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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Invista Fnd Tst | LSE:IFD | London | Ordinary Share | GB00B01HM147 | ORD SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 35.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMSREI
RNS Number : 7565F
Schroder Real Estate Inv Trst Ld
16 November 2015
For release 16 November 2015
Schroder Real Estate Investment Trust Limited
("SREIT"/ the "Company"/ "Group")
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
SREIT DELIVERING ON GROWTH STRATEGY POST CONVERSION TO UK REIT
Schroder Real Estate Investment Trust today announces its results for the six months ended 30 September 2015.
Financial highlights
-- Underlying EPRA earnings per share of 1.2p, an increase of 9% (six months to 30 September 2014: 1.1p)
Hot Features
Premium
-- Net Asset Value ('NAV') increased 5.6% to 60.9p (31 March 2015: 57.7p)
-- NAV total return of 7.8% (six months to 30 September 2014: 16.2%)
-- Underlying portfolio delivered a total return of 7.5%, outperforming the Investment Property Databank ('IPD') Benchmark Index of 6.8%
-- Profit before tax of GBP23 million (six months to 30 September 2014: GBP36 million; six months to 31 March 2015: GBP18.8 million)
-- Dividend of 1.24 pence per share declared and paid for the six months to 30 September 2015 reflecting cover of 104%, adjusting for one-off costs in relation to conversion to UK REIT status
Operational highlights
-- Completed conversion to UK REIT status as of 1 May 2015, reducing the overall burden of UK taxation and increasing net income and overall profitability, with the potential to attract a wider investor base
-- Two acquisitions totalling GBP54.5 million at an average net initial yield of 6.8%, funded by a combination of previously raised equity and a GBP20.5 million revolving credit facility
-- Asset management activity reduced the portfolio void rate to 8.1% compared with 9.2% as at 31 March 2015, with further reductions expected upon the completion of contracted lettings
-- Execution of the growth strategy has contributed to the objectives of maximising income, enhancing NAV and improving diversification and investment performance
Commenting, Lorraine Baldry, Chairman of the Board, said:
"Total returns from UK commercial property are more likely to be driven by income and rental growth. Consequently, we expect markets with sustainable tenant demand and a significant supply and demand imbalance to offer more attractive returns."
Duncan Owen, of Schroder Real Estate Investment Management Limited, added:
"The UK commercial real estate market has continued to benefit from strong investor demand driving values upwards. We believe future returns are now more likely to be driven by the active management of assets with strong fundamentals in winning cities and towns.
Execution of the strategy has led to an increase in the level of net income as well as outperformance of the underlying portfolio."
-Ends-
For further information:
Schroder Real Estate Investment Management Duncan Owen / Nick Montgomery 020 7658 6000 -------------------------------------------- -------------- Northern Trust David Sauvarin 01481 745529 -------------------------------------------- -------------- FTI Consulting Dido Laurimore / Ellie Sweeney / Polly Warrack 020 3727 1000 -------------------------------------------- --------------
Schroder Real Estate Investment Trust Limited
Interim Report and Consolidated Financial Statements
as at 30 September 2015
Contents Company Summary 2 Performance Summary 3 Chairman's Statement 5 Investment Manager's Report 7 Responsibility Statement 14 Condensed Consolidated Statement of Comprehensive Income 15 Condensed Consolidated Statement of Financial Position 16 Condensed Consolidated Statement of Changes in Equity 17 Condensed Consolidated Statement of Cash Flows 18 Notes to the Interim Report 19 Independent Auditor's Review Report 27 Corporate Information 28
Schroder Real Estate Investment Trust Limited aims to provide shareholders with an attractive level of income together with the potential for income and capital growth through investing predominantly in UK commercial property.
Company Summary
Schroder Real Estate Investment Trust (the 'Company' / 'Group') is a real estate investment company with a premium listing on the Official List of the UK Listing Authority and whose shares are traded on the Main Market of the London Stock Exchange (ticker: SREI).
On 1 May 2015 the Company converted to a Real Estate Investment Trust ('REIT') in order to benefit from the various tax advantages offered by the UK REIT regime as well as the potential for improved liquidity as a result of being able to access a wider shareholder base. The Company continues to be an authorised closed ended investment scheme registered in Guernsey.
Objective
The Company aims to provide shareholders with an attractive level of income with the potential for income and capital growth from owning and actively managing a diversified portfolio of UK commercial real estate. The current annualised level of dividend is 2.48 pence per share ('pps') and it is intended that successful execution of the investment strategy will enable a progressive dividend policy to be adopted over time.
The portfolio is principally invested in the three main UK commercial property sectors of office, industrial and retail, and will also invest in other sectors including, but not limited to, residential, leisure, healthcare and student accommodation. Over the property market cycle the portfolio aims to generate an above average income return with a diverse spread of lease expiries.
Relatively low level gearing is used to enhance income and total returns for shareholders with the level dependent on the property cycle and the outlook for future returns. The current target gearing level reflects a net loan-to-value ('LTV') ratio of between 25% and 35%.
Investment strategy
The current investment strategy is to grow income and enhance shareholder returns through selective acquisitions, pro-active asset management and selling smaller, lower yielding properties on completion of asset business plans. The issuance of new shares will also be considered if it is consistent with the strategy.
Our objective is to own a portfolio of larger properties in cities and towns with diversified local economies, sustainable occupational demand and favourable supply and demand characteristics. These properties should offer good long-term fundamentals in terms of location and specification and be let at affordable rents with the potential for income and capital growth from good stock selection and asset management.
Performance Summary
Financial summary
30 September 30 September 31 March
2015 2014 2015
----------------------------------- ------------------- ------------- ----------------
NAV(1) GBP315.8m GBP260.0m GBP299.2m
NAV per Ordinary Share(1) (pence) 60.9 55.1 57.7
EPRA NAV GBP315.8m GBP260.0m GBP299.2m
Six months Six months Year to
to to
30 September 30 September 31 March
2015 2014 2015
--------------------------------------- --------------- ------------- ----------------
NAV total return 7.8% 16.2% 24.4%
Profit for the period GBP23.0m GBP36.0m GBP54.8m
EPRA earnings GBP6.2m GBP5.1m GBP12.1m
Equity raised - GBP40.2m GBP67.2m
----------------------------------- ------------------- ------------- ----------------
(1) Net Asset Value is calculated using International Financial Reporting Standards.
Share price and index
30 September 30 September 31 March
2015 2014 2015
Share price (pence) 58.0 57.0 62.3
Share price (discount)/premium to
NAV (4.8%) 3.4% 8.0%
FTSE All Share Index 3,335.9 3,533.9 3,663.6
FTSE EPRA/NAREIT UK Real Estate Index 1,983.2 1,629.0 1,942.5
------------------------------------------- ---------- ------------- ---------
Earnings and dividends
Six months Six months Year to
to to
30 September 30 September 31 March
2015 2014 2015
Earnings per share (pence) 4.4 7.7 11.3
EPRA earnings per share (pence) 1.2 1.1 2.5
Dividends paid per share (pence) 1.24 1.24 2.48
Annualised dividend yield on 30
September /31 March share price 4.3% 4.4% 4.0%
--------------------------------------- ------------- ------------- ----------------
Performance Summary (continued)
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Bank borrowings
30 September 30 September 31 March
2015 2014 2015
On-balance sheet borrowings (GBP000's)
(2) 150,085 129,585 129,585
Loan to value ratio, net of all cash
(3) 30.0% 26.8% 22.4%
-------------------------------------------- ----------- ------------- ---------
(2) On balance sheet borrowings reflects the loan facility with Canada Life and RBS, without deduction of finance costs
(3) Cash excludes rent deposits and floats held with managing agents
Ongoing charges(4)
Six months Six months Year to
to to
30 September 30 September 31 March
2015 2014 2015
Ongoing charges (including fund only
expenses(5) ) 0.59% 0.55% 1.30%
Ongoing charges (including fund and
property expenses) 1.19% 1.40% 2.80%
------------------------------------------ ----------- ------------- ----------------
(4) Ongoing charges calculated in accordance with AIC recommended methodology issued in May 2012, as a percentage of average NAV during the year. The ongoing charges exclude all exceptional costs incurred during the period.
