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Schroder Real Estate (SREI)

Schroder Real Estate

Net Asset Value(s) & Dividend Declaration

For release 17 February 2020

Schroder Real Estate Investment Trust Limited


Schroder Real Estate Investment Trust (the ‘Company’), the actively managed UK-focused REIT, announces its net asset value (‘NAV’) and dividend for the quarter to 31 December 2019.

Net Asset Value

The unaudited quarterly NAV as at 31 December 2019 was £321.4 million or 62.0 pence per share ('pps'). During the quarter the Company completed a major refinancing that incurred costs of £27.2 million. The refinancing generated an immediate interest saving of £2.5 million per annum that will be paid to shareholders as an annualised 19% dividend increase to 0.7715 pps with effect from the forthcoming dividend to be paid on 13 March 2020.

Following the refinancing, the Company has approximately £90 million of cash and undrawn debt facilities to invest in income enhancing asset management and new acquisitions that are under active consideration.    

The NAV of 62.0 pps reflects a like-for-like decrease of 1.7% compared with the NAV as at 30 September 2019 adjusted for the refinancing costs. Based on the quarterly dividend paid in December 2019 of 0.65 pps, the NAV total return excluding the refinancing costs was -0.7%. A breakdown is set out below:

£m pps Comments
NAV as at 30 September 2019 354.3 68.3
Refinancing costs (27.2) (5.2) Break costs and related fees of £25.8 million together with writing off unamortised finance costs of £1.4 million.
NAV at 30 September 2019 adjusted for the refinancing costs 327.1 63.1
Unrealised change in valuation of direct real estate portfolio and joint ventures (4.6) (0.9)
Capital expenditure (1.5) (0.3) £800,000 relates to works linked to pre-lets such as Bedford, Milton Keynes and Leeds.  Remainder principally relates to refurbishment of multi-let industrial estates.   
Realised gains on disposals 0.3 0.1 £200,000 gain on Peterborough (completed December 2019) and £100,000 gain on Hinckley (completed November 2019).
Net revenue 3.4 0.7 Quarterly earnings.
Dividend paid (3.4) (0.7) Reflects the 0.65 pps September 2019 quarterly dividend which was paid in December 2019, equating to 100% dividend cover.
Others 0.1 Nil Lease incentive adjustments and rounding.
NAV as at 31 December 2019 321.4 62.0 Reflects a 1.7% decrease in the NAV adjusted for the refinancing costs

Dividend payment

The Company announces an interim dividend of 0.7715 pps for the period 1 October 2019 to 31 December 2019. This reflects the previously announced 19% increase over the prior period following the refinancing in October 2019.

The dividend payment will be made on 13 March 2020 to shareholders on the register as at 28 February 2020. The ex-dividend date will be 27 February 2020. The dividend of 0.7715 pps will be designated 0.3500 pps as an interim property income distribution (‘PID’) and 0.4215 pps as an interim ordinary dividend.

Performance versus MSCI Index

Over the quarter to 31 December 2019, the underlying portfolio produced a total return of 0.1%, in line with the MSCI Benchmark Index. The portfolio’s quarterly income return of 1.6% compared with the Benchmark at 1.1%. 

For the calendar year 2019, the underlying portfolio produced a total return of 4.0% compared with MSCI of 1.6%, with the sector total return breakdown as follows:

Calendar year 2019 portfolio total return Total return %
SREIT MSCI Benchmark Index
Industrial 8.9 6.8
Offices 6.0 4.7
Retail -4.8 -7.0
Other 2.7 5.5
Total 4.0 1.6

Property portfolio

The underlying portfolio comprised 39 properties valued at £413.9 million as at 31 December 2019, which produced a rent of £23.7 million per annum reflecting a net initial yield of 5.4% (MSCI Benchmark Index 4.8%). The portfolio rental value is £30 million per annum, resulting in a reversionary yield of 7.2% (MSCI Benchmark Index 5.3%).

