NAV and Dividend

RNS Number : 4464T

Schroder Real Estate Inv Trst Ld

20 July 2015

 



20 July 2015

Schroder Real Estate Investment Trust Limited

(the 'Company' / 'Group')

ANNOUNCEMENT OF NAV AND DIVIDEND FOR PERIOD TO 30 JUNE 2015

The Schroder Real Estate Investment Trust Limited today announced its unaudited net asset value and dividend for the three months to 30 June 2015.

Net Asset Value

The Company delivered an unaudited net asset value ('NAV') of £306.5 million or 59.1 pence per share ('pps') as at 30 June 2015.  This reflects an increase of 2.4% per share compared with the NAV as at 31 March 2015, or a NAV total return, including the dividend of 0.62 pps, of 3.5%.  A breakdown of the NAV movement over the quarter is set out below:

	£m	pps	Comments
NAV as at 31 March 2015	299.2	57.7
Unrealised change in valuation of direct property portfolio	6.5	1.3	Quarterly uplift of 1.8% before capital expenditure and acquisition costs, increasing to 2.2% following the revaluation of St. John's Retail Park in Bedford.
Acquisition costs	(0.3)	(0.1)	Acquisition costs relating to purchase of St John's Retail Park.
Capital expenditure	(0.5)	(0.1)	In relation to the assets in Liverpool and Milton Keynes
Unrealised gain on joint ventures*	2.1	0.4	Included in the quarterly uplift of 1.8% above.
Pre-tax net revenue	2.5	0.5	Reflects quarterly dividend cover of 78%, increasing to 100% after adjusting for one-off expenses in respect of REIT conversion and allowing for a full quarter's income from the St. John's Retail Park.
Dividends paid	(3.2)	(0.6)	Reflects an annualised dividend of £12.8 million or 2.48 pps
Others	0.2	0.0	Adjustment for lease incentives.
NAV as at 30 June 2015	306.5	59.1

*City Tower in Manchester and University of Law in London

REIT conversion

On 1 May 2015 the Company converted to a Real Estate Investment Trust ('REIT') in order to reduce the overall burden of UK taxation and increase net income and overall profitability. 

The Company's Registrar has provided the necessary Declaration forms to all qualifying registered owners of the Company's shares. However, the Board are aware that a number of investors hold shares via execution-only platforms or with ISA/SIPP providers and may not have been advised of the requirement to complete a declaration in order to receive their dividend gross.

If a declaration form is not completed the investor will receive a lower level of dividend due to withholding tax. Declaration forms are available on the Company's website www.sreit.co.uk, and should be completed and returned to the registrars, Computershare by 14 August 2015 to take effect for the August dividend payment.

Investors are therefore advised to seek independent tax advice and to contact their nominee company should they be deemed eligible to receive gross dividends.

Full details of the REIT conversion proposal and rationale are also contained in the Circular available on the Company's website www.sreit.co.uk.

Dividend payment

The Company announces an interim dividend of 0.62 pps for the period 1 April 2015 to 30 June 2015.  The dividend payment will be made on 28 August 2015 to shareholders on the register as at 14 August 2015.  The ex-dividend date will be 13 August 2015.

The dividend of 0.62 pps will be designated 0.35 pps as an interim property income distribution ('PID') and 0.27 pps as an interim ordinary dividend.

Market overview

The latest Investment Property Databank ('IPD') Monthly Index confirmed an average total return for the three months to 30 June 2015 of 3.6%, comprising an income return of 1.4% and capital growth of 2.2%.  The retail sector produced the weakest total return of 2.2% with the office and industrial sectors producing total returns of 5.2% and 4.4% respectively. 

Performance versus IPD Index

The latest available performance data for the quarter to 31 March 2015 showed that the Company's property portfolio produced a total return of 4.1% compared with 2.8% for the IPD peer group Quarterly Version of Balanced Monthly Index Funds (the 'IPD Index') on a like-for-like basis.  This resulted in a total return for the 12 months to 31 March 2015 of 20.8% compared with the IPD Index of 17.1%.

Property Portfolio

As at 30 June 2015 the Company's direct property portfolio comprised 53 properties independently valued at £420.6 million.  At the same date, the portfolio produced a rent of £27.7 million per annum which, based on the independent valuation, reflected a net initial yield of 6.2%.  The portfolio's rental value is £31.6 million per annum, resulting in a reversionary yield of 7.1%.  The portfolio benefits from additional fixed rental uplifts of £1.5 million per annum due by June 2017.

