NAV and Dividend for Quarter to 31 December 2020

For release 15 February 2021

Schroder Real Estate Investment Trust Limited

ANNOUNCEMENT OF NAV AND DIVIDEND FOR QUARTER TO 31 DECEMBER 2020

Schroder Real Estate Investment Trust (the ‘Company’ or ‘SREIT’), the actively managed UK-focused REIT, announces its net asset value (‘NAV’) and dividend for the quarter to 31 December 2020. The Company’s rent collection remains strong, which has underpinned a 9% increase in the quarterly dividend. In addition, following two signficant acquisitions in December, the portfolio weighting towards the industrial sector has increased from 30% to 37% over the quarter.

Net Asset Value

The unaudited NAV as at 31 December 2020 was £293.3 million or 58.8 pence per share ('pps'). This reflects an increase of 1.4% per share compared with the NAV as at 30 September 2020. Based on the quarterly dividend paid of 0.575 pps, the NAV total return was 2.4% for the period, with a like for like portfolio valuation increase offset by capital expenditure and one off acquisition costs. A breakdown is set out below:

	£m	pps	Comments
NAV as at 30 September 2020	296.8	58.0
Unrealised increase in the valuations of the direct real estate portfolio and Joint Ventures	4.5	0.9	Portfolio like-for-like valuation movement, net of capital expenditure, of +0.9% over the period to 31 December 2020. Sector capital value movements, net of capital expenditure, were Industrial +4.7%, Offices 0.0%, Retail -1.9% and Other -2.1%
Capital expenditure (direct portfolio and share of Joint Ventures)	(1.1)	(0.2)	Includes asset management activity across the  multi-let industrial portfolio  to capture rental growth (Millshaw Industrial Estate, Leeds and Union Park, Norwich) and completing the landlord works in relation to Lidl and Home Bargains lettings at St John’s Retail Park, Bedford
Acquisition costs	(2.3)	(0.4)	Costs associated with the separate acquisitions of Langley Park, Chippenham and Stanley Green, Cheadle, that totalled £36.5m.
Realised gains on disposals	0.1	-	Disposal of small non-core assets including two units in Commercial Road, Portsmouth (High Street Retail, £2.0m) and unconditional exchange of The Portergate, Sheffield (Office, £4.2m) which has now completed
Net revenue	2.6	0.5	Quarterly EPRA earnings
Dividend paid	(2.9)	(0.6)	Reflects the 0.575 pps quarterly dividend which was paid in December 2020
NAV as at 31 December 2020 (excluding the share buyback)	297.7	58.2	Calculation based on 511,364,955 shares
Share buyback	(4.4)	0.6	Purchase of 12.8m shares at an average price of 34.5 pence per share
NAV as at 31 December 2020	293.3	58.8	Calculation based on 498,516,392 shares

Dividend payment

The Company announces an interim dividend of 0.625 pps for the period 1 October 2020 to 31 December 2020. This equates to a 9% increase compared with the prior quarter’s dividend level and reflects progress with rent collection, asset management, acquisitions and share repurchases. This dividend level is anticipated to be fully covered by recurring net income, with further net income growth potential from asset management and further new investment. The dividend will continue to be reviewed by the Board targeting a sustainable and progressive dividend policy.

The dividend payment will be made on 12 March 2021 to shareholders on the register as at 26 February 2021. The ex-dividend date will be 25 February 2021.

The dividend of 0.625 pps will be wholly designated as an interim property income distribution (‘PID’).

Rent collection

Rent collected for the quarter ending 31 March 2021 currently totals 85% of contracted rents (as at 10 February 2021), which is in-line with the equivalent date in the previous quarter. The breakdown between sectors is 96% of office rent collected, 98% of industrial rent collected and 54% relating to retail, leisure and ancillary uses collected. The Company remains in active dialogue with its tenants for all rents due to be paid and expects to recover a significant portion of the outstanding amount.

Performance versus MSCI Benchmark Index

Over the quarter to 31 December 2020, the underlying portfolio produced a total return of 1.9%. This compares favorably with the total return for the MSCI Benchmark of 1.3%. The portfolio’s quarterly income return of 1.6% compared with the Benchmark at 1.1%. 

For the calendar year 2020, the underlying portfolio produced a total return of 0.7% compared with MSCI of -1.2%, resulting in relative outperformance of 1.8%. The Company has outperformed the MSCI Benchmark Index over one, three, five, 10 years and since IPO in 2004.

