of ongoing asset management initiatives to
optimise occupancy, income, value and liquidity."
Jeff O'Dwyer, Fund Manager for Schroder Real Estate Investment Management
Limited, added:
"The focus over the past six months has been on implementing factors within
our control. This included asset management initiatives that significantly
enhanced the portfolio's income security, along with the completion of
strategic disposals that allowed the Company to further reduce gearing. In
addition, the proceeds have allowed for the commencement of a value accretive
share buyback programme. Our main priority remains progressing key tenant
discussions and we expect to make formal announcements regarding further
re-gearing initiatives in due course.
From a market perspective, we foresee positive developments for the European
commercial real estate sector as interest rates and inflation continue to
decline. While improvements may be gradual for the rest of 2025, we anticipate
that strengthening conditions will become more pronounced throughout 2026."
A presentation for analysts and investors will be held at 9.00am BST / 10.00am
SAST today, registration for which can be accessed via:
https://www.schroders.events/SEREHY25 (https://www.schroders.events/SEREHY25)
Enquiries:
Jeff O'Dwyer 020 7658 6000
Schroder Real Estate Investment Management Limited
Natalia de Sousa 020 7658 6000
Schroder Investment Management Limited
Richard Gotla/Dido Laurimore/Ollie Parsons 020 3727 1000
FTI Consulting Schroderrealestate@fticonsulting.com
(mailto:Schroderrealestate@fticonsulting.com)
HALF YEAR REPORT AND CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR
THE SIX MONTH PERIOD ENDED 31 MARCH 2025
Chairman's Statement
Overview
The period began with a sense of optimism as, underpinned by the outlook for
lower interest rates, sentiment improved. This translated into a more
optimistic outlook amongst occupiers and in the investment markets, following
a prolonged period of caution. Unfortunately, this momentum was short-lived,
impacted by a US trade stance that has impeded global growth and investment
confidence. The environment is being further challenged by recent
geo-political tensions.
Against this backdrop, and despite the ongoing support of shareholders, the
Board and Manager are acutely aware of the persistent discount (c.35%) to NAV
that the Company's shares are trading at. The equity markets continue to
disadvantage smaller listed vehicles, especially those with a market
capitalisation of below £150 million, regardless of management quality or the
suitability of strategies, with growing evidence that institutional investors
want exposure to larger vehicles that offer enhanced liquidity,
diversification and cost efficiencies.
The Board continues to believe in the fundamentals of the strategy which
offers shareholders unique access to Continental European commercial real
estate. However despite delivering strong underlying property performance
including over £70 million of dividend payments since IPO, as well as
maintaining a robust balance sheet, the Company's size and low levels of
liquidity have adversely affected the share price performance for a prolonged
period of time.
The Board has therefore been actively exploring and implementing various
strategies to address the above, including share buybacks and a transition
towards thematic or sector-specific investments. It is also aware of the
heightened corporate activity that has been seen in the wider REIT market in
recent months. The Board's priority in the coming months is therefore to
identify the strategy which best positions it to maximise value for
shareholders, and a further announcement will be made in due course.
In the meantime, our Investment Manager's proactive asset management approach,
delivered via local expertise and operational excellence, has delivered robust
results and ensured stable income returns for our stakeholders. The disposal
of Frankfurt and the more recent regear with Hornbach in Berlin are examples
of implementing factors within our control to improve Company performance.
Whilst considering the right strategy to maximise value for shareholders, the
Investment Manager will remain highly focused on delivering a pipeline of
ongoing asset management initiatives to optimise occupancy, income, value and
liquidity.
Results
We are pleased to announce our unaudited results for the half-year ended 31
March 2025.
Underlying EPRA Earnings: Underlying EPRA earnings were flat, at €3.9
million before exceptional items compared to the previous six months to Sept
2024 (six months to March 2024: €4.3 million), driven by high occupancy, a
diversified tenant base and high rent collection.
Collectively, these factors have helped mitigate the impact of rising interest
costs.
Fully Covered Dividends: The Board has maintained the quarterly dividend of
1.48 euro cents per share for the most recent quarter.
The total dividends declared for the current six months amounted to €3.9
million, equating to 2.96 euro cents per share, which offers an attractive
dividend yield of approximately 7.3% per annum based on the share price of
67.2 pence sterling as of 20 June 2025. This dividend is fully covered by EPRA
earnings before exceptional items.
The key binary risk to long-term dividends remains the lease with KPN in
Apeldoorn, expiring in December 2026. If KPN were to vacate, it is likely to
affect the Company's capacity to sustain its current dividend. However, the
manager is pursuing various initiatives to mitigate this impact, including
sourcing a replacement tenant and/or selling the asset to redeploy capital
elsewhere.
Robust Balance Sheet: Having successfully completed all near-term refinancings
on favourable terms, the Company is in a robust financial position. €25
million of available cash1, modest LTV of 18% net of cash, and no debt
maturities until June 2026, provides significant operational flexibility.
Portfolio Value: The underlying portfolio valuation decreased slightly by
€2.6 million (net of capex), or -1.3%, to €205.6 million, with a 4%
increase in the industrial portfolio, which witnessed a slight tightening of
yields, offset by declines in other sectors.
Emphasis on Asset Management: We executed several major asset management
initiatives during the period, including, post period end, a 12 year lease
re-gear with our second largest tenant Hornbach at our Berlin DIY asset, which
accounts for 11% of the portfolio income. In addition another six leases and
re-gears completed, generating €0.3 million in annual rent, with a weighted
lease term of six years.
Energy and Carbon: Completion of third-party sustainability and Net Zero
Carbon ('NZC') audits across 12 assets in the portfolio, further contributing
to our understanding of the quality of our portfolio and future potential
asset management initiatives. Additionally, the Manager has published a
mandatory product- level disclosure consistent with the Task Force on
Climate-Related Financial Disclosures ("TCFD")2 and maintained the Company's
4-star status in the 2024 Global Real Estate Sustainability Benchmark (GRESB).
Tax disclosure: The French tax authorities have issued a notice of adjustment
in respect of the tax years 2021 to 2023. Discussions with the tax authority
are ongoing. The range of potential outcomes indicates a possible outflow
(assuming equivalent adjustments are made in 2024 and 2025) of between €nil
and €14.4 million, including interest and penalties.
Based on professional advice, the Board has decided not to make a provision,
as they do not believe that an outflow is probable. The Group will continue
monitoring the situation and will provide further updates as necessary.
Outlook
The Company's fundamentals remain solid, supported by a strong balance sheet
and ongoing asset management activity focused on optimising occupancy, income,
and asset value.
From a market perspective, whilst global geopolitical risks persist, the
sector is structurally supported by low supply and falling interest rates.
Assuming these trends continue, they should foster greater confidence among
both consumers and investors, which should ultimately enhance the
attractiveness and liquidity of the real estate market into the next market
cycle.
Sir Julian Berney Bt.
Chairman
25 June 2025
1 Post sale of Frankfurt that occurred in April 2025
2 The relevant climate related financial disclosures are published at
TCFD Entity and Product Reports - Institutional Clients (schroders.com)
(https://www.schroders.com/en-gb/uk/institutional/funds-and-strategies/tcfd-entity-and-product-reports/)
.
(https://www.schroders.com/en-gb/uk/institutional/funds-and-strategies/tcfd-entity-and-product-reports/)
Strategic Report
Investment Manager's Report
Financial results
The net asset value ('NAV') as at 31 March 2025 stood at €158.9 million
(£133.0 million)(1), or 120.1 euro cents per share(2) (101.0 pence per
share), compared with €164.1 million, or 122.7 cps(2), as at 30 September
2024. During the period, dividends totalling €4.0 million were paid and
1,471,700 shares were bought back at costs of €1.2 million, which resulted
in a NAV total return of +0.3%.
