Announcement of NAV and Dividend

RNS Number : 2264E

Schroder Eur Real Est Inv Trust PLC

10 March 2022

 

10 March 2022

ANNOUNCEMENT OF NAV AND DIVIDEND 

Schroder European Real Estate Investment Trust plc ("SERE" or the "Company") provides a business update and announces its unaudited net asset value ("NAV") as at 31 December 2021, together with its first interim dividend for the year ending 30 September 2022:

-  Unaudited NAV as at 31 December 2021 increased by 0.8% to 201.2 million or 150.4 cents per share

-  NAV total return amounted to 2.1% over the quarter and 4.5% for the twelve months to 31 December 2021

-  A first interim dividend of 1.85 euro cents per share to be paid for the year ending 30 September 2022

-  Property portfolio is independently valued at €221.4 million, reflecting a like-for-like increase of the directly held properties over the quarter of 2.2%, or €4.4 million

-  Key portfolio level initiatives during the period included:

o  the strategic purchase of a 3,800 sqm industrial warehouse in Venray, the Netherlands, increasing the portfolio's industrial weighting to c.23%

o  The Paris Boulogne-Billancourt refurbishment remains on budget from both a cost and timing perspective. The remaining 40% (c.€40 million) of the sale price is due to be received during 2022, with the proceeds partially used to fund the remaining c.€16 million refurbishment cost

o  rent collection during the quarter, and January and February 2022, of 96%

-  The Company has an investable cash balance of approximately 30 million and a loan to value ratio on the total portfolio of approximately 18% net of cash and 28% gross of cash

Net Asset Value

The table below provides a breakdown of the movement in NAV during the reporting period:

	€m (1)	Cps (2)	% (3)
Brought forward NAV as at 1 October 2021	199.5	149.2
Unrealised gain in the valuation of the property portfolio	4.4	3.2	2.3
Transaction costs of investments made	(0.2)	(0.1)	(0.1)
Capital expenditure	(0.1)	(0.1)	(0.1)
EPRA earnings prior to extraordinary items	1.6	1.2	0.8
Extraordinary items 4	(0.9)	(0.7)	(0.5)
Non-cash items	(0.6)	(0.4)	(0.3)
Dividend paid	(2.5)	(1.9)	(1.3)
NAV as at 31 December 2021	201.2	150.4	0.8

(1) Management reviews the performance of the Company principally on a proportionally consolidated basis. As a result, figures quoted in this table include the Company's share of joint ventures on a line-by-line basis and exclude non-controlling interests in the Company's subsidiaries.

(2) Based on 133,734,686 shares.

(3) % change based on starting NAV 1 October 2021.

(4) Reflects a € 634,000 exceptional tax provision which is currently subject to arbitration, together with one-off service charge-related costs at the Frankfurt and Hamburg assets totalling € 295,000

Interim dividend

The Company continues to pay a full dividend equating to the pre-covid dividend level. The first interim dividend of 1.85 euro cents per share for the year ending 30 September 2022 represents an annualised rate of 6.2% based on the current share price ⁵ . As announced previously, the Company allocates a portion of the forward funded net sales proceeds from the Paris Boulogne-Billancourt asset towards covering the dividend income shortfall whilst it is being refurbished and pending the reinvestment of the remainder of the sale proceeds.

Dividend cover from income for the quarter ended 31 December 2021 was 64% excluding extraordinary items incurred in the quarter. These comprised a withholding tax provision of €634,000 and one-off service charge-related costs relating to the Group's Frankfurt and Hamburg assets. Including both these items, the dividend cover is 27%.

The interim dividend payment will be made on Wednesday, 20 April 2022 to shareholders on the register on the record date of Friday, 1 April 2022. In South Africa, the last day to trade will be Tuesday, 29 March 2022 and the ex-dividend date will be Wednesday, 30 March 2022. In the UK, the last day to trade will be Wednesday, 30 March 2022 and the ex-dividend date will be Thursday, 31 March 2022.

The interim dividend will be paid in GBP to shareholders on the UK register and Rand to shareholders on the South African register. The exchange rate for determining the interim dividend paid in Rand will be confirmed by way of an announcement on Monday, 14 March 2022. UK shareholders are able to make an election to receive dividends in Euro rather than GBP should that be preferred. The form for applying for such election can be obtained from the Company's UK registrars (Equiniti Limited) and any such election must be received by the Company no later than Friday, 1 April 2022. The exchange rate for determining the interim dividend paid in GBP will be confirmed following the election cut off date by way of an announcement on Monday, 4 April 2022.