As a result of positive letting activity over the quarter the portfolio void rate fell from 9.6% as at 31 March 2015 to 9.2% as at 30 June 2015, calculated as a percentage of the portfolio rental value.  The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is 7.1 years.  The tables below summarise the key portfolio information as at 30 June 2015:

Sector weightings	Weighting %
	SREIT	IPD Index*
Retail	35.9	38.4
Offices	41.9	31.8
Industrial	17.3	20.1
Other	4.9	9.7

* Latest available IPD Index data as at 31 March 2015 

Regional weightings	Weighting %
	SREIT	IPD Index*
Central London	8.3	16.1
South East excl. Central London	30.4	36.3
Rest of South	10.2	14.1
Midlands and Wales	27.9	14.1
North and Scotland	23.2	19.4

* Latest available IPD Index data as at 31 March 2015

Top ten properties		Value (£m)	(%)
1	Manchester, City Tower	39.3	9.3
2	London, Bloomsbury, Store Street	34.8	8.3
3	Bedford, St. John's Retail Park	34.1	8.1
4	Brighton, Victory House	30.1	7.2
5	Leeds, Headingley, The Arndale Centre	19.8	4.7
6	Uxbridge, 106 Oxford Road	18.7	4.4
7	Milton Keynes, Stacey Bushes Industrial Estate	16.3	3.9
8	Salisbury, Churchill Way West	15.9	3.8
9	Norwich, Union Park	13.0	3.1
10	Basingstoke, Wickes	11.9	2.8
	Total as at 30 June 2015	233.9	55.6

Top ten tenants		Rent p.a. (£m)	% of portfolio
1	University of Law Limited	1,582.7	5.7
2	Wickes Building Supplies Limited	1,092.2	3.9
3	Aviva Life and Pensions Limited	1,039.2	3.7
4	The Buckinghamshire New University	1,018.3	3.7
5	BUPA Insurance Services Limited	960.8	3.5
6	The Secretary of State	916.3	3.3
7	Mott MacDonald Limited	790.0	2.8
8	Recticel Limited (Guarantor Recticel SA)	731.0	2.6
9	Matalan Retail Limited	675.8	2.4
10	Sportsdirect.com Retail Limited	657.2	2.4
	Total as at 30 June 2015	9,463.5	34.0

Acquisitions

Bedford, St. John's Retail Park

On 15 May 2015, St. John's Retail Park in Bedford was acquired for £31.8 million reflecting a net initial yield of 6.5%.  The property comprises a well located and prominent 130,000 sq ft retail warehouse park with an adjoining 11,600 sq ft office building approximately 1.5 miles to the south of Bedford town centre.  The retail park is let to 12 tenants producing £2 million per annum which reflects a low average rent of £16 per sq ft.  The average unexpired lease term, assuming all tenants break at the earliest opportunity, is approximately seven years with tenants including DSG Retail Limited and Homebase Limited.  There is a single vacant unit of 5,000 sq ft where terms have been agreed for a new letting.

The acquisition offers good fundamentals due to tenant demand, affordable rents, low retail warehouse supply and vacancy in Bedford and above average population growth for Bedford and the surrounding area.  There is significant scope for asset management including lease extensions and widening the planning consent in order to increase the rental tone and improve the tenant mix.

The property was acquired via the acquisition of shares in a UK company that had developed the property and therefore had latent capital gains tax liabilities.  Following conversion to Real Estate Investment Trust ('REIT') status on 1 May 2015, the Company has been able to extinguish these capital gains tax liabilities.  This provided a competitive advantage when bidding for the property and resulted in the gross purchase price of £32.2 million.  The valuation as at 30 June 2015 is £34.1 million.

Leeds, Millshaw Industrial Estate

Today the Company has made a separate announcement in connection with exchanging contracts to acquire Millshaw Industrial Estate in Leeds.

Debt

The Company has a single loan in place with Canada Life totalling £129.6 million.  As at 30 June 2015 the loan was secured against property with a combined value of £332.1 million.  The loan has a weighted duration of 11.8 years with a fixed interest rate of 4.77%.  Details of the loan and compliance with the principal covenants are set out below:

Canada Life loan (£m)	Maturity	Interest rate (%)	Loan to Value ('LTV') ratio* (%)	LTV ratio covenant (%)*	Interest cover ratio (%)**	ICR ratio covenant (%)**	Forward looking ICR ratio (%)***	Forward looking ICR ratio covenant (%)***
25.9	16/04/2023	4.77	39.0	65	311	185	318	185
103.7	16/04/2028

*              Loan balance divided by property value as at 30 June 2015

**             For the quarter preceding the Interest Payment Date ('IPD'), ((rental income received - void rates, void service charge and void insurance) / interest paid)

***           For the quarter following the IPD, ((rental income received - void rates, void service charge and void insurance) / interest paid)

In addition to the property portfolio secured against the Canada Life facility, the Company has unsecured properties with a value of £88.5 million and cash as at 30 June 2015 of approximately £14.3 million.   This results in a loan to value ratio, net of cash, of 27.4%.   

-ENDS-

For further information:

Schroder Real Estate Investment Management Limited: Duncan Owen / Nick Montgomery	020 7658 6000
Northern Trust: David Sauvarin	01481 745529
FTI Consulting: Dido Laurimore / Ellie Sweeney	020 3727 1000

 

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