Schroder Real Estate Inv... Share Discussion Threads

[spectoacc] 17/11/2022 14:31

Valid point (tho I'd argue ZIRP was a one-off - but who knows). My beef was with how often SREI parroted "long term fixed debt", making out it was all fixed, at a very low rate, until avg 2029, with nothing to be rolled before 2027. It was pure falsehood.

They've been much more honest this time - had to be, from the questions they were asked.

Bigger issues than debt - which is no longer API-esque - is rent collection, voids, capex.

SREI don't seem bad to me but the economic outlook does.

[ferrox5] 17/11/2022 13:11

They did another presentation yesterday.

hxxps://www.investormeetcompany.com/investor/meeting/half-year-results-for-the-period-ended-30th-september-2022

You may have to register

They answer my question about the cap right at the end

[skinny] 17/11/2022 11:09

Thanks for that.

[speedsgh] 17/11/2022 10:42

For what little it is worth, SREI gets a Hold recommendation from IC's Simon Thompson in his latest write-up (which also updates on AEWU which he also rates as a Hold)...



... Schroder Real Estate Investment Trust (SREI:46p) looks well positioned to trade through a more challenging environment, having increased its portfolio exposure to sectors and locations enjoying high occupational demand from a granular and resilient tenant base. The portfolio also offers an above-average income yield and a near-term pipeline of asset management initiatives to support returns.

Around 46 per cent of the £532mn portfolio’s valuation is weighted to multi-let industrial estates, 11.8 per cent to retail warehousing, and 27.9 per cent to good-quality offices that are mainly located in higher-growth cities. In the six-month trading period, 33 new lettings, rent reviews and renewals generated £5.1mn of annualised rental income, or £1.9mn of additional rent above the previous level. Rent collection rates of 99 per cent across the 42 properties are at pre-pandemic levels, highlighting the resilience of the portfolio, too.

Moreover, ERV of £35.4mn reflects a reversionary yield of 6.6 per cent, well above the MSCI Benchmark of 4.8 per cent, and 15 per cent of the portfolio by contracted rents is inflation-linked, a tailwind for rental income in the current high inflationary environment. It’s worth noting that Schroder REIT benefits from relatively low leverage of 31.4 per cent, an average loan maturity of 11.2 per cent, low average total debt cost of 2.7 per cent and no near-term maturities. This is a competitive advantage relative to peers.

True, Schroder REIT's shares have slipped from around 52p to 46p since I initiated coverage (Alpha Research: ‘Targeting high-yield property to out-run inflation’, 4 March 2022), albeit the board has paid out 2.37p a share of dividends in the interim. The shares now trade 38.5 per cent below NAV and offer a 6.9 per cent annualised dividend yield, multiples that are clearly pricing in weaker property valuations in the future. Furthermore, the forthcoming correction could be relatively swift relative to past cycles given the lower levels of new developments in progress and a healthier banking system. Hold.

[wiganpunter] 16/11/2022 13:49

thanks nick . loop back after the call . they have good news on the top 5 tenants in terms of renewals etc and went through the top 15 in great detail so from a void standpoint I was very happy.

[nickrl] 16/11/2022 13:33

@wiganpunter thanks for debrief and im inclined to agree on rates and that API's disastrous timing will turn out to be an outlier on what to use for forward forecasting hence the pretty spectacular bounce back we've seen across this group. From here on its what happens to rental income and im less bothered about how much it can be grown more that sufficient is retained to maintain current divi levels if we get growth thats a bonus.

[fred177] 16/11/2022 13:29

Nick This morning they additionally covered some of the development upside potential which i am sure they will go into this pm

[wiganpunter] 16/11/2022 13:28

hi everyone I was on the 9 am call. basically my summary is this. the financing you dint have ti think twice around . the small amount fo ref which is capped will get redone and the forward rates suggest it will the the same / slightly worse but as a blend its inconsequential . there is uplift available from asset management of 4-5 of the holdings . that will be done organically or perhaps for the Cheadle estate with a partner given how big the potential uplift is. re overall estate the generic view is that commercial real estate will fall 15-20% but that doesn't apply for our estate thats just the perception overall . here at 7% yield with asset management uplift and funding locked in of you want uk commercial property exposure this at 40% discount to current nav and lets say nav falls to 58p for the rest under worst case scenario then its a great value asset here with secure income and very well diversified . I really like nick and barney and they had a really strong message and came across brilliantly . I also think if you look at forecasts you are going to see uk rates peak at around 4% then fall back to 2.5% in 2024 ( gs , citi and ms forecast ) so having chance to buy yield assets here is great for portfolio duration .

[nexusltd] 16/11/2022 12:35

nickrl. Thanks for the additional colour. Interims presentation pack: slides #18 "Void analysis" and #21 "Net LTV and interest cost sensitivity analysis" are informative.

[shieldbug] 16/11/2022 11:33

Thanks Skyship - I was looking at the summary of net movements in NAV. Like for like NAV was down but remedied a little by portfolio management.

[nickrl] 16/11/2022 11:14

So they now say on RCF in the small print "Replacement hedging options are being considered for the interest rate cap that expires in July 2023". The RCF is costing 3.8% on average currently.

Still trying to screw 3.2m (less 600k provision) of uncollected rent out of tenants at least although can't bank on getting much more back in current environment.

NRI benefits from 0.9m extra pa for next two years baked plus if they let Stanley Green once PC is achieved in March 23 then potentially another 1.3m (reporting 28% under discussion). Also as a big tenant good to see that they've extended Buckinghamshire New University lease.

