REG - Schroder Real Estate - NAV update for the quarter to 30 June 2025

Schroder Real Estate Investment TrustAnnouncement

05/08/2025 07:02

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RNS Number : 9180T  Schroder Real Estate Inv Trst Ld  05 August 2025

For release 5 August 2025

 

Schroder Real Estate Investment Trust Limited

NAV UPDATE FOR THE QUARTER TO 30 JUNE 2025

1.6% NAV TOTAL RETURN SUPPORTED BY EARNINGS GROWTH AND ACTIVE MANAGEMENT

 

Schroder Real Estate Investment Trust Limited ('SREIT' or the 'Company'), the
actively managed REIT focused on improving the sustainability performance of
buildings to generate higher income and capital growth, announces its 30 June
2025 net asset value ('NAV'), an asset management update, and further progress
selling smaller non-core assets on completion of business plans.

 

Financial highlights

·    NAV total return for the quarter of 1.6%

·    NAV increase of 0.2% to £301.9 million or 61.7 pence per share
('pps')

·    Annualised dividend yield of 6.8% on 4 August closing share price of
52.5p

·    Quarterly EPRA earnings increased 7.3% to £4.4 million, or 0.9 pps

 

Balance sheet highlights

·    Sector-leading debt terms with a weighted average maturity of 8.2
years and interest cost of 3.5% on drawn debt

·    Incremental positive fair value benefit of the fixed-rate loan of
£18.4 million, which is not reflected in the Company's NAV

·    Net loan to value 36.5% (31 March 2025: 36.9%)

 

Operational highlights

·    Quarterly portfolio capital growth of 0.3%

·    Strong leasing momentum maintained since the Company announced its
final results on 11 June 2025, with 10 deals completed across 52,000 sq ft:

o  Four new lettings of vacant units totalling £321,000 of annualised rent,
1% ahead of 30 June 2025 estimated rental value ('ERV')

o  Five lease renewals generating total rent of £281,000, which is 11% ahead
of the previous passing level and 5% ahead of 30 June 2025 ERV

o  One rent review with a total rent of £100,000 which is 22% ahead of the
previous passing level

·    39% reversion to the portfolio's ERV of £40.2 million from an annual
rent of £29.0 million as at 30 June 2025, which is expected to further drive
income and earnings growth

 

Dividend

·    Quarterly dividend paid of £4.4 million, or 0.897 pps (31 March
2025: 0.897 pps)

·    Quarterly dividend 100% covered by EPRA earnings (Year ended 31 March
2025: 100%)

·    Interim dividend of 0.897 pps for the period 1 April 2025 to 30 June
2025 to be paid in August 2025

 

Alastair Hughes, Chair of the Board, commented: "Whilst investment and
occupational market activity has remained largely subdued due to
macro-economic and geopolitical headwinds, the Company has delivered another
robust quarter of earnings growth, a fully covered dividend and further
capital value appreciation in the portfolio. With our differentiated and
active strategy, we are confident in our ability to continue driving rents
across the portfolio, which is well positioned to benefit from the ongoing
recovery of the UK real estate market."

 

Nick Montgomery, Fund Manager, added: "Our portfolio's alignment to higher
growth sectors combined with an active asset management strategy has enabled
us to deliver another period of positive financial and operational
performance. We remain highly focused on delivering consistent earnings growth
by capturing the portfolio reversion which should support the delivery of risk
adjusted returns for shareholders in the long term."

 

NAV

A breakdown of the quarterly movement in the NAV is set out below:

 

                                                                                £m     pps    Comments
 NAV as at 31 March 2025                                                        301.4  61.6   Calculation based on 489,110,576 shares
 Unrealised increase in the valuations of the direct real estate portfolio and  2.7    0.5    Portfolio capital growth of 0.3%
 Joint Ventures
 Capital expenditure (direct portfolio and share of Joint Ventures)             (1.5)  (0.3)  Relating to various projects across the portfolio
 EPRA earnings                                                                  4.4    0.9    Resulting in dividend cover of 100%
 Dividend paid                                                                  (4.4)  (0.9)  Dividend for the quarter ended 31 March 2025 was paid on 30 June 2025 at 0.897
                                                                                              pps
 Gain on disposal of asset                                                      0.1    0.0    15/16 King Street, a retail asset in Truro, was sold on 12 May 2025 for a
                                                                                              price of £1.25m, compared to the book value of £1.1m, with £0.02m of sale
                                                                                              costs
 Unrealised fair value movement on the interest rate collar                     (0.1)  (0.0)  Relating to the interest rate collar for the RBSI revolving credit facility
 Others                                                                         (0.7)  (0.1)  All other items including lease incentives and rounding
 NAV as at 30 June 2025                                                         301.9  61.7   Calculation based on 489,110,576 shares