(5) Fund only expenses excludes all property operating expenses, valuers' and professional fees in relation to properties.
Chairman's Statement
Overview
The Company has benefited from a high level of activity over the period encompassing transactions, asset management, tactical new borrowings and the conversion to UK Real Estate Investment Trust ('REIT') status. This activity has enabled the Company to effectively progress its key strategic objectives of increasing net income and generating attractive total returns.
Average UK commercial property capital values increased by 4.2% over the period (source: IPD), supported by annualised Gross Domestic Product ('GDP') growth of 2.3% and low interest rates. Economic recovery is being driven by the service sector, notably TMT (telecommunications, media and technology), professional services and, to a lesser extent, financial services. This is leading to strong demand for office space in Central London and larger regional centres which, combined with lower levels of new development, is resulting in higher rental growth. Rising real earnings and cheap credit are also leading to rental growth in areas of high discretionary spending, such as the leisure sector. Whilst these factors and a strong housing market have also supported robust retail sales, increased on-line sales are contributing to stronger growth in the industrial and warehouse sector compared with the traditional high street retail.
Successful execution of our stated strategy has enabled the Company to acquire larger properties in strong local economies. These offer the potential to invest capital expenditure in order to capture higher levels of rental growth and enhance the portfolio's defensive qualities in terms of reduced vacancy, tenant covenant and lease term.
Results
The Company's Net Asset Value ('NAV') as at 30 September 2015 was GBP315.8 million or 60.9 pence per share ('pps') compared with GBP299.2 million or 57.7 pps as at 31 March 2015. This reflected an increase over the period of 5.6%. Shareholders received total dividends over the period of GBP6.4 million or 1.24 pps, resulting in a total NAV return of 7.8%.
The portfolio benefited from a higher income return of 3.2% compared with the IPD Index of 2.5%, resulting in a total return of 7.5% compared with the Index of 6.8%.
REIT conversion
On 28 April 2015 shareholders voted in favour of converting to UK REIT status, leading to the Company entering the UK REIT regime on 1 May 2015. The Board recommended conversion to REIT status in order to reduce the overall burden of UK taxation and increase net income and overall profitability. The recommendation also considered the potential benefit of improved liquidity in the Company's shares as a result of greater access to a wider investor base. Whilst this is likely to be a longer term benefit, there has been encouraging early interest from specialist REIT investors. The Company incurred costs of approximately GBP0.4 million in relation to the REIT conversion.
Strategy
The strategic focus over the period has been to grow income through a combination of selective acquisitions and disposals, completion of key asset management initiatives and efficient management of the balance sheet.
Two significant acquisitions satisfying the Company's investment criteria were completed over the period totalling GBP54.5 million at an average net initial yield of 6.8%. These acquisitions were funded by a combination of equity raised at the end of the last financial period and a GBP20.5 million revolving credit facility.
During the period key asset management initiatives have been progressed that should contribute positively to returns as well as to the portfolio's defensive characteristics. Positive letting activity across the portfolio has also led to a reduction in the portfolio void rate from 9.2% to 8.1%, which will fall further on completion of contracted lettings. This activity contributed to recurring dividend cover of 104% over the period, having adjusted for one-off expenses relating to the conversion to UK REIT status.
Chairman's Statement (continued)
Improving occupational demand is creating more opportunities to generate attractive returns from investing into the existing portfolio. These initiatives may require up to GBP25 million of capital expenditure, which could be funded from lower yielding disposals or new equity issuance. There is also the potential for equity issuance to fund further opportunistic acquisitions that contribute positively to income or may form part of on-going asset management initiatives. This could involve acquiring adjoining ownerships.
Successful execution of the strategy outlined above should enable the Board to review its dividend policy in light of what is sustainable and the prevailing market conditions.
Debt
As at 30 September 2015, the Company had a loan to value, net of cash, of 30%, within the long term target range of 25% to 35%. Putting in place the aforementioned revolving credit facility in August resulted in the Company having total debt of GBP150.1 million with an average duration of 10.5 years and an average interest cost of 4.4%.
Risks and Uncertainties
There have been no significant changes to the risks and uncertainties as described on pages 23 to 24 of the Annual Report and Consolidated Financial Statements for year ended 31 March 2015.
Outlook
Total returns from UK commercial property are more likely to be driven by income and rental growth. Consequently, we expect markets with sustainable tenant demand and a significant supply and demand imbalance to offer more attractive returns.
Whilst the prospects for the UK economy as a whole remain positive, there are likely to be headwinds arising from cuts in public spending and the planned referendum on the UK's membership of the European Union. A forecast rise in consumer price inflation also means that capital markets are likely to have to adjust to a gradual rise in interest rates over 2016.
Against this backdrop the strategy will continue to focus on growing net income and generating attractive total returns by investing in the portfolio and, where compelling, making acquisitions, funded via further disciplined growth.
Lorraine Baldry
Chairman
Schroder Real Estate Investment Trust Limited
13 November 2015
Investment Manager's Report
Over the period to 30 September 2015 the Company's Net Asset Value ('NAV') increased to GBP315.8 million or 60.9 pence per share ('pps'), compared with GBP299.2 million or 57.7 pps as at 31 March 2015. This reflects a 5.6% increase and a total NAV return, including dividends of 7.8%. The table below provides a detailed breakdown of the growth in NAV over the period:
Pence
----------------------------------------------------- ------
NAV as at 31 March 2015 57.7
----------------------------------------------------- ------
Unrealised change in valuation of direct investment
property portfolio 2.8
----------------------------------------------------- ------
Unrealised gain in the value of joint ventures 0.9
----------------------------------------------------- ------
Capital expenditure during the period (0.2)
----------------------------------------------------- ------
Property acquisition costs during the period (0.3)
----------------------------------------------------- ------
Realised gain on sold properties 0.1
----------------------------------------------------- ------
Post tax net revenue 1.1
----------------------------------------------------- ------
Dividends paid (1.2)
----------------------------------------------------- ------
NAV as at 30 September 2015 60.9
----------------------------------------------------- ------
Performance was driven by a 4.1% increase in the value of the held portfolio over the six month period which, adjusting for capital expenditure, contributed 3.6 pps to the NAV. This includes strong performance from the joint venture investments at City Tower in Manchester and the University of Law Campus on Store Street in London.
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Acquisition costs of GBP1.6 million were incurred over the period, reducing the NAV by 0.3 pps, which represented 3% of the aggregate price paid for two assets totalling GBP54.5 million. They have subsequently been revalued to GBP58 million at 30 September 2015.
Dividends of GBP6.4 million or 1.2 pps were paid during the period which, based on post tax net revenue of GBP6.2 million, resulted in a dividend cover of 98%. The underlying cover for the period was 104%, having adjusted for one-off expenses relating to the conversion to UK REIT status.
