Schroder Euro Real - Announcement of NAV

Schroder European Real Estate Investment Trust

03/10/2022 07:00

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RNS Number : 4251B  Schroder Eur Real Est Inv Trust PLC  03 October 2022

3 October 2022

 

ANNOUNCEMENT OF NAV

 

Schroder European Real Estate Investment Trust plc ("SERE" or the "Company")
provides a business update and announces its unaudited net asset value ("NAV")
as at 30 June 2022:

 

-     Unaudited NAV of €197.8 million or 147.9 euro cents per share
("cps") as at 30 June 2022, reflecting a NAV total return of 0.6% over the
quarter and 8.0% over a 12 month period

-     The directly held property portfolio value decreased over the
quarter by 0.5%, or €1.0 million (net of capex 0.6% or €1.2 million), with
inflation-linked rental growth offset by individual asset activity

-     A further €1.2 million of post-tax development profit from the
Boulogne-Billancourt, Paris asset was recognised in the quarter

-     A third ordinary interim dividend has been previously declared in
August 2022 relating to the year ending 30 September 2022 of 1.85 cps. Total
ordinary dividends declared relating to the nine months of the current
financial year are now 5.55 cps

-     In addition, the Company has also announced in August 2022 a third
and final special dividend of 0.10 cps associated with the successful
execution of the Paris Boulogne-Billancourt business plan. This brings the
final combined special dividends to 9.60 cps, with total dividends of 15.15
cps being paid to investors in the financial year ended 30 September 2022

-     At the end of June 2022, the Company completed the purchase of a car
showroom in Cannes, France for €8.4 million, reflecting a net initial yield
of 5.5%, and a reversionary yield of 6.4%. The asset also offers longer term
alternative use upside

-     As at 30 June 2022, the Company has an available cash balance of
€29 million. The loan to value ratio on the total portfolio is approximately
20% net of cash and 28% gross of cash

-     The Company has a remaining investment capacity of c.€50 million,
including €25 million of additional debt

-     Annualising the ordinary dividend provides investors with a dividend
yield exceeding 7%, based on the 30 September 2022 share price of c. 90p

-     The portfolio income, value and debt is Euro denominated, with 100%
of the income subject to indexation

 

Net Asset Value

The table below provides a breakdown of the movement in NAV during the quarter
ended 30 June 2022:

 

                                                             €m((1))    Cps((2))  %((3))
 Brought forward NAV as at 1 April 2022                      199.1      148.8
 Unrealised loss in the valuation of the property portfolio  (1.0)      (0.7)     (0.5)
 Transaction costs                                           (0.8)      (0.6)     (0.4)
 Capital expenditure                                         (0.3)      (0.2)     (0.1)
 EPRA earnings                                               1.7        1.3       0.8
 Boulogne-Billancourt, Paris post-tax development profit     1.2        0.9       0.6
 Non-cash items                                              0.4        0.3       0.2
 Dividend paid                                               (2.5)      (1.9)     (1.3)
 NAV as at 30 June 2022                                      197.8      147.9     (0.7)

 

(1) Management reviews the performance of the Company principally on a
proportionally consolidated basis. As a result, figures quoted in this table
include the Company's share of joint ventures on a line-by-line basis and
exclude non-controlling interests in the Company's subsidiaries.

(2) Based on 133,734,686 shares.

(3) % change based on starting NAV as at 1 April 2022.

 

Property portfolio

As at 30 June 2022, the direct property portfolio, including the recently
acquired car showroom in Cannes, France, was independently valued at €218.4
million, reflecting a NIY of 5.9%.

 

The value of the portfolio decreased over the quarter by 0.5% or €1.0
million (net of Capex 0.6% or €1.2 million). The majority of the portfolio's
valuation change was driven by:

 

-     Increased vacancy assumptions at the Paris, Saint-Cloud office
investment, resulting in a valuation decrease of -€0.5 million, or -1.2%;

-     Increase in the capital expenditure provision for the upgrading of
heating, air conditioning and renewable energy at the Houten industrial
investment in the Netherlands, being the main driver of a valuation decrease
of -€0.5 million, or -5.6%;

-     Five year lease extension for c. 1,000 sqm, equating to c.20% of the
floorspace, at the Stuttgart office investment, delivering a valuation
increase of €0.3 million, or 1.4%

 

With 100% of the portfolio leases subject to indexation, rising inflation is
starting to contribute to rental growth. Furthermore, rent collection remains
high, with 100% of rent due for the quarter ended 30 June 2022 collected from
the direct property portfolio.

 

In addition to the direct property portfolio, the Company has a 50% interest
in a joint venture in Seville which continues to be recognised at nil
interest.

 

The portfolio valuation excludes the Boulogne-Billancourt, Paris refurbishment
and sale which has been treated as disposed in the Financial Statements. The
refurbishment was delivered to the business plan in the second quarter of 2022
and a further €1.2 million of post-tax development profit has been
recognised in the accounts in the quarter ended 30 June 2022. The majority of
the profit from the refurbishment and sale has now been recognised in the
Financial Statements and a further  €1.5 million of development profit may
potentially be released to the NAV over the next 12 months.

 

Outlook

 

The economic outlook has continued to worsen over the last three to six months
with the Eurozone facing a number of headwinds. The Energy crisis,
inflationary concerns and increasing interest costs are creating a drag on
sentiment and recessionary concerns.

 

Values across the portfolio are holding up well, although recent bond yield
rises are likely to put pressure on this. The Company expects the portfolio's
diversification characteristics, income profile and location strengths will
help in mitigating this pressure. Looking forward the expectation is that
rental affordability and managements local expertise will be an increasing
positive regarding retention of occupiers.

 

The Company currently has c.€50 million of firepower to deploy (including
€25 million of additional debt) and expects to see an improving pipeline of
opportunities over the next twelve months that will enable it to diversify and
strengthen its exposure to growth cities, regions and sectors.

 

 

Enquiries:

 

Jeff O'Dwyer

Schroder Real Estate Investment Management Limited
Tel: 020 7658 6000

 

Ria Vavakis

Schroder Investment Management
Limited
Tel: 020 7658 2371

 

Dido Laurimore/Richard Gotla/Ollie
Parsons
Tel : 020 3727 1000

FTI Consulting

 

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