 

Property portfolio

As at 30 June 2025, the underlying portfolio comprised 37 properties valued at
£481.6 million. It generated annual rent of £29.0 million, reflecting a net
initial yield of 5.6% (MSCI Benchmark: 5.1% 1 ). Note that the University of
Law, the tenant at Store Street in Bloomsbury, is in a 10-month rent free
period ending on 16 October 2025. Adding back the Company's share of its
annual rent, being £2,359,885, would result in a net initial yield of 6.1%.
The portfolio's ERV is £40.2 million, reflecting a reversionary yield of 8.3%
(MSCI Benchmark: 6.2%(1)).

 

Including the impact of the exchange of unconditional contracts to sell
Pacific House in Marlow with vacant possession, the portfolio void rate has
improved to 12.2% as at today (31 March 2025: 12.3%), calculated as a
percentage of ERV.  In addition:

·    A further 2.3% of this void is currently under offer and in advanced
legal negotiations.

·    A further 2.9% is undergoing refurbishment including major
sustainability improvement works at Millshaw Park Industrial Estate in Leeds
(representing 1.7%) and St Ann's House in Manchester (representing 0.6%), both
visited by shareholders and analysts on the Asset Tour in June and expected to
generate material increases in rent compared to the previous passing level on
completion.

 

The weighted average unexpired lease term, assuming all tenants vacate at the
earliest opportunity, is 5.2 years.

 

The tables below summarise portfolio information as at 30 June 2025:

 

Sector weighting

                               Sector as a % of total value
                               SREIT            MSCI Benchmark

                                                (as at 31 March 25)
 Industrial                    51.1             32.6
 Office                        23.3             22.2
 Retail warehouse              12.7             9.8
 Retail                        7.2              9.6
 Retail ancillary to main use  4.8              -
 Retail single use             2.4              -
 Other                         5.7              20.3
 Shopping centres              -                2.0
 Unattributable                -                3.5

 

Region weighting

                                      Region as a % of total value
                                      SREIT 2          MSCI Benchmark

                                                       (as at 31 March 25)
 Central London                       8.0              17.2
 South East excluding Central London  16.7             36.3
 Rest of South                        11.2             6.6
 Midlands and Wales                   21.5             22.6
 North                                40.3             13.1
 Scotland                             2.4              4.0
 Northern Ireland                     -                0.2

 

Balance sheet and debt

The weighted average interest rate for total debt drawn at the quarter end was
3.5%, with an average maturity of 8.2 years, with 87% either fixed or hedged
against movements in interest rates. The Company has significant headroom on
all covenants. A summary of the key terms as at 30 June 2025 is in the table
below:

 

 Lender       Drawn loan (£m)   Maturity                    Total interest rate
 Canada Life  129.6             50%: 15/10/32               2.5%                 Fixed rate loan

                                50%: 15/10/39
 RBSI         54.5              06/06/27                    5.9%                 £75 million revolving credit facility ('RCF'), of which £54.5 million is
                                                                                 drawn. Loan margin is 1.65% over SONIA. £30.5 million benefits from an
                                                                                 interest rate collar to maturity, with a cap at 4.25% and a floor at 3.25%.
                                                                                 The balance of the loan is floating. The RCF is a 'Green Loan', with criteria
                                                                                 linked to reduced energy consumption, future improvements in the GRESB rating
                                                                                 and certification linked to building improvements.
 Total        184.1             Weighted average 8.2 years  3.5%

 

As at 30 June 2025, the Company had cash, including cash held in joint
ventures, of £8.1 million and a net loan to value ratio of 36.5%, slightly
above the long-term strategic target range of 25% to 35%. The Company is
taking steps to reduce the net loan to value ratio back in line with the
target range, including two post quarter end disposals, and others in progress
or planned.

