Schroder Real Estate Inv... Share Discussion Threads

[fred177] 19/10/2022 16:08

Balance sheet and debt

As at 30 June 2022, the Company had cash of £16.4 million, including its share of Joint Venture cash balances, and a loan to value ratio, net of cash, of 29.0%.

The Company has two loan facilities, a £129.6 million term loan with Canada Life and a £75.0 million revolving credit facility ('RCF') with Royal Bank of Scotland International ('RBSI'). As at 30 June 2022, £46.3 million of the RCF was drawn.

50% of the Canada Life facility matures in October 2032 with the balance in October 2039, at an average fixed interest rate of 2.5%.

The RBSI facility matures on 6 June 2027 and £30.5 million of the £46.3 million drawn has an interest rate cap that results in a maximum interest rate, including the margin of 1.65%, of 3.15%. The cap expires in July 2023.

[fred177] 19/10/2022 16:05

SpectoAcc as i am sure you are aware The Canada Life £125 million facility is longer and fixed at 2.7%, therefore the £30m which is part of the RCF comprises 20% of the debt which comes up next year still a problem but not so big (20% of gearing) although an additional £16m has also been drawn which may not have any cap at all. A couple of disposals may help, though presumably in time other funds not so well capitalised may lead to high quality distressed assets coming available and more opportunity even if money is expensive

[spectoacc] 19/10/2022 15:50

Good luck, you'd struggle to say it was expensive here.

But can you explain the debt situation?

27th July:

"Net loan to value of 29.0%, with an average interest cost of 2.7%, an average loan duration of 11 years and no debt maturities until 2027."


Clear enough.


Nick Montgomery, in same release:

"...The Company is well positioned due to its good quality, higher yielding portfolio and long-term, fixed-rate debt.""


Again, crystal clear - long-term, fixed-rate debt.


But:

"The RBSI facility matures on 6 June 2027 and £30.5 million of the £46.3 million drawn has an interest rate cap that results in a maximum interest rate, including the margin of 1.65%, of 3.15%. The cap expires in July 2023."


So £30.5m has a 3.15% cap ends in July next year (they don't mention if the undrawn portion is subject to the same). API's has cost them near-7% for the next 3 years from next April. SREI's doesn't need rolling, but what will the floating rate be come next July? 6.5%? Higher?

I'm wanting to hear the debt situation has been resolved, and how the statements above can possibly be squared. NM seems to be lying through his teeth to me: the debt is long-term but it isn't fixed-rate, at least not a significant portion..

What am I missing?

[skyship] 19/10/2022 15:37

Decided to get back in here just now @ 41.36p.

A 25% NAV fall (59.3p) would translate into a 30.2% discount versus the current 47.7% (79.10p). The yield is an extremely attractive 7.76%.

[my retirement fund] 19/10/2022 10:12

Schroder Real Estate Investment Trust Limited is pleased to announce that Nick Montgomery and Bradley Biggins will provide a live presentation relating to Half Year Results for the period ended 30 September 2022 via the Investor Meet Company platform on Wednesday 16 November 2022 at 2.00 pm GMT.The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.Investors can sign up to Investor Meet Company for free and add to meet Schroder Real Estate Investment Trust Limited via:https://www.investormeetcompany.com/schroder-real-estate-investment-trust-limited/register-investor

[spectoacc] 19/10/2022 10:05

Perhaps we'll get the answer to the debt dichotomy (ie Nick Montgomery saying what I believe to be a falsehood) then.

[spectoacc] 18/10/2022 13:42

@nickrl - anything back from SREI on the end of the interest rate cap on part of the debt?

SREI seem to have bounced less than some.

[spectoacc] 04/10/2022 13:42

Lol re 10 year 3% peak.

But agree with the premise of no 1974. But it does feel very 1989/1990. We're at the top end of a humungous property boom, given extra impetus by Covid & BBLs (in '89 it was getting in ahead of the end of MIRAS), and now facing inflation/a strongly rising rates environment.

Even a 20% fall in values would hurt.

[rambutan2] 04/10/2022 13:34

Agree that interesting, but trouble is it was published on 31/08 and there have been "events" since then:

"In light of these differences in market structure and assuming that UK 10-year government bond yields peak at 3%, we believe that a repeat of the 1974 crash is unlikely. That said, we believe all property capital values could fall by around 10-20% between end-2021 and end-2023."

[shieldbug] 04/10/2022 12:43

Fascinating article by Nick Montgomery and Mark Callender, looking at 1970s property market with thoughts on current market. "We think the decline in capital values over the two years to end-2023 will be limited to 10-20%."

Glad to see he is seeking insights from history.

hxxps://www.schroders.com/en/uk/tp/markets2/markets/is-uk-real-estate-heading-back-to-the-1970s/

[my retirement fund] 30/9/2022 18:25

Yes thats a big change for you Sky you'vebeen in this sector for years haven't you, what will you target next. Personally I'm just starting to re enter the area on this huge discounts and sell off, particularly where the fund looks solvent if its really bad and can continue to pay out. My logic is based on having to have a weighting based on the fact property did well in the early 70s.

[badtime] 30/9/2022 17:07

Gosh Sky..must be quite a while since youve been REITless

[skyship] 30/9/2022 15:42

BT - well done indeed. Sold the balance of my UKCM at over 60p today - so now not holding a single REIT!

[spectoacc] 30/9/2022 15:36

One of my largest REIT holdings at generally much higher - also hindsight ;)

[badtime] 30/9/2022 15:31

Nabbed a few at a tad over 40p earlier in the week ..now I wish that few had been lots ..hindsight eh lol

[nickrl] 28/9/2022 23:14

@sky didn't stay there long and bounced back nicely although my disappearing out for a few hours mid morning was badly timed for sub 40p opportunity which may not materialise again for a while but who knows....

[speedsgh] 28/9/2022 11:16

Think of all the dividends you've had in the meantime, Skinny! #glasshalffull :-)

[skinny] 28/9/2022 10:32

Nearly back (again) to my original purchase price @39.10p in 2012.

[badtime] 28/9/2022 10:29

Certain amount of slaughter going on this week :(

[skyship] 28/9/2022 09:55

Unbelievable - that gloomy Head & Shoulders chart was right - 40p target hit:

[my retirement fund] 27/9/2022 16:20

Couldn't resist a few more, yield now looking compelling

[spectoacc] 25/9/2022 19:52

@m_kerr - and $ earners. Trouble is, anything with "..Stable, recession proof earnings" isn't exactly cheap, on the logic that anyone running a fund needs to be invested, hence bidding up the "safe" stocks.

There'll be a time to buy junk in this downturn too - but it isn't yet IMO.

Sitting in the safety of the REITs hasn't proved all that safe, but I'd still take the yields, relatively secure cashflows, physical assets offsetting inflation & low debt/gearing/interest rate.