NAV and Dividend

RNS Number : 8033E

Schroder Real Estate Inv Trst Ld

21 July 2016

 

For release 21 July 2016

Schroder Real Estate Investment Trust Limited

ANNOUNCEMENT OF NAV AND DIVIDEND FOR QUARTER TO 30 JUNE 2016

Schroder Real Estate Investment Trust (the 'Company'), the actively managed UK-focused REIT, announces its net asset value ('NAV') and dividend for the quarter to 30 June 2016.

Net Asset Value

The unaudited NAV as at 30 June 2016 was £325.6 million or 62.9 pence per share ('pps').  This reflects an increase of 1.1% per share compared with the NAV as at 31 March 2016, or a NAV total return, including the dividend of 0.62 pps, of 2.1%.  A breakdown is set out below:  

	£m	pps	Comments
NAV as at 31 March 2016	322.6	62.2
Unrealised change in valuation of direct property portfolio	7.0	1.4	Reflects a quarterly like-for-like increase in the value of the underlying portfolio of 1.6% before capital expenditure
Capital expenditure	(3.2)	(0.6)	Relating to refurbishment work at Cardiff, Bristol and Liverpool
Unrealised loss on joint ventures	(0.1)	-	Capital expenditure relating to City Tower in Manchester
Loss on disposals	(0.1)	-	Loss reflects costs in connection with the previously announced disposals in Bath, Nottingham and New Malden
Net revenue	3.3	0.6	Results in quarterly dividend cover of 104%
Dividends paid	(3.2)	(0.6)	Reflects an annualised dividend of £12.8 million or 2.48 pps
Others	(0.4)	(0.1)	Principally relating to lease incentives
NAV as at 30 June 2016	325.6	62.9

Following the EU referendum result, and in common with other independent valuers, Knight Frank has stated that (i) the UK real estate market is now in a period of uncertainty in relation to many factors that impact the property investment and letting markets; (ii) it has not been possible to gauge the effect of the vote to leave the EU by reference to transactions in the market place; and (iii) the probability of the value coinciding with the price achieved, were there to be a disposal, has reduced.

Dividend payment

The Company announces an interim dividend of 0.62 pps for the period 1 April 2016 to 30 June 2016.  The dividend payment will be made on 31 August 2016 to shareholders on the register as at 12 August 2016.  The ex-dividend date will be 11 August 2016.

The dividend of 0.62 pps will be designated 0.39 pps as an interim property income distribution ('PID') and 0.23 pps as an interim ordinary dividend.

Strategy

The investment strategy remains focussed on winning cities and towns, meaning those with a competitive advantage in terms of:

·      Higher levels of GDP, employment and population growth;

·      Well developed infrastructure; and

·      Being places where people want to live as well as work.

A concentration of assets in these locations combined with active management and long term fixed rate debt supports the potential for long term sustainable earnings growth.  The portfolio also has no exposure to the City of London, Canary Wharf or European financial institutions as tenants, which could be the most impacted by the uncertainty arising from the UK's exit from the EU.  As a consequence the Company is well positioned whilst remaining vigilant to potential challenges as well as opportunities following the referendum.

Performance versus MSCI (formerly IPD) Index

The latest available performance data for the quarter to 31 March 2016 showed that the Company's portfolio produced a total return of 1.4%, outperforming the MSCI peer group on a like-for-like basis, which delivered a return of 1.1%.

Property portfolio

As at 30 June 2016, the underlying portfolio comprised 50 properties valued at £459.4 million.  Adjusting for transactions since the quarter end, the portfolio produced a rent of £27.6 million per annum reflecting a net initial yield of 5.6%.  The portfolio rental value is £34.2 million per annum, resulting in a reversionary yield of 7.4%. 

On the same basis the portfolio void rate as a percentage of rental value was 9.5%, falling to 8.5% including lettings that have exchanged but not yet completed.  The average unexpired lease term, assuming all tenants vacate at the earliest opportunity, is seven years, increasing to approximately 7.5 years including lettings that have exchanged but not yet completed.  The tables below summarise the portfolio information as at 30 June 2016:

Sector weightings	Weighting %
	SREIT	MSCI (formerly IPD) Index*
Retail	32.4	37.8
Offices	39.6	32.5
Industrial	22.6	20.3
Other	5.4	9.4

* Latest available MSCI (formerly IPD) Index data as at 31 March 2016

Regional weightings	Weighting %
	SREIT	MSCI (formerly IPD) Index*
Central London	7.1	15.9
South East excluding Central London	29.1	37.9
Rest of South	8.7	13.5
Midlands and Wales	26.8	14.2
North and Scotland	28.3	18.5

* Latest available MSCI (formerly IPD) Index data as at 31 March 2016

Asset management

During the quarter and since the quarter end 20 new leases and lease renewals have exchanged or completed.  Three recent letting transactions are set out below: 

Sheffield, Riverside East

On 22 June a seven year lease extension with solicitors Irwin Mitchell was completed at the prevailing rent of £555,000 per annum.  As a result the quarterly independent valuation increased 77% to £5.8 million as at 30 June 2016.

Warwick, Seton House

Since the quarter end the remaining vacant office space has been let to Tulip Limited, the existing tenant.  Tulip has taken a ten year lease of the entire property at £339,355 per annum, 16% above with the independent valuation rental value of £293,900 per annum.                  

Leeds, Millshaw Industrial Estate

Since the quarter end, contracts have been exchanged to let a 48,916 sq ft warehouse unit to Oxygen Freejumping on a 15 years lease at £293,000 per annum, 17% above the independent valuation rental value of £250,000. 

Debt

The Company has two loan facilities from Canada Life and Royal Bank of Scotland ('RBS') totalling £150.1 million with an average duration of approximately 10 years and an average interest cost of 4.4%.  The loans are fully compliant with covenants. 

In addition to the properties secured against the Canada Life and RBS loan facilities, the Company has unsecured properties with a value of £77.6 million and cash as at 30 June 2016 of approximately £20.5 million.   This results in a loan to value ratio, net of cash, of approximately 28%.   

-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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