Schroder European REIT has published its financial results for the year ended 30th September 2024, declaring its fourth interim dividend for the year of 1.46 Euro cents per share.
The Company’s underlying EPRA earnings increased 3% to €8.2 million (2023: €0.8 million) primarily due to rental growth offsetting the impact of higher interest costs.
Its net asset value (NAV) of €164.1 million (122.7 Euro cents per share) was primarily driven by outward yield movement during the first half (30th September 2023: €171.4 million- or 128.2-Euro cents per share). The Company’s IFRS profit of €0.6 million contributed to a positive NAV total return of 0.4% (30th September 2023: -5% total return or €9.4 million IFRS loss).
Schroder says it strengthened its balance sheet during the period with the completion of all near-term refinancings on ‘attractive’ terms with no further debt expiring until June 2026 at a low interest cost of 3.2%.
“Despite the broader challenges facing smaller REITs, the Company is well positioned, with a differentiated and compelling investment thesis focused on assets with robust property fundamentals in higher growth European cities,” comments Chairman of Schroder, Sir Julian Berney Bt.
As previously announced by the REIT, the French tax authorities are proceeding with a tax audit with the potential exposure up to €12.6 million (excluding penalties). Based on professional advice, Schroder says its Board continues to believe that an outflow is not probable, and no provision is recognised. The Company will continue to monitor the situation and to update its shareholders.
Schroder concluded sixteen new leases and re-gears during the period, totalling c.8 000m2 which generated €1.4 million of contracted rent at a weighted lease term of eight years. It says its portfolio benefits from a high occupancy level of 96% with an average portfolio lease term of 4.7 years. The REIT collected 100% of rent due during the period.
“The portfolio has demonstrated notable resilience, which is testament to the quality of our assets and local teams, as well as the focus on high performing sub-markets. Although further short-term macroeconomic volatility is expected, the medium-term outlook is supportive of real estate investment. Our focus moving forward is to maintain our balance sheet strength whilst capturing the portfolio reversion to boost earnings and asset liquidity, with the aim of reducing the current share price discount,” says Jeff O’Dwyer, Fund Manager for Schroder REIT.
Schroder’s direct property portfolio independent valuation declined 3.6% to €208.1 million (or €7.6 million net of capital expenditure (capex)), entirely weighted towards the first half of the year due to outward yield movement as investor sentiment was negatively impacted by higher interest rates.
Total dividends declared for the year totalled 5.92 Euro cents per share covered by EPRA earnings, offering a dividend yield of c7.1% based on the closing share price of 69.2 Euro cents per share as at 29th November 2024.
Its loan-to-value ratio (LTV) currently sits at 25% (net of cash) with c.€25 million of available cash.