Market overview
According to the IPD Index, average UK commercial property produced a total return of 6.8% over the six months to 30 September 2015, comprising an income return of 2.5% and capital growth of 4.2%. This resulted in the average net initial income yield falling from 5.4% to 5.2%. The occupational market recovery, particularly in stronger regional markets, meant that increasing rental values contributed 2.5% compared with 1.9% over the six months to 31 March 2015. Falling yields as a result of investor demand contributed 2.6% to capital growth which compared with 3.7% over the previous six month period.
Offices were the best performing sector over the period with a total return of 8.9%, driven by capital growth of 6.7%, despite having the lowest net initial income yield of 4.5%. Central London and the South East outperformed the UK as a whole with total returns of 10.2% and 10.4% respectively (Source: IPD key city digest). Stronger regional centres such as Cambridge and Manchester also saw improving performance with total returns of 11.7% and 8.4% respectively over the period. We expect this trend to continue with regards to larger cities and towns with diversified local economies and sustainable occupational demand offering higher levels of rental growth.
The retail sector was the poorest performing sector over the six month period with a total return of 4.1%. The underperformance was principally due to lower rental growth of 0.8%, with the traditional high street and supermarkets experiencing rental falls due to the increase in on-line sales and the impact of discounters such as Aldi and Lidl.
Central London retail continued to deliver strong returns due to international investors increasing prices and as a consequence income yields have reduced to below 3%. The market outside of Central London remains polarised with larger units in dominant cities and towns benefiting from increased tenant demand due to retailers' expanding multi-channel retail formats. The convenience retail and leisure sectors are also benefiting from changing consumer behaviour.
Investment Manager's Report (continued)
The industrial sector produced a total return of 8.7% over the period, supported by a high net initial income yield of 5.6% with accelerating rental growth. Although London and the South East generated higher total returns of approximately 10% over the period, falling regional unemployment resulted in average rental growth doubling compared with 2014. The industrial sector is also benefiting from the growth in on-line sales with strong demand for distribution warehouses.
Strategy
Efficient execution of the growth strategy since January 2014 and a focused asset management approach has contributed positively to the three central objectives of maximising income, enhancing the NAV and improving the portfolio's defensive qualities. This has delivered the following benefits over the period to 30 September 2015:
-- Above average income return of 3.2% compared with the IPD Index of 2.5% - Higher yielding acquisitions increased the portfolio's rental income to GBP28.5 million per annum compared with GBP27.5 million as at 31 March 2015.
-- Increased exposure to investments offering good fundamentals - The portfolio's reversionary rental income increased to GBP34.17 million compared with GBP29.05 million as at 31 March 2015.
-- Reduction in the portfolio void rate - A combination of lettings and disposals has reduced the void rate to 8.1% compared with 9.2% as at 31 March 2015.
-- Economies of scale - Acquiring larger properties has enabled more value to be added from asset management initiatives and further reduced expenses by 15% as a percentage of NAV.
The strategy remains focussed on further sustainable net income growth in order to support a progressive dividend policy over time. As noted above, improving market conditions, particularly in the stronger regional centres where exposure has been increased, are reducing vacancy rates and creating opportunities to invest into the portfolio, improving rental values and generating attractive income and total returns. Net income levels have also been enhanced by disposing lower yielding assets post active management and redeploying proceeds into higher yielding assets.
There are potentially up to GBP25 million of capital expenditure initiatives that would make a positive contribution to performance over the next 12 to 24 months. Efficient management of the balance sheet means that existing current cash resources are low at approximately GBP12 million. Therefore, in order to fund this activity, proceeds from lower yielding disposals are likely to be reinvested into the portfolio rather than for new acquisitions. A selective and opportunistic approach has been separately applied to acquisitions. Recent experience illustrates that these can still make a positive contribution to returns but potential acquisitions of adjoining interests could generate better returns, for example, by improving longer term strategic holdings.
In order to fund these opportunities we and the Board will continue to review the potential for further equity issuance but only in a cautious and disciplined manner and where new investment will enhance income and total returns.
Investment Manager's Report (continued)
Property portfolio
As at 30 September 2015, the underlying portfolio comprised 54 properties independently valued at GBP453.7 million. This included the share of joint venture properties as well as St. George's Court in New Malden where an unconditional sale contract has been exchanged with completion due in April 2016. The portfolio produced a rental income of GBP28.5 million per annum, reflecting a net initial yield of 5.9%. The independent valuer has estimated that the current market rental value of the portfolio is GBP34.2 million per annum, reflecting a reversionary yield of 7.1%. The portfolio benefits from additional fixed annual rental uplifts of GBP2.1 million per annum due by September 2017. The data below summarises the portfolio information as at 30 September 2015 compared with the IPD Index:
Weighting (%)
---------------------------- ------------------
Sector weightings by value SREIT IPD Index
---------------------------- ------ ----------
Retail 34.3 37.7
---------------------------- ------ ----------
Offices 39.5 33.6
---------------------------- ------ ----------
Industrial 21.7 20.1
---------------------------- ------ ----------
Other 4.5 8.6
---------------------------- ------ ----------
Weighting (%)
------------------------------ ------------------
Regional weightings by value SREIT IPD Index
------------------------------ ------ ----------
Central London 7.9 16.0
------------------------------ ------ ----------
South East excluding Central
London 28.9 36.8
------------------------------ ------ ----------
Rest of the South 9.6 14.2
------------------------------ ------ ----------
Midlands and Wales 26.4 14.0
------------------------------ ------ ----------
North and Scotland 27.2 19.0
------------------------------ ------ ----------
The Company's top ten properties set out below comprise 55.3% of the portfolio value:
Top ten properties Value (GBPm) % of portfolio
---------------------------------- ------------- ---------------
1 Manchester, City Tower* 41.2 9.1
--- ----------------------------- ------------- ---------------
2 London, University of Law* 35.6 7.9
--- ----------------------------- ------------- ---------------
Bedford, St. John's Retail
3 Park 35.0 7.7
--- ----------------------------- ------------- ---------------
4 Brighton, Victory House 30.7 6.8
--- ----------------------------- ------------- ---------------
Leeds, Millshaw Industrial
5 Estate 23.0 5.1
--- ----------------------------- ------------- ---------------
6 Leeds, The Arndale Centre 20.0 4.4
--- ----------------------------- ------------- ---------------
7 Uxbridge, 106 Oxford Road 18.7 4.1
--- ----------------------------- ------------- ---------------
Milton Keynes, Stacey Bushes
8 Industrial Estate 17.4 3.8
--- ----------------------------- ------------- ---------------
Salisbury, Churchill Way
9 West 15.9 3.5
--- ----------------------------- ------------- ---------------
10 Norwich, Union Park 13.2 2.9
--- ----------------------------- ------------- ---------------
Total as at 30 September
2015 250.7 55.3
--- ----------------------------- ------------- ---------------
*Group share of joint venture properties
Investment Manager's Report (continued)
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The table below sets out the Company's top ten tenants that generally comprise large businesses and represent 33.3% of the portfolio:
Top ten tenants Rent p.a. (GBP'000) % of portfolio
---------------------------------------- -------------------- ---------------
1 University of Law Limited* 1,583 5.6
--- ----------------------------------- -------------------- ---------------
Wickes Building Supplies
2 Limited 1,092 3.8
--- ----------------------------------- -------------------- ---------------
Norwich Union Life and Pensions
3 Ltd 1,039 3.6
--- ----------------------------------- -------------------- ---------------
4 The Buckinghamshire New University 1,018 3.6
--- ----------------------------------- -------------------- ---------------
5 BUPA Insurance Services Limited 961 3.4
--- ----------------------------------- -------------------- ---------------
6 Secretary of State 916 3.2
--- ----------------------------------- -------------------- ---------------
7 Mott MacDonald Ltd 790 2.8
--- ----------------------------------- -------------------- ---------------
8 Recticel SA 731 2.6
--- ----------------------------------- -------------------- ---------------
9 Matalan Retail Limited 676 2.4
--- ----------------------------------- -------------------- ---------------
Sports Direct.com Retail
10 Limited 657 2.3
--- ----------------------------------- -------------------- ---------------
Total as at 30 September
2015 9,463 33.3
--- ----------------------------------- -------------------- ---------------
*Group share of joint venture properties
As at 30 September 2015 the average unexpired lease term, assuming all tenants break at the earliest opportunity, is 6.9 years, compared with the IPD Index at 7.9 years. This increases to 7.1 years on completion of the Premier Inn lease at the Arndale Centre, assuming completion in December 2016. The table below shows the portfolio lease expiry profile in five year increments compared against the IPD Index, updated for transactions since the period end.
