NAV and Dividend for Quarter to 31 December 2018

Schroder Real Estate Investment Trust Limited

ANNOUNCEMENT OF NAV AND DIVIDEND FOR QUARTER TO 31 DECEMBER 2018

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 2018.

Net Asset Value

The unaudited NAV as at 31 December 2018 was £358.6 million or 69.2 pence per share ('pps'). This reflects an increase of 0.25% per share compared with the NAV as at 30 September 2018, or a NAV total return, including the dividend paid of 0.6355 pps, of 1.2%. A breakdown is set out below:

	£m	pps	Comments
NAV as at 30 September 2018	357.7	69.0
Unrealised change in valuation of direct property portfolio	0.0	0.0	Reflects a quarterly like-for-like increase in the value of the underlying portfolio of 0.2% before capital expenditure. Note that this includes the underlying valuation movement in the joint ventures.
Unrealised gain on joint ventures	0.6	0.1	Increase in valuation of joint ventures net of capital expenditure.
Capital expenditure	(0.6)	(0.1)	Capital expenditure includes £0.3m works completed at Clifton Park, York. Commercial Road, Portsmouth £0.1m and Swindon of £0.1m.
Net revenue	4.5	0.9	Includes one-off dilapidation/surrender premium received in relation to The Portergate, Sheffield of £1.2m.
Dividends paid	(3.3)	(0.6)	Reflects the increased dividend.
Others	(0.3)	(0.1)	Adjustment for lease incentives.
NAV as at 31 December 2018	358.6	69.2

Recurring dividend cover for the quarter was 98%. This increased to 134% including the one-off dilapidations/surrender premium at The Portergate, Sheffield.

Dividend payment

The Company announces an interim dividend of 0.65 pence per share (‘pps’) for the period 1 October 2018 to 31 December 2018. This reflects a further 2.5% increase over the prior quarter.

The dividend payment will be made on 15 March 2019 to shareholders on the register as at 1 March 2019. The ex-dividend date will be 28 February 2019. The dividend of 0.65 pps will be designated 0.35 pps as an interim property income distribution (‘PID’) and 0.30 pps as an interim ordinary dividend.

Performance versus MSCI Index

Over the quarter to 31 December 2018, the underlying portfolio produced a total return of 1.6% compared with the MSCI Index of 1.0%. For the calendar year 2018, the underlying portfolio produced a total return of 9.5% compared with MSCI of 7.1%.

Property portfolio

As at 31 December 2018, the underlying portfolio comprised 46 properties valued at £511.2 million. At the same date the portfolio produced a rent of £27.9 million per annum reflecting a net initial yield of 5.1%. The portfolio rental value is £35.6 million per annum, resulting in a reversionary yield of 7.0%.

As at 31 December 2018 the void rate was 7.5%, calculated as a percentage of rental value. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, was 6.4 years. The tables below summarise the portfolio information as at 31 December 2018:

Sector weightings	Weighting %
	SREIT	MSCI Index*
Retail	25.8	31.7
Offices	39.3	28.9
Industrial	28.6	29.1
Other	6.3	10.3

Regional weightings	Weighting %
	SREIT	MSCI Index*
Central London	7.1	12.8
South East excluding Central London	29.4	40.5
Rest of South	6.8	16.2
Midlands and Wales	27.1	13.3
North	26.4	12.8
Scotland	3.2	4.4

Transactions

Milton Keynes, Stacey Bushes Industrial Estate – 31 December 2018 valuation £37.1 million (Industrial)

In December an adjoining vacant ownership was acquired for £776,000. Since the quarter end the unit has been let to Granemore Group on a three year lease at £80,000 per annum, reflecting a yield on cost of 10%.

Portsmouth, Commercial Road – 31 December 2018 valuation £6.7 million (Retail)

Since the quarter end contracts have been exchanged to sell part of the retail property in Portsmouth for £1.6 million. The disposal follows asset management activity and the apportioned price is in line with the independent valuation at 31 December 2018.

Asset management

St. John’s Retail Park, Bedford – 31 December 2018 valuation £31.5 million (Retail Warehouse)

In December Homebase vacated a 36,214 sq ft unit as part of their Company Voluntary Arrangement (‘CVA’). Homebase were previously paying £353,000 per annum and their departure contributed to a 4% quarterly decline in the valuation of St. John’s Retail Park.

During the quarter a conditional agreement for lease was exchanged with Lidl for a supermarket totalling 21,630 sq ft. Subject to securing planning consent and delivering a refurbished unit, Lidl will complete a new 15 year lease at £335,000 per annum. Discussions are also ongoing in connection with letting the remaining space to a complementary retailer. Assuming planning consent is secured, the former Homebase will be refurbished and extended at a cost of approximately £3.7 million.

Sheffield, The Portergate – 31 December 2018 valuation £4.8 million (Office)

The Portergate is a 49,489 sq ft office that was let to Aviva Life and Pension until June 2019 at £1.02 million per annum. Aviva were not in occupation and on 21 December 2018 paid £1.2 million to terminate their lease early. Following lease termination Aviva’s sub-tenants will continue to pay £355,275 per annum reflecting an average rent of £10.60 per sq ft. The strategy is to refurbish vacant space totalling 16,000 sq ft and improve the building’s reception in order to increase the rental tone to circa £14 per sq ft, which is in line with comparative assets.

Debt

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 30 January 2019, the Company announced that it had expanded its RCF from £32.5 million to £52.5 million. The expansion maximises operational flexibility and provides additional capacity for a pipeline of asset management initiatives and future income enhancing acquisitions.

As at 31 December 2018, £160.1 million of debt is drawn with an average duration of approximately 8.4 years and an average interest cost of 4.4%. £22 million of the RCF facility remains undrawn. Fully drawn, the Company’s overall cost of debt would be 3.9%. 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 £36.5 million and cash of approximately £11.8 million. This results in a loan to value ratio, net of cash, of approximately 29%.

-ENDS-

For further information:

Schroder Real Estate Investment Management Limited: Duncan Owen / Nick Montgomery / Frank Sanderson	020 7658 6000
Northern Trust: Sean Walsh / James Machon	01481 745529
FTI Consulting: Dido Laurimore / Richard Gotla	020 3727 1000