Announcement of NAV and Dividend

RNS Number : 1137D

Schroder Real Estate Inv Trst Ld

01 March 2022

 

Schroder Real Estate Investment Trust Limited

('SREIT' or the 'Company')

ANNOUNCEMENT OF NAV AND DIVIDEND FOR THE QUARTER TO 31 DECEMBER 2021

Schroder Real Estate Investment Trust ('SREIT' or the 'Company'), the actively managed UK-focused REIT, announces its net asset value ('NAV') and dividend for the quarter to 31 December 2021.

Highlights

· NAV of £345.9 million (30 September 2021: £323.4 million).

· NAV per share increase of 7.0% and total return of 8.1%.

· 6.3% increase to the quarterly dividend to 0.772 pence per share ('pps').

· This reinstates the dividend back to its pre-pandemic level.

· £19.85 million off-market acquisition of four industrial assets in the northwest of England in December reflecting a 6.9% net initial yield, delivered a 4.3% valuation increase as at 31 December 2021.

· Rent collection levels stabilising at pre-pandemic levels, with 96% of rent due for the quarter ending 31 March 2022 collected, in line with the equivalent date in the previous quarter.

· Post quarter end disposal of a Nottingham office building for £13.0 million, representing a 39% premium to the 31 December 2021 valuation and a 4.5% net initial yield.

Nick Montgomery, Fund Manager of SREIT, commented: "This performance is testament to the speed of recovery of the market alongside the strategic steps we have taken to pivot the portfolio towards higher growth sub-sectors. Having restored the dividend to the pre-pandemic level, our focus is on delivering our pipeline of portfolio activity, progressing our ambitious sustainability strategy and continuing to grow net income."

Net asset value

The unaudited NAV as at 31 December 2021 was £345.9 million or 70.4 pps. This reflects an increase of 7.0% per share compared with the NAV as at 30 September 2021. Taking into account the quarterly dividend of 0.726 pps paid in December 2021 and relating to the quarter to 30 September 2021, the NAV total return for the quarter was 8.1%. A breakdown is set out below:

	£m	pps	Comments
NAV as at 30 September 2021	323.4	65.8
Unrealised net increase in the valuations of the direct real estate portfolio and Joint Ventures	25.6	5.2	Portfolio like-for-like valuation movement, net of capital expenditure, of +5.0% over the quarter to 31 December 2021
Capital expenditure (direct portfolio and share of Joint Ventures)	(1.7)	(0.3)	Includes asset management activity across the  multi-let industrial portfolio to capture rental growth (Stacey Bushes, Milton Keynes and Millshaw Industrial Estate, Leeds)
Acquisition costs	(1.3)	(0.3)	Transaction costs incurred relating to the industrial portfolio acquired in December 2021.
Net revenue	3.3	0.7	Quarterly EPRA earnings.
Dividend paid	(3.6)	(0.7)	Dividend for the quarter ended 30 September 2021 paid in December 2021 (at 0.726 pence per share). Fully covered over the quarter on a cash basis.
Others	0.2	-	All other items.
NAV as at 31 December 2021	345.9	70.4	Calculation based on 491,080,301 shares.

As previously announced, the Company has completed the disposal of an office building, The Arc in Nottingham, for £13.0 million, which compares with the 31 December 2021 valuation of £9.35 million. The asset produced net income of £622,210 per annum and the price reflected a net initial yield of 4.5%.

Dividend payment

The Company announces an interim dividend of 0.772 pence per share ('pps') for the period 1 October 2021 to 31 December 2021.

This reflects a 6.3% increase compared with the prior quarter's dividend and equates to 100% of the pre-Covid dividend on a pps basis. The dividend will continue to be reviewed by the Board targeting a sustainable and progressive dividend policy.

The dividend payment will be made on 25 March 2022 to shareholders on the register at the record date of 11 March 2022. The ex-dividend date will be 10 March 2022.

The dividend of 0.772 pps will be wholly designated as an interim property income distribution ('PID').

Performance versus MSCI Benchmark Index

Over the quarter to 31 December 2021, the underlying portfolio produced a total return of 6.4%. This compares favourably with the total return for the MSCI Benchmark Index (the 'Benchmark') of 6.2%. The portfolio's quarterly income return of 1.5% compared with the Benchmark at 1.0%.