% of rent passing
----------- --------------------------------------------------
SREIT earliest termination SREIT assuming no
/ IPD Index earliest tenant breaks / IPD
termination Index assuming no
tenant breaks
----------- --------------------------- ---------------------
Up to five 49.5/ 45.5 34.6/ 33.0
----------- --------------------------- ---------------------
Five to 10 31.1/ 29.5 36.9/ 36.9
----------- --------------------------- ---------------------
10 to 15 11.0/ 13.8 17.8/ 16.8
----------- --------------------------- ---------------------
15 to 20 5.4/ 5.6 7.6/ 6.0
----------- --------------------------- ---------------------
Over 20 3.0/ 5.6 3.1/ 7.4
----------- --------------------------- ---------------------
Property portfolio performance
The annualised performance of the Company's underlying property portfolio compared with the IPD Index to 30 September 2015 is shown below:
SREIT total return IPD Index total return Relative p.a. (%)
p.a. (%) p.a. (%)
------------ ------------------------------- ------------------------------- -------------------------------
Period Six Three Since Six Three Since Six Three Since
months years inception* months years inception* months years inception*
------------ -------- ------- ------------ -------- ------- ------------ -------- ------- ------------
Retail 6.4 10.1 6.0 4.1 8.6 4.7 2.2 1.4 1.3
------------ -------- ------- ------------ -------- ------- ------------ -------- ------- ------------
Office 7.8 16.3 8.2 8.9 16.0 7.2 -1.0 0.3 0.9
------------ -------- ------- ------------ -------- ------- ------------ -------- ------- ------------
Industrial 8.1 14.4 7.1 8.7 16.0 7.1 -0.6 -1.4 0.0
------------ -------- ------- ------------ -------- ------- ------------ -------- ------- ------------
Other 6.1 4.1 1.3 5.5 10.6 6.1 0.6 -5.9 -4.5
------------ -------- ------- ------------ -------- ------- ------------ -------- ------- ------------
Total 7.5 13.6 7.3 6.8 12.5 6.0 0.7 1.0 1.2
------------ -------- ------- ------------ -------- ------- ------------ -------- ------- ------------
* Inception was July 2004
Investment Manager's Report (continued)
Acquisitions
Bedford, St. John's Retail Park
On 15 May 2015 St. John's Retail Park in Bedford was acquired for GBP31.8 million which reflected a net initial yield of approximately 6.5%, based on a rent of GBP2.07 million per annum. The asset comprises a well located and prominent 130,000 sq ft retail warehouse park with an adjoining office building. The acquisition rationale was underpinned by a low average retail rent on acquisition of GBP16 per sq ft combined with good property fundamentals due to tenant demand, low retail warehouse vacancy in Bedford and above average population growth. The property was acquired via the acquisition of shares in a UK company that had developed the property and therefore had significant latent capital gains tax liabilities. The Company's UK-REIT status enabled these capital gains tax liabilities to be extinguished and provided SREIT with a competitive advantage when bidding.
Early progress has been made with the business plan to increase the rental level, extend leases and improve tenant mix. The only vacant retail warehouse unit has been let, producing GBP121,550 per annum or GBP25 per sq ft, 11% ahead of the estimated rental value. Since acquisition the lease to Maplin, who on acquisition were paying GBP81,576 per annum on a lease until March 2018, has been extended by five years. This activity has increased the contracted rent to GBP2.22 million per annum, reflecting a yield on the gross acquisition cost of approximately 7%.
Leeds, Millshaw Industrial Estate
On 17 July 2015 Millshaw Industrial Estate in Leeds was acquired for GBP22.7 million, reflecting an average capital value of GBP49 per sq ft and a net initial yield of 7.25%. Millshaw Industrial Estate comprises a freehold, 463,400 sq ft multi-let industrial estate constructed in the 1990's on a 28.3 acre site with 27 units ranging in size from 2,683 sq ft to 56,440 sq ft. On acquisition the property was let to 20 tenants producing a rental income of GBP1.73 million per annum, reflecting a low average rent of GBP3.77 per sq ft. The estate is strategically located within three miles of junction 27 of the M62 motorway and has frontage to Leeds' inner ring road. Millshaw Industrial Estate is also close to alternative uses properties such as the White Rose Office Park, the White Rose Shopping Centre, car showrooms and residential.
The Company's business plan for the property is to take advantage of restricted supply of new industrial and warehouse development in Leeds and re-position the estate by refurbishing units as leases expire in order to achieve higher rents. The rental value of the estate at acquisition was assumed to be GBP2.2 million per annum or GBP4.80 per sq ft, resulting in a reversionary yield of 8.4%. Early progress is being made on the business plan with good interest in the vacant units that represent approximately 4% of the rental value.
The acquisition was funded via a four year, GBP20.5 million, revolving credit facility ('RCF') from Royal Bank of Scotland.
Asset management
Leeds, Arndale Centre
The Arndale Centre in Leeds, a multi-let retail and office centre, was acquired in January 2014 for GBP16.2 million reflecting a net initial income yield of 9.2%. The business plan for the property was to generate income growth from asset management and explore the change of use of Arndale House, a substantially vacant office building comprising 32,000 sq ft.
During the period an Agreement for Lease has been exchanged with Premier Inn Hotels Limited ('Premier Inn') for a letting of a new 96 bedroom hotel. The agreement is conditional on securing planning consent and converting Arndale House to hotel use, at a cost of approximately GBP6.7 million. Subject to these conditions being satisfied, Premier Inn will enter into a new 30 year lease, with a tenant only break option after 20 years, at a rent of GBP412,800 per annum. The lease will benefit from five yearly upwards only rent reviews linked to the Consumer Price Index ('CPI'), subject to a cap of 4% per annum compound. The lease will be guaranteed by Premier Inn's parent company, Whitbread Group PLC. A planning application has been made and the target date for completion of the lease is December 2016. The transaction is expected to generate a yield on cost of approximately 6.5%.
Investment Manager's Report (continued)
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In parallel with the pre-letting to Premier Inn, good progress has been made with the strategy to increase the existing retail rents from an average rent of GBP45 per sq ft. Recent retail lettings at rentals have achieved rents at over GBP65 per sq ft. The evidence created by these lettings has increased the rental value from GBP1.65 million per annum upon acquisition to GBP1.9 million per annum as at 30 September 2015 and creates further scope to increase income and value.
