Schroder reports a period of robust operational and financial performance

Schroder's Saint Cloud office asset in Paris.
Schroder's Saint Cloud office asset in Paris.

Schroder European Real Estate Investment Trust plc has announced its audited full year results for the year ended 30 September 2019.

Operational highlights

  • Agreed a conditional new long-term lease and capex programme at the Group’s largest asset, Boulogne-Billancourt office in Paris, providing future potential capital value and income upside.
  • Portfolio allocation to higher growth logistics sector increased to 20% (30 Sept 2018: 13%) with the acquisition of a French logistics asset for €18.2 million.

–          Underlying property portfolio total return of 7.7% (excluding the impact of transaction costs) (30 September 2018: 10.8%).

  • 100% of the portfolio’s 13 institutional grade properties located in cities and regions of Continental Europe that are in the top two quartiles of forecast economic growth.
  • Portfolio valued at €242.7 million (on a proportionally consolidated basis), reflecting an uplift of approximately 9.0% on purchase price.

–          Conclusion of 18 new leases and re-gears with a total annual rental income of €1.6 million, generating a c.2% increase in annualised income on a like-for-like basis and secured at a weighted lease term of c.9 years. The overall unexpired lease term across the portfolio is 5.0 years to first break and 6.4 years to expiry.

–          Achieved a Global Real Estate Sustainability Benchmark (‘GRESB’) Green Star for 2019.

Financial highlights

  • Net Asset Value (“NAV”) of €182.1 million or 136.2 cps (30 September 2018: €182.1 million / 136.2 cps).
  • Total dividends declared of 7.4 cps, in line with target of 5.5% annualised yield against the Euro IPO issue price.
  • EPRA earnings of €10.5 million (30 September 2018: €10.8 million), resulting in dividend cover of 107% (30 September 2018: 109%).

–          Profit for the year of €7.4 million (30 September 2018: €13.2 million), predominantly reflecting lower valuation gains on investment properties.

–          NAV total return of 4.1% (30 September 2018: 7.5%), reflecting the impact of acquisition costs and one-off tax restructuring costs.

–          Loan to value (‘LTV’) of 29% (30 September 2018: 26%) at a weighted average total interest rate of 1.4%. Additional loans completed post period take the LTV to 31%..

Commenting, Sir Julian Berney, Chairman of the Board, said:

2019 has been an important year in positioning SEREIT to deliver long-term income and capital growth. Our increasingly diversified portfolio by sector, geography and tenant has underpinned a period of stable financial and operational performance, supporting the delivery of the attractive and well covered dividend, whilst also improving the Company’s defensive characteristics. At the same time, initiatives such as the Paris Boulogne-Billancourt refurbishment and lease regear demonstrate the potential to generate strong shareholder returns from our strategy of focusing on Winning European Cities, where all 13 of the Group’s assets are situated.

Jeff O’Dwyer, Fund Manager for Schroder Real Estate Investment Management Limited, added:

Property markets in our target cities are performing well. Whilst there are pockets of weakness, such as in the retail shopping centre sector, our limited exposure to under performing parts of the market and balanced portfolio helps mitigate us against these. Alongside progressing the Paris redevelopment and other initiatives to further improve our income profile, the ambition for 2020 is that we will grow the portfolio via new acquisitions in our target Winning cities, benefiting from both the macro trends supporting attractive real estate returns, as well as the Company’s extensive local market expertise.