The table below provides an analysis of the movement in NAV during the
reporting period as well as a corresponding reconciliation in the movement in
the NAV euro cents per share.
€m cps2
NAV as at 1 October 2024 164.1 122.7
Unrealised change in the valuations of the
real estate portfolio(3) (2.3) (1.7)
Capital expenditure(3) (0.3) (0.2)
Transaction costs(3) (0.2) (0.1)
EPRA earnings(4) 3.7 2.8
Non-cash/capital items (0.9) (0.7)
Share buyback (1.2) 0.3
Dividends paid(5) (4.0) (3.0)
NAV as at 31 March 2025 158.9 120.1
The direct portfolio, after accounting for capital expenditure, declined in
value by €2.6 million.
Accrued transaction costs for the sale of the Frankfurt asset (€0.2 million)
and other non-cash/capital items (€0.9 million) also contributed to the NAV
decline.
EPRA earnings of €3.7 million largely offset the impact from these capital
items and resulted in a very small overall IFRS loss of €0.1 million.
Including the impact of the share buyback, the NAV total return is positive at
+0.3% for the six months.
1 Exchange rate as at 31 March 2025 GBP:EUR 1.19.
2 133,734,686 shares in issue as at 1 October 2024, reducing to
132,262,986 shares in issue as at 31 March 2025 post the share buyback over
period.
3 The unrealised loss in the valuation of the real estate of the
portfolio (€2.6m), net of capital expenditure (€0.3m) and net of
transaction costs (€0.2m), reconciles to the 'net gain/(loss) from fair
value adjustment on investment property' of (€2.8m) on page 19 of the full
Half Year Report.
4 EPRA earnings as reconciled on page 34 of the full Half Year Report.
EPRA earnings were €3.9 million (2.9 cps) before exceptional items and
€3.7 million (2.7 cps) after exceptional items for the six months to 31
March 2025.
5 Dividends of 2.96cps were paid during the financial period.
Our strategy
Investment objective
Schroder European Real Estate Investment Trust plc (the 'Company'/'SEREIT')
aims to provide shareholders with a regular and attractive level of income
together with the potential for income and capital growth through investing in
commercial real estate in Continental Europe.
Investment strategy
Our focus remains on actively managing the portfolio to maximise income, value
and liquidity, leveraging the expertise of our local sector specialists. The
strategy to achieve this is outlined below.
1 2
Maximising shareholder value through active asset management Exposure to higher growth Winning Cities and Regions
3 4
Applying a research-led approach to determine attractive sectors and locations Managing the Company prudently and efficiently by controlling costs and
for commercial real estate allocations maintaining a strong balance sheet
5 6
Actively managing the Company and its assets, drawing on the expertise of our Managing assets as individual businesses, ensuring the services and contract
sector specialists to maximise shareholder returns and evolve the Company's terms meet changing tenant demands and that assets are operated efficiently to
asset management approach that is focused on operational excellence minimise the use of scarce resources
Transactions
Following the successful completion of various asset management initiatives in
the Frankfurt grocery asset, including securing longer-term leases with anchor
tenants Lidl and Fressnapf, a disposal of the asset was agreed, with the sale
concluding post period end (April 2025).
In addition, the Company completed the sale of its 50% stake in the Metromar
joint venture. The disposal price is in line with the Company's previous
recognition of its interest being nil value, with the outstanding debt
transferring to the purchaser.
Real estate portfolio
As at 31 March 2025, the investment portfolio comprised 14 institutional grade
properties valued at €194.0 million. In addition, the Company held for sale
in its books the Frankfurt grocery asset at a net value of €11.6 million.
The investment portfolio (excluding Frankfurt) generates rental income of
€16.3 million per annum, reflecting a net initial yield of 7.0%. The
independent valuers' portfolio estimated rental value ('ERV') is €15.6
million per annum.
At the period end, the investment portfolio void rate was 5%, calculated as a
percentage of estimated rental value. The weighted average lease length,
calculated to the earlier of lease expiry or break, is 3.0 years.
Key asset management highlights included:
- Concluded six new leases and re-gears generating €0.3 million of
annual contracted rent, at a weighted lease term of six years.
- In addition, successfully executed a new 12-year re-gear with Hornbach
post-period end. The new lease will increase the portfolio's average unexpired
lease term by over 1.3 years.
- Managing the remaining breaks and expiries with Hachette (March 2026
break, Nantes), Nestlé (April 2026 expiry, Rumilly), State of Baden
Württemberg (July 2026 expiry, Stuttgart) and KPN (Dec 2026 expiry,
Apeldoorn), remain a key priority. The initial discussions for the majority of
these are positive.
The de-risking of Apeldoorn in particular continues to be a focus. The
building is leased to the Dutch telecommunications company, KPN, generating
€3 million of rent p.a. with expiry in December 2026. The asset accounts for
6% of the portfolio's total value and 18% of rent. Independent valuers have
determined the market value based on the present value of the remaining income
and land value. Despite no formal notice to terminate the lease, we believe
KPN may vacate the premises at lease expiry. We are exploring options that
include reletting to a replacement tenant and/or obtaining planning approval
for alternative uses, however, should KPN vacate, and considering potential
implications of alternative options and broader portfolio activity, the
Company's ability to maintain its current dividend may be affected.
The diversified nature and strength of underlying tenants, and the assets
generally being leased off affordable and sustainable rents, is expected to
sustain relatively resilient portfolio income in a weaker economic climate.
Approximately 32% of the portfolio by value is offices, all of which are in
supply-constrained locations and leased off affordable rents. Our industrial
exposure of 32% is a mixture of distribution warehouses and light industrial
accommodation in growth cities within France and The Netherlands. Our retail
exposure of 16% comprises DIY (11%) and the Frankfurt grocery asset held for
sale (5%). Another 9% of the portfolio is allocated to the alternatives
sector, comprising a mixed-use data centre and a car showroom, with the
remaining 11% in cash.
1 Represents the annualised contracted rents as at 31 March
2025 of the direct portfolio.
At a glance
Portfolio Overview
The Company owns a diversified portfolio of commercial real estate in
Continental Europe with favourable property fundamentals. The Company has
targeted assets located in Winning Cities and Regions and in high-growth
sectors. Winning Cities and Regions are those that are expected to generate
higher and more sustainable levels of economic growth, underpinned by themes
such as urbanisation, demographics, technology and infrastructure
improvements.
The table below sets out the portfolio's top ten tenants by contracted rent,
representing a diverse range of industry segments and reflecting 70% of the
portfolio.
Top ten tenants
Contracted rent WAULT break WAULT expiry
Rank Tenant Industry Property €m % of total (yrs) (yrs)
1 KPN Telecom Apeldoorn 3.0 18% 1.8 1.8
2 Hornbach1 DIY Berlin 1.9 11% 0.8 0.8
3 C-log Logistics Rennes 1.3 8% 5.9 5.9
4 Outscale IT Paris 1.1 6% 4.2 7.2
5 DKL Logistics Venray 0.8 5% 3.5 3.5
6 Cereal Partners Consumer staples Rumilly 0.8 5% 1.1 1.1
7 LandBW Government Stuttgart 0.8 4% 1.3 1.3
8 Schuurman Beheer Manufacturing Alkmaar 0.8 4% 13.0 18.0
9 Inventum Manufacturing Houten 0.7 4% 4.8 4.8
10 Filassistance Insurance Paris 0.7 4% 2.8 7.8
Total top ten tenants 11.9 70% 3.3 4.1
Remaining tenants 5.2 30% 3.8 4.9
Total 17.1 100% 3.4 4.3
1 New 12-year lease agree with Hornbach.
The largest tenant is KPN, representing 18% of the portfolio's contracted
rent. KPN, a leading telecommunications and IT provider and market leader in
the Netherlands, occupies our mixed-use Apeldoorn asset (data centre and
office).
