Company Update

RNS Number : 6309J

Schroder Eur Real Est Inv Trust PLC

15 April 2020

 

15 April 2020

COMPANY UPDATE

Schroder European Real Estate Investment Trust plc ("SEREIT"/ the "Company" / "Group"), the Company investing in European growth cities, provides a business update in light of the market uncertainty caused by the COVID-19 pandemic. The Company is appropriately positioned to mitigate against short-term market volatility, benefiting from a highly diversified portfolio, low levels of gearing and limited exposure to underperforming sectors.

Introduction

The Company's ongoing focus is to protect shareholders' long-term interests.  A core part of protecting the long-term value of our business involves working closely to support our customers, tenants, suppliers and our team across Europe during these difficult times.

Portfolio

The Company's diversified portfolio comprises 13 assets located in the growth cities and regions of Continental Europe. The portfolio has approximately 100 tenants across a range of industries and benefits from being well balanced with approximately 75% in the office and industrial/data centre sectors, in cities including Paris, Berlin, Frankfurt, Hamburg and Stuttgart.

Retail represents 25% of the portfolio, of which 15% is invested in a Lidl supermarket in Frankfurt, which is currently still trading, and a Hornbach DIY unit in Berlin, leased on five and six year terms respectively.  The Metromar Centre in Seville is the only shopping centre in the portfolio and represents 10% of the portfolio value.  

The Company's largest investment is the office building, leased to engineering and technology consulting specialist Alten, in Boulogne Billancourt, Paris. As previously announced, the Company has been working on a value enhancing asset management initiative to refurbish the building on the basis of a new ten year lease to Alten, who remain committed. The Company continues to progress  the planning, tender and financing.

Rent collection

As at close of business on 7 April 2020, the Company had received payments on 75% of monthly rents in respect of April 2020. Some rents for April get paid mid month and as such it  expects this rate to continue to rise. This more than covers the running costs of the Company. The analysis between sectors for rent collection over April is as follows: 90% of office; 72% of industrial / data centre use; and 57% of retail and leisure.

Balance sheet and debt

As at 31 December 2019, the Company had free cash of approximately €10 million and a net loan-to-value ("LTV") of approximately 30%. The Company has seven drawn debt facilities, which are each non-recourse with security against individual investments or groups of investments, and no cross collateralisation between loans. The loans have the following overall profile:

· No loan maturity prior to 2023

· Loans well diversified, ranging in size from €3.7 million to €17 million

· Each loan has separate LTV and income covenants, with a range of headroom against covenants:

-  Across the portfolio, the weighted average valuation decline before LTV default covenants are breached is approximately 27%. This ranges between 17% (Seville) and 37% (Hamburg and Stuttgart);

-  Across the portfolio, the weighted average net income decline before income default covenants are breached is approximately 34%. This ranges between 15% (Hamburg and Stuttgart) and 73% (Rennes)

· The Company's sole shopping centre in Seville is closed as a result of COVID-19 (except for the supermarket). There is no default income covenant for the loan, however there is currently a cash trap of net income from the property

· The Company has two assets, Paris (Boulogne Billancourt) and Apeldoorn, which are unlevered and had a total value as at 31 December 2019 of €61.6 million

Dividend

The Company's first interim dividend for the year ending 30 September 2020 of 1.85 euro cents per share was paid on 14 April 2020.

In light of the ongoing market uncertainty and the stated objective to pay a dividend based on sustainable rental income, the Manager and the Board propose to keep the future dividend payments under review. Whilst the Company recognises the importance of dividends to shareholders, in the current circumstances it is anticipated a postponement or reduction in dividend may be appropriate. This will be reviewed as clarity improves around the economic backdrop in light of ongoing developments regarding COVID-19 and how future rental receipts and the cash position of the Company is impacted.

Half year results

The announcement of the Company's half year results for the period to 31 March 2020 is expected in June 2020. Further details will be provided in due course.

-ENDS-

For further information:

Schroder Real Estate Investment Management Limited: Duncan Owen / Jeff O'Dwyer	020 7658 6000
Schroder Investment Management Limited: Ria Vavakis	020 7658 2371
FTI Consulting: Dido Laurimore / Richard Gotla	020 3727 1000

 

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