Schroder Eur Real Est Inv Trust PLC Announcement of NAV and dividend increase (9447Y)

TIDMSERE

RNS Number : 9447Y

Schroder Eur Real Est Inv Trust PLC

15 September 2020

15 September 2020

ANNOUNCEMENT OF NAV AND DIVID INCREASE

Schroder European Real Estate Investment Trust plc ("SERE" or the "Company"), the company investing in European growth cities, today provides a business update, alongside announcing its unaudited net asset value ("NAV") as at 30 June 2020 and third interim dividend for the year ending 30 September 2020:

- Rent collection during the quarter and subsequent period remained stable at c.84% of contracted rent (as at 15 September 2020);

- An increase in the interim dividend to 1.39 euro cents per share, equating to 75% of the previous target level pre COVID-19. This is an increase from 50% of the target level for the prior quarter. The dividend is 104% covered from income received during the quarter;

   -     The dividend increase reflects the positive progress made with the Paris Boulogne-Billancourt refurbishment project and the stabilisation in rent collection levels. The board will continue to keep the dividend level under review; 

- Unaudited NAV as at 30 June 2020 of EUR178.4 million or 133.4 cents per share, a 2.1% reduction compared to 31 March 2020, driven by capital expenditure commitments at Paris Boulogne-Billancourt and a valuation decrease at the Company's sole shopping centre in Seville;

   -     NAV total return of -0.7% over the quarter; and 
   -     Loan to value, net of cash, of 27%, with no debt maturity before 2023. 

Jeff O'Dwyer, of Schroder Real Estate Investment Management Limited, commented:

"The SERE portfolio continues to hold up well, underpinned by our city, sector and tenant diversification that has led to favourable rent collection statistics and valuation resilience. Our primary focus remains to deliver and capitalise on the Paris Boulogne-Billancourt refurbishment. Successful completion will have the potential to be accretive to NAV and, subject to disposal, provide an opportunity to further diversify the portfolio and provide a path back to the target dividend."

Net Asset Value

The table below provides a breakdown of the movement in NAV during the reporting period:

 
                                               EURm(1)  Cps(2)  %(3) 
Brought forward NAV as at 1 April 2020          182.1   136.2 
Unrealised gain in valuation of the property 
 portfolio                                      (2.6)   (1.9)   (1.4) 
Capital expenditure                             (0.9)   (0.7)   (0.5) 
EPRA earnings                                    1.9     1.4     1.0 
Non-cash items                                   0.4     0.3     0.2 
Dividend paid                                   (2.5)   (1.9)   (1.4) 
NAV as at 30 June 2020                          178.4   133.4   (2.1) 
 

(1) Management reviews the performance of the Company principally on a proportionally consolidated basis. As a result, figures quoted in this table include the Company's share of joint ventures on a line-by-line basis and exclude non-controlling interests in the Company's subsidiaries.

(2) Based on 133,734,686 shares

(3) % change based on the starting NAV as at 1 April 2020

The NAV total return is -0.7% over the quarter, 2.7% over 12 months and 5.2% p.a. over three years.

Interim dividend

The Company announces its third interim dividend for the year ending 30 September 2020 of 1.39 euro cents per share, equating to 75% of the target dividend.

The dividend is 104% covered from income received over the quarter. Total dividends declared relating to the nine months are now 4.16 euro cents per share, with a dividend cover for the nine months of 113%.

In implementing the dividend strategy, the board has considered the rent collection and cash position of the Company, alongside market conditions, current asset management activity and the longer term sustainable rental income from the portfolio. Further positive clarity is starting to emerge around these factors, in particular certain asset management activity and rent collection. However, as a consequence of COVID-19, uncertainty and risks remain heightened and by retaining additional cash at this time, the Company will be better positioned to withstand a downturn in activity. The dividend will continue to be kept under close review by the board, in particular as the Paris Boulogne-Billancourt project progresses.

The interim dividend payment will be made on Friday, 23 October 2020 to shareholders on the register on the record date of Friday, 9 October 2020. In South Africa, the last day to trade will be Tuesday, 6 October 2020 and the ex-dividend date will be Wednesday, 7 October 2020. In the UK, the last day to trade will be Wednesday, 7 October 2020 and the ex-dividend date will be Thursday, 8 October 2020.