As at 31 December 2019, the void rate was 7.9%, calculated as a percentage of rental value. The Company has ongoing totalling annualised rental income of approximately £700,000.  Successful completion of these leases under offer would reduce the void rate to approximately 6%. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, was 5.8 years. The tables below summarise the portfolio information as at 31 December 2020:

Sector weightings Weighting %
SREIT MSCI Benchmark Index
Industrial 28.0 26.2
Offices 39.2 25.6
Retail 25.2 28.0
   Primary use retail 19.2 N/A
   Ancillary use retail 6.0 N/A
Other 7.6 20.1


Regional weightings Weighting %
SREIT MSCI Benchmark Index
Central London 8.9 13.8
South East excluding Central London 20.2 38.8
Rest of South 8.7 15.1
Midlands and Wales 28.0 12.7
North 31.5 14.7
Scotland 2.7 4.9


The Company completed five disposals during the quarter totalling £45 million reflecting a 15% net premium to the valuation at March 2019. These included:

  • Edinburgh, Haston House – Completed 1 October 2019. Sale price of £6.5 million compared with the 31 March 2019 independent valuation of £5.5 million.
  • Alfreton, Recticel Unit – Completed 8 October 2019. Sale price of £10.4 million compared with the 31 March 2019 independent valuation of £10.2 million.
  • Acton, Allied Way Estate – Completed 15 November 2019. Sale price of £18.9 million compared with the 31 March 2019 independent valuation of £17.2 million.
  • Hinckley, Coventry Road – Completed 22 November 2019. Sale price of £2.2 million compared with the 31 March 2019 independent valuation of £2.0 million.
  • Peterborough, Finmere Park – Completed 12 December 2019. Sale price of £7.0 million compared with the 31 March 2019 independent valuation of £3.8 million following the re-letting of the unit on a 10.5 year lease.

Asset management

The Company continues to focus on actively managing the portfolio. Highlights during the quarter include:

St John’s Retail Park, Bedford (Retail warehouse)

The lease to DSG Retail (t/a Curry’s PC World) has been extended from 2021 to 2029 at the passing rent of £280,000 per annum. DSG will receive an incentive of 6 months’ rent free.

In addition, a simultaneous surrender of Majestic Wine’s lease with a new 10-year lease to Easy Bathrooms has completed at the existing rent of £64,200 per annum.

These transactions and the previously announced agreements for lease with Lidl and Home Bargains increase the unexpired term from 3.9 years to 8.2 years and will support the future trading performance of the asset. The income yield following completion of the Lidl and Home Bargains lettings will be approximately 7%.

Horton Park, Telford (Industrial)

A new five year lease for a 6,535 sq ft unit to Evolution Foods completed at £5.50 per sq ft, equating to £36,000 per annum.

A five year lease renewal with Activ Projects on a 16,663 sq ft unit at £83,315 per annum equating to £5.50 per sq ft representing a 39.2% increase on the previous passing rent.

Post period end activity

Since the calendar year end 15 new lettings, renewals and rent reviews have completed, generating additional income of approximately £135,000 per annum.  The focus is now on completing lettings under offer that have the potential to generate additional annualised income of £700,000 per annum.


The Company has two loan facilities, a £129.6 million term loan with Canada Life and a revolving credit facility (‘RCF’) with Royal Bank of Scotland International (‘RBSI’).

On 8 October 2019 the Company announced the refinancing of its £129.6 million loan with Canada Life. This extended the average maturity from 8.5 to 16.5 years and reduced the interest rate from 4.4% to 2.5% per annum. The refinancing generated an immediate interest saving of £2.5 million per annum to be paid to shareholders as an increased dividend of £16.0 million per annum, equating to an increase of 19%, starting at the period 1 October 2019. As at 31 December 2019, the RCF facility of £52.5 million remained undrawn. The loans are fully compliant with their covenants.

In addition to the properties secured against the Canada Life and RBSI loan facilities, the Company has unsecured properties with a value of £36.9 million and cash of approximately £40.9 million. This results in a loan to value ratio, net of cash, of approximately 21%.

Duncan Owen, Global Head of Schroder Real Estate, said:

“It has been an active quarter for the Company as we have executed our strategy with the refinancing enabling the delivery of a 19% increase in dividend. The underlying portfolio has continued to outperform over the 12 months to 31 December 2019 against the Benchmark by 2.3%. We are continuing our active asset management programme and have a robust pipeline of reinvestment opportunities to drive returns and grow net income in a sustainable way.”


For further information:

Schroder Real Estate Investment Management Limited:
Duncan Owen / Nick Montgomery / Frank Sanderson
020 7658 6000
Northern Trust:
Lisa Garnham
01481 745 001
FTI Consulting:
Dido Laurimore / Richard Gotla / Methuselah Tanyanyiwa
020 3727 1000
Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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