REG - Schroder Real Estate - NAV and Dividend for the quarter to 30 June 2022

Schroder Real Estate Investment TrustAnnouncement

27/07/2022 11:15

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RNS Number : 9368T  Schroder Real Estate Inv Trst Ld  27 July 2022

For release 27 July 2022

 

Schroder Real Estate Investment Trust Limited

('SREIT' or the 'Company')

 

ANNOUNCEMENT OF NAV AND DIVIDEND FOR THE QUARTER TO 30 JUNE 2022

Schroder Real Estate Investment Trust Limited ('SREIT' or the 'Company'), the
actively managed UK-focused REIT, announced its net asset value ('NAV') and
dividend for the quarter to 30 June 2022 at 7.00 am. The Company has been made
aware that some investors are having difficulty accessing this, which can be
found at
https://www.londonstockexchange.com/news-article/SREI/nav-and-dividend-for-quarter-to-30-june-2022/15557698
(https://www.londonstockexchange.com/news-article/SREI/nav-and-dividend-for-quarter-to-30-june-2022/15557698)
.

The full text of the announcement is shown below:

Schroder Real Estate Investment Trust Limited ('SREIT' or the 'Company'), the
actively managed UK-focused REIT, announces its net asset value ('NAV') and
dividend for the quarter to 30 June 2022.

Highlights

·      NAV increased by 4.4% to £388.6 million (31 March 2022: £372.2
million) and the NAV total return was 5.4%.

·      Dividend paid during the quarter of 0.795 pps, fully covered by
recurring earnings, with a further 1% increase in the quarterly dividend to
0.803 pence per share ('pps'), payable on 19 August.

·      Net loan to value of 29.0%, with an average interest cost of
2.7%, an average loan duration of 11 years and no debt maturities until 2027.

·      Acquired St. Ann's House in Manchester, a mixed-use office and
retail asset, for £14.7 million reflecting a net initial yield of 7.8%.

·      Disposed of a single let industrial asset at Southlink,
Portsmouth for £6.5 million, reflecting a net initial yield of 3.5% and a 33%
premium above the independent valuation as at 31 March 2022.

·      High volume of portfolio activity with 22 letting transactions
completed across 468,760 sq ft totalling rent of £3.2 million per annum,
reflecting an uplift of £1.5 million per annum compared to the previous
position.

·      Continued outperformance vs. MSCI Benchmark Index over three
months, 12 months, three years and since inception in 2004 (based on latest
available Benchmark data to 31 March 2022).

·      Announced recommencement of the share buyback programme.

Nick Montgomery, Fund Manager of SREIT, commented: "This strong performance is
testament to continued asset management successes, notably at our regional
multi-let industrial estates and retail warehouse assets. Whilst the outlook
is increasingly uncertain due to high inflation and an expectation that
interest rates will continue to rise, the Company is well positioned due to
its good quality, higher yielding portfolio and long-term, fixed-rate debt."

Net asset value

The unaudited NAV as at 30 June 2022 was £388.6 million or 79.1 pps. This
reflects an increase of 4.4% compared with the NAV as at 31 March 2022. Taking
into account the quarterly dividend of 0.795 pps paid in June 2022, the NAV
total return for the quarter was 5.4%. A breakdown is set out below:

 

                                                                                £m     pps    Comments
 Audited NAV as at 31 March 2022                                                372.2  75.8
 Unrealised net increase in the valuations of the direct real estate portfolio  16.7   3.4    Portfolio like-for-like valuation movement, net of capital expenditure, of
 and Joint Ventures                                                                           +3.0% over the quarter to 30 June 2022.
 Capital expenditure (direct portfolio and share of Joint Ventures)             (1.0)  (0.2)  Principally relating to the operational net zero carbon warehouse development
                                                                                              at Cheadle, Greater Manchester.
 Acquisition costs                                                              (0.9)  (0.2)  St. Ann's House in Manchester.
 Realised gain on disposal                                                      1.5    0.3    Gain from the sale of Southlink, Portsmouth in June 2022, net of disposal
                                                                                              fees.
 EPRA earnings                                                                  4.0    0.8
 Dividend paid                                                                  (3.9)  (0.8)  Dividend for the quarter ended 31 March 2022 paid in June 2022 (at 0.795 pps).
 Unaudited NAV as at 30 June 2022                                               388.6  79.1   Calculation based on 491,080,301 shares.

Dividend payment

The Company announces an interim dividend of 0.803 pps for the period 1 April
2022 to 30 June 2022.

This reflects a 1% increase compared with the prior quarter dividend, and
compares with 0.772 pps paid immediately prior to the Covid-19 pandemic in
December 2019. The dividend will continue to be reviewed by the Board
targeting a sustainable and progressive dividend policy.

The dividend payment will be made on 19 August 2022 to shareholders on the
register at the record date of 5 August 2022. The ex-dividend date will be 4
August 2022.

The dividend of 0.803 pps will be wholly designated as an interim property
income distribution ('PID').