 

Asset management

The Company continues to deliver on its asset management programme, with key
activity since 11 June 2025 including:

 

Retail

·    At Churchill Way West, a retail warehouse scheme in Salisbury,
Wiltshire Council has granted planning permission for the unit reconfiguration
required to bring Lidl Great Britain Limited ('Lidl') to the scheme. As
previously reported, an agreement for lease exchanged with Lidl to occupy unit
1 and part of unit 2, totalling 22,400 sq ft, on a new 25-year lease (break at
year 20) at £440,000 per annum or £19.81 per sq ft. This is 67% higher than
the previous passing level on a per sq ft basis. Lidl will receive nine months
of rent free and the lease will be subject to five yearly, inflation-linked
reviews with a collar of 1% per annum and a cap of 3% per annum. Lease
completion is subject to the Company delivering a unit split and refurbishment
at an estimated cost of £1.5 million inclusive of consultant and legal fees.
Lidl is required to install photovoltaic panels on the roof which will enable
the overall project to achieve an EPC rating of 'A'.

 

Net zero carbon pathway

·    In the latest annual report, we reported 5% year-on-year reductions
in both landlord energy consumption and associated Scope 1 and 2 greenhouse
gas ('GHG') emissions on a like-for-like basis, demonstrating progress against
our target to reduce these to net zero by 2030. In addition, the Company is
pleased to now report positive progress towards its target for operational
whole building GHG emissions to be aligned to a 1.5°C global warming pathway
by 2030. Independent assessment has determined a reduction in operational
whole building GHG emissions intensity of 14% in calendar year 2024 compared
to the 2023 baseline 3 . This has been supported by reductions in landlord
energy consumption, continued tenant (Scope 3) data collection efforts, which
supports our continual improvement in understanding actual building energy and
energy-related GHG performance, and reducing reliance on the use of
benchmarks.

 

Disposals

As noted in the annual report, during the quarter the Company completed the
sale of 15/16 King Street, a Grade II listed freehold asset comprising two
ground floor retail units in Truro, for £1.25 million. The price was 14%
ahead of the 31 March 2025 independent valuation of £1.1 million. This
follows the lettings of the ground floor retail units, with the price
reflecting a net initial yield of 8.0%.

 

Post quarter end, the sale of 12/14 East Gates in Leicester, a Grade II listed
freehold single let retail asset, completed on 23 July 2025 for £1.0 million.
The price is 11% ahead of the 31 March 2025 independent valuation of £0.9
million and equal to the valuation as at 30 June 2025. The lease expires in
4.25 years, and the price reflects a net initial yield of 9.4%.

 

Also post quarter end, unconditional contracts have been exchanged to sell
Pacific House in Marlow, a vacant freehold office asset, for £1.665 million.
The price is 11% ahead of the 31 March 2025 independent valuation of £1.5
million and equal to the valuation as at 30 June 2025. The price reflects a
capital value of £108 per sq ft.

 

As noted in the annual report, further disposals are under consideration.

-ENDS-

 

For further information:

 Schroder Real Estate Investment Management Limited:

 Nick Montgomery / Bradley Biggins / Katherine Fyfe   020 7658 6000
 FTI Consulting:

 Dido Laurimore / Richard Gotla / Oliver Parsons      020 3727 1000

 

 

 1  Latest available MSCI data is as at 31 March 2025.

 2  Column does not sum due to rounding.

 3  The whole building operational greenhouse gas intensity analysis has been
prepared by Verco Global, an independent third-party consultant, and is based
on analysis of the underlying real estate assets' 2023 and 2024 calendar year
energy and energy-related greenhouse gas emissions performance. 56% of actual
emissions data has been used for the analysis of GHG intensity performance for
the 2024 period, improved from 23% for the 2023 period. The results have been
established by applying a methodology determined for Schroders Capital. Whilst
every effort has been made to ensure the accuracy and reliability of the
information, it should be considered as indicative and is subject to numerous
assumptions and limitations.

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