Announcement of NAV

RNS Number : 4251B

Schroder Eur Real Est Inv Trust PLC

03 October 2022

 

3 October 2022

ANNOUNCEMENT OF NAV

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 30 June 2022:

-  Unaudited NAV of €197.8 million or 147.9 euro cents per share ("cps") as at 30 June 2022, reflecting a NAV total return of 0.6% over the quarter and 8.0% over a 12 month period

-  The directly held property portfolio value decreased over the quarter by 0.5%, or €1.0 million (net of capex 0.6% or €1.2 million), with inflation-linked rental growth offset by individual asset activity

-  A further € 1.2 million of post-tax development profit from the Boulogne-Billancourt, Paris asset was recognised in the quarter

-  A third ordinary interim dividend has been previously declared in August 2022 relating to the year ending 30 September 2022 of 1.85 cps. Total ordinary dividends declared relating to the nine months of the current financial year are now 5.55 cps

-  In addition, the Company has also announced in August 2022 a third and final special dividend of 0.10 cps associated with the successful execution of the Paris Boulogne-Billancourt business plan. This brings the final combined special dividends to 9.60 cps, with total dividends of 15.15 cps being paid to investors in the financial year ended 30 September 2022

-  At the end of June 2022, the Company completed the purchase of a car showroom in Cannes, France for €8.4 million, reflecting a net initial yield of 5.5%, and a reversionary yield of 6.4%. The asset also offers longer term alternative use upside

-  As at 30 June 2022, the Company has an available cash balance of €29 million. The loan to value ratio on the total portfolio is approximately 20% net of cash and 28% gross of cash

-  The Company has a remaining investment capacity of c.€50 million, including €25 million of additional debt

-  Annualising the ordinary dividend provides investors with a dividend yield exceeding 7%, based on the 30 September 2022 share price of c. 90p

-  The portfolio income, value and debt is Euro denominated, with 100% of the income subject to indexation

Net Asset Value

The table below provides a breakdown of the movement in NAV during the quarter ended 30 June 2022:

	€m (1)	Cps (2)	% (3)
Brought forward NAV as at 1 April 2022	199.1	148.8
Unrealised loss in the valuation of the property portfolio	(1.0)	(0.7)	(0.5)
Transaction costs	(0.8)	(0.6)	(0.4)
Capital expenditure	(0.3)	(0.2)	(0.1)
EPRA earnings	1.7	1.3	0.8
Boulogne-Billancourt, Paris post-tax development profit	1.2	0.9	0.6
Non-cash items	0.4	0.3	0.2
Dividend paid	(2.5)	(1.9)	(1.3)
NAV as at 30 June 2022	197.8	147.9	(0.7)

(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 as at 1 April 2022.

Property portfolio

As at 30 June 2022, the direct property portfolio, including the recently acquired car showroom in Cannes, France, was independently valued at €218.4 million, reflecting a NIY of 5.9%.

The value of the portfolio decreased over the quarter by 0.5% or €1.0 million (net of Capex 0.6% or €1.2 million). The majority of the portfolio's valuation change was driven by:

-  Increased vacancy assumptions at the Paris, Saint-Cloud office investment, resulting in a valuation decrease of -€0.5 million, or -1.2%;

-  Increase in the capital expenditure provision for the upgrading of heating, air conditioning and renewable energy at the Houten industrial investment in the Netherlands, being the main driver of a valuation decrease of -€0.5 million, or -5.6%;

-  Five year lease extension for c. 1,000 sqm, equating to c.20% of the floorspace, at the Stuttgart office investment, delivering a valuation increase of €0.3 million, or 1.4%

With 100% of the portfolio leases subject to indexation, rising inflation is starting to contribute to rental growth. Furthermore, rent collection remains high, with 100% of rent due for the quarter ended 30 June 2022 collected from the direct property portfolio.

In addition to the direct property portfolio, the Company has a 50% interest in a joint venture in Seville which continues to be recognised at nil interest.

The portfolio valuation excludes the Boulogne-Billancourt, Paris refurbishment and sale which has been treated as disposed in the Financial Statements. The refurbishment was delivered to the business plan in the second quarter of 2022 and a further €1.2 million of post-tax development profit has been recognised in the accounts in the quarter ended 30 June 2022. The majority of the profit from the refurbishment and sale has now been recognised in the Financial Statements and a further  1.5 million of development profit may potentially be released to the NAV over the next 12 months.

Outlook

The economic outlook has continued to worsen over the last three to six months with the Eurozone facing a number of headwinds. The Energy crisis, inflationary concerns and increasing interest costs are creating a drag on sentiment and recessionary concerns.

Values across the portfolio are holding up well, although recent bond yield rises are likely to put pressure on this. The Company expects the portfolio's diversification characteristics, income profile and location strengths will help in mitigating this pressure. Looking forward the expectation is that rental affordability and managements local expertise will be an increasing positive regarding retention of occupiers.

The Company currently has c.€50 million of firepower to deploy (including €25 million of additional debt) and expects to see an improving pipeline of opportunities over the next twelve months that will enable it to diversify and strengthen its exposure to growth cities, regions and sectors.

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    Tel : [phone]

FTI Consulting

 

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