TIDMSREI
RNS Number : 3336H
Schroder Real Estate Inv Trst Ld
27 July 2023
For release 27 July 2023
Schroder Real Estate Investment Trust Limited
('SREIT' or the 'Company')
NAV AND DIVID ANNOUNCEMENT FOR THE QUARTER TO 30 JUNE 2023
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 2023
and provides an update on portfolio activity.
Key points
-- NAV increased to GBP301.1 million or 61.6 pence per share
('pps') (31 March 2023: GBP300.7 million or 61.5 pps), which,
together with dividends paid, resulted in a NAV total return for
the quarter of 1.5%
-- Dividend paid during the quarter of 0.836 pps, 103% covered
by EPRA earnings, representing an annualised yield of 7.6% on the
26 July closing share price of 43.8 pps
-- Net loan to value of 35.7%, with an average interest cost of
3.4%, an average loan duration of 10.5 years and no debt maturities
until 2027
-- Strong leasing activity since 1 April 2023 with 25 new
lettings, renewals and rent reviews completed across 131,599 sq ft
totalling GBP1.5 million per annum, reflecting an uplift of 4%
compared to the estimated rental value ('ERV') at the beginning of
the quarter
-- Good progress with ongoing letting activity which could
generate a further GBP1 million per annum of rent
-- Disposed of an office asset, Morgan Sindall House, in Rugby,
for GBP4.0 million, in line with the independent valuation as at 31
March 2023
-- Sustained outperformance vs. MSCI UK Balanced Portfolios
Quarterly Property Index (the 'Benchmark') over three months, 12
months, three years and since inception in 2004 (based on latest
available Benchmark data to 31 March 2023)
Alastair Hughes, Chair of the Board, commented: "Despite
continuing real estate market uncertainty due to elevated interest
rates, the Company remains well placed with an above average rental
income profile and the longest duration, fixed-rate debt in the
peer group. These factors enable us to continue paying an
attractive dividend with good visibility on future earnings."
Nick Montgomery, Fund Manager, commented: "Notwithstanding
market volatility, leasing activity remains encouraging across all
sectors, with a high volume of deals done and under offer above the
prevailing valuation rental value assumptions. We are working up a
number of new asset management initiatives to further grow
earnings, with a focus on delivering development and refurbishment
projects to a high sustainability specification."
NAV
On a like-for-like basis the underlying portfolio value declined
by -0.1% over the quarter, which compared to -0.4% for the MSCI UK
Monthly Property Index (a proxy for the Company's formal Benchmark
that will be released shortly).
This resulted in an unaudited NAV as at 30 June 2023 of GBP301.1
million, or 61.6 pps, an increase of 0.2% compared with the NAV as
at 31 March 2023 (GBP300.7 million, or 61.5 pps).
Including the quarterly dividend of 0.836 pps paid in June 2023,
the NAV total return for the quarter was 1.5%. A breakdown is set
out below:
GBPm pps Comments
=============================== ====== ====== =================================
Calculation based on 489,110,576
NAV as at 31 March 2023(1) 300.7 61.5 shares
=============================== ====== ====== =================================
Portfolio like-for-like
Unrealised net increase valuation movement, net
in the valuations of of capital expenditure,
the direct real estate of -0.1% over the quarter
portfolio and Joint Ventures 2.6 0.5 to 30 June 2023
Principally relating to
the operational net zero
carbon warehouse development
at Stanley Green Trading
Estate, Manchester and a
Capital expenditure (direct similar, smaller, development
portfolio and share of at Stacey Bushes Industrial
Joint Ventures) (3.3) (0.7) Estate, Milton Keynes
=============================== ====== ====== =================================
EPRA earnings 4.2 0.9 -
Dividend for the quarter
ended 31 March 2023 paid
Dividend paid (4.1) (0.8) in June 2023 of 0.836 pps
=============================== ====== ====== =================================
A realised gain of GBP189,119
on the disposal of the interest
rate cap that was due to
expire on 3 July 2023, and
an unrealised fair value
gain of GBP567,888 on the
Gain related to interest collar acquired and effective
rate hedging instruments 0.8 0.2 from 1 June 2023
All other items including
Other 0.2 0.0 lease incentives and rounding
=============================== ====== ====== =================================
Unaudited NAV as at Calculation based on 489,110,576
30 June 2023 301.1 61.6 shares
=============================== ====== ====== =================================
(1) Morgan Sindall House, Rugby, unconditionally exchanged on 6
March 2023 for a sale price of GBP4.0m and was thereby treated as
sold in the quarter ended 31 March 2023. Completion was 22 June
2023.
Dividend payment
The Company announces an interim dividend of 0.836 pps for the
period 1 April 2023 to 30 June 2023, reflecting an 8% increase
versus the 0.772 pps paid immediately prior to the Covid-19
pandemic in December 2019. Future dividends will be reviewed by the
Board targeting a sustainable and progressive dividend policy.
The dividend payment will be made on 25 August 2023 to
shareholders on the register at the record date of 4 August 2023.
The ex-dividend date will be 3 August 2023.
The dividend of 0.836 pps will be wholly designated as an
interim property income distribution ('PID').