The second largest tenant is Hornbach, a leading German-based operator of
do-it-yourself ('DIY') stores and home centres, which accounts for 11% of the
portfolio rent and is the sole occupier of our Berlin DIY asset, comprising a
four- hectare site that has the potential to benefit from alternative uses.
The remaining larger tenants, spanning a diversified range of industries, each
account for between 4-8% of portfolio rents. They are C-log, Outscale, Cereal
Partners (Nestlé), DKL, Land Baden-Württemberg, Schuurman Beheer, Inventum
and Filassistance.
Portfolio performance
Valuation performance: Over the six-month period, the underlying portfolio
valuation decreased slightly by €2.6 million (net of capex), or -1.3%, to
€205.6 million.
The portfolio's industrial assets all saw their values increase. Rumilly,
Venray I & II, Alkmaar, Houten, Utrecht, Rennes and Rumilly values (net of
capex) increased 4% on average, driven by positive investment sentiment
translating into stronger investment volumes and yield compression.
In contrast, the office portfolio value (Paris, Hamburg, Stuttgart) declined
by 3%, owing to continued weak market sentiment. The Berlin DIY asset value
reduced 6% as valuers revised their cap rates owing to the short remaining
lease term (lease negotiations completed post period end) and the mixed-use
data centre in Apeldoorn value declined 8%, due to the decreasing remaining
lease term. With the post period end lease re-gear with Hornbach we would
expect a reversal of the Berlin valuation decline to occur in June 2025.
Total property returns: During the period, the property portfolio total
property return ('TPR') was 2.0%. With the portfolio benefitting from strong
occupancy and high rent collection, property income returns were strong at
+3.3% for the six months, thereby more than offsetting negative capital
returns of -1.4% which was primarily a result of shortening lease lengths.
Strong performance was seen in the industrial portfolio, with Venray
delivering a TPR of +14.1%, Rumilly +10.7%, Utrecht +9.9%, Houten +8.4%,
Nantes +9.1%, Venray II +9.0%, Rennes +3.3% and Alkmaar +3.0%.
Following the Frankfurt sale, the Berlin DIY store is now the sole retail
asset in the portfolio. Its value decreased as valuers revised their cap rates
owing to the short remaining lease term. Negotiations are in progress
regarding a potential lease extension. The asset returned -3.0% TPR over the
period.
The office portfolio performance was more muted, with Paris Saint-Cloud
delivering a TPR of 1.9%, Stuttgart -0.7% and Hamburg -6.1%.
The portfolio's mixed-use data centre in Apeldoorn delivered a total return of
+2.8%, with a high income return compensating for a capital value decline as a
result of outward yield movement. The Cannes car showroom remained unchanged,
with the asset delivering an income return of 4.0%.
Over the longer term, the real estate portfolio has delivered ungeared
property returns of 4.8% over one year, 1.7% over three years and 5.5% over
five years.
Berlin, Germany
ASSET MANAGEMENT
Asset overview
The asset is a freehold 16,800 sqm DIY retail scheme that includes a DIY unit,
garden centre and trade counter fully let to Hornbach. The property was
acquired in March 2016 for a purchase price of €24.3 million, with the
latest valuation at €26.0 million as of 31 March 2025.
Located in Mariendorf, approximately 10 km south of Berlin City Centre, the
site spans four hectares in a supply-constrained location surrounded by
medium- density residential.
Asset strategy
The strategy over the period has centred on negotiating a re-gear of the lease
with the tenant in order to enhance asset liquidity and value. This was
successfully concluded in May 2025, post period end.
Rationale
- Post-period end successfully executed a 12-year re-gear with Hornbach,
the second largest tenant in the Company's portfolio (11% of income) with a
market cap of c.€1.7 billion
- The triple net lease is subject to indexation and has been agreed
ahead of the 31 December 2024 estimated rental value (ERV)
- Improved the portfolio's income security and WAULT by 1.3 years, from
3.0 years to 4.3 years until the earlier of break and expiry
- Secured an improved BREEAM in Use certification of 'Very Good'
(previously 'Good') upon renewal by collaborating with the tenant and
implementing light quality and flood risk assessments
Frankfurt, Germany
ASSET MANAGEMENT & SALE
Asset overview
Acquired in May 2016 for its strong income characteristics, the asset
comprises a multi-let convenience retail centre spanning 4,525 sqm.
Situated in Rödelheim, a well-connected urban location 5 km north-west of
Frankfurt city centre, the submarket benefits from a population density of
3,760 residents per sq km, significantly higher than the city's average of
3,100. The nearest metro station is just a five-minute walk away, providing
direct access to the city centre.
Asset strategy
Building on the successful long-term lease re-gears achieved in the prior
period, the emphasis over the past six months has been on completing the sale
of the asset to realise value.
Rationale
- Strategic disposal following the successful completion of the business
plan and an opportunity to use proceeds to further enhance shareholder value
- Sale price was consistent with the 30 September 2024 valuation and
c.7% higher than the purchase price
- Disposal enabled the Company to significantly reduce gearing and to
use elevated cash reserves to advance a value accretive share buyback
programme
Balance sheet
The Company's third-party debt totals €70.9 million across five loan
facilities as at 31 March 2025. The current blended all-in interest rate is
3.7% and the average remaining loan term is 2.7 years. The loan to value
('LTV') net of cash is 21% against the Company's gross asset value (gross of
cash LTV is 30%).
Post period end in April 2025, the Company used the Frankfurt disposal
proceeds to repay €6.6 million of the portfolio loan facility with Deutsche
Pfandbriefbank. As a result, total debt reduced to €64.3 million, reflecting
an expected LTV of 18% net of cash. Post the Frankfurt sale and debt
repayment, average debt interest costs will increase to c.3.9% on average with
a loan maturity of 2.8 years.
There is a net of cash LTV cap of 35% that restricts concluding new external
loans if the Company's net LTV is above 35%. An increase in leverage above 35%
as a result of valuation decline is excluded from this cap.
The individual loans are detailed in the table below. Each loan is held at the
property-owning level instead of the Group level and is secured by the
individual properties noted in the table. There is no cross- collateralisation
between loans. Each loan has specific LTV and income default covenants. We
detail the headroom against those covenants in the latter two columns of the
table below.
Headroom LTV default covenant Headroom net income default covenant
(% decline) (% decline)
Lender Property Maturity date Outstanding principal Interest rate
VR Bank Westerwald Stuttgart / Hamburg 31/12/2027 €18.00m 3.80% No No covenant
covenant
Deutsche Pfandbriefbank Berlin / Frankfurt 30/06/2026 €16.50m 1.31% n.a. >50%
BRED Banque Populaire Paris (Saint-Cloud)(1) 15/12/2027 €14.00m 3M Eur+1.9% 17% >50%
ABN Amro The Netherlands industrials(2) 27/09/2028 €13.76m 5.30% 39% 25%
Landesbank SAAR Rennes 26/03/2029 €8.60m 4.3% 16% 41%
Total €70.86m
1 The Frankfurt/Berlin debt balance will reduce to €9.9m in the
second quarter of 2025 as a result of the Frankfurt grocery sale. Additional
monies were put on security deposit to meet bank covenants post sale.