Manchester, City Tower (25% interest)
A 25% interest of City Tower in Manchester was acquired in June 2014 for GBP33 million, reflecting a net initial yield of 7% and a reversionary yield of 8.7%. City Tower is situated in a prime location in the centre of Manchester. It provides 615,429 square feet of office, retail, leisure and hotel accommodation on a three acre island site including car parking with 456 spaces. The property provides significant diversification with 115 tenants with an average unexpired lease term, to the earlier of lease expiry or break, of 10 years. The acquisition rationale was to invest in a fundamentally good asset with potential for growth from active management. The low average office rent of GBP17 per sq ft, was attractive with an improving occupational market and low levels of competing supply. This presented the opportunity to refurbish and re-position the offices to capture rental growth.
There has been a high level of activity since acquisition with a refurbishment scheme on-going to improve the reception and vacant office floors at a total cost to the Company of GBP800,000. This, combined with recent lettings at between GBP20 and GBP25 per sq ft, has increased the rental value from GBP3 million per annum upon acquisition to GBP3.15 million per annum as at 30 September 2015. In addition to office lettings good progress has been made with re-positioning the retail and leisure offering.
Milton Keynes, Stacey Bushes and Heathfield Industrial Estates
Stacey Bushes and Heathfield Industrial Estates were acquired in two separate transactions in 2014 for GBP14.3 million, reflecting a net initial yield of 7.7% and an average capital value of GBP45 per sq ft, materially below replacement cost. The combined estate provides 54 units of varying sizes totalling 317,000 sq ft, and at acquisition produced a rent of GBP1.17 million per annum.
Over the period, five units have been refurbished, eight lettings completed and three lease renewals completed. Increased occupier demand and restricted supply in Milton Keynes has led to headline rents being achieved at over 20% ahead of the estimated rental value. The void rate has reduced from 20% on acquisition to the current void of 7%. This activity has increased the yield on the gross acquisition cost to approximately 9.3%
Finance
As at 30 September 2015 the Company had a loan to value, net of cash, of 30%, within the long-term target range of 25% to 35%.
On 15 May 2015 a four year, GBP20.5 million, revolving credit facility ('RCF') was agreed with Royal Bank of Scotland ('RBS') to fund the acquisition of Millshaw Industrial Estate. The RCF is an efficient and flexible source of funding due to the low margin of 1.6% and the ability to be repaid and redrawn as often as required. GBP10.25 million of the RCF has been hedged with an interest rate cap of 1.5% at a cost of GBP209,500.
Investment Manager's Report (continued)
Drawing down the RCF results in total debt of GBP150.1 million at an average total cost of 4.4% with a weighted duration of 10.5 years. Details of the loans and compliance with the principal covenants as at 30 September 2015 are set out below:
Lender Loan Maturity Interest Security LTV ratio Interest ICR ratio Forward Forward
(GBPm) rate / Loan covenant cover covenant looking looking
(%) to Value (%)* ratio (%)** ICR ratio ICR ratio
('LTV') (%)** (%)*** covenant
ratio (%)***
(%)
-------- -------- ----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
Canada 339.2
Life 25.9 16/04/2023 4.77($) / 38.2 65 320 185 309 185
-------- -------- ----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
103.7 16/04/2028
-------- -------- ----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
2.18 37.7
RBS 20.5 15/05/2019 (ALPHA>) / 54.5 65 393 185 521 250
-------- -------- ----------- ----------- ---------- ---------- --------- ---------- ----------- -----------
* Loan balance divided by property value as at 30 September 2015
** For the quarter preceding the Interest Payment Date ('IPD'), ((rental income received - void rates, void service charge and void insurance) / interest paid)
*** For the quarter following the IPD, ((rental income received - void rates, void service charge and void insurance) / interest paid)
($) Fixed total interest rate for the loan term
(ALPHA>) Total interest rate as at 30 September 2015 comprising 3 month LIBOR of 0.58% and the margin of 1.6%
Outlook
The UK commercial real estate market has continued to benefit from strong investor demand driving values upwards. Whilst interest rates are expected to remain low over the near term, we believe future returns are now more likely to be driven by above average income returns and rental growth rather than falling yields.
The properties acquired as part of the growth strategy should continue to support attractive returns due to the level of income and the potential to enhance returns by actively managing and investing in the portfolio. Successful execution of the initiatives outlined should therefore increase the prospects for an increase in the level of net income as well as protect values in a rising interest rate environment.
Duncan Owen
Schroder Real Estate Investment Management Limited
13 November 2015
Responsibility Statement of the Directors' in respect of the interim report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting; and
-- the interim management report (comprising the Chairman's and the Investment Managers report) includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By order of the Board
Lorraine Baldry
Chairman
13 November 2015
Condensed Consolidated Statement of Comprehensive Income
Six months Six months Year
to to to
30/09/2015 30/09/2014 31/03/2015
Notes GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
------------------------------------- -------- -------------------- -------------------- -----------
Rental income 11,817 11,294 22,124
Other income 284 578 2,067
Property operating expenses (1,330) (1,460) (2,812)
------------------------------------- -------- -------------------- -------------------- -----------
Net rental and related income,
excluding joint ventures 10,771 10,412 21,379
------------------------------------- -------- -------------------- -------------------- -----------
Share of net rental income in joint
ventures 1,581 813 2,273
Net rental and related income,
including joint ventures 12,352 11,225 23,652
------------------------------------- -------- -------------------- -------------------- -----------
Profit on disposal of investment
property 6 419 15,117 20,696
Net valuation gain on investment
property 6 11,795 13,879 20,144
Expenses
Investment management fee 2 (1,540) (1,094) (2,752)
Valuers' and other professional
fees (537) (668) (1,277)
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Administrators fee 2 (60) (60) (120) Auditor's remuneration (57) (62) (112) Directors' fees (108) (93) (185) Other expenses 3 (489) (63) (388) Total expenses (2,791) (2,040) (4,834) ------------------------------------- -------- -------------------- -------------------- ----------- Net operating profit before net finance costs 20,194 37,368 57,385 Interest receivable - - 21 Finance costs payable (3,487) (3,177) (6,344) Net finance costs (3,487) (3,177) (6,323) Share of net rental income in joint ventures 7 1,581 813 2,273 Share of net valuation gain in joint ventures 7 4,797 1,015 1,792 Profit before tax 23,085 36,019 55,127 Taxation (74) (62) (353) ----------------------------------------- ---- -------------------- -------------------- ----------- Total comprehensive income for the period/year attributable to the equity holders of the parent 23,011 35,957 54,774 ----------------------------------------- ---- -------------------- -------------------- ----------- Basic and diluted earnings per share 4 4.4p 7.7p 11.3p ----------------------------------------- ---- -------------------- -------------------- -----------
All items in the above statement are derived from continuing operations. The accompanying notes 1 to 11 form an integral part of the interim report.