Shares cannot be moved between the South African register and the UK register between Monday, 14 March 2022 and Friday, 1 April 2022, both days inclusive. Shares may not be dematerialised or rematerialised in South Africa between Wednesday, 30 March 2022 and Friday, 1 April, both days inclusive.

The Company has a total of 133,734,686 shares in issue on the date of this announcement. The dividend will be distributed by the Company (UK tax registration number 21696 04839) and is regarded as a foreign dividend for shareholders on the South African register. In respect of South African shareholders, dividend tax will be withheld from the amount of the dividend noted above at the rate of 20% unless the shareholder qualifies for the exemption. Further dividend tax information for South African shareholders will be included  in the exchange rate announcement to be made on Monday, 14 March 2022 .

Rent collection

Approximately 96% of the rent due for the quarter ended 31 December 2021 has been collected which is ahead of the average amount collected in the previous financial year of 93%. As at 8 March 2022, 96% of the rent due for January 2022 and February 2022 has been collected.

⁵ Share price 99p as at 8 March 2022 and an exchange rate of £1 to €1.2025

Property portfolio

As at 31 December 2021, the property portfolio was independently valued at 221.4 million, reflecting a NIY of 5.8%.

The value for directly held properties increased over the quarter by 2.2% or €4.4 million (net of Capex, 2.1% or €4.1 million). This was driven by yield compression across the office, retail and logistics assets within the portfolio, reflecting the benefit of having a multiple sector focused portfolio and management expertise, as well as the strength of those individual assets. The increase excludes the impact of both a recently acquired industrial warehouse in Venray, Netherlands (valued at €1.65 million) and from the Seville Shopping centre where the Company continues to recognise its 50% interest in a joint venture at nil interest.

The majority of the valuation uplift was driven by:

-  Improved yield re-rating at the Berlin retail DIY investment, delivering a valuation increase of €1.8 million, or 6.2%

-  Improved yield re-rating at the Hamburg office investment, delivering a valuation increase of €1.2 million, or 5.2%

-  Improved yield re-rating at the Rennes logistics investment, delivering a valuation increase of €0.9 million, or 4.8%.

The Company continues to recognise its 50% interest in its Seville joint venture at nil interest.

The portfolio valuation excludes Paris, Boulogne-Billancourt, which has been treated as disposed in the Financial accounts. The majority of the profit from the refurbishment and sale has already been recognised in the financial accounts. The remaining approximately €4 million of potential development profit pending (pre-tax), which may be released as the refurbishment is completed.

Transactions & asset management update

Key portfolio level initiatives during the period included:

-  In Venray, the Netherlands, SERE acquired a freehold 3,800 sqm warehouse, fully let to So Expo, a design and construction specialist focused on exhibition trade shows, with approximately 8 years remaining on the lease term. The purchase price was c.€1.7 million including costs and reflected a net initial yield of c.5.5%, with significant reversion potential. The asset adjoins the Company's existing Venray logistics investment and further increases the portfolio's logistics weighting

-  In Paris, the refurbishment of the Boulogne-Billancourt office investment remains within cost and programme with completion expected towards the end of Q2 2022. The remaining 40% (c.€40 million) of the purchase price will be received during 2022, with the proceeds used, in part, to fund the remaining c.€16 million refurbishment cost

-  In Frankfurt, discussions continue with the anchor tenant Lidl regarding a longer term extension

Balance sheet and debt

As at 31 December 2021, the Company has investable cash of approximately 30 million. The loan to value ratio of the portfolio amounts to approximately 18% net of cash and 28% gross of cash. This capital is available for new earnings-enhancing initiatives including acquisitions.

The Company has seven loans secured by individual assets or groups of assets, with no cross-collateralisation between loans and no recourse to the Company. The average weighted total interest rate of the loans is 1.4% per annum and the earliest scheduled loan maturity is in 2023. With the exception of Seville, all loans are currently in compliance with their covenants. The Seville loan is subject to a cash trap and is being managed under an LTV covenant waiver to facilitate a sale.

Enquiries:

Jeff O'Dwyer

Schroder Real Estate Investment Management Limited    Tel: [phone]

Ria Vavakis

Schroder Investment Management Limited  Tel: [phone]

Dido Laurimore/Richard Gotla/Ollie Parsons 

FTI Consulting                                                                               Tel: [phone]

 

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