For the calendar year 2021, the underlying portfolio produced a total return of 19.2% compared with the Benchmark of 16.6%, resulting in relative outperformance of 2.6%, driven by an income return of 6.5% compared with the Benchmark of 4.2%. The Company has outperformed the Benchmark over one, three, five, 10 years and since IPO in 2004.

Property portfolio

As at 31 December 2021, and adjusting for the disposal of The Arc office building in Nottingham, the underlying portfolio comprised 42 properties valued at £500.0 million. At the same date the portfolio produced a rent of £29.5 million per annum reflecting a net initial yield of 5.5% which compares with the Benchmark of 4.1%. The portfolio estimated rental value is £33.3 million per annum, reflecting a reversionary yield of 6.7%, which compares with the Benchmark of 4.7%.

The void rate was 6.9% calculated as a percentage of rental value, of which 1.2% is under offer. The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 5.4 years. The tables below summarise the portfolio information as at 31 December 2021, adjusted for the Nottingham disposal:

Sector weightings	Weighting (%)
	SREIT	MSCI Benchmark Index*
Industrial	46.5	33.1
Offices	28.1	25.0
Retail warehouse	11.5	9.0
Retail   Retail ancillary to main use   Retail single use	7.6 4.4 3.2	12.5
Other	6.3	16.6
Unattributable	-	3.7

Regional weightings	Weighting (%)
	SREIT	MSCI Benchmark Index*
Central London	7.9	16.1
Southeast excluding Central London	20.1	38.0
Rest of South	10.7	14.9
Midlands and Wales	21.7	12.9
North	37.3	13.7
Scotland	2.3	4.3
Northern Ireland	0.0	0.2

* Figures may not sum to 100.0 due to rounding.

Portfolio activity

Since 30 September 2021, the Company has completed 21 new lettings, renewals and reviews across 128,600 sq ft of space. These transactions were completed at 4% ahead of 30 September 2021 ERVs, generating £1.1 million per annum of contracted rent, which represents an additional £500,000 per annum of rental income compared to the previous position.

Transactions

As previously reported, in December 2021 the Company acquired an off-market portfolio of four industrial assets in the northwest of England for £19.85 million. Combined, the assets generate initial rental income of £1.5 million per annum, equating to a 6.9% net initial yield and a low capital value equating to £53 per sq ft. The portfolio was revalued at £20.7 million as at 31 December 2021, reflecting a 4.3% uplift.

The portfolio comprises a well located, multi-let industrial estate in Birkenhead valued at £12.5 million as at 31 December 2021, together with single let assets in Haydock and Sandbach with a combined value of £8.2 million as at 31 December 2021. The assets are let off an average rent of £3.40 per sq ft, which provides scope for growth and good initial progress has been made with lettings under offer at Birkenhead. The portfolio acquisition increases SREIT's industrial weighting from 42% as at 30 September 2021 to 47%, with the majority of this in good quality, multi-let estates. Following the disposal of the Nottingham office, a number of potential acquisitions are under consideration.

Balance sheet and debt

As at 31 December 2021, the Company had cash of £12.5 million and a loan to value ratio, net of cash, of approximately 32%. Following the disposal of Nottingham, the net LTV has reduced to approximately 30%.

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 2021, £45.7 million of the RCF was drawn. Fully drawn, the facilities have an average duration of approximately 11 years and an average interest cost of 2.3%.

Sustainability

Three Green Stars awarded in annual GRESB survey

The Company retained its three star rating in the 2021 GRESB global sustainability benchmark assessment for real estate assets. Participation in the GRESB survey is part of the Company's broader ESG and positive impact strategy which is fully integrated at all stages of our investment process.

Further information can be found within the Company's latest SREIT Annual Sustainability Report (for year ended 31 March 2021) at:

https://www.schroders.com/en/sysglobalassets/investment-trusts/sereit/sreit_sustainability_report_march-2021.pdf .

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.

The Company will publish its own net zero carbon pathway in 2022 to align the fund with Schroders' commitment and the Paris 1.5 ° C ambition.

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 / Bradley Biggins / Matthew Riley	020 7658 6000
FTI Consulting: Dido Laurimore / Richard Gotla / Ollie Parsons	020 3727 1000

 

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