2 The ABN Amro loan is secured against five of the Netherlands
industrial assets: Alkmaar, Houten, Utrecht, Venray and Venray II.
The German and Dutch loans are fixed rate for the duration of the loan term.
The Paris loan is based on a margin above three-month Euribor. The Company
benefits from an interest rate hedge, capped at 3.25%, which is covering the
remaining loan period to 15 December 2027. The fair value of the derivative
contract is c.€24,000 as at 31 March 2025.
Outlook
Investment sentiment and liquidity in the European commercial real estate
markets have seen a degree of improvement in recent quarters, although
concerns regarding economic conditions and political risks continue to be
significant. Following a decline in bond yields, real estate is becoming a
more appealing option in the context of modest economic growth, gradual
interest rate reductions, and easing inflation.
Occupational markets in key cities have shown notable resilience, particularly
in certain sub-markets relevant to our business. Our strategy centres on
targeting growing cities and locations benefiting from infrastructure
advancements, supply constraints, competing demand for uses and investments
leased off affordable rents. These factors are expected to help sustain
liquidity and enhance the value of the majority of our portfolio. We have made
strides in reinforcing the portfolio's income security through lease re-gears,
such as a new 12-year term with Hornbach for our DIY asset in Berlin (post
period end), and a 15-year extension with Lidl in Frankfurt ahead of its sale.
As we look ahead, our efforts will remain centred on negotiations with KPN,
Nestlé, Hachette, and the State of Baden-Württemberg. Successfully
finalising these discussions will have a positive impact on our income, value,
and liquidity, thereby enhancing shareholder value.
Jeff O'Dwyer
Fund Manager
25 June 2025
Strategic Report
Responsibility Statement of the Directors in respect of the Interim Report
Principal risks and uncertainties
The principal risks and uncertainties with the Company's business relate to
the following risk categories: investment and strategy; economic and property
market; valuation; gearing and leverage; and regulatory and tax compliance. A
detailed explanation of the risks and uncertainties in each of these
categories can be found on pages 31 to 33 of the Company's published Annual
Report and Consolidated Financial Statements for the year ended 30 September
2024.
The Company's portfolio remains resilient, as evidenced by rent collection
levels over the half year. Covenant, interest rates, cost of debt and expiry
profiles continue to be actively managed as part of cash flow forecasting and
liquidity management. The Company has substantial cash available providing a
robust position to manage the Company through current headwinds facing
European economies.
The Apeldoorn investment is fully leased to the Dutch telecommunications
company KPN. The current lease is set to expire on 31 December 2026, with the
possibility of a five-year tenant extension. From a valuation standpoint, this
asset accounts for approximately 6% of the portfolio's total value.
Independent valuers have determined the market value based on the present
value of the remaining income and the land value. In terms of income, KPN pays
an annual rent of around €3 million, which constitutes about 18% of the
portfolio income. We are actively communicating with the tenant; however,
although there has been no formal notice to terminate the lease, since year
end it appears increasingly likely that KPN will vacate the premises.
Consequently, we are exploring options that include locating a replacement
tenant or obtaining planning approval for alternative uses. If KPN were to
vacate, it is likely to affect the Company's capacity to sustain its current
dividend. However, the manager is pursuing various initiatives to mitigate
this impact. The other principal risks and uncertainties have not materially
changed during the six months ended 31 March 2025.
Going concern
The Board believes it is appropriate to adopt the going concern basis in
preparing the financial statements. A comprehensive going concern statement
setting out the reasons the Board considers this to be the case is set out in
note 1 on pages 23 to 24 of the full Half Year Report.
Related party transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 31 March 2025. Related party transactions are disclosed in
note 13 of the Condensed Consolidated Interim Financial Statements.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
- The Half Year Report and Condensed Consolidated Interim Financial
Statements have been prepared in accordance with the UK adopted International
Accounting Standard IAS 34 Interim Financial Reporting; and
- The Interim Management Report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules.
Sir Julian Berney Bt.
Chairman
25 June 2025
Independent Review Report to Schroder European Real Estate Investment Trust
plc
Conclusion
We have been engaged by Schroder European Real Estate Investment Trust plc
(the "Company") and its subsidiaries (together the "Group") to review the Half
Year Report and Condensed Consolidated Interim Financial Statements for the
six months ended 31 March 2025 ('Interim financial statements') which
comprises the Condensed Consolidated Interim Statement of Comprehensive
Income, Condensed Consolidated Interim Statement of Financial Position,
Condensed Consolidated Interim Statement of Changes in Equity, Condensed
Consolidated Interim Statement of Cash Flows, and the related Notes to the
Financial Statements 1 - 16. We have read the other information contained in
the Half Year Report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the Interim
financial statements in the Half Year Report.
Based on our review, nothing has come to our attention that causes us to
believe that the Interim financial statements for the six months ended 31
March 2025 are not prepared, in all material respects, in accordance with
UK-adopted International Accounting Standard 34 and the Disclosure Guidance
and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the Interim financial statements included in this Half
Year Report have been prepared in accordance with UK-adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the Half Year Report and Interim
financial statements in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
In preparing the Half Year Report and Interim financial statements, the
directors are responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the Half Year Report and Interim financial statements, we are
responsible for expressing to the Company a conclusion on the Interim
financial statements in the Half Year Report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
25 June 2025
Condensed Consolidated Interim Statement
of Comprehensive Income
For the period ended 31 March 2025
Notes Six months to 31 March 2025 Six months to 31 March 2024 Year to 30 September
€000 €000 2024
(unaudited) (unaudited) €000
(audited)
Rental and service charge income 2 10,263 10,295 20,647
Property operating expenses (3,430) (2,767) (5,602)
Net rental and related income 6,833 7,528 15,045
Net loss from fair value adjustment on investment 3 (2,806) (6,617) (7,740)
property
Development revenue 4 9 519 1,500
Development expense 4 (9) (519) (695)
Realised gain/(loss) on foreign exchange 15 (2) 4
Net change in fair value of financial instruments at fair value through profit 9 (211) (388) (494)
or loss
Expenses
Investment management fee 13 (913) (972) (1,899)
Valuers' and other professional fees (443) (285) (719)
Administrator's and accounting fees (231) (328) (586)
Auditors' remuneration (169) (173) (347)
Directors' fees 13 (117) (120) (239)
Other expenses (385) (104) (540)
Total expenses (2,258) (1,982) (4,330)
Operating profit 1,573 (1,461) 3,290
Finance income 266 290 654
Finance costs (1,295) (1,271) (2,596)
Net finance costs (1,029) (981) (1,942)
Share of loss of joint venture 5,6 - - -
Gain/(Loss) before taxation 544 (2,442) 1,348
Taxation 7 (670) 259 (773)
(Loss)/Gain for the period/year (126) (2,183) 575
Other comprehensive (expense)/income:
Other comprehensive (expense)/income items that may be
reclassified to profit or loss - - -
Total other comprehensive (expense)/income - - -
Total comprehensive (expense)/income for the (126) (2,183) 575
period/year
Basic and diluted (loss)/earnings per share attributable to owners of the
parent
8 (0.1)c (1.6)c 0.4c
All items in the above statement are derived from continuing operations. The
accompanying notes 1 to 16 form an integral part of the condensed consolidated
interim financial statements.
