TIDMSREI
RNS Number : 2449N
Schroder Real Estate Inv Trst Ld
31 May 2022
Schroder Real Estate Investment Trust Limited
("SREIT" / the "Company" / "Group")
Acquisition of Manchester city centre mixed-use office and
retail asset for GBP14.7 million
Schroder Real Estate Investment Trust Limited, the actively
managed UK-focused REIT, announces the acquisition of St. Ann's
House in Manchester, for GBP14.7 million, reflecting a net initial
yield of 7.8%, a reversionary yield of 9.1% and a low average
capital value of GBP283 per sq ft. The mixed-use office and retail
asset generates GBP1.22 million per annum of headline rent compared
with an estimated rental value ("ERV") assessed by the independent
valuer of GBP1.33 million.
The freehold, 51,885 sq ft building, is 96% occupied and
comprises 40,277 sq ft of office space over five upper floors with
five retail units at the ground floor level and ancillary basement
space. It is prominently located on St. Ann's Square, near to the
prime retail core. St. Ann's Square features a listed church, the
Royal Exchange theatre, a mix of office occupiers and high-quality
luxury retail as well as leisure operators. The building benefits
from its proximity to two tram stations that are within four and
eight minutes' walk respectively.
Nick Montgomery, Fund Manager of SREIT, commented:
"This acquisition is line with the strategy to selectively
acquire income producing assets with good fundamentals and the
potential to add value through active asset management initiatives,
with a focus on improving sustainability credentials. Compared to
other major cities, Manchester, which is one of the Company's high
conviction locations, currently has the lowest office vacancy rate,
and we expect relatively higher growth in office rents over the
next five years."
The office space is fully let to four office tenants at an
average rent of GBP18.65 per sq ft, with the potential to increase
rental levels through refurbishment and improving sustainability
performance. There is also the opportunity to enhance income by
offering fitted out office space. The tenants are:
-- Ingeus UK Limited, a company that helps governments and
employers design and deliver people-related services, at GBP405,000
per annum (GBP20.62 per sq ft) or 33% of total income;
-- Ecclesiastical Insurance Office Plc, an insurance company
headquartered in the United Kingdom, at GBP137,500 per annum
(GBP16.63 per sq ft) or 11% of total income;
-- Verlingue Limited, a chartered insurance broker, at
GBP119,932 per annum (GBP16.45 per sq ft) or 10% of total
income;
-- Watt Utilities Limited, a commercial energy consultancy, at
GBP81,747 per annum (GBP16.10 per sq ft) or 7% of total income.
The appeal of St. Ann's Square to high quality luxury retailers
is reflected in the current tenant mix with complementary retailers
located around the subject asset. During the pandemic rents were
rebased by the current landlord and there are currently no arrears.
The tenants are:
-- Watches of Switzerland Limited, trading as Tag Heuer, at
GBP92,500 per annum or 8% of total income. The current rent
reflects 100% of the pre-pandemic rent;
-- Russell & Bromley Limited, a luxury footwear and handbag
retailer, at GBP175,000 per annum or 14% of total income. Russell
& Bromley have recently completed a new shop fit, and the
current rent reflects 69% of the pre-pandemic rent on a per square
foot basis;
-- Space NK Limited, a health and beauty retailer, at GBP85,000
per annum or 7% of total income. The current rent reflects 89% of
the pre-pandemic rent;
-- A vacant unit representing 5% of the property by ERV is under
offer to an established, north-west based retailer of luxury
watches and jewellery, at GBP70,000 per annum or 6% of total
income. The proposed rent reflects 69% of the pre-pandemic rent on
a per square foot basis. The lease is expected to complete shortly
and there is an 18 month rental guarantee in place from the vendor
to cover void and the ingoing tenant incentives;
-- A further vacant unit representing 3% of the property by ERV
is subject to an 18 months' rental guarantee at GBP50,000 per
annum, or 4% of total income.
Following completion of the aforementioned above, the weighted
average unexpired lease term is 3.4 years to earliest termination
and 6.0 years to lease expiries. 58% of the property by floor area
currently has an EPC rating of 'B' with the remainder rated
'C'.
Following completion, SREIT's loan to value ratio, net of cash,
adopting the independent valuation as of 31 December 2021 and
accounting for the disposal of The Arc office in Nottingham, is now
32.2%, with cash and undrawn loan facilities totalling
approximately GBP16.5 million.
Further details on portfolio activity will be provided in the
Company's annual results for the year to 31 March 2022, due to be
announced on 7 June 2022.
-ENDS-
For further information:
Schroder Real Estate Investment Management
Limited:
Nick Montgomery / Bradley Biggins
/ Matthew Riley 020 7658 6000
FTI Consulting:
Dido Laurimore / Richard Gotla / Ollie
Parsons 020 3727 1000
--------------
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 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.
SREIT is currently paying an annualised dividend of 3.086 pence
per share.
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