NRI up with the JVs showing some good improvement although running costs have absorbed part of that as well as increased interest costs. Divi is covered at cash level and should have scope for modest increase given incremental fixed uplifts on NRI but depends how much RCF IR costs add. The RCF drawdown is 46.3m of which only 30.4m is capped until July 23. It will be c55m with planned CAPEX so we are potentially looking at around 4.5% for non capped element and by July next year could be nearer 5.5% on all of it. So my estimate is c1m extra on finance will absorb part of the NRI uplifts next year limiting scope for divi increase if they want to keep it cash covered.

Annoyingly i couldn't get into the analysts update this morning so will have to see what we get this afternoon.

[spectoacc] 16/11/2022 10:37

Could have written that middle paragraph myself ;)

[skyship] 16/11/2022 10:30

shieldbug - see this interesting extract from the Chairman's Overview. He mentions the 4% decline in Q3; but then a lot more besides:
=================================================

Market conditions and the outlook for UK real estate changed markedly over the period, with a 3.1% net like-for-like increase in the Company's underlying portfolio value over the quarter to June contrasting with a 4.0% decline over the quarter to September. Although a slowdown was expected, and follows a period of strong growth in the real estate market, more persistent inflation, political instability and the resultant impact on gilt rates has contributed to a sharp change in sentiment and an associated decline in liquidity. More generally, rising interest rates and tighter fiscal policy are squeezing household real disposable incomes and will reduce business investment, leading to weaker GDP growth and an increased risk of a prolonged recession.

At this stage, it is difficult to assess how far average UK real estate values will fall in response to rising interest rates but, assuming the ten year gilt yield settles at approximately 3.5%, then, based on historical averages, investors may demand a yield from real estate of 5% to 5.5%. This would imply a decline in average market values of approximately 15% to 20%. To date we have indeed seen rapid yield expansion, with lower yielding assets such as prime south-east industrial and logistics experiencing the sharpest declines. The next phase of the correction will be more influenced by weaker GDP growth impacting occupier demand and therefore rental values, leading to a greater negative impact on secondary assets with poor fundamentals. Market conditions have led to the listed real estate market experiencing severe share price declines, with prices at wide discounts to NAV across both diversified and specialist real estate strategies.

Against this uncertain backdrop, we benefit from owning good quality, higher yielding, diversified assets focused on higher long term growth sectors. These characteristics, combined with transaction and asset management activity, mitigated the negative market valuation impact over the period, with a net like-for-like capital value decline of the underlying portfolio of -1.0%, compared with the Benchmark at -3.1%. This underlying movement resulted in a Net Asset Value ('NAV') as at 30 September 2022 of GBP366.0 million or 74.8 pence per share ('pps'), a marginal decline of 1.0 pps, or 1.3%, compared with the NAV as at 31 March 2022.

[shieldbug] 16/11/2022 10:05

NAV is down a bit but looks to be capital expenditure rather than valuation.

[danny500] 16/11/2022 09:28

Skyship, thanks and understood,really should pay more attention to my investments!

[fred177] 16/11/2022 08:49

Also a live stream with Q & A now at 9

[skyship] 16/11/2022 08:35

Also, seems to me you may be missing the fact that the 74.8p NAV is down in the Qtr from 79.1p; ie a 5.4% fall. Better than many; but does reflect recent valuation changes.

[skyship] 16/11/2022 08:29

danny - dividend no change - same as the 0.803p in August. 3.212p annualised.

[danny500] 16/11/2022 08:18

Wasnt expecting a Divi increase but it must be the smallest in history, cant even work it out in percentage terms!

The LTV has jumped a bit and these results dont reflect the turmoil yet.

[rambutan2] 15/11/2022 20:44

Roll up, roll up! No excuses not to ask those searching questions:

Investor Presentation

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:

[mirandaj] 06/11/2022 18:09

This in part from end July 2022 might be a reminder regarding refinancing for instance.

In this 30-minute interview, Montgomery explains:

where UK commercial property can fit into investors’ portfolios;his confidence in real estate avoiding a crash in the impending recession despite it slowing down;how the Reit is shielded against rising interest rates, having refinanced three years ago;how he can generate inflation-beating returns by growing the rental value of properties; andwhere he is seeing value in the key industrial and office sectors at the moment.

[my retirement fund] 04/11/2022 21:58

Should be of interest https://registration.duuzra.com/form/SREITHalfYearResults2022

[skyship] 22/10/2022 15:56

Further to the earlier posts by hindsight, Riverman and others on the matter of NAVs post value falls.

# Portfolio of 42 props valued at £549.6m as at Jun'22

# A 20% fall would wipe out £109.9m, ie 22.47p/share with 489.1m shares in issue

# That would be a 28.4% reduction in NAV from 79.1p to 56.63p

# At 41p the discount would reduce to 27.6%

# At 41p the likely maintained dividend of 3.212p would still give us a yield of 7.83%

The dividend is covered; and is likely to be more so as the upcoming Interims (16th November) will show. The rather high void rate at the time of the Finals was 8.4%; but matters in hand post yr end were reducing that to 6.9%; and hopefully further lettings will reduce that figure to c5% - perhaps less. More lettings, more income, more cover.

Happy to have bought more cheap stock at 40.34p on Friday. A small switch after the nice bounce in UKCM.

Now, roll on those Interims and the InvestorMeet presentation.

(Incidentally, I feel that 20% fall would be the very worst case scenario)