Property portfolio

As at 31 December 2020, the underlying portfolio comprised 40 properties valued at £432.8 million. At the same date the portfolio produced a rent of £28.3 million per annum reflecting a net initial yield of 6.1% which compares with the MSCI Benchmark Index of 4.7%. The portfolio estimated rental value is £31.6 million per annum, reflecting a reversionary yield of 7.3%, which compares with the MSCI Benchmark Index of 5.2%.

The void rate was 5.1% calculated as a percentage of rental value. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 5.5 years. The tables below summarise the portfolio information as at 31 December 2020:

Sector weightings	Weighting (%)
	SREIT	MSCI Benchmark Index
Industrial	37.2	28.4
Offices	35.3	27.5
Retail    Retail warehouse    Retail ancillary to main use    Retail single use	20.6 11.4 5.2 4.0	24.5
Other	6.9	16.6

Regional weightings	Weighting (%)
	SREIT	MSCI Benchmark Index
Central London	9.1	17.6
South East excluding Central London	19.2	37.1
Rest of South	11.9	14.3
Midlands and Wales	24.9	12.3
North and Scotland	34.9	18.4
Northern Ireland	0.0	0.2

Acquisitions

Two multi-let industrial estates in Cheadle (Greater Manchester) and Chippenham were acquired, in separate transactions, in December 2020 for £36.5 million. The two estates generate initial rental income of £2.8 million per annum, equating to a 6.8% net initial yield. The estates offer significant potential to grow net income through asset management and development. The acquisitions increase SREIT’s industrial weighting from 30% to 37%, with the majority of this in high quality, multi-let estates.

The Company has approximately £40 million of cash and undrawn debt facilities as at 31 December 2020 to make further acquisitions, invest in the existing portfolio and share repurchases.

Share buy-back programme

During the period to 31 December 2020 12.8 million shares were acquired for £4.4 million which reflected an average price of 35.5 pps and an average discount to the September 2020 NAV of -39%. This resulted in NAV accretion of approximately 1.0%. Since the period end approximately 3.1 million additional shares have been acquired for £1.2 million.

In total, 23.1 million shares have been repurchased since the share buy-back programme launched in September 2020, delivering 2.0% of accretion to the 31 March 2020 NAV. In addition, the repurchases are earnings accretive, therefore increasing dividend cover.

The open market share buyback programme will continue with the Company’s broker, JP Morgan Securities plc.

Balance sheet and debt

As at 31 December 2020, the Company has cash of £25.2 million and a loan to value ratio, net of cash, of approximately 32%.

The Company has two loan facilities, a £129.6 million term loan with Canada Life and a £52.5 million revolving credit facility (‘RCF’) with Royal Bank of Scotland International.  As at 31 December 2020, £37.0 million of the RCF was drawn. Fully drawn, the facilities have an average duration of approximately 12 years and an average interest cost of 2.2%.

Sustainability

Three Green Stars awarded in annual GRESB survey
The Company retained its three star rating in the GRESB global sustainability benchmark assessment for real estate assets during the period and came first in its peer group of nine internally and externally managed listed real estate investment companies.  The 2020 GRESB Assessment structure fundamentally changed from the 2019 Assessment, establishing a new, more challenging baseline for measuring sustainability performance.

Participation in the GRESB survey is part of the Company’s broader ESG and positive impact strategy which is integral to the investment process. 

Further information can be found within the Company’s latest Sustainability Guide at https://www.schroders.com/en/uk/private-investor/fund-centre/funds-in-focus/investment-trusts/schroders-investment-trusts/schroder-real-estate-investment-trust/sustainability/.

Net Zero Carbon Pathway
The Company, together with Schroder Real Estate as Investment Manager, is focussed on delivering continued improvements in the sustainability performance of the portfolio. In December 2020, Schroders issued its Net Zero Carbon Pathway, a commitment made in September 2019 as part of the UK Better Buildings Partnership Climate Commitment. This outlines a trajectory for achieving net zero carbon by 2050 and addresses both operational carbon, covering whole building performance; and embodied carbon, covering development and refurbishment activities.

Further information can be found within the Schroder Real Estate Pathway to Net Carbon Zero document at https://www.schroders.com/en/sysglobalassets/email/uk/realestate/2020/schroder-real-estate-net-zero-carbon-pathway-december-2020_1621372_v1.pdf

-ENDS-

For further information:

Schroder Real Estate Investment Management Limited: Nick Montgomery / Frank Sanderson	020 7658 6000
Northern Trust: Jingjing Qi	01481 745529
FTI Consulting: Dido Laurimore / Richard Gotla / Meth Tanyanyiwa	020 3727 1000