Property portfolio
As at 30 June 2023, the underlying portfolio comprised 40
properties valued at GBP469.0 million. It produced an annual rent
of GBP28.5 million reflecting a net initial yield of 5.7%. The
portfolio's ERV is GBP37.6 million per annum, reflecting a
reversionary yield of 8.0%.
The void rate was 11.5% calculated as a percentage of ERV, and
since the quarter end 1.1% of this is now under offer, and 1.7%
undergoing refurbishment. The weighted average unexpired lease
term, assuming all tenants vacate at the earliest opportunity, is
5.2 years.
The tables below summarise the portfolio information as at 30
June 2023:
Sector Weighting (%)
============================== ===================
SREIT Benchmark*
============================== ====== ===========
Industrial 48.2 31.2
Offices 26.4 25.2
============================== ====== ===========
Retail warehouse 11.9 9.8
Retail 7.5 9.7
Retail ancillary to main
use 4.7
Retail single use 2.8
============================== ====== ===========
Other 6.0 18.1
Shopping centres - 2.1
============================== ====== ===========
Unattributable - 3.8
============================== ====== ===========
Region Weighting (%)
============================== ===================
SREIT Benchmark*
============================== ====== ===========
Central London 8.0 17.1
South East excluding Central
London 17.4 34.5
============================== ====== ===========
Rest of South 10.5 16.2
Midlands and Wales 21.2 13.2
============================== ====== ===========
North 40.8 14.4
Scotland 2.1 4.4
============================== ====== ===========
Northern Ireland - 0.2
============================== ====== ===========
* Benchmark data as at 31 March 2023, the latest available, and
may not sum due to rounding.
Portfolio activity
Transaction
Morgan Sindall House, a 34,334 sq ft single let office asset in
Rugby, was sold on 22 June 2023 for GBP4.0 million, equal to the 31
March 2023 independent valuation. Based on the disposal price, the
asset has generated an ungeared total return of 7.2% per annum
since acquisition, compared with the All Property MSCI Benchmark
for the same period of 6.2% per annum, and MSCI All Office for the
same period of 5.7% per annum.
Further disposals of lower value, non-core properties are under
consideration and being progressed.
Asset management
There has been strong leasing activity since the year end to 31
March 2023, with 25 new lettings, renewals and rent reviews
completed across 131,599 sq ft totalling GBP1.5 million per annum,
reflecting an uplift of 4% compared to the ERV at the beginning of
the quarter.
GBP370,397 of the total annualised new rent relates to five
lettings at the recently completed operationally net zero carbon
warehouse development at Stanley Green Trading Estate ('SGTE') in
Cheadle, Greater Manchester. There is good interest in the
remaining units at SGTE, with the potential to generate an
additional GBP1.0 million of annualised rent. The objective is to
fully let the scheme this calendar year.
Balance sheet and debt
The average interest rate for total debt drawn as at 30 June
2023 was 3.4%, with an average maturity of 10.5 years, and 91%
fixed or hedged against movements in interest rates.
The debt refinancing completed with Canada Life in 2019 is now
providing a significant benefit in a higher interest rate
environment. This long term loan, that represented GBP129.6
million, or 74% of the GBP175.6 million total borrowings at the
quarter end, had an average maturity of 12.8 years with a fixed
average interest rate of 2.5%. At the quarter end, the incremental
positive fair value benefit of this fixed-rate loan was GBP20.2
million, which is not reflected in the Company's NAV.
The balance of borrowings at the quarter end, totalling GBP46.0
million, comprised a revolving credit facility ('RCF') from RBSI.
The total facility is GBP75.0 million and matures on 6 June 2027.
Drawn amounts are subject to an interest rate of SONIA plus a 1.65%
margin.
GBP30.5 million of the RCF benefitted from an interest rate cap
at 1.5%, which was due to expire in July 2023. On 1 June 2023, this
cap was replaced with a hedging instrument termed an interest rate
'collar' which also has a nominal value of GBP30.5 million. The
collar, which runs to the end of the RCF term on 6 June 2027,
protects the Company from rate increases above 4.25% and allows the
Company to benefit from future falls in interest rates down to a
3.25% floor. This results in a maximum interest rate for the capped
element of the RCF, including the margin of 1.65%, of 5.90%.
The gross cost including fees of the new collar was GBP766,229
and as at 30 June 2023 the fair value was GBP1,334,117, therefore
an unrealised gain of GBP567,888 was recognised during the quarter.
The previous interest rate cap was sold for GBP189,119 and this
amount was recognised as a realised gain on disposal during the
quarter. As a result the gain from interest rate hedging
instruments during the quarter was GBP0.8 million.
During the quarter the RCF was converted into a 'Sustainability
Linked Loan', with criteria linked to reduced energy consumption,
future improvements in the GRESB rating and building certification
linked to building improvements.
As at 30 June 2023, the Company had cash of GBP8.0 million,
including its share of joint venture cash balances, and a loan to
value ratio, net of cash, of 35.7%. The Company has significant
headroom against all loan covenants.
Sustainability
As announced in our annual results, the Company is evolving its
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
and should 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.
-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 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 134 in the UK as at 30 June 2023.
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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