Condensed Consolidated Statement of Financial Position
30/09/2015 30/09/2014 31/03/2015
Notes GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
------------------------------ ------ ------------ ------------ -----------
Investment in joint ventures 7 77,589 35,840 72,792
Investment property 6 363,665 301,368 298,684
Non-current assets 441,254 337,208 371,476
------------------------------ ------ ------------ ------------ -----------
Trade and other receivables 18,867 30,400 16,187
Cash and cash equivalents 8 12,330 33,984 46,591
------------------------------ ------ ------------ ------------ -----------
Current assets 31,197 64,384 62,778
------------------------------ ------ ------------ ------------ -----------
Total assets 472,451 401,592 434,254
============================== ====== ============ ============ ===========
Issued capital and reserves 342,245 259,967 325,666
Treasury shares (26,452) - (26,452)
------------------------------ ------ ------------ ------------ -----------
Equity 315,793 259,967 299,214
------------------------------ ------ ------------ ------------ -----------
Interest-bearing loans and
borrowings 9 147,918 127,490 127,562
Non-current liabilities 147,918 127,490 127,562
------------------------------ ------ ------------ ------------ -----------
Trade and other payables 8,528 14,020 7,266
Taxation payable 212 115 212
------------------------------ ------ ------------ ------------ -----------
Current liabilities 8,740 14,135 7,478
------------------------------ ------ ------------ ------------ -----------
Total liabilities 156,658 141,625 135,040
------------------------------ ------ ------------ ------------ -----------
Total equity and liabilities 472,451 401,592 434,254
============================== ====== ============ ============ ===========
Net Asset Value per ordinary
share 10 60.9p 55.1p 57.7p
------------------------------ ------ ------------ ------------ -----------
The financial statements on pages 15-26 were approved at a meeting of the Board of Directors held on 13 November 2015 and signed on its behalf by:
Lorraine Baldry
Chairman
The accompanying notes 1 to 11 form an integral part of the interim report.
Condensed Consolidated Statement of Changes in Equity
For the period from 1 April 2014 to 30 September 2014 (unaudited)
Treasure
Share share Revenue
Notes premium reserve reserve Total
GBP000 GBP000 GBP000 GBP000
Balance as at 31 March
2014 127,152 - 63,291 190,443
Profit for the period - - 35,957 35,957
New Equity Issuance (net
of issue costs) 38,918 - - 38,918
Dividends paid 5 - - (5,351) (5,351)
---------------------------- ------ ---------- ----------- ---------- --------
Balance as at 30 September
2014 166,070 - 93,897 259,967
---------------------------- ------ ---------- ----------- ---------- --------
For the year ended 31 March 2015 (audited) and for the period from
1 April 2015 to 30 September 2015 (unaudited)
Treasure
Share share Revenue
Notes premium reserve reserve Total
GBP000 GBP000 GBP000 GBP000
---------------------------- ------ ---------- ----------- ---------- ---------
Balance as at 31 March
2014 127,152 - 63,291 190,443
Profit for the year - - 54,774 54,774
New Equity Issuance (net
of issue costs) 91,938 (26,452) - 65,486
Dividends paid 5 - - (11,489) (11,489)
---------------------------- ------ ---------- ----------- ---------- ---------
Balance as at 31 March
2015 219,090 (26,452) 106,576 299,214
---------------------------- ------ ---------- ----------- ---------- ---------
Profit for the period - - 23,011 23,011
Dividends paid 5 - - (6,432) (6,432)
---------------------------- ------ ---------- ----------- ---------- ---------
Balance as at 30 September
2015 219,090 (26,452) 123,155 315,793
---------------------------- ------ ---------- ----------- ---------- ---------
The accompanying notes 1 to 11 form an integral part of the interim report
Condensed Consolidated Statement of Cash Flows
Six months Six months Year
to to to
30/09/2015 30/09/2014 31/03/2015
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
-------------------------------------- ------------- ------------ ------------ -----------
Operating activities
Profit for the period/year 23,011 35,957 54,774
Adjustments for:
Profit on disposal of investment
property (419) (15,117) (20,696)
Net valuation gain on investment
property (11,795) (13,879) (20,144)
Share of profit of joint ventures (6,378) (1,015) (4,065)
Net finance cost 3,487 3,177 6,323
Taxation 74 62 353
------------------------------------------- -------- -----------
Operating cash generated before
changes in working
capital 7,980 9,185 16,545
Decrease/(increase) in trade and
other receivables 1,320 (18,369) (4,157)
Increase in trade and other payables 1,262 7,038 112
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------------------------------------------------ --- ------------ ------------ ----------- Cash generated from operations 10,562 (2,146) 12,500 Finance costs paid (3,389) (3,091) (6,188) Interest received - - 21 Tax (74) (17) (211) ----------------------------------------------------- ------------ ----------- Net cash from operating activities 7,099 (5,254) (6,122) ----------------------------------------------------- ------------ ------------ ----------- Investing Activities Proceeds from sale of investment property - 37,712 86,548 Acquisition of investment property (55,630) (12,010) (45,470) Additions to investment property (1,137) - (848) Acquisition of joint ventures - (35,000) (71,000) Net income distributed from joint ventures 1,581 - 2,273 Net cash from investing activities (55,186) (9,298) (28,497) ----------------------------------------------------- ------------ ------------ ----------- Financing Activities Share issue net proceeds - 38,918 65,486 New Loan 20,500 - - Loan arrangement fees (242) - - Dividends paid (6,432) (5,351) (11,489) ----------------------------------------------------- ------------ ------------ ----------- Net cash from financing activities 13,826 33,567 53,997 ----------------------------------------------------- ------------ ------------ ----------- Net (decrease)/increase in cash and cash equivalents for (34,261) 19,015 31,622 for the period/year Opening cash and cash equivalents 46,591 14,969 14,969 ----------------------------------------------------- ------------ ------------ ----------- Closing cash and cash equivalents 12,330 33,984 46,591 ----------------------------------------------------- ------------ ------------ -----------
The accompanying notes 1 to 11 form an integral part of the interim report
Notes to the Interim Report
1. Significant accounting policies
Schroder Real Estate Investment Trust Limited ("the Company") is a closed-ended investment company incorporated in Guernsey. The condensed interim financial statements of the Company for the period ended 30 September 2015 comprise the Company, its subsidiaries and its interests in associates and joint ventures (together referred to as the "Group").
Statement of compliance
The condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority and IAS 34 Interim Financial Reporting. They do not include all of the information required for the full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2015. The condensed interim financial statements have been prepared on the basis of the accounting policies set out in the Group's annual financial statements for the year ended 31 March 2015. The financial statements for the year ended 31 March 2015 have been prepared in accordance with IFRS as issued by the IASB. The Group's annual financial statements refer to new Standards and Interpretations none of which had a material impact on the financial statements.
Going concern
The Directors have examined significant areas of possible financial risk including cash and cash requirements and the debt covenants, in particular the loan to value covenants and interest cover ratios on the loans with Canada Life and Royal Bank of Scotland. 80% of the Canada Life loan matures on 15 April 2028 and 20% matures on 15 April 2023. The Royal Bank of Scotland loan matures on 17 July 2019. The Directors have not identified any material uncertainties which would cast significant doubt on the Group's ability to continue as a going concern for a period of not less than twelve months from the date of the approval of the financial statements. The Directors have satisfied themselves that the Group has adequate resources to continue in operational existence for the foreseeable future.
After due consideration, the Board believes it is appropriate to adopt the going concern basis in preparing the condensed interim financial statements.
Use of estimates and judgments
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. There have been no changes in the judgements and estimates used by management as disclosed in the last annual report and financial statements for the year ended 31 March 2015.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment and in one geographical area, the United Kingdom. There is no one tenant that represents more than 10% of group revenues. The chief operating decision maker is considered to be the Board of Directors who are provided with consolidated IFRS information on a quarterly basis.
