Proposed Placing

RNS Number : 1416X

Schroder Real Estate Inv Trst Ld

17 November 2014

 



THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR TO U.S. PERSONS.

Schroder Real Estate Investment Trust Limited

17 November 2014

Proposed placing

The Board of Schroder Real Estate Investment Trust Limited (the 'Company'), today announces a proposal to issue up to 43.5 million New Shares at 57.5 pence per New Share to raise gross proceeds of up to approximately £25 million by way of a placing (the 'Placing') pursuant to the terms and conditions of the Placing Programme established under the prospectus issued by the Company dated 20 March 2014 (as amended).

Background

The Company has taken advantage of the strengthening UK commercial property market by pursuing a disciplined and accretive growth strategy as well as realising profitable disposals post completion of asset management.   During the calendar year to date the Company has issued 115.6 million Ordinary Shares to raise £57.4 million of equity at an average equity funding yield of 5%.  These proceeds have been fully invested in six property acquisitions totalling £71.0 million reflecting an average yield of 7.8% that are consistent with the Company's investment policy.  Implementation of the growth strategy and other activity has delivered the following key benefits:

·      The acquisition of larger properties offering good fundamentals and greater scope for higher rental growth and value enhancing asset management;

·      Increased dividend cover to 111% over the quarter to 30 September 2014 (excluding exceptional items), compared with 75% over the year to 31 March 2014 on a like-for-like basis;

·      A further reduction in the Company's loan to value ratio, net of cash, to 26.8% as at 30 September 2014, compared with 37.8% as at 31 March 2014; and     

·      Improved share liquidity and economies of scale.

In April 2014 Shareholders approved the issue of a further 120 million New Shares under the Placing Programme, to be issued as and when potential new acquisitions and capital expenditure projects within the existing portfolio are identified.  New Shares can only be issued at a premium to the prevailing NAV at the time of issue, with the Placing Programme ending in March 2015. 

The continued positive momentum in the UK property market combined with identified investment opportunities means that the Board and the Investment Manager believe there is potential to enhance returns to Shareholders through further disciplined growth of the Company.

Investment pipeline

It is intended that proceeds from the Placing will be invested in identified opportunities that satisfy the Company's investment policy and strategy.  Recent acquisitions and disposals and the resultant improvement in net operating income means that the Company is able to acquire lower yielding property offering high growth potential as well as defensive characteristics in terms of security of income.  The Company therefore expects to deploy proceeds into three principal areas:

·      Property in London offering good underlying fundamentals where there is sustainable tenant demand, affordable rents and potential for long-term, higher value and alternative uses;

·      Property in stronger regional centres with differentiated economies, favourable supply and demand characteristics, population and employment growth.  This is illustrated by the Company's recent acquisition of a multi-let industrial estate in Milton Keynes; and

·      Investment within the existing portfolio that is expected to be both income and value enhancing.  The Company estimates that there is the potential to invest up to £15 million in refurbishment and partial redevelopments over 2015 and 2016.

Proposed Placing

Under the Placing, subject to compliance with the Law and the Articles, the Company is proposing to issue up to 43.5 million New Shares at 57.5 pence per New Share (the 'Placing Price') to raise gross proceeds of up to approximately £25 million. The Placing Price is based on the prevailing NAV per Share as at 30 September 2014 plus a premium to cover the costs of the Placing.

The Placing is expected to close at 5.00 pm (London time) on 19 November 2014, but may close earlier (or later) at the absolute discretion of the Company, in consultation with Numis and J.P. Morgan Cazenove who are acting as joint sponsors and brokers to the Company. 

The Directors have also reserved the right, in consultation with Numis and J.P. Morgan Cazenove, to increase the number of New Shares offered pursuant to the Placing up to a maximum of 120 million New Shares representing the balance for which authority remains to issue pursuant to the Issues. Any such increase will be announced via an RIS.

Participation in the Placing will be available only to persons falling within Articles 49(2)(a) to (d) or 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005.  Such persons are invited to apply for New Shares by contacting their usual contact at Numis and J.P. Morgan Cazenove. 

In the event that the number of New Shares applied for under the Placing exceeds 43.5 million New Shares, or such higher amount as determined by the Directors (as noted above), it would be necessary to scale back applications under the Placing. In such event New Shares will be allocated as nearly as reasonably possible, so that applications from existing Shareholders are given priority over other applicants, and, where applicable, with a view to ensuring that existing Shareholders are allocated such percentage of New Shares as is as close as possible to their existing percentage holding of Ordinary Shares.

The New Shares will rank pari passu in all respects with the existing Ordinary Shares, (save for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the allotment of the relevant New Shares).

The Placing is not being underwritten.

Applications will be made to the FCA for admission of the New Shares to the Official List. Applications will also be made for the New Shares to be admitted to trading on the London Stock Exchange. It is expected that Admission will become effective and that unconditional dealings in the New Shares will commence on the main market for listed securities of the London Stock Exchange at 8.00 a.m. (London time) on 24 November 2014.

The New Shares will be issued in registered form and may be held in uncertificated form. The New Shares allocated will be issued to Placees through the CREST system unless otherwise stated. The New Shares will be eligible for settlement through CREST with effect from Admission.

Commenting on the Placing, Lorraine Baldry, Chairman of Schroder Real Estate Investment Trust said: "Against the backdrop of a growing UK economy, lower inflation and low interest rates, the potential returns available from the UK commercial property market remain attractive. The Placing Programme enables the Company to behave opportunistically by selectively targeting property that meets its investment criteria whilst minimising cash drag."

Duncan Owen, Head of Real Estate at Schroders added: "This year's activity has improved the quality of the Company's earnings, increased the rental income and reduced leverage.  Further disciplined growth and investment into good assets with strong fundamentals opportunities with capture future upside through asset management should continue to deliver superior Shareholder returns."

For further information:

Schroder Property Investment Management Limited:

Duncan Owen / Nick Montgomery

020 7658 6000

Northern Trust:

David Sauvarin

01481 745529

J.P. Morgan Cazenove:

William Simmonds

020 7742 4000

Numis Securities:

David Benda

020 7260 1000

FTI Consulting:

Dido Laurimore / Ellie Sweeney

020 3727 1000

Capitalised terms used but not defined in this announcement will have the same meaning as set out in the prospectus to Shareholders dated 20 March 2014 (as amended). Copies of that prospectus, together with any supplementary prospectuses relating thereto, are available from the Company's website: www.srei.co.uk.

 

END

 

 

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