Condensed Consolidated Interim Statement
of Financial Position
As at 31 March 2025
Notes Six months to 31 March 2025 Six months to 31 March 2024 Year to 30 September
€000 €000 2024
(unaudited) (unaudited) €000
(audited)
Assets
Non-current assets
Investment property 3 192,574 207,066 206,522
Investment in joint venture 6 - - -
Non-current assets 192,574 207,066 206,522
Current assets
Trade and other receivables 8,988 9,307 10,026
Interest rate derivative contracts 9 24 342 236
Cash and cash equivalents 26,881 28,103 27,362
Current assets 35,893 37,752 37,624
Investment propoerty held for sale 3 11,600 - -
Total assets 240,067 244,818 244,146
Equity
Share capital 10 17,966 17,966 17,966
Share premium 10 43,005 43,005 43,005
Treasury share reserve 10 (1,158) - -
Retained earnings 99,041 104,327 103,126
Total equity 158,854 165,298 164,097
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 9 70,528 70,409 70,471
Deferred tax liability 7 4,179 3,724 4,163
Non-current liabilities 74,707 74,133 74,634
Current liabilities
Trade and other payables 6,363 5,387 4,955
Current tax liabilities 7 143 - 460
Current liabilities 6,506 5,387 5,415
Total liabilities 81,213 79,520 80,049
Total equity and liabilities 11 240,067 244,818 244,146
Net asset value per ordinary share 120.1 123.6 122.7
Condensed Consolidated Interim Statement
of Changes in Equity
For the period ended 31 March 2025
Share Share Treasury Retained Other Total
capital premium share reserve earnings 1 reserves1 equity
Notes €000 €000 €000 €000 €000 €000
Balance as at 1 October 2024 17,966 43,005 - 103,126 - 164,097
Share buyback 11 - - (1,158) - - (1,158)
Loss for the period - - - (126) - (126)
Dividends paid 12 - - - (3,959) - (3,959)
Balance as at 31 March 2025 (unaudited)
17,966 43,005 (1,158) 99,041 - 158,854
Share Share Treasury Retained Other Total
capital premium share reserve earnings 1 reserves1 equity
Notes €000 €000 €000 €000 €000 €000
Balance as at 1 October 2023 17,966 43,005 - (6,142) 116,610 171,439
Transfers - - - 116,610 (116,610) -
Profit for the year - - - 575 - 575
Dividends paid 12 - - - (7,917) - (7,917)
Balance as at 30 September 2024 (audited)
17,966 43,005 - 103,126 - 164,097
Share Share Treasury Retained Other Total
capital premium share reserve earnings 1 reserves1 equity
Notes €000 €000 €000 €000 €000 €000
Balance as at 1 October 2023 17,966 43,005 - (6,142) 116,610 171,439
Transfers - - - 116,610 (116,610) -
Profit for the period - - - (2,183) - (2,183)
Dividends paid 12 - - - (3,958) - (3.958)
Balance as at 31 March 2024 (unaudited)
17,966 43,005 - 104,327 - 165,298
1 These reserves form the distributable reserves of the Company and include
a historic share premium reduction and may be used to fund distribution of
profits to investors via dividend payments.
The accompanying notes 1 to 16 form an integral part of the condensed
consolidated interim financial statements.
Condensed Consolidated Interim Statement
of Cash Flows
For the period ended 31 March 2025
Notes Six months to 31 March 2025 Six months to 31 March 2024 Year to 30 September
€000 €000 2024
(unaudited) (unaudited) €000
(audited)
Operating activities
Profit/(loss) before tax for the period/year 544 (2,442) 1,348
Adjustments for:
Net loss from fair value adjustment on investment property 3 2,806 6,617 7,740
Share of loss of joint venture 6 - - -
Realised foreign exchange (gain)/loss (15) 2 (4)
Finance income (266) (290) (654)
Finance costs 1,295 1,271 2,596
Net change in fair value of financial instruments at fair value
through profit or loss 9 211 388 494
Operating cash generated before changes in working capital 4,575 5,546 11,520
Decrease/(increase) in trade and other receivables 779 (84) (627)
Increase/(decrease) in trade and other payables 375 313 (167)
Cash generated from operations 5,729 5,775 10,726
Finance costs paid (1,384) (964) (2,145)
Finance income received 266 290 654
Tax paid 7 (971) (1,580) (1,345)
Net cash generated from operating activities 3,640 3,521 7,890
Investing activities
Payments received in advance on sale of investment property 1,180 - -
Additions to investment property 3 (199) (524) (1,682)
Net cash generated from/(used in) investing activities 981 (524) (1,682)
Financing activities
Repayment of loan facilities - (3,000) (3,000)
Interest rate derivative contracts purchased - (57) (56)
Refinancing costs paid - (322) (322)
Share buyback (1,158) - -
Dividends paid 12 (3,959) (3,958) (7,917)
Net cash (used in)/provided by financing activities (5,117) (7,337) (11,295)
Net decrease in cash and cash equivalents for the period/ year
(496) (4,340) (5,087)
Opening cash and cash equivalents 27,362 32,445 32,445
Effects of exchange rate change on cash 15 (2) 4
Closing cash and cash equivalents 26,881 28,103 27,362
The accompanying notes 1 to 16 form an integral part of the condensed
consolidated interim financial statements.
Notes to the Financial Statements
1 Significant accounting policies
The Company is a closed-ended investment company incorporated in England and
Wales. The condensed consolidated interim financial statements of the Company
for the period ended 31 March 2025 comprise those of the Company and its
subsidiaries (together referred to as the 'Group'). The shares of the Company
are listed on the London Stock Exchange (Primary listing) and the Johannesburg
Stock Exchange (Secondary listing). The registered office of the Company is 1
London Wall Place, London, EC2Y 5AU.
These condensed consolidated interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 30 September 2024 were approved by
the Board of Directors on 5 December 2024 and were delivered to the Registrar
of Companies. The report of the auditors on those accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
These condensed consolidated interim financial statements have been reviewed
and not audited.
Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. They do not
include all of the information required for the full annual financial
statements and should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 30 September 2024. The
condensed consolidated interim financial statements have been prepared on the
basis of the accounting policies set out in the Group's consolidated financial
statements for the year ended 30 September 2024. The consolidated financial
statements for the year ended 30 September 2024 have been prepared with
UK-adopted International Accounting Standards in accordance with the Companies
Act 2006. The Group's annual financial statements refer to new Standards and
Interpretations, none of which had a material impact on the financial
statements.
Basis of preparation
The condensed consolidated interim financial statements are presented in euros
rounded to the nearest thousand. They are prepared on a going concern basis,
applying the historical cost convention, except for the measurement of
investment property and derivative financial instruments that have been
measured at fair value. The accounting policies have been consistently applied
to the results, assets, liabilities and cash flow of the entities included in
the condensed consolidated interim financial statements and are consistent
with those of the year-end financial report.
Going concern
The Board and the Investment Manager exercise judgement in assessing whether
it is appropriate to adopt the going concern basis in preparing the condensed
consolidated interim financial statements. In making that determination for
this set of financial statements, the Directors have examined significant
areas of possible financial risk including: cash held and the liquidity of the
Group's assets; forward-looking compliance with third-party debt covenants, in
particular the loan to value ('LTV') covenant and interest cover ratios; the
likelihood of any payment of contingent tax liabilities; potential falls in
property valuations; the non-collection of rent and service charges; and the
existing, and future, anticipated cash requirements of the Group.
Furthermore, ongoing geopolitical developments, and macroeconomic variables
such as projected interest rates and inflation, have also been considered
regarding the Group's property investments in France, Germany and the
Netherlands.