2. Material agreements
Schroder Real Estate Investment Management Limited is the Investment Manager to the Company.
The Investment Manager is entitled to a fee together with reasonable expenses incurred in the performance of its duties. The fee is payable monthly in arrears and shall be an amount equal to one twelfth of the aggregate of 1.1% of the NAV of the Company. The Investment Management Agreement can be terminated by either party on not less than twelve months written notice or on immediate notice in the event of certain breaches of its terms or the insolvency of either party. The total charge to profit during the period was GBP1,540,000 (year to 31 March 2015: GBP2,752,000) (6 months to 30 September 2014: GBP1,094,000). At the period end GBP712,000 (31 March 2015: GBP471,000) (30 September 2014: GBP667,000) was outstanding.
During the period, Schroder Real Estate Investment Management Limited was also paid GBP200,000 for additional services in relation to the Group's conversion to a REIT in May 2015.
The Board appointed Northern Trust International Fund Administration Services (Guernsey) Limited as the Administrator to the Company with effect from 25 July 2007. The Administrator is entitled to an annual fee equal to GBP120,000 of which GBP30,000 (31 March 2015: GBP30,000) (30 September 2014: GBP30,000) was outstanding at the period end.
3. Other expenses
Six months Six months Year to
to to 31/03/2015
30/09/2015 30/09/2014
GBP000 GBP000 GBP000
------------------------------------ -------------------- ------------ ------------
Directors' and officers' insurance
premium 7 7 21
Regulatory costs 22 10 60
Marketing 19 11 15
Professional fees 34 31 79
Other expenses (*) 407 4 213
489 63 388
------------------------------------ -------------------- ------------ ------------
(*) Six month to 30 September 2015 include REIT conversation cost of circa GBP400,000
4. Basic and Diluted Earnings per share
The basic and diluted earnings per share for the Group is based on the net profit for the period of GBP23,011,000 (31 March 2015: GBP54,744,000), (30 September 2014: GBP35,957,000) and the weighted average number of ordinary shares in issue during the period/year of 518,513,409 (31 March 2015: 485,661,354 and 30 September 2014: 465,799,123).
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EPRA earnings reconciliation
Six months Six months Year to
to to 31/03/2015
30/09/2015 30/09/2014
GBP000 GBP000 GBP000
------------------------------------- --------------------- ----------------------- -------------------
Profit after tax 23,011 35,957 54,774
Adjustments to calculate EPRA
Earnings exclude:
Profit on disposal of investment
property (419) (15,117) (20,696)
Net valuation gain on investment
property (11,795) (13,879) (20,144)
Finance cost: interest rate cap 209 - -
Share of valuation gain in joint
ventures (4,797) (1,828) (1,792)
----------------------------------------- --------------------- ----------------------- -------------------
EPRA earnings 6,209 5,133 12,142
----------------------------------------- --------------------- ----------------------- -------------------
Weighted average number of ordinary
shares 518,513,409 465,799,123 485,661,354
EPRA earnings per share (pence
per share) 1.2 1.1 2.5
Notes to the Interim Report (continued)
4. Basic and Diluted Earnings per share (continued)
European Public Real Estate Association ('EPRA') earnings per share reflect the underlying performance of the company calculated in accordance with the EPRA guidelines.
5. Dividends paid
01/04/2015
Number of to
In respect of ordinary Rate 30/09/2015
shares (pence) GBP000
------------------------------------ --------------- -------- -----------
Quarter 31 March 2015 dividend
paid 28 May 2015 518.51 million 0.62 3,216
Quarter 30 June 2015 dividend paid
28 August 2015 518.51 million 0.62 3,216
------------------------------------ --------------- -------- -----------
1.24 6,432
------------------------------------ --------------- -------- -----------
01/04/2014
Number of to
In respect of ordinary Rate 30/09/2014
shares (pence) GBP000
------------------------------------ ---------------- -------- -----------
Quarter 31 March 2014 dividend
paid 25 April 2014 391.51 million 0.62 2,427
Quarter 30 June 2014 dividend paid
15 August 2014 471.51 million 0.62 2,924
------------------------------------ ---------------- -------- -----------
1.24 5,351
------------------------------------ ---------------- -------- -----------
01/04/2014
Number of to
In respect of ordinary Rate 31/03/2015
shares (pence) GBP000
------------------------------------- --------------- -------- -------------
Quarter 31 March 2014 dividend paid
25 April 2014 391.51 million 0.62 2,427
Quarter 30 June 2014 dividend paid
15 August 2014 471.51 million 0.62 2,923
Quarter 30 September 2014 dividend
paid 28 November 2014 471.51 million 0.62 2,923
Quarter 31 December 2014 dividend
paid 27 February 2015 518.51 million 0.62 3,216
------------------------------------- --------------- -------- -------------
2.48 11,489
------------------------------------- --------------- -------- -------------
A dividend for the quarter ended 30 September 2015 of 0.62p (GBP3.2 million) was declared on 4 November 2015 and will be paid on 30 November 2015.
6. Investment property
For the period 1 April 2014 to 30 September 2014 (unaudited)
Leasehold Freehold Total
-------------------------------------------
GBP000 GBP000 GBP000
------------------------------------------- ---------- --------- ---------
Fair value as at 1 April 2014 39,361 258,713 298,074
Additions 215 11,795 12,010
Disposals - (22,595) (22,595)
Net valuation gain on investment property 2,030 11,849 13,879
Fair value as at 30 September 2014 41,606 259,762 301,368
------------------------------------------- ---------- --------- ---------
Notes to the Interim Report (continued)
6. Investment property (continued)
For the year 1 April 2014 to 31 March 2015 (audited)
Leasehold Freehold Total
-------------------------------------------
GBP000 GBP000 GBP000
------------------------------------------- ---------- --------- ---------
Fair value as at 1 April 2014 39,361 258,713 298,074
Additions 232 46,086 46,318
Gross proceeds on disposals (2,295) (84,253) (86,548)
Realised (loss)/gain on disposals (1,209) 21,905 20,696
Net valuation gain on investment property 3,138 17,006 20,144
Fair value as at 31 March 2015 39,227 259,457 298,684
------------------------------------------- ---------- --------- ---------
For the period 1 April 2015 to 30 September 2015 (unaudited)
Leasehold Freehold Total
-------------------------------------------
GBP000 GBP000 GBP000
------------------------------------------- ---------- --------- --------
Fair value as at 1 April 2015 39,227 259,457 298,684
Additions 28 56,658 56,686
Gross proceeds on disposals - (3,919) (3,919)
Realised gain on disposals - 419 419
Net valuation gain on investment property 636 11,159 11,795
Fair value as at 30 September 2015 39,891 323,774 363,665
------------------------------------------- ---------- --------- --------
Fair value of investment property as determined by the valuer's totals GBP376,875,000 (31 March 2015: GBP310,205,000) (30 September 2014: GBP325,755,000). Of this amount GBP3,750,000 (31 March 2015: GBP2,305,000) in relation to the unconditional exchange of contracts for the sale of New Malden and GBP9,460,000 (31 March 2015: GBP9,216,000) (30 September 2014: GBP8,987,000) in connection with lease incentives is included within trade and other receivables.
The fair value of investment property has been determined by Knight Frank LLP, a firm of independent chartered surveyors, who are registered independent appraisers. The valuation has been undertaken in accordance with the RICS Valuation - Professional Standards January 2014 Global and UK Edition, issued by the Royal Institution of Chartered Surveyors (the "Red Book") including the International Valuation Standards.