The interim dividend will be paid in GBP to shareholders on the UK register and Rand to shareholders on the South African register. The exchange rate for determining the interim dividend paid in Rand will be confirmed by way of an announcement on Monday, 21 September 2020. UK shareholders are able to make an election to receive dividends in Euro rather than GBP should that be preferred. The form for applying for such election can be obtained from the Company's UK registrars (Equiniti Limited) and any such election must be received by the Company no later than Friday, 9 October 2020. The exchange rate for determining the interim dividend paid in GBP will be confirmed following the election cut off date by way of an announcement on Monday, 12 October 2020.

Shares cannot be moved between the South African register and the UK register between Monday, 21 September 2020 and Friday, 9 October 2020, both days inclusive. Shares may not be dematerialised or rematerialised in South Africa between Wednesday, 7 October 2020 and Friday, 9 October 2020, both days inclusive.

The Company has a total of 133,734,686 shares in issue on the date of this announcement. The dividend will be distributed by the Company (UK tax registration number 21696 04839) and is regarded as a foreign dividend for shareholders on the South African register. In respect of South African shareholders, dividend tax will be withheld from the amount of the dividend noted above at the rate of 20% unless the shareholder qualifies for the exemption. Further dividend tax information for South African shareholders will be included in the exchange rate announcement to be made on Monday, 21 September 2020.

Asset management update

During the period the Company made significant progress in respect of the following key asset management initiatives:

- At its Paris office investment in Boulogne-Billancourt, the tenant Alten, remains committed to the new pre-let. The Company has received planning approval and continues to advance construction tender pricing. The intention is to award and commence the main works in October 2020. Positive discussions are ongoing with regard to multiple funding options, including a forward funding/forward sale or the taking of additional debt, keeping within the stated gearing level of 35% LTV (net of cash).

- At the Company's sole shopping centre, Metromar in Seville (50% share), SERE has completed a 400 sqm expansion to the anchor supermarket and agreed a new 16 year term with Mercadona. This generates an additional EUR50,000 in annual rent (100% interest). The Company has also concluded agreements totaling 13,300 sqm, representing 60% of the building's GLA, with a number of other retailers to continue occupation, subject to rental discounts. These discounts are in line with that assumed in the June 2020 valuation. The investment represents 9% of the portfolio value to the previous June NAV.

Debt

The overall loan to value ('LTV') net of cash is 27%. The weighted average total interest rate on the loans is 1.4% p.a.

The Company has seven loans secured by individual assets or groups of assets, with no cross-collateralisation between loans. Each loan has separate LTV and income covenants, with a range of headroom against covenants:

   -     LTV default covenant headroom ranges between 17% (Seville) and 37% (Hamburg and Stuttgart) 

- Income default covenant headroom ranges between 18% (Hamburg and Stuttgart) and 95% (Rumilly). For the Company's sole shopping centre in Seville, there is no default income covenant for the loan, however there continues to be a cash trap of net income from the property due to reduced rental income

Property portfolio

- The Company is well positioned with a diversified portfolio and pipeline of value-enhancing asset management initiatives

- As at 30 June 2020, the Company owned 13 properties located in growth cities of Continental Europe, independently valued at EUR244.7 million at a blended net initial yield of 5.8%. This value represents a fall of 1.1% led primarily by a deterioration in the retail sector. The annual contracted rent is EUR17.3 million, with an average unexpired lease term to first break and expiry of 4.6 years and 5.8 years

- 75% of the portfolio is invested in business space assets (office/industrial/mixed-use data centre) in cities including Paris, Berlin, Stuttgart and Hamburg. The country and sector allocations for the portfolio as at 30 June 2020 are set out in the table below:

 
Country       Allocation  Sector      Allocation 
 
France        44%         Office      48% 
Germany       31%         Retail      25% 
Netherlands   16%         Industrial  19% 
Spain         9%          Mixed       8% 
Total         100%        Total       100% 
 

- Over the quarter, total property returns were flat (0.0%). Over 12 months the underlying property portfolio returned 6.1% and over three years it returned 8.3% p.a. (excluding the impact from transaction costs).

Enquiries:

Jeff O'Dwyer / Duncan Owen

   Schroder Real Estate Investment Management Limited               Tel: [phone] 

Ria Vavakis

   Schroder Investment Management Limited                                  Tel: [phone] 
   Dido Laurimore/Richard Gotla/Methuselah Tanyanyiwa             Tel: [phone] 

FTI Consulting

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September 15, 2020 02:00 ET (06:00 GMT)