Cash flow forecasts, based on deemed plausible downside scenarios, have led
the Board to conclude that the Group will have sufficient cash reserves to
continue in operation for twelve months from the date of the signing of the
condensed consolidated interim financial statements.
Given the Board's priority in the coming months to identify the strategy which
best positions it to maximise value for shareholders, in making its judgement
regarding the going concern assumption, particular consideration has been
given to the breadth of strategic options available for the future, which are
under balanced consideration and at an early stage of discussion.
Following thorough evaluation, the Directors have not identified any material
uncertainties that would cast significant doubt on the Group's ability to
continue as a going concern for at least 12 months from the date of approval
of the condensed consolidated interim financial statements.
Use of estimates and judgements
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies
and the reported amounts of assets and liabilities, income and expenses. The
use of estimates and judgements is consistent with the Group's consolidated
financial statements for the year ended 30 September 2024. These estimates and
associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making judgements about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and
in any future periods affected.
The most significant estimates made in preparing these financial statements
relate to the carrying value of investment properties, as disclosed in note 3
which are stated at fair value. The fair value of investment property is
inherently subjective because the valuer makes assumptions which may not prove
to be accurate. The Group uses an external professional valuer to determine
the relevant amounts.
The following are key areas of judgement:
- Accounting for development revenue and variable consideration regarding
Paris, BB: When estimating an appropriate level of development revenue to be
recognised in the reporting period, the Group considered the contractual
penalties of not meeting certain criteria within the agreement; the total
development costs incurred; the stage of completion of the refurbishment; the
milestones achieved and still to be achieved; the timing and likelihood of
further future billed and unbilled cash receipts from the purchaser and
therefore the appropriate recognition in the balance sheet; and the overall
general development risk to form a considered judgement of revenue to be
appropriately recognised in the financial statements. Further details of the
estimated variable consideration are disclosed in note 4.
- Tax provisioning and disclosure: Management uses external tax advisers
to monitor changes in tax laws in countries where the Group has operations.
New tax laws that have been substantively enacted are recognised in the
Group's financial statements. Where changes to tax laws give rise to a
contingent liability, the Group discloses these appropriately within the notes
to the financial statements (further details are disclosed in note 7).
- IFRS 9 expected credit losses: All receivables and joint venture loans
are considered to be such financial assets and must therefore be assessed for
an impairment using the forward-looking expected credit loss model. Where any
impairment is required to be made, appropriate recognition is required in the
consolidated statement of comprehensive income, together with appropriate
disclosure and sensitivity analysis in the notes to the financial statements
(further details are disclosed in note 6).
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being property investment, and in one geographical area,
Continental Europe. The chief operating decision-maker is considered to be the
Board of Directors who are provided with consolidated IFRS information on a
quarterly basis.
Financial risk factors
The main risks arising from the Group's financial instruments and investment
properties are: market price risk, currency risk, credit risk, liquidity risk
and interest rate risk. The Board regularly reviews and agrees policies for
managing each of these risks.
Credit risk
Cash balances are maintained with major international financial institutions
with strong credit ratings and the creditworthiness of the Group's tenants is
monitored on an ongoing basis.
Market risk
The market values for properties are generally affected by overall conditions
in local economies, such as changes in gross domestic product, employment
trends, inflation and changes in interest rates. The Directors monitor the
market value of investment properties by having independent valuations carried
out quarterly by a firm of independent chartered surveyors. The sensitivity of
the market value of the investment properties to changes in the equivalent
yield is also disclosed in note 3 of the financial statements.
In April 2025, the United States of America (USA) initiated sweeping tariff
arrangements against their global trading partners. This has heightened
macroeconomic uncertainty, with potential for escalating trade policy
responses from USA trade counterpart countries, and significant impact to
global trade. As at the date of approval of the financial statements, the
Company is closely monitoring these changes in global trade policy, however,
the Group's primary exposure to the European commercial property sector means
it is anticipated to have low impact to key fundamentals and valuations. The
group also does not have direct exposure to other global conflicts but
continues to monitor the situation closely.
The Group's rental collection has continued to remain very robust with a
c.100% rent collection in the period.
Environmental, Social and Governance factors
The Group has incorporated Environmental, Social and Governance ('ESG')
objectives into its core investment strategy and at every stage of the
investment process. The Group continues to monitor individual assets and their
conformity with sustainability requirements at every stage. The Group
continues to review potential initiatives where sustainability credentials can
be enhanced, ratings improved, value can be created and the liquidity of
investments be improved.
2 Rental and service charge income
Six months Six months Year to
to 31 to 31 30 September
March 2025 March 2024 2024
€000 €000 €000
(unaudited) (unaudited) (audited)
Rental income 8,196 8,236 16,385
Service charge income 2,067 2,059 4,262
Total 10,263 10,295 20,647
3 Investment property
Freehold
€000
Fair value at 30 September 2023 (audited) 213,098
Acquisitions and acquisition costs -
Additions 1,164
Net valuation gain on investment property (7,740)
Fair value as at 30 September 2024 (audited) 206,522
Additions 199
Reclassification to held for sale (11,342)
Net valuation loss on investment property (2,806)
Fair value as at 31 March 2025 (unaudited) 192,574
Freehold
€000
Fair value as at 30 September 2023 (audited) 213,098
Acquisitions and acquisition costs -
Additions 585
Net valuation loss on investment property (6,617)
Fair value as at 31 March 2024 (unaudited) 207,066
The investment property in Frankfurt has been transferred to investment
properties held for sale and is held within current assets at the expected
sales price of €11,800,000 less expected costs to sell of €200,000. The
sale completed on 30 April 2025 for the agreed sale price of €11,800,000.
The fair value of investment properties, as determined by the valuer, totals
€194,000,000 (excluding the Frankfurt property which is held for sale) (30
September 2024: €208,050,000) with the valuation amount relating to a 100%
ownership share for all the assets in the portfolio.
The fair value of investment properties per the condensed consolidated interim
financial statements of €192,574,000 includes a tenant incentive adjustment
of €1,426,000 (30 September 2024: €1,528,000).
The fair value of investment property has been determined by Knight Frank LLP,
a firm of independent chartered surveyors, who are registered independent
appraisers. The valuations have been undertaken in accordance with the current
edition of the RICS Valuation - Global Standards, which incorporate the
International Valuation Standards. References to the 'Red Book' refer to
either or both of these documents, as applicable.
The properties have been valued on the basis of 'fair value' in accordance
with the RICS Valuation - Professional Standards VPS4 (1.5) Fair Value and
VPGA1 Valuations for inclusion in financial statements which adopt the
definition of fair value used by the International Accounting Standards Board.
The valuation has been undertaken using appropriate valuation methodology and
the valuer's professional judgement. The valuer's opinion of fair value was
primarily derived using recent comparable market transactions on arm's length
terms, where available, and appropriate valuation techniques (the 'Investment
Method').
The properties have been valued individually and not as part of a portfolio.
All investment properties are categorised as Level 3 fair values as they use
significant unobservable inputs. There have not been any transfers between
levels during the period. Investment properties have been classed according to
their real estate sector. Information on these significant unobservable inputs
per class of investment property are disclosed below.
