Disposal and Asset Management Update

RNS Number : 7197Q

Schroder Real Estate Inv Trst Ld

30 June 2022

 

For release 30 June 2022

Schroder Real Estate Investment Trust Limited

("SREIT" / the "Company" / "Group")

DISPOSAL 33% AHEAD OF BOOK VALUE AND ASSET MANAGEMENT UPDATE

Schroder Real Estate Investment Trust Limited, the actively managed UK-focused REIT, announces further progress with its capital recycling programme and an asset management update.

Disposal

Southlink, a 26,975 sq ft single let industrial asset in Portsmouth has been sold for £6.5 million. The price compares with the 31 March 2022 independent valuation of £4.9 million and reflects a net initial yield of 3.2%.

Situated within the Walton Road Industrial area, the Company acquired Southlink in July 2004. The asset produces a net rent of £225,000 per annum with a lease term of 2.4 years. Based on the disposal price, the asset has generated an ungeared total return of 13.2% per annum since acquisition, compared with the All Property MSCI Benchmark for the same period of 6.8% per annum, and MSCI All Industrial for the same period of 10.6% per annum.

As noted in this month's Full Year results, further disposals are under consideration, alongside potential acquisitions of adjoining ownerships where these support delivery of the asset business plan.

Asset management

Since 31 March 2022 the Company has completed 17 new lettings, renewals and reviews across 427,121 sq ft. The transactions will generate £2.7 million per annum of rental income and increase contracted rental income by £1.0 million per annum.

Chippenham, Langley Park Industrial Estate (Industrial)

Following the update provided with the Full Year results, two lettings have completed at Langley Park Industrial Estate, achieved at 26% and 31% above the previous passing rent respectively:

· A rent review with Siemens Mobility Limited ('Siemens') across five units totalling 263,221 sq ft, at £1.22 million per annum, reflecting a rental increase of 26% compared with the previous rent. The rent review is 17% ahead of the combined 31 December 2021 estimated rental value ("ERV"), and in line with the ERV as at 31 March 2022.  Siemens is now the Company's second largest tenant.

· IXYS UK Westcode Limited ('IXYS'), the UK subsidiary of Littelfuse Inc., a global electronic manufacturing company, who occupy an 84,584 sq ft warehouse unit due to expire in December 2022, has completed a new ten-year lease renewal without break options from December 2022 at a rent of £465,000 per annum, or £5.50 per sq ft. This reflects a rental increase of 31% compared with the current rent and is in line with the 31 March 2022 ERV.  IXYS receive 12 months' rent free and a contribution towards improvement works capped at £250,000. The lease includes a rent review at year five to the higher of open market value or the retail price index ('RPI'), with a cap of 5% per annum. The lease is guaranteed by Littelfuse, Inc. and, following completion of the new lease, IXYS will be the Company's eighth largest tenant.

Based on the contracted rent following the above activity, and after expiry of the rent free period, the valuation as at 31 March 2022 of £27.5 million reflects an attractive net initial yield of 7.4%. The asset was acquired in December 2020 for £19.25 million.

The next phase of the business plan at Langley Park is the development of new warehouse units, to be constructed to an operational Net Zero Carbon ("NZC") standard, on the site where there is surplus land with currently no apportioned value. A pre-planning application to develop 130,000 sq ft of space has been submitted to Wiltshire County Council.

Bedford, St. John's Retail Park (Retail warehouse)

A 15-year pre-let has completed with Starbucks Coffee Company UK Limited ("Starbucks"), for a new drive thru at St. John's Retail Park in Bedford. Subject to securing planning consent, Starbucks will construct the new unit on the site and will receive a contribution towards construction costs capped at £850,000 and a 12-month rent free period. The rent will be £145,000 per annum, increasing by 10% of any construction cost in excess of £750,000, capped at an additional £10,000 of rent per annum.

The conditional letting is line with the valuation assumptions as at 31 March 2022 and, based on the current apportioned site value of £1.0 million and total estimated costs, reflects an attractive yield on cost of 8.4%.

Bletchley, Watling Street (Retail warehouse)

A second 15-year pre-let has completed with Starbucks for a drive thru at Watling Street in Bletchley, Milton Keynes. Subject to securing planning consent, Starbucks will construct the new unit on the site and will receive a contribution towards construction costs capped at £850,000 and a 12-month rent free period. The rent will be £100,000 per annum, increasing by 10% of any construction cost in excess of £800,000, capped at an additional £5,000 of rent per annum.

The conditional letting is in line with the valuation assumptions as at 31 March 2022 and, based on the current apportioned site value of £50,000 and total estimated costs, reflects an attractive yield on cost of 11.7%.

Planning applications have been submitted for both sites and, assuming successful, completion of both leases is expected in mid 2023.  Starbucks is also required to deliver the buildings to a minimum BREEAM rating of 'Very Good' and Electric Vehicle charging points will be provided for customer usage.

-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

About Schroder Real Estate Investment Trust

Schroder Real Estate Investment Trust aims to provide shareholders with an attractive level of income together with the potential for income and capital growth as a result of its investments in, and active management of, a diversified portfolio of UK commercial real estate.

The investment policy of the Company is to own a diversified portfolio of UK real estate underpinned by good fundamental characteristics. The Group invests principally in the industrial, office and retail sectors and will also consider other sectors including mixed-use, residential, hotels, healthcare and leisure.

The Company leverages Schroders' specialist capabilities across strategies, with a strong team of 95 in the UK. SREIT employs a hospitality-driven approach to improve the operational performance of its assets, underpinned by a fully integrated ESG strategy, in order to deliver superior shareholder returns.

 

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