The properties have been valued on the basis of "Fair Value" in accordance with the RICS Valuation - Professional Standards VPS4(1.5) Fair Value and VPGA1 Valuations for Inclusion in Financial Statements which adopt the definition of Fair Value used by the International Accounting Standards Board.
The valuation has been undertaken using appropriate valuation methodology and the valuer's professional judgement. The valuer's opinion of Fair Value was primarily derived using recent comparable market transactions on arm's length terms, where available, and appropriate valuation techniques (The Investment Method).
The properties have been valued individually and not as part of a portfolio.
All investment properties are categorised as Level 3 fair values as they use significant unobservable inputs. There have not been any transfers between Levels during the period. Investment properties have been classed according to their real estate sector. Information on these significant unobservable inputs per class of investment property is disclosed below:
Notes to the Interim Report (continued)
6. Investment property (continued)
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Quantative information about fair value measurement using unobservable inputs (Level 3) as at 30 September 2015
Industrial Retail (incl Office Other Total
(1) retail warehouse)
------------- ----------- --------------- ------------------- ---------------- -------- -----------------
Fair value
(GBP000) 98,275 150,950 115,800 11,850 376,875
-------------------------- --------------- ------------------- ---------------- -------- -----------------
Area ('000
sq ft) 1,711 636 647 145 3,139
-------------------------- --------------- ------------------- ---------------- -------- -----------------
Net passing Range GBP0 - GBP8.82 GBP0 - GBP38.50 GBP0 - GBP25.72 GBP6.97 GBP0-GBP38.50
rent Weighted GBP3.88 GBP14.40 GBP13.33 N/A GBP8.10
psf per average
annum
------------- ----------- --------------- ------------------- ---------------- -------- -----------------
Gross ERV Range GBP3.25 GBP7.40-GBP49.50 GBP9.00 GBP8.69 GBP3.25-GBP49.50
psf Weighted - GBP9.50 GBP16.48 - GBP27.50 N/A GBP9.32
per annum average GBP4.65 GBP14.73
------------- ----------- --------------- ------------------- ---------------- -------- -----------------
Net initial Range 0% - 7.50% 0% - 8.60% 0.00%-14.57% 8.07% 0% - 14.57%
yield (1) Weighted 6.44% 5.74% 7.04% N/A 6.38%
average
------------- ----------- --------------- ------------------- ---------------- -------- -----------------
Equivalent Range 5.67% - 4.50%-9.80% 5.49%-11.60% 8.49% 4.50%-11.60%
yield Weighted 8.58% 7.29% 6.07% 7.13% N/A 6.79%
average
------------- ----------- --------------- ------------------- ---------------- -------- -----------------
Notes:
(1) Yields based on rents receivable after deduction of head rents, but gross of non-recoverables
Quantitative information about fair value measurement using unobservable inputs (Level 3) as at 31 March 2015
Industrial Retail (incl Office Leisure Total
retail warehouse)
------------- ----------- ----------------- ------------------- ---------------- -------- -----------------
Fair value
(GBP000) 70,850 113,105 114,550 11,700 310,205
-------------------------- ----------------- ------------------- ---------------- -------- -----------------
Area ('000
sq ft) 1,248 505 657 145 2,555
-------------------------- ----------------- ------------------- ---------------- -------- -----------------
Net passing Range GBP0 - GBP8.82 GBP0 - GBP38.50 GBP0 - GBP25.72 GBP6.97 GBP0-GBP38.50
rent per Weighted GBP4.03 GBP13.44 GBP12.92 N/A GBP8.34
sq ft per average
annum
------------- ----------- ----------------- ------------------- ---------------- -------- -----------------
Gross ERV Range GBP3.00 - GBP7.40-GBP49.50 GBP9.00 GBP8.72 GBP3.00-GBP49.50
per sq Weighted GBP9.25 GBP4.59 GBP16.31 - GBP26.00 N/A GBP9.62
ft per average GBP14.26
annum
------------- ----------- ----------------- ------------------- ---------------- -------- -----------------
Net initial Range 0% - 8.31% 0% - 9.20% 1.00%-13.99% 8.17% 0% - 13.99%
yield (1) Weighted 6.71% 5.67% 7.00% N/A 6.49%
average
------------- ----------- ----------------- ------------------- ---------------- -------- -----------------
Equivalent Range 5.74% - 8.53% 4.50%-9.84% 5.39%-9.67% 8.49% 4.50%-9.84%
yield Weighted 7.43% 6.45% 7.24% N/A 7.04%
average
------------- ----------- ----------------- ------------------- ---------------- -------- -----------------
Notes: (1) Yields based on rents receivable after deduction of head rents, but gross of non-recoverables
Notes to the Interim Report (continued)
6. Investment property (continued)
Sensitivity of measurement to variations in the significant unobservable inputs
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:
Unobservable input Impact on fair value Impact on fair value
measurement of significant measurement of significant
increase in input decrease in input
------------------- ---------------------------- ----------------------------
Passing rent Increase Decrease
------------------- ---------------------------- ----------------------------
Gross ERV Increase Decrease
------------------- ---------------------------- ----------------------------
Net initial yield Decrease Increase
------------------- ---------------------------- ----------------------------
Equivalent yield Decrease Increase
------------------- ---------------------------- ----------------------------
There are interrelationships between the yields and rental values as they are partially determined by market rate conditions.
The sensitivity of the valuation to changes in the most significant inputs per class of investment property are shown below:
Estimated movement in Industrial Retail Office Other Total fair value of investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 properties at 30 September 2015 ----------------------------- ----------- --------- --------- --------- --------- Increase in ERV by 5% 4,260 6,280 3,715 250 14,505 ----------------------------- ----------- --------- --------- --------- --------- Decrease in ERV by 5% (3,995) (5,805) (4,005) (150) (13,955) ----------------------------- ----------- --------- --------- --------- --------- Increase in net initial yield by 0.25% (3,825) (7,150) (4,650) (550) (16,075) ----------------------------- ----------- --------- --------- --------- --------- Decrease in net initial yield by 0.25% 4,050 7,850 5,100 600 17,525 ----------------------------- ----------- --------- --------- --------- --------- Estimated movement in fair Industrial Retail Office Other Total value of investment properties GBP000 GBP000 GBP000 GBP000 GBP000 at 31 March 2015 --------------------------------- ----------- -------- -------- -------- --------- Increase in ERV by 5% 3,050 4,300 4,150 300 11,800 --------------------------------- ----------- -------- -------- -------- --------- Decrease in ERV by 5% (2,750) (4,300) (3,655) (200) (10,905) --------------------------------- ----------- -------- -------- -------- --------- Increase in net initial yield by 0.25% (2,550) (4,850) (3,900) (350) (11,650) --------------------------------- ----------- -------- -------- -------- --------- Decrease in net initial yield by 0.25% 2,750 5,150 4,300 400 12,600 --------------------------------- ----------- -------- -------- -------- ---------
7. Investment in joint ventures
For the period 1 April 2014 to 30 September 2014 (unaudited)
GBP000
------------------------------------------------------ --------
Opening balance as at 1 April 2014 1,800
Distributions received (1,975)
Addition to investment in joint ventures 35,000
Share of net valuation gain in period 1,015
Amounts recognised as joint ventures at 30 September
2014 35,840
------------------------------------------------------- --------
Notes to the Interim Report (continued)
7. Investment in joint ventures (continued)
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