Quantitative information about fair value measurement using unobservable
inputs (Level 3) as at 31 March 2025 (unaudited)
Industrial Retail (including retail warehouse) Office Total
Fair value (€000) 80,800 26,000 87,200 194,000
Area ('000 sqm) 95.030 16.800 54.580 166.410
Net passing rent € Range 34.43-122.48 114.75 122.29-164.39 34.43-164.39
per sqm per annum Weighted average(1) 65.15 114.75 143.62 124.28
Gross ERV € Range 45.00-115.36 96.75 79.93-233.70 45.00-233.70
per sqm per annum
Weighted average(1) 65.73 96.75 186.74 107.07
Net initial yield(2) Range 5.28-9.55 6.66 4.64-21.60 4.64-21.60
Weighted average(1) 6.43 6.66 7.53 6.95
Equivalent yield Range 5.50-6.90 5.60 4.50-15.82 4.50-15.82
Weighted average(1) 6.06 5.60 7.82 6.79
Notes:
1 Weighted by market value.
2 Yields based on rents receivable after deduction of head rents and
non-recoverables.
Quantitative information about fair value measurement using unobservable
inputs (Level 3) as at 30 September 2024 (audited)
Industrial Retail (including retail warehouse) Office Total
Fair value (€000) 77,950 39,500 90,600 208,050
Area ('000 sqm) 95.030 21.326 54.580 170.936
Net passing rent € per sqm per annum Range 33.23-118.05 56.85-108.12 120.65-163.59 33.23-163.59
Weighted average(1) 64.98 92.80 138.14 102.12
Gross ERV € per sqm per annum Range 44.00-115.36 101.58-163.33 79.93-233.70 44.00-233.70
Weighted average(1) 64.78 120.03 185.21 127.71
Net initial yield(2) Range 5.43-9.61 1.99-5.94 4.39-19.94 1.99-19.94
Weighted average(1) 6.62 6.15 7.02 6.44
Equivalent yield Range 5.50-6.98 5.13-5.55 4.20-14.89 4.20-14.89
Weighted average(1) 6.17 5.42 7.59 6.65
Notes:
1 Weighted by market value.
2 Yields based on rents receivable after deduction of head rents and
non-recoverables.
Sensitivity of measurement to variations in the significant unobservable
inputs
Given fair value measurement is an inherent judgement due to unobservable
inputs, management have reviewed the ranges used in assessing the impact of
changes in unobservable inputs on the fair value of the Group's property
portfolio. We consider +/-10% for ERV, and +/-50bps for NIY to capture the
uncertainty in these key valuation assumptions. The results of this analysis
are detailed in the sensitivity table below.
The significant unobservable inputs used in the fair value measurement
(categorised within Level 3 of the fair value hierarchy of the Group's
property portfolio), together with the impact of significant movements in
these inputs on the fair value measurement, are shown below:
Unobservable input Impact on fair value measurement of significant increase in input Impact on fair value measurement of significant decrease in input
Passing rent Increase Decrease
Gross ERV Increase Decrease
Net initial yield Decrease Increase
Equivalent yield Decrease Increase
There are interrelationships between the yields and rental values as they are
partially determined by market rate conditions.
The sensitivity of the valuation to changes in the most significant inputs per
class of investment property is shown below:
Estimated movement in fair value of investment properties at 31 March 2025 Industrial Retail Office Total
(unaudited) €000 €000 €000 €000
Increase in ERV by 10% 6,000 2,500 7,200 15,700
Decrease in ERV by 10% (6,000) (2,500) (7,200) (15,700)
Increase in net initial yield by 0.5% (6,700) (2,200) (6,800) (15,700)
Decrease in net initial yield by 0.5% 7,900 2,600 8,100 18,600
Estimated movement in fair value of investment properties at 30 September 2024 Industrial Retail Office Total
(audited) €000 €000 €000 €000
Increase in ERV by 10% 1,500 3,350 6,350 11,200
Decrease in ERV by 10% (1,500) (3,350) (6,300) (11,150)
Increase in net initial yield by 0.5% (2,300) (3,400) (6,750) (12,450)
Decrease in net initial yield by 0.5% 2,600 4,150 8,200 14,950
4 Recognition of development revenue and profit
During the year ended 30 September 2021, the Group disposed of its office
asset in Boulogne-Billancourt, Paris. This involved an initial transfer of the
legal title to a purchaser on 16 December 2020 for €69.8m, followed by a
development phase for which the Fund was able to receive a further €30.4m.
The total cash proceeds to be received across the sale and development thereby
totalled €100.2m.
As at 31 March 2025 a cash sum of €98.9m (30 September 2024: €98.1m) had
been received by the Fund from the purchaser. Of the remaining €1.3m, no
further sums have been invoiced to the purchaser as at 31 March 2025.
Furthermore, during the interim period a sum of €nil (30 September 2024:
€0.7m) was invested by the Fund as development expenditure, and as at the
interim period end a final €0.1m (30 September 2024: €0.1m) of development
expenditure remains to be invested.
When forming a judgement as to an appropriate level of development revenue to
be recognised in the reporting period, the Group primarily considered the
total development costs incurred; the stage of completion of the
refurbishment; the milestones achieved and still to be achieved; the timing of
future cash receipts from the purchaser; the overall general development risk;
and the commercial discussions ongoing with the buyer.
5 Provision of internal loan made to Seville joint venture
The Seville entity, which owned a shopping centre in Seville, was sold for
€1 on 30 January 2025. The Group previously owned 50% of the Metromar entity
and had advanced €10.0 million as a loan and was owed interest of €2.5
million (30 September 2024: €2.4 million); (31 March 2024: €1.7 million).
The loan carried a fixed interest rate of 4.37% per annum payable quarterly.
The loan had previously been fully impaired and was written off on the sale of
the Seville entity.
6 Investment in joint ventures
As at 31 March 2025, the Group owned 50% of the Seville joint venture entity
Urban SEREIT Holding. On 30 January 2025 Urban SEREIT Holding sold its
interest in the underlying Seville entity, Metromar Retail, which owned a
shopping centre in Seville, for €1. The principal place of business of the
joint venture is Calle Velázquez 3, 4th Madrid 28001 Spain.
Balance as at 1 October 2024 -
Share of loss for the period -
Balance as at 31 March 2025 (unaudited) -
31 March 2024
€000
Balance as at 1 October 2023 -
Share of loss for the period -
Balance as at 31 March 2024 (unaudited) -
31 Sept 2024
€000
Balance as at 1 October 2023 -
Investment in joint venture -
Share of loss for the year -
Balance as at 30 September 2024 (audited) -
31 March 2025 31 March 2024 (unaudited) 30 September
(unaudited) €000 2024
Summarised joint venture financial information: €000 (audited) €000
Total assets 65 27,542 26,548
Total liabilities (411) (51,606) (51,259)
Net liabilities (346) (24,064) (24,711)
Net asset value attributable to the Group - - -
Six months to Six months to Year to 30 September
31 March 2025 31 March 2024 2024
€000 €000 €000
(unaudited) (unaudited) (audited)
Revenues 937 1,395 2,756
Total comprehensive profit/(loss) 121 (2,087) (2,734)
Total comprehensive loss attributable to the Group - - -
7 Taxation
Six months to Six months to Year to 30 September
31 March 2025 31 March 2024 2024
€000 €000 €000
(unaudited) (unaudited) (audited)
Current tax charge 480 242 1,017
Current tax adjustment in respect of prior periods 174 - (182)
Deferred tax charge/(credit) 16 (501) (62)
Tax charge/(credit) in period/year 670 (259) 773
Current tax liability/ Deferred tax liability
(asset)
€000 €000
As at 1 October 2024 460 4,163
Tax charge for the period 654 16
Tax paid during the period (971) -
Balance as at 31 March 2025 (unaudited) 143 4,179
Current tax liability Deferred tax liability
€000 €000
As at 1 October 2023 971 4,225
Tax charge/(credit) for the period 242 (501)
Tax paid during the period (1,580) -
Balance as at 31 March 2024 (unaudited) (367) 3,724
Current tax liability Deferred tax
€000 liability
€000
As at 1 October 2023 971 4,225
Tax charge/(credit) for the period 834 (62)
Tax paid during the period (1,345) -
Balance as at 30 September 2024 (audited) 460 4,163
The Company has been approved by HM Revenue and Customs as an investment trust
in accordance with section 1158 of the Corporation Tax Act 2010, by way of a
one-off application, and it is intended that the Company will continue to
conduct its affairs in a manner which will enable it to retain this status.
