Schroder European highlights portfolio resilience during the pandemic

Schroder European REIT's Boulogne-Billancourt office asset in Paris.
Boulogne-Billancourt in Paris.

Schroder European REIT has released its half year results for the six months ended 31st March 2021, reflecting a strong rental collection of approximately 92% for the reporting period which includes 94% of rent collected for the quarter ended 31st March 2021.

The REIT reported a low loan-to-value (LTV) ratio of 11% net of €57.0 million of available cash (29% gross of cash) with a low weighted average total interest rate of 1.4%.

With a portfolio value, including cash, of €259.9 million (HY 2020: €247.3 million), its directly held properties delivered like-for-like valuation growth of €5.6 million or 2.3% which reflects the company’s exposure to the high growth industrial, data centre, DIY, and grocery sectors.

Sir Julian Berney, Chairman of the Board, commented: “Despite operating against a backdrop of local and national lockdowns, the portfolio valuation has remained resilient over the period, underpinned by uplifts across the industrial portfolio, a number of asset management successes and improving and strong rent collection. As a result, we are pleased to be able to reinstate the dividend to the pre-pandemic level, whilst paying two special dividends to reflect the successful execution of the Paris sale and reward shareholders who continue to support the company.”

The board remains frustrated that the share price has not reflected the robust performance of the business during the pandemic or that the current discount accurately reflects its prospects. Given the healthy cash position, the Board will continue to review the discount and use its discretion to execute measures that it believes should support income and total returns, including new acquisitions.”

The REIT declared dividends of €4.6 million / 3.42 cps for the reporting period with a reinstatement of the pre-Covid-19 dividend of 1.85cps due to an improved outlook, strong rental collections, the company’s cash position and valuation resilience. The company intends to declare two further distributions with a target of approximately 4.75 cents per share each by way of special dividends over the next twelve months, allowing shareholders to benefit from the profit associated with the successful execution of the Paris-Boulogne-Billancourt business plan.

Key financial highlights:

  • Net Asset Value (NAV) of €197.1 million or 147.4 cps (30th September 2020: €2018 million), a decrease of €4.7 million over the six-month period, primarily driven by the write-down of the group’s Seville exposure to nil which in part was offset by an increase in the valuation of the industrial and DIY portions of the portfolio.
  • A loss of €0.7 million was recorded for the reporting period with a profit of €4.9 million which resulted in a NAV total return of -0.4%. Pre-tax, the company made a profit of €0.8 million compared to €5.7 million in the comparable reporting period.
  • Underlying EPRA earnings of €2.8 million (six months ended 31st March 2020: €4.3 million) which reflects a temporary reduction in income until the redeployment of the Paris sale proceeds.

Schroder European’s operational highlights for the reporting period include the conclusion of five new leases and re-gears in Hamburg, Paris Saint-Cloud and Seville which total 1 100m2 at a weighted lease term of 4.1 years, generating a 3.9% increase in its annualised income relative to the previous rent.

Post-period end, an acquisition exchanged for a logistics property in Nantes, Western France, for €6.15 million (reflecting a net initial yield of 5.5%) will bring the company’s portfolio to a total of thirteen investments across four Western European countries with approximately ninety tenants.

Jeff O’Dwyer, Fund Manager for Schroder Real Estate Investment Management Limited, added: “Whilst uncertainty relating to the pandemic will continue, we are starting to see some positive signs of growth over 2021 as lockdowns ease and consumer and investor confidence returns. The proceeds from the sale of Boulogne-Billancourt substantially strengthen the Company’s balance sheet and provide significant operational and financial flexibility. We are focused on identifying attractive income-generating opportunities in future proof assets that meet our strict investment criteria. These will provide further diversification benefits to the portfolio and assist in maintaining an attractive dividend covered from sustainable rental income, as we seek to maximise shareholder returns.”