Property portfolio (MSCI Benchmark data as at 31 March 2022)

As at 30 June 2022, the underlying portfolio comprised 42 properties valued at
£549.6 million. At the same date the portfolio produced a rent of £30.8
million per annum reflecting a net initial yield of 5.2%, which compares with
the Benchmark of 3.9%. The portfolio estimated rental value ("ERV") is £35.3
million per annum, reflecting a reversionary yield of 6.4%, which compares
with the Benchmark of 4.6%.

As at 30 June 2022, the void rate was 8.4% calculated as a percentage of ERV.
Combining the impact of leases representing 0.9% of ERV which have completed
post quarter end, and a further 0.6% which is under offer, the void rate would
fall to 6.9%. The average unexpired lease term, assuming all tenants vacate at
the earliest opportunity, is 5.4 years. The tables below summarise portfolio
information as at 30 June 2022:

 Sector weightings                     Weighting (%)
                                       SREIT    MSCI Benchmark Index*
 Industrial                            46.7     34.4
 Offices                               27.8     24.8
 Retail warehouse                      11.8     9.3
 Retail                                7.9      11.6

     Retail ancillary to main use      5.1

     Retail single use                 2.8
 Other                                 5.8      16.2
 Unattributable                        -        3.7

 

 Regional weightings                  Weighting (%)
                                      SREIT    MSCI Benchmark Index*
 Central London                       7.7      15.9
 South East excluding Central London  19.3     36.1
 Rest of South                        10.6     15.8
 Midlands and Wales                   21.4     13.4
 North                                38.8     14.4
 Scotland                             2.2      4.2
 Northern Ireland                     0.0      0.2

 

* Latest MSCI Benchmark data as at 31 March 2022.

Portfolio activity

Since 31 March 2022, the Company has completed 22 new lettings, renewals and
reviews across 468,760 sq ft of space. These transactions generate £3.2
million per annum of contracted rent, which represents an additional £1.5
million per annum of rental income compared to the previous position.

Transactions

As previously reported, in May 2022 the Company acquired St. Ann's House in
Manchester, a city centre mixed-use office and retail asset for £14.7
million, reflecting a net initial yield of 7.8%, a reversionary yield of 9.1%
and a low average capital value of £283 per sq ft.  At acquisition the
mixed-use office and retail asset generated £1.22 million per annum of
headline rent compared with an ERV assessed by the independent valuer of
£1.33 million.

Balance sheet and debt

As at 30 June 2022, the Company had cash of £16.4 million, including its
share of Joint Venture cash balances, and a loan to value ratio, net of cash,
of 29.0%.

The Company has two loan facilities, a £129.6 million term loan with Canada
Life and a £75.0 million revolving credit facility ('RCF') with Royal Bank of
Scotland International ('RBSI'). As at 30 June 2022, £46.3 million of the RCF
was drawn.

50% of the Canada Life facility matures in October 2032 with the balance in
October 2039, at an average fixed interest rate of 2.5%.

The RBSI facility matures on 6 June 2027 and £30.5 million of the £46.3
million drawn has an interest rate cap that results in a maximum interest
rate, including the margin of 1.65%, of 3.15%. The cap expires in July 2023.

Sustainability

As announced in our annual results, we are evolving our strategy to focus on
sustainability and Environmental, Social and Governance ('ESG') considerations
more generally, throughout the real estate life cycle. This leverages the
strengths of Schroders, will deliver enhanced long-term returns for
shareholders as well as have a positive impact on the environment and the
communities where the Company is investing.

Buyback programme

As a result of the strong financial position outlined above, the Board and
Manager believe that investment in the Company's shares at the prevailing
price and discount to NAV offers attractive value for its shareholders. As a
result, the Company has today separately announced that it intends to
recommence its share buyback programme.

This follows the share buy back programme last undertaken by the Company
between September 2020 and April 2021, when 27,433,108 shares were acquired
for £9.7 million. This reflected an average price of 35 pence per share
('pps') and an average discount to the net asset value as at 30 September 2020
of 40%.

Board changes

As previously announced, Lorraine Baldry, Chair of the Company since January
2014, retired with effect from 26 July. The Board and Manager thank Lorraine
for her significant contribution during this period. Alastair Hughes, Senior
Independent Non-Executive Director, replaces Lorraine as Chair with effect
from 26 July. As previously announced, Priscilla Davies was appointed Senior
Independent Non-Executive Director of the Company on 7 June 2022.

-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

 

About Schroder Real Estate Investment Trust Limited

Schroder Real Estate Investment Trust Limited aims to provide shareholders
with an attractive level of income together with the potential for income and
capital growth as a result of its investments in, and active management of, a
diversified portfolio of UK commercial real estate.

The investment policy of the Company is to own a diversified portfolio of UK
real estate underpinned by good fundamental characteristics. The Group invests
principally in the industrial, office and retail warehouse sectors and will
also consider other sectors including mixed-use, residential, hotels,
healthcare and leisure.

The Company leverages Schroders' specialist capabilities across strategies,
with a strong team of 95 in the UK. SREIT employs a hospitality-driven
approach to improve the operational performance of its assets, underpinned by
a fully integrated ESG strategy, in order to deliver superior shareholder
returns.

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