The Company and certain subsidiary entities have also elected to be treated as
a société d'investissement immobilier cotée ('SIIC') for French tax
purposes. Provided that the Group meets certain requirements, the Group's
French subsidiaries should be exempt from French corporate income tax on net
rental income and gains arising from interests in property. Management intends
that the Group will continue to comply with the SIIC regulations for the
foreseeable future.
The Group operates in a number of jurisdictions and is subject to periodic
challenges by local tax authorities on a range of tax matters during the
normal course of business. The tax impact can be uncertain until a conclusion
is reached with the relevant tax authority. The Group addresses this
uncertainty by closely monitoring tax developments, seeking independent advice
and maintaining transparency with the authorities it deals with as and when
any enquiries are made.
The French tax authorities have issued a notice of adjustment in respect of
the tax years 2021 to 2023 and discussions with the tax authority are ongoing.
The range of potential outcomes indicates a possible outflow (assuming
equivalent adjustments are made in 2024 and 2025) of between €nil and
€14.4 million, including interest and penalties. Based on professional
advice, the Board has decided not to make a provision, as they do not believe
that an outflow is probable and have therefore disclosed this as a contingent
liability. The Group will continue monitoring the situation and will provide
further updates as necessary
8 Basic and diluted earnings per share
The basic and diluted earnings per share for the Group are based on the net
(loss)/profit for the period of €(126,000) (six months to 31 March 2024:
€(2,183,000); for the year ended 30 September 2024: €575,000 and the
weighted average number of ordinary shares in issue during the period of
133,343,474 (six months to 31 March 2024: 133,734,686; for the year ended 30
September 2024: 133,734,686).
9 Interest-bearing loans and borrowings
Six months to 31 March 2025
€000
As at 1 October 2024 70,471
Repayment of loans -
Capitalisation of finance costs -
Amortisation of finance costs 57
As at 31 March 2025 (unaudited) 70,528
Year to 30 September 2024
€000
As at 1 October 2023 73,623
Repayment of loans (3,000)
Capitalisation of finance costs (322)
Amortisation of finance costs 170
As at 30 September 2024 (audited) 70,471
Six months to 31 March 2024
€000
As at 1 October 2023 73,623
Repayment of loans (3,000)
Capitalisation of finance costs (322)
Amortisation of finance costs 108
As at 31 March 2024 (unaudited) 70,409
As at 31 March 2025 the Group held interest rate caps as follows:
- Saint-Cloud loan with BRED Banque Populaire: a cap totalling the full
€14.0m of the loan, and which expires on 15 December 2027, with a strike
rate of 3.25%
10 Issued capital and reserves
As at 31 March 2025, the Company has 133,734,686 (30 September 2024:
133,734,686) ordinary shares in issue with a par value of 10.00p, of which
1,471,700 ordinary shares are held in Treasury (30 September 2024: nil). The
total number of voting rights in the Company is 132,262,986 (September 2024:
133,734,686).
11 NAV per ordinary share and share buyback
Between the 20 January 2025 to 31 March 2025 the Company purchased 1,471,700
shares for a sum of £0.97 (€1.16) million at an average price of 66 pence
per share. As a consequence of the buyback, the number of ordinary shares in
issue fell from 133,734,686 to 132,262,986 during the reporting period.
The NAV per ordinary share is based on the net assets at 31 March 2025 of
€158,854,000 (30 September 2024: €164,097,000; 31 March 2024:
€165,298,000) and 132,262,986 ordinary shares in issue at 31 March 2025 (30
September 2024: 133,734,686; 31 March 2024: 133,734,686).
12 Dividends paid
Six months ended 31 March 2025 (unaudited)1 Number of ordinary shares Rate €000
(cents)
Interim dividend paid on 1 November 2024 133,734,686 1.48 1,980
Interim dividend paid on 31 January 2025 133,734,686 1.48 1,979
Total interim dividends paid 133,734,686 2.96 3,959
1 A dividend for the quarter ended 31 December 2024 of 1.48 Euro cents per
share was approved and was paid on 15 May 2025. Total dividends declared
relating to the six months' ended 31 March 2025 were 2.96 Euro cents per
share.
Six months ended 31 March 2024 (unaudited) Number of ordinary shares Rate (cents) €000
Interim dividend paid on 17 November 2023 133,734,686 1.48 1,979
Interim dividend paid on 25 January 2024 133,734,686 1.48 1,979
Total interim dividends paid 133,734,686 2.96 3,958
Year ended 30 September 2024 (audited) Number of ordinary shares Rate (cents) €000
Interim dividend paid on 17 November 2023 133,734,686 1.48 1,979
Interim dividend paid on 25 January 2024 133,734,686 1.48 1,979
Interim dividend paid on 10 May 2024 133,734,686 1.48 1,979
Interim dividend paid on 12 August 2024 133,734,686 1.48 1,979
Total interim dividends paid 7,917
13 Related party transactions
Schroder Real Estate Investment Management Limited is the Group's Investment
Manager.
The Investment Manager is entitled to a fee, together with reasonable
expenses, incurred in the performance of its duties. The fee is payable
monthly in arrears and shall be an amount equal to one-twelfth of the
aggregate of 1.1% of the EPRA NAV of the Company. The Investment Management
Agreement can be terminated by either party on not less than 12 months'
written notice, such notice not to expire earlier than the third anniversary
of admission, or on immediate notice in the event of certain breaches of its
terms or the insolvency of either party. The total charge to profit and loss
during the period was €913,000 (year ended 30 September 2024: €1,899,000;
six months ended 31 March 2024: €972,000). At 31 March 2025, €625,000 was
outstanding (year ended 30 September 2024: €140,000; six months ended 31
March 2024: €599,000).
The Directors are the only officers of the Company and there are no other key
personnel. The Directors' remuneration for services to the Group for the six
months ended 31 March 2025 was €103,000 (year ended 30 September 2024:
€215,000; six months ended 31 March 2024: €120,000), equivalent to
£86,000. The total charge for Directors' fees for the six months ended 31
March 2025 was €117,000 (year ended 30 September 2024: €239,000; six
months ended 31 March 2024: €120,000), which included employer's National
Insurance contributions. All of the Directors hold shares in the Company and
have not purchased or sold any shares in the financial period. Details of
their holdings can be found on page 52 of the September 2024 Annual Report and
Consolidated Financial Statements
14 Capital commitments
At 31 March 2025, the Group had capital commitments of €605,000 (30
September 2024: €131,000; 31 March 2024: €nil).
The Group is expected to incur a further €100,000 (30 September 2024:
€100,000) of development expenditure with regards to the comprehensive
refurbishment of the Paris, BB asset.
15 Contingent liabilities
There are no contingent liabilities other than those disclosed in note 7.
16 Post balance sheet events
On 30 April 2025 the Group sold the property in Frankfurt for a gross sales
price of €11,800,000.
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